August 2018

On 6 December 2019, amendments to various tax acts were published in the State Gazette. Amendments to the Tax and Social Security Procedures Code concerning the thresholds for preparation of mandatory transfer pricing documentation are set out below. More specifically, the obligation for preparation of such documentation will not be applicable for persons that, as at 31 December of the previous year, did not exceed at least two of the following thresholds:

• net book value of assets: BGN 38 million (approximately EUR 19 million);
• net sales revenue: BGN 76 million (approximately EUR 39 million); and
• average number of personnel for the reporting period: 250 persons.

The other rules and thresholds regarding the mandatory transfer pricing documentation remain unchanged. The above rules will apply from 1 January 2020.

On 6 December 2019, amendments to various tax acts were published in the State Gazette. Amendments to the Value Added Tax Act (the VAT Act) are set out below. For other amendments, The main changes relate to implementation of "quick fixes" for intra-Community trade within the European Union as provided in Council Directive (EU) 2018/1910 of 4 December 2018 amending Directive 2006/112/EC as regards the harmonization and simplification of certain rules in the value added tax system for the taxation of trade between Member States. An overview of implemented rules that will apply from 1 January 2020 is set out below. In addition, other amendments to the VAT Act were also published in the State Gazette Changes to the required evidence for application of the 0% VAT rate for intra-Community supplies As from 1 January 2020, suppliers must obtain a document (e.g. invoice, protocol, etc.) for intra-Community supplies, as well as documents evidencing dispatching/transporting the goods to other EU Member States (as provided in article 45a of Implementing Regulation (EU) 282/2011) in order to apply a 0% VAT rate to an intra-Community supply. Other mandatory conditions for applying the 0% VAT rate to intra-Community supplies are as follows:

• the recipient must provide to the supplier its VAT number issued by an EU Member State (different from Bulgaria); and
• the intra-Community supply must be reported correctly in the VIES return (EC Sales List) of the supplier.

Introduction of call-off stock simplification rules and new reporting requirements in this respect Currently, the call-off stock simplification is possible. Therefore, it is considered that an intra-Community supply and acquisition are taking place when the goods arrive at the warehouse of the recipient. As from 1 January 2020, the new EU call-off stock simplification rules will be applied. As a result, an intra-Community supply/acquisition will be deemed to take place when the goods are removed from the warehouse by the recipient. Specific rules are introduced for cases of changing the recipient or when the goods are stored in the warehouse of the recipient for more than 12 months. New reporting requirements are introduced for persons involved in a call-off stock simplification, as well as penalties for non-compliance with these requirements. New rules for successive supplies (chain transactions) between EU Member States Changes are introduced for successive supplies (chain transactions) within the European Union in order to establish rules for determining the transaction which should be considered as intra-Community supply subject to 0% VAT rate in the cases where an intermediary operator dispatches or transports the goods either himself or through a third party acting on his behalf.

On 6 December 2019, amendments to various tax acts were published in the State Gazette. Amendments to the Corporate Income Tax Act (the Act) are set out below. Implementation of EU exit taxation and anti-hybrid mismatch legislation The exit taxation rules contained in European Union Anti-Tax Avoidance Directive 2016/1164 (2016) (ATAD 1) and the anti-hybrid mismatches rules contained in Council Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (ATAD 2) were implemented into national legislation. Recognition of expenses for technical infrastructure Expenses for construction, improvement and repairs of public technical infrastructure owned by the state or a municipality incurred by a taxable person and relating to the person's economic activity (even if the infrastructure is also available for use by other persons) will be recognized for corporate income tax purposes (either directly or through depreciation). In addition, and under certain conditions, expenses incurred in the period 1 January 2015 to 31 December 2019 may also be recognized. Amendments to thin capitalization rules The list of expenses not considered interest expense for the application of the thin capitalization rules is extended to include the lease and/or loan which is guaranteed and/or secured both by the lessee and/or borrower and its related part. In that case, the part of the interest expense calculated by multiplying the total interest expense by the market price of the security provided by the lessee and/or borrower (determined at the date when the security is provided) and the amount of the lease and/or loan should not be included in the interest expense. If the coefficient is higher than 1, it will be considered to be 1 for the purposes of this provision. Amendments to controlled foreign company (CFC) rules The criteria for determining the persons for which CFC rules apply is clarified. Currently, the Act provides that the CFC rules are not applicable for a CFC which is not subject to corporate income tax in the country in which it is a tax resident. According to the amendment, CFC rules will not be applicable for a CFC which:

• is subject to alternative forms of taxation of its activities in the country in which it is a tax resident or in another country; or
• has a permanent establishment in another country which is subject to alternative forms of taxation of its activities.

