August 2020

  • Bulgaria
    • COVID-19 Pandemic: Bulgaria Extends Scope of Reduced 9% VAT Rate

      On 11 August 2020, the Bulgarian government officially extended the scope of the products for which the value added tax (VAT) rate is temporarily reduced to 9% for the period from 1 August 2020 to 31 December 2021. The new products include:
      • beer and wine provided as part of restaurant/catering services;
      • the use of certain sports facilities; and
      • tour operators' services, including the organization of excursions by tour operators and travel agents with occasional transportation.
      For the text of the gazetted Bill, see here (in Bulgarian only).
    • COVID-19 Pandemic: Bulgaria Extends Reporting Deadlines under DAC2 and DAC6

      On 4 August 2020, Bulgaria amended the Tax and Social Security Procedure Code by extending the deadlines for DAC2 (CRS) and DAC6 reporting frameworks. The DAC2 (Common Reporting Standard (CRS)) reporting deadline for financial institutions in respect of information concerning the taxable period 2019 is extended from 30 June 2020 to 30 September 2020. The DAC6 reporting deadlines are extended as follows:
      Reporting time framework Deadline
      mainstream reporting (30-day period to report new cross-border arrangements) the period commences on 1 January 2021 (currently, 1 July 2020)
      historical reporting (reportable arrangements from 25 June 2018 to 30 June 2020) 28 February 2021 (currently, 31 August 2020)
      first periodic reporting of marketable arrangements (reportable arrangements between 1 July 2020 and 31 December 2020) first reporting by 30 April 2021 (currently, the law requires recurrent reporting after every 3 months)
        The extension is based on Directive (EU) 2020/876 that amends the Directive on Administrative Cooperation (DAC) allowing EU Member States an option to defer the time limits for DAC2 and DAC6 reporting.   For the text of the Bill, see here (in Bulgarian only).  
  • China
    • China Allows Tax Reduction for Imports of Certain Commodities

      Source: IBFD Tax Research Platform News

      Effective 5 August 2020, China allows the reduction of import duties and VAT or consumption tax on imports of 20 listed commodities that were previously prohibited in the Notice of State Council [1994] No. 64.

      The 20 commodities concerned include:

      • televisions;
      • video cameras;
      • video recorders;
      • video players;
      • audio equipment;
      • air-conditioning equipment;
      • refrigerators and freezers;
      • washing machines;
      • cameras;
      • photocopy machines;
      • stored program control telephone switching systems;
      • microcomputers and peripherals;
      • telephones;
      • wireless paging systems;
      • fax machines;
      • electronic calculators;
      • typewriters and text processors;
      • furniture;
      • lamps/lighting instruments; and
      • food materials (condiments, meat, eggs and vegetables, seafood, fruit, soft drinks, alcohol drinks and dairy products).

      The repeal of the prohibition was announced in Circular [2020] No. 36, jointly issued by the Ministry of Finance, General Customs and the State Taxation Administration.

      Report from Shiqi Ma, IBFD China office

    • China Renews Preferential Policy for Integrated Circuits and Software Industry

      Source: IBFD Tax Research Platform News

      China has renewed its policy of promoting the development of high-quality integrated circuits (ICs) and software, including tax and other incentives, for the industry.

      The main tax incentives announced are as follows:

       Exemption from enterprise income tax
      Post-exemption reduced tax rate
      Minimum period of manufacturing operations

      enterprises or projects engaged in manufacturing ICs with a line width of not more than 0.8 microns

      first 10 years
      none (normal rate of 25%)
      15 years

      enterprises or projects encouraged by the state that are engaged in manufacturing ICs with a line width of not more than 65 nanometres

      first 5 years
      12.5% for 5 years
      15 years

      enterprises or projects encouraged by the state that are engaged in manufacturing ICs with a line width of not more than 130 nanometres*

      first 2 years
      12.5% for 3 years
      10 years

      enterprises engaged in the design, assemble, materials, packing and testing of ICs, and software enterprises that are encouraged by the state

      first 2 years starting from first profit-making year
      12.5% for 3 years

      key encouraged enterprises engaged in the design of ICs and software enterprises
      first 5 years starting from first profit-making year

      * Losses may be carried forward for 10 years (instead of the normal 5 years).

      The tax incentives commence from the first profit-making year of the enterprise or, in the case of projects, the first year in which revenue is derived from manufacturing. A list of enterprises and projects that are eligible for the incentives will be compiled by the relevant ministries.

      In respect of indirect taxes:

      • the current preferential policy on value added tax (VAT) for ICs and software enterprises in relation to the refund of VAT exceeding 3% of the total VAT burden (thus after offset against input tax) continues to apply; and
      • qualified enterprises are exempt from import duties on certain items and key IC projects may be allowed to pay VAT on import of new equipment in instalments.