Amendments to rules on application of tax reliefs An amendment is introduced regarding the application of the tax relief allowing companies to retain the full or partial amount of the corporate income tax due, provided that it is used for specific investments referred to in the Corporate Income Tax Act. More specifically, to avoid different interpretations in situations where the requirements for applying the tax relief are not met, it is explicitly stated that the full amount of tax is due, not just the part related to the amount not invested.

On 6 December 2019, a proposal for amendments (the proposal) to the VAT Act was submitted to the parliament by some of its members. The proposal addresses documents required for evidencing intra-Community supplies. The previous amendment, gazetted on 6 December 2019 provided that, as from 1 January 2020, suppliers must obtain a document (invoice, protocol, etc.) for intra-Community supplies, as well as documents evidencing dispatching/transporting the goods to other EU Member States (as provided in article 45a of Implementing Regulation (EU) 282/2011) in order to apply a 0% VAT rate to an intra-Community supply. Other mandatory conditions for applying the 0% VAT rate to intra-Community supplies are as follows:

• the recipient must provide the supplier with its VAT number issued by another EU Member State; and
• the intra-Community supply must be reported correctly in the VIES return (EC Sales List) of the supplier.

On 13 December 2019, the National Revenue Agency announced a new service allowing taxpayers to verify the assignment of, and receive updates on the status of, ongoing tax checks or tax inspections. A taxpayer under investigation will be able to confirm the date, scope, the tax auditing team and audit deadline. The audit may, among other things, include requests for information and checks. A taxpayer may use the new service in person at every territorial directorate of the National Revenue Agency (NRA), or do so electronically using the NRA's e-portal. Obtaining access to the service requires a unique identification number of the tax check or tax inspection. The new proposed amendments of 6 December 2019 introduce an alternative option allowing taxpayers to also use the documents evidencing the transportation/dispatch as provided in the regulations for the application of the VAT Act. As a next step, the proposal must be voted on by the parliament.

On 18 December 2019, the bill implementing the provisions of Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU (DAC6) as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements was adopted by the parliament. The bill, introduced to the parliament by the government, is available here.

The draft decision on amending the personal income tax law was deliberated at the fifth session of the 13th NPC Standing Committee on August 27, 2018. The decision is due to take effect from January 1, 2019, the major amendments for the personal income tax law as followings: Article 1 is amended to read: “A resident individual is an individual who is domiciled in China or who is not domiciled in China but has stayed in the aggregate for 183 days or more of a tax year in China, and shall, in accordance with the provisions of this Law, pay individual income tax on his or her income obtained inside and outside China. “A nonresident individual is an individual who neither is domiciled in China nor stays in China or who is not domiciled in China but has stayed in the aggregate for less than 183 days of a tax year in China, and shall, in accordance with the provisions of this Law, pay individual income tax on his or her income obtained inside China.” Article 6 is amended to read: “Calculation of the amount of taxable income: “(1) For the comprehensive income of a resident individual, the amount of taxable income shall be the balance after subtracting expenses of 60,000 yuan, special deductibles, special additional deductibles, and other deductibles determined in accordance with the law from the amount of income obtained in a tax year. Special deductibles include but are not limited to contributions to the basic pension insurance, basic medical insurance, unemployment insurance, and other social insurance and housing provident funds paid by resident individuals in accordance with the scopes and standards specified by the state. Special additional deductibles include but are not limited to expenditures for education of children, continuing education, medical treatment of serious diseases, housing loan interest, housing rents and raise of elderly (4) For the income from the lease of property, the amount of taxable income shall be the balance after subtracting expenses of 800 yuan from the income if the income is less than 4,000 yuan each time; and the amount of taxable income shall be the balance after subtracting expenses at 20% from the income if the income is 4,000 yuan or more each time. The amount of income from author's remuneration shall be calculated at 70% of the income obtained. The donations made by an individual to the educational cause and other public welfare and charitable causes shall be deducted from the taxable income in accordance with the relevant provisions issued by the State Council. One article is added as Article 14: “Public security, people's bank, financial regulation, and other relevant departments shall assist tax authorities in confirming the identity and bank account information of taxpayers. Education, health, medical insurance, civil affairs, human resources and social security, housing and urban-rural development, people's bank, financial regulation, and other relevant departments shall provide tax authorities with information on special additional deductibles such as education of children, continuing education, medical treatment of serious diseases, housing loan interest, and housing rents of taxpayers. XVI. Schedule 1 of Individual Income Tax Rates (applicable to income from wages and salaries) is amended to read: Schedule 1 of Individual Income Tax Rates (applicable to comprehensive income) Brackets Annual Taxable Income Tax Rate (%)

1	Up to 36,000 yuan	3%
2	Over 36,000 yuan nor more than 144,000 yuan	10%
3	Over 144,000 yuan nor more than 300,000 yuan	20%
4	Over 300,000 yuan nor more than 420,000 yuan	25%
5	Over 420,000 yuan nor more than 660,000 yuan	30%
6	Over 660,000 yuan nor more than 960,000 yuan	35%
7	Over 960,0000 yuan	45%

  (Notes: 1. For the purposes of this Schedule, “annual taxable income” means the balance of comprehensive income obtained by a resident individual after subtracting expenses of 60,000 yuan, special deductibles, special additional deductibles, and other deductibles determined in accordance with the law from the amount of income in a tax year, in accordance with the provision of Article 6 of this Law.

2. The amount of tax payable on comprehensive income obtained by a nonresident individual shall be calculated on a monthly basis after conversion in accordance with this Schedule.)

XVII. Schedule 2 of Individual Income Tax Rates (applicable to income from the production or operation of an individual industrial and commercial household and the income from the contracted operation or leased operation of an enterprise or public institution) is amended to read: Schedule 2 of Individual Income Tax Rates (applicable to business income) Brackets Amount of Annual Taxable Income Tax Rate (%)

1	Up to 30,000 yuan	5%
2	Over 30,000 yuan nor more than 90,000 yuan	10%
3	Over 90,000 yuan nor more than 300,000 yuan	20%
4	Over 300,000 yuan nor more than 500,000 yuan	30%
5	Over 500,000 yuan	35%

  (Note: For the purposes of this Schedule, “annual taxable income” means the balance after subtracting costs, expenses and losses from the gross income in a tax year in accordance with the provision of Article 6 of this Law.)

The State Council announced on August 3, 2018 the Decision to Cancel Some Administrative Approval Items. 11 such items have been scrapped under the decision. For six items that were established in accordance with laws and regulations, the State Council will submit them to the Standing Committee of the National People's Congress for amendment on the laws and regulations. The canceled items include approvals on business registration for enterprise group, preliminary approval for overseas investment by domestic companies (Excluding financial institutions), registration for business subsidiaries, as well as the establishment, alteration and cancellation of foreign-funded companies' branches.

The People's Bank of China recently announced that starting from August 6, 2018, the forex risk reserve ratio for forward forex sales is adjusted from 0 to 20%. On August 10, the central bank further explained the scope of businesses subject to forex risk reserves. The central bank highlighted some forward forex sales that are exempt from forex risk reserves conducted by overseas institutional investors with investment in domestic securities market: 1) forward forex sales by overseas institutional investors used to hedge against forex risk exposure resulting from approved cross-border securities investment; 2) forward forex sales conducted with overseas central banks.

The fourth draft Amendment to E-commerce Law was submitted on August 27 to the fifth session of the 13th NPC Standing Committee for consideration. Compared with the third draft, the fourth draft has made revisions on provisions concerning the shouldering of liability by e-commerce platform operators, green development of e-commerce, application of laws in e-commerce, and delivery of goods and services. The fourth draft also raised the fines that may be imposed against e-commerce platform operators who restrict transactions of dealers using the platform unreasonably or have the act of infringing the intellectual property of the dealers from "between 50,000 yuan and 200,000 yuan" and "between 20,000 yuan and 500,000 yuan", as specified in the third draft, to "between 50,000 yuan and 500,000 yuan" and "between 500,000 yuan to 2,000,000 yuan".