      It is noted that the incentives are available to all ICs and software enterprises established in China that have fulfilled the requirements stated therein, regardless of the source of their investment capital (thus regardless of whether they are state-owned or private, or domestic or foreign invested).

      The State Council issued Notice of State Council [2020] No. 8, which came into effect on 4 August 2020 for the above incentives. In addition, Notice of State Council [2000] No. 18 and Notice of State Council [2011] No. 4 remain effective. However, in case of divergence, the provisions of Notice of State Council [2020] No. 8 will prevail.

  • Focus Africa
    • Nigeria is set to launch the Segilola Gold Project in Osun state in 2021

      NIGERIA / MINING - Nigeria is set to launch the Segilola Gold Project in Osun state in 2021, according to the recent statement of the Minister of Mines and Steel Development, Olamilekan Adegbite. According to the Minister, the project is expected to create about direct 400 direct jobs and 1000 indirect jobs along the gold value chain. The project is expected to open up an industry centered around gold production, from equipment leasing and repairs, logistic and transport. Gold requires a specialized means of transport, security, insurance, aggregators among others. Nigeria has largely untapped deposits of 44 minerals including gold, iron ore, coal, tin and zinc, in more than 500 locations, but mining makes up just 0.3% of the economy.
    • MTN announced it would pull out of the Middle East to concentrate on Africa

      AFRICA / TELECOM - Africa's largest mobile operator, South African telecoms giant MTN, announced it would pull out of the Middle East to concentrate on Africa, and scrap its interim dividend under a blueprint to navigate the coronavirus pandemic. In the January to June period, MTN's subscriber base rose by 10.6 million to 251.5 million compared to end-2019. Earnings before interest, taxation, depreciation and amortisation (ebitda) rose 10.9 percent to R41.8-billion.
    • VeggieVictory announced last week that it has raised its first round of angel investment

      NIGERIA / START UPS - VeggieVictory announced last week that it has raised its first round of angel investment. The investment sum was not disclosed. VeggieVictory is one of the first Nigeria’s plant-based meat company. Starting out of their restaurant located in Lagos, the company created a variety of soy-based meat alternatives to incorporate into Nigerian cuisine dishes, as well as vegan hot dogs, burger patties, and shawarma. Additionally, they released VegMeat, which is a shelf-stable, plant-based alternative that mimics chunks of beef and does not need to be refrigerated. Elsewhere in Africa, Infinite Foods is becoming a well-known name for alt-protein. VeggieVictory plans on offering additional plant-based meat products in the future and announced that vegan beef jerky will be one of them. Their products are currently available in 12 states within Nigeria, and they plan on expanding to neighboring West African countries.
    • Ghana-based healthtech startup, mPharma has been listed among CB Insights’ 150 most Promising Digital Health Startups 2020 rankings

      GHANA / HEALTH TECH - Ghana-based healthtech startup, mPharma has been listed among CB Insights’ 150 most Promising Digital Health Startups 2020 rankings. The startup is the only African healthtech named in the ranking which showcases the top private digital health companies transforming the future of healthcare in the world. mPharma was recognized for its achievements in the rankings for the Pharma Supply Chain category. The startup was among the 150 companies selected out of about 8,000 startups across the globe. mPharma is a data and cost management platform connecting Africans to affordable quality prescription drugs. The company was founded in 2013 by Gregory Rockson (CEO), Daniel Shoukimas (CPO) and James Finucane (CTO). Since its launch, mPharma’s focus has been to make pharmaceuticals accessible and affordable. It also helps pharmaceutical companies to keep stock of their inventories. Over the years the company has grown steadily and now operates in four countries including Nigeria while supporting over 250 pharmacies. The company has raised a total of about $40 million in funding placing it around 108 on the 2020 cohort list.
    • The government of Ghana has cut the sod for the construction of a new Water Supply system in Yendi

      GHANA / WATER MANAGEMENT - The government of the Republic of Ghana under the leadership of President Nana Addo Dankwa Akufo-Addo has cut the sod for the construction of a new Water Supply system in Yendi, a town and the capital of Yendi Municipal district in the Northern Region of the West African country. The project is being financed by the India Exim Bank under a $30m loan facility. The latter entered into the financial agreement with the government of the Republic of Ghana recently after approximately 24 months of negotiations. The aim of the project is to provide the people of the Yendi Municipality and surrondings with 5,000 cubic meters of water per day, at least for the next 20 years.
    • Dangote Cement will this month do test runs for the $90 million gas-fired power plant in Mtwara, southern Tanzania

      TANZANIA / INVESTMENTS - Dangote Cement will this month do test runs for the $90 million gas-fired power plant in Mtwara, southern Tanzania, after months of delays occasioned by the Covid-19 pandemic. The plant is expected to stop the use of imported coal besides ending diesel imports tax disputes with the government. Plant commissioning will start this month and is expected to go fully online in November. The company reported a decline in cement production for the first six months of this year and said it sold 526,000 tonnes of cement in the period, four per cent lower than the same period last year. Dangote is banking on the power plant to enhance the efficiency of its three million-metric tonne per annum capacity.
    • Post Covid-19: Rebuilding Africa and strengthening its resilience against future economic shocks

      Source: African Business

      After demonstrating its resilience during the Ebola outbreak and the global financial crisis, Africa is once again facing a severe test of its strength and agility because of the coronavirus pandemic. The good news is that the continent has entered this crisis in reasonably good shape following decades of progression in health, education and economic outcomes.