Ovum, a data, research and consulting business focused on helping digital service providers across globe, has estimated that mobile broadband connections in Africa will rise to over one billion by the end of 2022, up from the 419 million figure it attained at the end of 2017. According to the report, Africa’s digital economy will be built on mobile platforms, creating exciting opportunities for farsighted mobile operators to play a key role in the continent’s digital revolution. As in many other developing markets in which mobile is outstripping fixed-line networks, it noted that mobile operators were becoming an important provider of, and platform for, a growing range of services. In Nigeria alone, active mobile subscribers’ connections had been put at 162 million, with over 100 million internet users, and a teledensity standing at over 116 per cent, as at May this year, according to recent statistics released by the Nigerian Communications Commission (NCC), the telecoms industry regulator. According to the latest report, Kenya’s M-Pesa money transfer service, which has helped in boosting Africa’s connectivity, was developed partly by Vodafone, which has compelled mobile operators to partner insurers, retailers, banks and other companies to provide a growing range of innovative services to Africans. Air time, was even being used to replace cash for small payments in most African countries like Nigeria, Kenya and South Africa, the report said. According to the report, “In this growing ecosystem, payment solutions that are both secure and customer-friendly are of paramount importance. “In particular, as mobile operators offer more and more services, identity fraud is becoming an issue. As a result, the ability to verify customer identity is becoming a business imperative for mobile operators.” “However, traditional identity verification methods are subject to manual error and provide a frustrating customer experience. In contrast, a digital and automated identity verification solution can have an immediate impact on fraud reduction and even improve customer enrolment,” the report said. “A powerful digital identity verification solution that is automated and integrated into the business process brings a new dimension to customer identity management. “While there are a number of associated benefits, we highlight the four key ones for mobile operators to include: Reducing fraud; Streaming customer acquisition; Providing better customer support; and Creating new opportunities through digital services,” the report added. In the area of fraud reduction, the report revealed that deploying identity verification services could help to reduce the crime. It quoted Technology Research Institute ad saying; “real-time point-of-sale identity verification services are an invaluable aid to stopping fraudsters from exploiting identity theft.” “For example, since Orange introduced Gemalto’s identity verification tool, fraud in some stores was reduced by 100 per cent. “Additionally, performing identity verification in front of customers was found to discourage criminals from even attempting fraud.” In the area of streamlining customer acquisition, the report explained that mobile operators offer customers a growing range of value-added services such as payments, Internet of Things (IoT) services and peer-to-peer payment solutions, and that the list keeps growing all the time. “By deploying an identity verification solution, mobile operators could benefit from a consistent and unique digital identity that covers all services at the same time. “Therefore, when existing customers decide to buy a new service, or extend the functionality they already have, it can be done seamlessly and without any additional inconvenience by using their digital identity,” In the aspect of providing better customer support, the report was of the view that deploying a solution that is user-friendly right from the start offers a real advantage because it can be improved over time by gathering feedback from sales staff. In creating new opportunities through digital services, the report said a multi-channel solution for identity verification, which also works remotely, provides a great opportunity for mobile operators to take the first step towards the creation of a trusted digital identity.

German leading pharma Boehringer Ingelheim, also a global pharmaceutical leader, has announced the launch of the ‘In Reach Africa’ program, an initiative aimed at facilitating quality and innovative human and animal healthcare access across the African continent. The program is set to kick off in Kenya and to expand throughout major African markets including Nigeria, Ghana, Ethiopia, Uganda, Mozambique, Tanzania, Zambia, Zimbabwe and Rwanda. It comprises a range of key elements that aim at adding more value to overall health systems, in an effort to drive access to care, support with the development of innovative health solutions, creating community based partnerships and raising awareness around key disease areas as well as prevention mechanisms. Through MMH in Kenya, Boehringer Ingelheim and Askoka supported iSikCure, an application developed to improve access to quality care and safe medicine. In 2017, Boehringer Ingelheim, in partnership with Access Afya and PharmAccess, launched Akiba Ya Roho, a micro-savings program geared towards driving more healthcare awareness and overall understanding and management of non-communicable disease in some rural areas within Kenya. A series of activities and workshops that are the building blocks of the newly launched program already started in July as for example the ‘Making More Health (MMH) Accelerator program. This program supports social health entrepreneurs to strengthen and scale their work, by bringing some of the best experiences in social and health innovation as well as global health to improve access across Sub-Saharan Africa. Empowering individuals is a core part of the initiative’s strategy and the fundamental element throughout ‘In Reach Africa’. MMH is a long-term global initiative driven by Boehringer Ingelheim in partnership with Ashoka, a global non-governmental organization. “‘In Reach Africa’ shares a vision of driving accessibility, sustainability and innovation through enhancing health systems in Africa by providing an accessible range of medication and healthcare solutions, increasing awareness of key disease priorities through reach and enriching knowledge and education initiatives. In doing so, it is designed to add more value to the socioeconomic structure by working with and supporting low income families on multiple fronts,” said Yew Looi Liew, Head of Corporate Division Prescription Medicine Emerging Markets at Boehringer Ingelheim. Reducing the avoidable burden caused by Non Communicable Diseases (NCDs) is central to the initiative. (NCDs) are a silent epidemic in low and middle-income countries, which account for 75 per cent of global NCDs deaths. Africa is expected to experience 3.9 million NCD-related deaths a year by 2020, a rise of more than 20 per cent.1 “Accordingly, we need to commit ourselves as an organization to working together with all other healthcare players to build an infrastructure that is sustainable, and one, which can ensure needed therapies are available in even the most remote areas. At Boehringer Ingelheim, we believe that everyone should have access to good health, no matter where they live,” commented Enrique Manzoni, Regional Managing Director – Middle East, Turkey, Africa (META) at Boehringer Ingelheim.