      As of early 2020, macroeconomic fundamentals in Africa were improving, with investments, rather than consumption, accounting for more than half of the region’s growth. Inflation was falling and the continent was making impressive strides towards accomplishing the United Nations Sustainable Development Goals (SDGs). Africa must build on the momentum and strive to prevent the coronavirus pandemic from reversing the gains of the past 20 years.

      Admittedly, that’s easier said than done: despite their best efforts, many countries still struggle with fragile health systems, high debt levels, weak external balances, as well as high rates of poverty and unemployment. The African Development Bank now projects that Africa will fall into a recession in 2020 with economic growth contracting by at least 1.7%. In a worst-case-scenario, this figure could turn out as high as 3.4%.

      Cumulative losses in gross domestic product (GDP) across the continent could range between $173.1bn and $236.7bn in 2020 and 2021. The coronavirus pandemic threatens to increase the debt burden of African countries from 60% to 70% of GDP, heightening the likelihood of a sovereign debt crisis. The additional financing required to cushion the consequences of the crisis could be in excess of $150bn.

      In a part of the world where 85% of the population earn their living in the informal sector, unemployment as a direct result of the coronavirus pandemic could push an additional 28 to 49m people into extreme poverty. Moreover, if we fail to take adequate action, the impact of the crisis on food insecurity and malnutrition may be even worse than anticipated.

      What can be done to support African economies?

      To counter the fallout of the coronavirus pandemic, Africa needs robust policy responses from every country on the continent, paired with strong support from Africa’s development partners. In the short term, African countries should prioritise healthcare spending for the provision of essential personal protective equipment (PPE) and materials, acceleration of local production of medical supplies including PPE and vaccine and drug discovery.

      Targeted cash transfers and subsidies for vulnerable households as well as subsidies and tax relief for businesses should be high on the agenda. Central banks must inject liquidity into the economy, turning to unconventional policy tools such as quantitative easing if necessary. In the longer term, countries should seize the imperative of building resilience to future crises. As good times return and economies get back on track, it should become a priority to build domestic and external buffers against any potential exogenous shocks.

      More money should be earmarked for scientific, economic and social research. Countries should pursue global and continental partnerships to prepare for eventualities. Private sector growth and revamping education and labour markets for the future of work are also key.

      The role of development partners

      At the onset of the coronavirus pandemic, multilateral development institutions took immediate action to help Africa’s poorest countries navigate the crisis and help them on the road to recovery. The African Development Bank is playing its part through its $10bn Covid-19 Rapid Response Facility (CRF). The CRF offers immediate relief to African countries to address the crisis by providing additional resources for public health interventions, social protection programs and liquidity and budget support to affected sectors of their economies.

      Civil society and think tanks have a useful role to play by helping to build trust, solidarity and uptake of Covid-19 prevention and containment measures. They can also help to ensure that Covid-19 interventions are carried out equitably and that governments are held accountable for their policies and actions.

      The African Development Bank stands ready to work with other multilateral financial institutions and wealthier nations to alleviate the impact of the pandemic on African countries. For example, we welcome partnerships to establish dedicated donor-financed Covid-19 trust funds. We also urge G20 nations to consider debt forgiveness for low-income countries.

      Reasons to remain optimistic

      The continent’s youthful and innovative population, its growing middle class, its value addition to the abundant natural resources and its ever-improving governance systems give us plenty of reason to be confident that Africa will overcome the ravages of the coronavirus pandemic.

      This year marks the first time the continent has entered a recession in more than half a century. Over the past two decades, Africa has boasted some of the highest growth rates in the world, setting the region up as the next investment frontier in a post-Covid-19 world.

      The level of cooperation in Africa has been encouraging. But beyond the crisis, we need to continue working together to help rebuild our economies and prepare them for the future. Africa will emerge from this episode stronger and more resilient than ever before.