Zambia’a pension funds and insurance companies have invested $445m and local developers have invested $80m in new property developments between 2014 and 2017, according to Urban Africa Property Group. “There is a lot more local and international money in Zambia’s property market than people think,” Carl Johan Collet, Managing Partner of Urban Africa Property Group, said. “Between 2014 and 2017, we have tracked more than $1.3bn in direct investment into the Zambian property market,” he said. The lion share of this investment has been by Foreign Direct Investments (FDIs) predominantly into cash flow generating properties with Lusaka’s retail sector by far the largest recipient. “We have tracked more than $715m in FDI with 74.6% invested into Lusaka and the remainder into the Copperbelt region and Livingstone,” he said. Having spent four years tracking foreign and local investment into Zambia commercial real estate, the money invested by international and domestic institutional investors into different sectors certainly paints a bullish and distinct picture of the country’s real estate market, according to Collet. The majority of FDI he said, 56% to be exact has gone into “cash flow generating properties”, while 44% have gone into the development. “Retail is by far the most popular asset class with 64% of the investment while office, hospitality and residential has each received 10-13%”, respectively, of funds, invested,” said Collet. While the continued investment into Zambia’s retail sector has called for some developers and retailers warning of a rapid saturation in the sector, Bonna Kashinga, Partner, Chief Finance & Operations Executive at Urban Africa Real Estate Group, pointed out that the market still has more room to grow. “We now have 41 supermarkets in Lusaka alone, 81 across the country when 15-years ago there were only five,” he said. Such rapid growth in such a short period has helped the industry thrive and has led to the continued push into retail, which Kashinga believes will continue. “There has been massive growth, but Zambia can comfortably accommodate 300 grocery stores and its why the big five retailers want to build 30 per year,” said Kashinga. For Collet, the growth in the retail sector and investment has highlighted distinct trends in appetite between local investors and international investors. “As a local developer in the retail sector, we have noticed that 5,000 sqm below $8m is optimum for the local pension funds. Also, the internationals only want to buy at $20m and up,” he said. Assets valued in between these figures are struggling to attract buyers, according to Collet: “Zambia is intriguing, and in our research, we’ve begun to call this the dead zone.” “The Zambian market is dynamic, and our purpose in releasing this first report is to create transparency in the market and encourage others to share their information, which we believe will result in more investment,” he said.

Oil and gas industry in East Africa is growing and proper management could only make the regional economy get better results.

Two firms are battling for a $3.5 billion tender to oversee the construction of a pipeline between Tanzania and Uganda, estimated to be 1,443km long with 1,147km of it being on the Tanzanian side. The firms, Penspen from the United Kingdom and WorleyParsons from Australia are among seven other firms that had expressed interest in the East African Crude Oil Export Pipeline project. However, these two are currently leading in the race. Both firms have a wealth of experience in project management as well as a significant presence in the East African territory. They have overseen major projects in Kenya and Uganda and have been recommended for familiarity and excellence in their operations. The tender opportunity will strengthen the portfolio of either company and a chance to expand their operations in Africa. The crude oil pipeline is expected to unlock significant potentials in the energy sector. Many African countries are depending on improved infrastructure to drive their economic goals and lure foreign investments. Oil and gas demand in East Africa has offered numerous opportunities to international companies to which have expressed interests to venture into the market. The cooperation between Uganda and Tanzania to construct a crude oil pipeline has enabled Uganda to export oil within the East African Community (EAC) borders. Kenya has also tapped into crude oil with Lokichar basins and joined Uganda as the two nations producing oil in East Africa. Tanzania continues to make efforts to better its operations in natural gas which has boosted the country’s economic growth. East Africa has massive oil deposits that could reward the region bountifully. Sudan also has oil deposits which could transform the country’s economy should they be managed well. Oil exploration in Uganda continues to be a massive task for oil companies that have invested millions of dollars in the process. It has been debated further that East Africa could have potential oil deposits to compete with the secondary sources in West Africa.