      Charles Leyeka Lufumpa is Acting Chief Economist and Vice President for Economic Governance and Knowledge Management at the African Development Bank Group

    • Ethiopia Showcases First Locally Assembled Electric Car

      Electric cars are increasing in popularity thanks to companies like Tesla and legacy car manufacturers are starting to take them seriously. This has led them to come up with new electric cars, and most importantly ramp up production across the world. Well, our neighbour is now a beneficiary to the electric car revolution. Ethiopia today announced that they will be locally assembling electric cars from the major car manufacturer, Hyundai. Ethiopia’s Prime Minister, Abiy Ahmed Ali received the first electric car fully assembled locally by a Hyundai dealership, Marathon Motors. The Prime Minster noted that such investments “support the country’s climate resilience and greening ambitions.” The car in question looks like the Hyundai IONIQ which debuted in its home country of South Korea in 2016. The 2016-2018 versions had a 28Kwh battery pack while the 2020 version has a bigger 38.3kwh battery back which they say can give you upto 200km and 274km of range respectively. The batteries can be apparently charged upto 80% in 33 minutes on a 50kW station or in 24 minutes at a 100kW fast charging station. However if you charge it at home in the 220-240volt means like in your house, 100% of range can be added with an overnight charge. It has a single electric motor that generates 120 horsepower with 295Nm of torque for the 2016-2019 versions or 134hp and the same amount of torque with the 2020 version, which is a similar power figure you get from 1.5 to 2.0 liter gasoline cars. Marathon Motors was reported to have invested half a billion birr (Kshs 1.5 billion) on the assembly plant. The assembly plant has the capacity to assemble 10,000 cars per year. One of the shareholders of Marathon Motor Engineering is the famous Ethiopian long distance athlete, Haile Gebreselassie who was present at the handover ceremony today.
    • Kenyan government receives bids from private institutions for five State-owned sugar firms

      KENYA – The government of Kenya approved the leasing of five state owned sugar factories last month July, in a bid to increase value addition, farmers’ incomes and improve competitiveness and service delivery in the sugar Sector. The factories will be leased through long term leases of at least 20 years under Right of Use (ROU) on a firm commitment that the lessee will re-develop and operate factory to meet the governments objectives. The idea behind leasing is that government will invite investors with experience in the global sugar industry with a focus on sugar as the main product and co –production of ethanol, co-generation of power and value add products such as industrial sugar, pharma sugar and sugar cubes. The five factories slated for leasing are Chemelil sugar, Miwani Sugar Company which is under receivership, Muhoroni sugar also under receivership, Nzoia sugar company and South Nyanza sugar company. According to reports by Business Daily, the agriculture ministry has received bids from 29 companies including two firms linked to the billionaire Rai family i.e. West Kenya Sugar Company and Sukari Industries. Other bidders are China CAMC Engineering Company Limited, Shenzhen Start Instruments, Mheta Group, Kiboss Sugar, Butali Sugar Mills, Mini Bakeries and Kuguru Food Complex. “The next stage that will follow will be evaluation of the bids after which those ones that will qualify will be asked to present their proposal from which we shall pick the winners,” Benjamin Tito, chairperson of the tendering committee. The government is banking on capital injection by private investors to revive the country’s sugar industry, long crippled by poor funding, ageing machinery and an overall high cost of production. “We want to attract and finally secure only those investors we think serious and worthy enough to partner the government in the revival of the sugar industry in Kenya,” Agriculture Cabinet Secretary Peter Munya said. Other reforms put in place by the government to revive the sector include, banning the importation of brown sugar into the Country since July and suspending sugar import permits and pre-shipment approvals until further notice. This move aims to curb influx of the cheap sweetener in the domestic market, which has negatively impacted the local sector. The government also approved debt write off of State-owned mills and Out-grower institutions as at 31st December last year.    
    • Zambia’s Zazu launches pan-African correspondent fintech network

      Zambian fintech startup Zazu has launched Union54, a correspondent network of fintech platforms that seeks to facilitate real-time payments across Africa and offers each member equity.   Launched in October 2015, Zazu originally allowed farmers with extra produce to connect with new markets, but pivoted into the digital banking space in 2017. Its mobile wallet allows customers – even those without a bank account – to send, receive, pay and save money digitally. The startup, which raised US$1.4 million in funding late last year, has now announced the launch of Union54, a member-owned association of fintechs across Africa. Zazu has built a digital banking app connected to a debit card, with the startup’s contribution to Union54 being the product. Members will operate the product and issue Union54 debit cards in their markets. Perseus Mlambo, chief executive officer (CEO) of Zazu, described the initiative as a union of fintechs across Africa all operating the same product, and each owning equity in the union. “If successful, the move promises to effect a properly pan-African challenger bank capable of real-time cross-border payments,” he said. “We have been directly approaching members for a while now, and we now have just under 10 under serious consideration – contracting will be happening later in the year.” Founding members are given equity in Union54, meaning they are incentivised to stay for the long run. Slated to launch with a multi-currency debit card, Union54’s app will allow customers to create joint accounts, including saving groups, and perform real-time cross-border payments, along with other features to be expected from a financial services app. “With Version 2 of the product, our goal is to leverage that scale by looking at turning cardholders into merchants and opening up our product suite to any business in Africa to integrate into our vast payment APIs,” Mlambo said.   BY  ON 
    • Kenya reveals Sh540bn nuclear power plant in Tana River

      Kenya is set to build a $5 billion (Sh540 billion) nuclear power plant on a site in Tana River County over the next seven years with funding from private investors.
      The Kenya Nuclear Electricity Board (KNEB) in a regulatory filing with the National Environment Management Authority (Nema) revealed that the plant with an initial capacity of 1,000 megawatt (Mw) plant would be constructed through a concessionaire.
      The government looks to expand the plant’s capacity fourfold by 2035 under a build, operate and transfer (BOT) model.
      The KNEB plan will be subjected to public scrutiny before the environmental watchdog can approve it and pave the way for the project to continue.
      Kenya views nuclear power both as a long-term solution to high fuel costs — incurred during times of drought when diesel generators are used — and an effective way to cut carbon emissions from the power generating sector. The KNEB said private funding for the nuclear plant would ease the burden on Kenya’s strained public coffers. The estimated cost of the nuclear plant is nearly half the government’s annual tax collections.
      “The financing aspect of the Nuclear Power Plant is among the plans underway with a Build Operate Transfer (BOT) being the most preferred financing agreement with the concessionaire that shall come on board,” the agency says in plans submitted to the environmental watchdog.
      The agency said Tana River is the most preferred location since it is not prone to earthquakes. Other sites under consideration were in the Lake Victoria and Lake Turkana basins.
      The proposed sites are endowed with large water masses, which are crucial in cooling nuke reactors.
      The project would involve the building of a ‘third-generation’ plant with pressurised water reactors. Nuclear reactors require reliable sources of water for steam condensation, service water, emergency core cooling system and other functions.
      South Africa is the only country in Africa with a nuclear power plant near Cape Town.
      Kenya’s energy mix currently consists of geothermal (45 per cent), hydropower (28 per cent), wind (13 per cent) and expensive diesel-run generators (11 per cent) according to the Economic Survey.
      Experts say that hydropower, despite being the cheapest, is weather-dependent, making it unreliable during drought, hence the need for alternative base loads like nuclear that runs for long and uninterrupted.
      The nuclear plant would be Kenya’s biggest and most expensive project since the Chinese-built standard gauge railway. The KNEB has running memoranda of understanding with China, Russia, South Korea and Slovakia for capacity building for the nuclear plant.
        The nuclear agency wants the State to fend off risks of graft associated with similar mega projects when it is implemented.
      Any compromise on implementation standards for the nuclear power plant would also be a hazard, adds the agency.
      “Kenya is at a risk due to the expected investment of Sh500 billion ($5 billion) into the Nuclear Power Plant if the current issues of run-away corruption are not curtailed, which may lead to massive public economic loss due to possible implementation delays and overruns as experienced in other mega projects in the country,” says the agency.
      “The vice has the potential of exposing the country to national safety and security risks.”
      As well as a nuclear plant, President Uhuru Kenyatta’s administration has talked of building solar and wind energy facilities in the coming three years to increase power generation from 2,712 megawatts.
      Additional cheaper electricity for industrialists is meant to boost economic growth.
    • Ghana’s economy to witness US$10bn boost with revamping of Integrated Aluminum Industry

      Ghana is expected to witness a $10 billion boost in her economy with government's plan of exploiting bauxite and aluminum reserves into the Integrated Aluminum Industry. To achieve that objective, the Management of the Ghana Integrated Aluminum Development Corporation (GIADEC), in partnership with the Volta Aluminum Company Limited (VALCO) has deployed a Recovery Plan of retrofitting the VALCO refinery plant to produce at its full capacity of 300,000 tonnes of aluminum per annum. It is also expected to establish three new bauxite mines, and at least two refineries in addition to the existing smelter. The successful implementation of the Recovery Plan is expected to generate 35,000 direct and indirect jobs as well as create a vibrant downstream sector. Mr Kweku Asomah-Cheremeh, the Minister of Lands and Natural Resources, who announced this at the swearing-in of the reconstituted Governing Board of VALCO in Accra, said the aluminum industry was a strategic sector contributing significantly to the manufacturing sector of many key economies globally. In view of that, the Minister said, VALCO aimed at leveraging on the country's existing bauxite reserves and allied aluminum assets to drive the full commercial exploitation through refining bauxite into Alumina and smelting it into Aluminum as well as encouraging the development of further downstream industries towards accelerating industrial transformation. Mr Asomah-Cheremeh explained that establishing an Integrated Aluminum industry was an opportune and continuous effort by the government to strengthening the capacity of the Aluminum Industry supply chain. This, he said, could be achieved through partnerships with strategic investors both locally and internationally. Pursuant to accelerating the country's industrial development, Mr Asomah-Cheremeh noted that GIADEC was established through an Act of Parliament in 2018, to leverage on the existing bauxite reserves to drive commercial exploitation and production of aluminum to enhance national economic growth. Dr Henry Benyah, the Board Chairman of VALCO, in his acceptance remarks, was thankful to the President for the honour and pledged to work closely with all the stakeholders to achieve the vision and mission of VALCO towards accelerating industrial transformation. He announced plans to clear VALCO's legacy debts and make it commercially viable for growth. Mr Michael Ansah, the Chief Executive Officer (CEO) of GIADEC and member of the VALCO Board, told the media that with the reconstitution of the Board, GIADEC would work closely with all the relevant stakeholders in securing a strategic investor, to source requisite funding for rejuvenating VALCO's operations. He said VALCO would be listed on the London Stock Exchange to attract the necessary investors, and subsequent financial inflows to revamp its operations.
    • Ethiopia is set to launch its second satellite into space, again with China’s help