The pipeline comes as the two countries adjust into an economic growth driven partnership after recently ending two decades of military standoff.

The United Arab Emirates has become the latest Gulf country to show interest in oil reserves in the Horn of Africa as it seeks to invest in the commodity’s evacuation. The UAE plans to build an oil pipeline between Ethiopia and Eritrea connecting Addis Ababa to the port city of Assab. This comes as Ethiopia continues to mull over investments in the oil sector, having commenced crude oil extraction on a test basis in June. The country which has recently signaled it’s willingness to open up it’s economy to foreign investors, under the leadership of Prime Minister Abiy Ahmed, has oil reserves in the country’s southeast region. Prime Minister Ahmed is said to have already held a meeting with the UAE Minister of State for International Cooperation Reem Al Hashimy on the planned pipeline project, which will be instrumental in the evacuation of the country’s oil, with Eritrea’s port being the exit point for its exports. The move is the latest in the recent of planned investments in the country with a 100 million population. Ethiopia is viewed as the regions giant and its awakening is likely to have a huge impact in the region’s economic growth. The UAE move to invest in the pipeline is seen as a rush to beat its rivals including neighbours Qatar, among other net oil investor countries in the world. The pipeline comes as the two countries adjust into an economic growth driven partnership after recently ending two decades of military standoff over a border war which lefts hundreds dead. Eritrean Airlines has begun regular flights to Ethiopia opening up the two economies. The two countries have also re-opened embassies in each other’s capital. Under Prime Minister Abiy Ahmed, the country which has for decades remained adamant on opening its economy to foreign investments has indicated it was open for business. The move has seen companies from the Region, with the likes of Kenya’s giant telecommunication company-Safaricom and lender KCB Group showing interest in crossing the border into Ethiopia. The latest infrastructure development is however likely to have an impact on the implementation of the  $23 billion Lamu Port-Southern Sudan-Ethiopia Transport Corridor (LAPSSET) with Ethiopia seen to likely focus on investments towards the North rather than South.

Hapag-Lloyd hopes to expand business opportunities in the Port of Mombasa as it seeks to serve well the growing market in the region.

Following its debut in the East African market in April 2018, multinational German-based transportation company Hapag-Lloyd has experienced a stellar performance in the shipping industry. The region’s annual growth rate of 6% caught the attention of the container shipper as it looks to expand its business in the African continent. Kenya was the preferred destination with the country handling most of the region’s cargo. The shipping company eyes job creation for the Kenyans to improve the country’s productivity. Hapag-Lloyd has revolutionized the shipping industry linking the Arabia Gulf and East Africa to bridge the gap of trade between them. The direct service connecting the two regions is essential for the growth of trade and investment opportunities. The German box carrier hopes to increase cargo volumes of the perishable products it deals in to effectively serve its customers. The company has a wealth of experience that it hopes will benefit the growing market in East Africa. The East Africa Service (EAS) launched at the company’s first operation in the region and has gone to pass their expectations. The firm no plans the next phase of the EAS2 with the growing demand of the market. The container shipping line has won a number of accolades under its belt owing to the quality services it provides in different parts of the world. Last year the company scooped the European Carrier of the Year Award, Green Connection Award and Top Ocean Performer. In July this year, the container shipping line scooped the Outstanding Partnership Award by Target Corporation, an awarding organization. Hapag-Lloyd’s investment is another sign of the luring East African market to foreign investors. Their presence increases the Foreign Direct Investment flow into their countries that Governments have emphasized. It increases and strengthens bilateral cooperation with their parent states to reap mutual benefits and open more opportunities.

The RisCura-Southern African Venture Capital and Private Equity Association (Savca) ‘South African Private Equity Performance’ report for the first quarter of this year shows that long-term private equity returns remain steady, with the ten-year rand internal rate of return (IRR), the headline returns measure, at 11.5% for the first quarter.