      Ethiopia is finishing plans to launch its second satellite into orbit next month, just eight months after the launch of its ETRSS-1 Satellite last December.

      The country’s space ambitions, backed by China’s funds and its satellite launch sites, has seen Ethiopian engineers design the satellites in an initiative co-funded by both countries. The ET-SMART-RSS earth observation nano satellite is expected to take off from the Wenchang Spacecraft Launch Site, in Wenchang, Hainan province.

      “We will benefit from this satellite’s data collecting abilities for up to a year,” says Dr. Yeshurun Alemayu, of Ethiopia’s Space Science and Technology Institute (ESSTI) via the institution’s website.

      Ethiopia’s ETRSS-1 satellite, which is manned by a team of engineers at the Entoto Observatory and Research Center on the outskirts of the capital Addis Ababa, analyzes weather patterns to extract data and enhance the country’s preparedness in the case of drought. The country’s collaboration on space projects with China was signed into agreement in 2016, by Ethiopia’s then minister of Science and Technology, the current prime minister Abiy Ahmed.

      Due to the heavy capital investment required, space programs were once considered beyond the reach of most developing countries. But the willingness of China, Japan, and Russia to collaborate with budding space programs, as well as the emergence of smaller, cheaper satellites, has more African states contemplating satellite launches. Ethiopia’s ETRSS-1 satellite launch sent the continent’s 41st satellite into orbit. Months earlier, Sudan’s successful debut launch made headlines, as had Rwanda’s in February of 2019. Egypt leads Africa with nine successful satellite launches since 1998, four of them coming last year.

      In 2017, the African Union introduced an African space policy, which calls for the development of a continental outer-space program and the adoption of a framework to use satellite communication for economic progress. And even as criticisms abound over the anomalous use of resources in the face of more immediate day-to-day concerns related to poverty, health, and education, the demand for satellite capacity is expected to double in the next five years in sub-Saharan Africa as climate change concerns grow and governments try to get ahead of the challenge.

      The ESSTI’s director general Dr. Solomon Belay indicated last week in an interview with the state run, Ethiopian Broadcasting Corporation that Ethiopia is aiming to reach 10 satellites launched by the end of the decade. “We have learned a lot and gained enriching experience from the launch of our first satellite,” Dr. Solomon said. “This second satellite will cover ground and collect data in areas we are yet to reach.”

      The country’s second remote sensing satellite will weigh 8.9 kilograms and be of improved resolution for its handlers on the ground at its Ethiopian command center. Costs amounting to $1.5 million are being covered by the ESSTI’s partner on the project, the Beijing Smart Satellite Space Technology.

      By Zecharias Zelalem

  • Hong Kong
    • Hong Kong Updates Guidance on Tax Treatment of Royalties and IP-Related Income

      Source: IBFD Tax Research Platform News

      The Inland Revenue Department (IRD) has updated the administrative guidelines on the tax treatment of royalties and other income derived from intellectual property (IP). The guidelines set out in detail the deeming provisions for IP-related income, guiding principles used in determining the source of royalty income, use of the appropriate deemed profit rates and the application of treaty tax rates.

      The latest guidelines as provided in the Departmental Interpretation and Practice Note (DIPN) No. 22 (revised) are summarized below.

      • The latest changes to the relevant legislative provisions deem certain sums derived from IP to be sourced from Hong Kong and subject to profits tax (i.e. the deeming provisions), such as sums for the use of intellectual property outside Hong Kong and for the assignment of a performer's right in relation to a performance in Hong Kong, as well as the introduction of a new provision on the taxation of sums attributable to value creation contributions in Hong Kong.
      • The broad guiding principle used to determine the source of royalty income is to see what the person has done to earn the profits in question and where the person has done it. The following situations are analysed when applying the principle:
        • totality of facts;
        • licensing of IP created or developed by licensor;
        • licensing of IP purchased by licensor; and
        • sublicensing of IP.
      • The following scenarios are analysed when applying the deeming provisions:
        • exhibition or use of cinematograph films, etc. in Hong Kong;
        • use or right to the use of patents, trademarks, etc. in/outside Hong Kong;
        • use or right to the use of IP generated from research and development activities in Hong Kong;
        • use or right to the use of IP with value creation contributions in Hong Kong; and
        • assignment of performer's right.
      • The application of the 30% and 100% deemed profits rate when computing the assessable profits are explained accordingly. Briefly, the assessable profits are deemed to be 30% of the sum received or accrued except where the IP was previously "owned" by a person carrying on a trade, profession or business in Hong Kong and the sum is paid or accrues to an "associate". In the latter case, 100% of the sum paid or accrued is taken as the assessable profits. The purpose of deeming 100% of the sum as assessable profits is to counter avoidance schemes that involve arrangements with overseas associates.
      • The rate specified in the royalties article of the relevant tax treaty will apply where the recipient is the beneficial owner of the royalty income, unless the business profits article applies. However, treaty benefits will not be applicable if the general anti-avoidance or specific anti-avoidance provisions are invoked.

      DIPN No. 22 (revised) replaces the previous DIPN issued in January 2005 and the full details are available here.

      Report from Ying Zhang, Senior Associate, IBFD

  • India
    • India Launches Transparent Taxation Platform

      With a clear agenda to build trust between the taxpayers and the administration, the Prime Minister has launched the "Transparent Taxation" platform to honour honest taxpayers amid the COVID-19 pandemic. The said platform focuses on major reforms such as faceless assessment, faceless appeal and the Taxpayers' Charter.

      Faceless assessment and faceless appeal

      The faceless assessment and faceless appeal schemes aim to simplify the assessment and appeal process, ensure anonymity of taxpayers and minimize direct contact between taxpayers and income tax officers. In this regard, the Central Board of Direct Taxes issued an order under section 119 of the Income Tax Act 1961 dated 13 August 2020 to support various e-governance initiatives, instructing that all assessment orders from now on be passed by the National e-Assessment Centre through the Faceless Assessment Scheme 2019, except for:
      • assessment orders in cases assigned to Central Charges; and
      • assessment orders in cases assigned to International Tax Charges.
      The cases taken up for faceless assessment would include a mix of returns filed by individuals and businesses (micro, small and medium-sized enterprises, as well as large companies) and would be determined based on risk parameters and mismatches by a central computer. The National e-Assessment Centre would then allocate the cases to assessment units through an automated allocation system to ensure taxpayer anonymity. Assessees should then respond to notices electronically to the National e-Assessment Centre.

      Taxpayers' Charter

      Taxpayers are assured of fair, courteous and rational behaviour with the introduction of the Taxpayers' Charter 2020, which lists the Income Tax Department's commitments to taxpayers, including treating taxpayers with honesty, providing mechanisms for appeal and review, providing complete information, and reducing the cost of compliance, among other things, as well as the department's expectations from taxpayers. The faceless assessment and the Taxpayers' Charter are effective from 13 August 2020, while the faceless appeal will be available across the country from 25 September 2020 onwards.
    • India Issues Administrative Rules on Claiming Preferential Custom Duty Rates under Treaty Agreements

      The Ministry of Finance has issued administrative rules for importers of goods claiming preferential duty rates under treaty agreements. The procedures in the Customs (Administration of Rules of Origin under Trade Agreements) Rules of 2020 (the Rules) require that an importer or his agent claiming the preferential duty rate:
      • declare that the goods qualify as originating goods for preferential rate of duty under an agreement at the time of filing the bill of entry;
      • indicate the respective tariff notification against each item on which preferential duty rate is claimed;
      • produce the certificate of origin (CO) covering each item on which the preferential rate is claimed; and
      • enter certain details from the CO in the bill of entry as prescribed by the Rules.
      Importers claiming preferential rate of duty are expected to:
      • possess information as indicated in Form I of the rules;
      • keep all supporting documents related to Form I for at least 5 years from the date of filing of the bill of entry and submit the same to the proper officer on request; and
      • exercise reasonable care to ensure the accuracy and truthfulness of the information and documents.
      The claim of preferential duty rate may be denied without verification if the CO:
      • is incomplete and not in accordance with the format prescribed in the Rules of Origin;
      • has an alteration not authenticated by the issuing authority;
      • is produced after its validity period has expired; or
      • is issued for an ineligible item.
      The claim may also be disallowed without further verification when:
      • the importer relinquishes the claim; or
      • the information or documents furnished by the importer and available on record are sufficient to prove that the goods do not meet the prescribed origin criteria.
      An importer must provide information or documents requested for verification by an officer within 10 working days from the date of request. Where the importer fails to comply by the prescribed date or where the information and documents are found to be insufficient, the officer shall forward a verification proposal for the CO from the designated verification authority in the exporting country or country of origin. Where it is established that an importer has suppressed the facts, made wilful misstatement or colluded with the seller or any other person, with the intention to avail undue benefit of a trade agreement, his claim of preferential rate of duty will be disallowed and the importer will be penalised accordingly. The Rules will come into force on 21 September 2020. Details are available here.
    • India Updates Scope of Mandatory Electronic Invoicing for Certain Taxpayers