This is ahead of the 9.7% achieved by the FSTE/JSE’s All Share Total Return Index for the same period, although slightly down from the 11.6% recorded in the fourth quarter of 2017. The five-year IRR is 13.2%, a slight improvement on the 13.1% in the fourth quarter of 2017. The three-year IRR return results, however, continue to trend downwards, ending the quarter at 9%. Stable returns have been observed for pooled IRR by vintage year, particularly for the newer funds. 2010 to 2012 and 2013 to 2015 vintage funds reported IRRs of 5% and 9%, respectively. The report also highlighted that owing to the high ratio of cash returned to investors to total cash invested, Total Times Money was greatest for funds smaller than R500-million. Accordingly, Total Times Money was smallest for funds over R1-billion. The performance shows that, as an asset class, private equity has been consistent in its outperformance of listed equity, says Savca CEO Tanya van Lill. She explained that aspects of resilience, resourcefulness and resoluteness have been demonstrated by the performance of the asset class over a ten-year cycle compared with listed equities. “Some of the strong performing portfolio companies that have contributed to this great performance will be honoured at the inaugural Savca Industry Awards on November 8,” she noted. Further, RisCura senior private equity analyst Kelsey Tenner said the report also noted that private equity returns largely remain unchanged, while poor listed market returns, particularly over the three-year period, resulted in an improvement to the public market equivalent results. “Direct Alpha earned by private equity also increased considerably, especially for the three-year results, when compared to all three listed markets,” she pointed out. The Direct Alpha earned over the three-year period relative to Swix reached 4.9% at March this year, up from 2.4% at December 2017. Meanwhile, the recently released Savca 2018 Private Equity Industry Survey showed that investment activity by private equity managers investing in Southern Africa grew by over 102%, from R15.5-billion the previous year to R31-billion and was well above the yearly average of R14.7-billion over the preceding ten years. Funds returned to investors in 2017 remained strong at R17.6-billion, while Southern African private equity funds raised a total of R7.5-billion during the year. “Despite a challenging investment environment, there is now, more than ever, great possibilities for growth and renewed interest in investment. The industry is left well positioned to rise to a new level, which aligns to the theme of the Savca 2019 industry conference,” said Van Lill.

It was Rwanda’s 78th air service agreement as it seeks to gain competitive space in the aviation sector.

East African country Rwanda penned down a bilateral air transport agreement with European nation Italy, giving the two countries access to each other’s skies. It was Rwanda’s 78^th air service agreement as it seeks to gain competitive space in the aviation sector. 59 per cent of the air service agreements signed by the African country involves fellow African nations. Open skies agreements have been encouraged especially in the African continent for the development of the industry and robust growth of economies. It enhances effective transportation of goods and people to and from designated destinations with limited inconvenience. The aviation sector in Africa is still lagging behind in the global market due to poor infrastructure and poor connectivity. High ticket prices and low passenger volumes have hindered its growth but necessary changes are being made to make it better. RwandAir will carry out its commercial flights to Italy as it seeks to increase its footprint in Europe. Cross-continental flights are essential for the tourism sector as well that has fattened the Government’s pocket. It will improve the level of operations for RwandAir who has not made a major impact regionally with Kenya Airways and Ethiopian Airlines competing for the major share in the industry. Rwanda’s national carrier had plans to expand its operations in Europe as well as Africa, Asia and North America. It is a move Rwanda sees will ease its exports to the nation and spur business opportunities. The gesture seeks to lure investors into the industry to grow the sector and develop the nation’s economy. Rwanda’s aviation sector has developed over the years and is poised for better performance. Despite the prevalent challenges, it has remained strong to prove its relevance domestically. The Government aims at offering world-class services and safety to keep the industry alive. President Paul Kagame has hailed the transformation of the industry to shape the country’s economy.

LUSAKA. – NFC Africa, majority owned by China Non-ferrous Metals Company Limited (CNMC), yesterday launched output at a new $832 million Zambian copper mine, extending the firm’s lifespan by over 20 years. Zambia, Africa’s second-largest producer of the metal, saw output rise 10.6 percent in the first half of the year on the back of stable power supply and relatively higher metal prices in recent months. Trial production begun last week at Chambishi South-East Mine, which is expected to produce 60,000 tonnes of copper at full capacity by 2020, NFC Africa spokesman John Mtonga said. NFC Africa currently mines at the Chambishi Main Mine and Chambishi West Mine and had been developing the Chambishi South-East Mine, Mtonga said. Zambia’s President Edgar Lungu said during the launch that NFC Africa had so far invested more than $500 million of the total planned project investment of $832 million in the project, about 400 km (250 miles) northwest of Lusaka. The South East Ore Body has copper ore reserves estimated at more than 76 million tonnes at an average grade of 2.18 percent, according to a document submitted to the environmental agency. Other foreign mining companies operating in Zambia include Canada’s First Quantum Minerals, Glencore, Barrick Gold and Vedanta Resources. – Reuters

In its meeting of 15 August 2018, the Federal Council finalized the implementation of the previously amended VAT Law with regard to mail-order companies. The Federal Council decided that the implementing regulation concerning the application of the new rules will take effect as from 1 January 2019. Tax Reform in detail: The main changes of the reform, which mostly apply from 1 January 2018, include the following:

• a reduction of the VAT rates. In this context, it may be noted that the reduced rates apply to electronic newspapers, magazines and books;
• the fact whether a Swiss company is subject to VAT is determined based on worldwide turnover. All companies that are established in Switzerland or provide services in Switzerland whose combined turnover derived in Switzerland from services which are not VAT exempt is at least CHF 100,000 are mandatorily subject to VAT;
• companies that import small consignments into Switzerland for an amount of at least CHF 100,000 which are exempt from customs duties (i.e. those duties are not more than CHF 5) are subject to VAT (applicable from 1 January 2019);
• in their VAT return, taxable persons may opt for a taxable supply without referring to a submitted invoice;
• a notional VAT deduction is now also allowed for the acquisition of business assets and unused goods;
• a margin regulation is introduced for works of art, antiques and collectors' items;
• the VAT due on purchases from a foreign company will only be applied to the purchase of tangible assets; and
• with regard to the tax liability of government institutions and public bodies, the turnover threshold of CHF 100,000 is decisive.

On 1 August 2018, the US Treasury Department and the US Internal Revenue Service (IRS) issued proposed regulations (REG-104226-18) to provide guidance on the transition tax under section 965 of the US Internal Revenue Code (IRC). The Treasury Department released a related Press Release dated 1 August 2018. The IRS also issued a related News Release (IR-2018-158). The transition tax is imposed on untaxed foreign earnings of foreign subsidiaries of US companies under IRC section 965, which treats those earnings as if they had been repatriated to the United States. Foreign earnings held in the form of cash and cash equivalents are taxed at a 15.5% rate. The remaining earnings are taxed at an 8% rate. The lower effective tax rates applicable to section 965 income inclusions are achieved by way of a participation deduction set out in IRC section 965(c). A reduced foreign tax credit (FTC) also applies with respect to the inclusion under IRC section 965(g). Taxpayers may generally elect to pay the transition tax in installments over an 8-year period under IRC section 965(h). The proposed regulations contain information on the calculation and reporting of the section 965(a) inclusion amount, as well as information for making the elections available to taxpayers under IRC section 965.

The US Treasury Department and the US Internal Revenue Service (IRS) issued IRS Notice 2018-67 on 21 August 2018 to provide guidance on the calculation of the unrelated business taxable income (UBTI) for tax-exempt organizations under section 512(a)(6) of the US Internal Revenue Code (IRC). IRS Notice 2018-67 sets forth interim guidance and transition rules, and also solicits comments, regarding IRC section 512(a)(6), which requires an organization subject to the unrelated business income tax under IRC section 511 to calculate the UBTI separately with respect to each trade or business if the organization carries on more than one unrelated trade or business. IRS Notice 2018-67 also provides guidance on the treatment of the global intangible low-taxed income (GILTI) under IRC section 951A for purposes of the unrelated business income tax under IRC section 511. Specifically, IRS Notice 2018-67 provides that:

• an inclusion of the GILTI will be treated as a dividend which is generally excluded from the UBTI under IRC section 512(b)(1); and
• unless otherwise provided in proposed regulations, the UBTI will not include the GILTI that is attributable to insurance income.

The guidance provided in IRS Notice 2018-67 may be relied upon until proposed regulations are published.

A tax treaty is a bilateral agreement made by two countries to resolve issues involving double taxation of passive and active income. Treaties Update – August 2018

Date	Country A	Country B	Object	Status
07.08.18	Bulgaria	Saudi Arabia	Income Tax Treaty	Approved by Saudi Arabian cabinet
26.08.18	Moldova	United Arab Emirates	Income Tax Treaty	Enters into force
10.08.18	Belarus	United Kingdom	Income Tax Treaty	Enters into force