      The Central Board of Indirect Taxes and Customs has updated the scope of the mandatory electronic invoicing (e-invoicing) requirement which will be effective from 1 October 2020. The following changes were announced in Notification No. 61/2020 – Central Tax of 30 July 2020:
      • taxpayers whose aggregate turnover exceeds INR 5 billion (from the previous limit of INR 1 billion) in a financial year will be required to issue e-invoices; and
      • a special economic zone unit is exempt from the requirement.
      The increase in the revenue threshold for mandatory e-invoicing aims to provide relief on compliance requirements for small companies. Insurance companies, banks, financial institutions, including non-banking financial institutions, goods transport agencies and passenger transportation services, which are covered by different invoicing rules, are exempt from the e-invoicing requirement.
  • Switzerland
    • Switzerland and United States Sign Mutual Agreement on Conducting Arbitration Procedures to Tax Treaty

      On 30 July 2020, the Swiss Ministry of Finance published a mutual agreement, signed by Switzerland on 28 July 2020 and by the United States on 23 July 2020, respectively, on mandatory binding arbitration under article 25(6) and (7) of the Switzerland - United States Income Tax Treaty (1996), as amended by the 2009 protocol and exchange of notes.   Cases eligible for arbitration The cases eligible for arbitration are:
      • cases in which no agreement under a mutual agreement can be reached, generally, within 2 years and all conditions for starting an arbitration procedure are satisfied; and
      • unresolved bilateral Advance Pricing Agreement (APA) requests.
      Cases not eligible for arbitration The cases not eligible for arbitration are:
      • cases not accepted by a competent authority or cases where no assistance is provided to a taxpayer because the procedural requirements are not met;
      • cases which are deemed not to be suitable for arbitration by the competent authorities; and
      • cases solved by a decision of a Court or Administrative Tribunal.
      Interested parties have to decide within 30 days whether or not they agree with the outcome of the arbitration procedure. For the full text of the Memorandum of Understanding, see here.
  • United Arab Emirates
    • FTA Issues VAT Guide on

      The UAE Federal Tax Authority (FTA) has published a Guide on the VAT treatment of supplies of goods and services made through the Internet and similar electronic networks. The Guide provides guidance on the supply of goods and services made via the electronic market place, as follows:

      Supply of goods

      The rules with regard to the supply of goods depend on whether the supplier is resident in the United Arab Emirates or not and on the location from where the goods are delivered (from inside the United Arab Emirates or outside), as follows:

      • a supply made by a resident supplier to a recipient in the United Arab Emirates, with goods delivered from inside the United Arab Emirates: the supply would be subject to VAT at a rate of 5% unless goods are subject to 0%;
      • a supply made by a resident supplier to a recipient in the United Arab Emirates, with goods delivered from outside the United Arab Emirates: the supply will be subject to VAT on the import and will be accounted for by the importer;
      • a supply by a resident supplier to a recipient outside the United Arab Emirates, with goods being delivered from inside the United Arab Emirates: the supply will be subject to 0% if export conditions are met; if not, it would be subject to VAT at a rate of 5%, or 0% for specific goods;
      • a supply by a resident supplier to a recipient outside the United Arab Emirates, with goods delivered from outside the United Arab Emirates: the place of supply is outside the United Arab Emirates, therefore VAT would not be applicable;
      • a supply by a non-resident supplier to a recipient in the United Arab Emirates, with goods delivered from inside the United Arab Emirates: the supply would be subject to 5% or 0% for specific goods, unless the goods are delivered outside the United Arab Emirates, in which case the rate of 0% would apply if the export conditions are met. The VAT should be accounted for by the recipient if it is a registered person; otherwise, the supplier will be responsible to account for the VAT;
      • a supply by a non-resident supplier to a recipient in the United Arab Emirates, with goods delivered from outside the United Arab Emirates: VAT would be applicable only if the goods are imported into the United Arab Emirates;
      • a supply by a non-resident supplier to a recipient outside the United Arab Emirates, with goods delivered from inside the United Arab Emirates: If the goods are delivered to the United Arab Emirates, then the supply is subject to VAT rate of 5% (0% for specific goods). However, if the goods are delivered outside the United Arab Emirates, the supply would be subject to 0% if the export conditions are met; otherwise, the rate of 5% (0% for specific goods) would apply; and
      • a supply by a non-resident supplier to a recipient outside the United Arab Emirates, with goods delivered from outside the United Arab Emirates: VAT would be applicable only if the goods are imported into the United Arab Emirates.

      Supply of services

      To fall under the special rules for electronic services, the supply of services must meet the following conditions:

      • the services must be referred to in article 23.2 of the Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments referred to as "Executive Regulation". Any services which are not mentioned in the article and supplied via the Internet or any network are not considered electronic services; and
      • the services must be automatically delivered via the Internet, an electronic network, or an electronic marketplace. The delivery of the services must be essentially automated; only a small degree of human intervention is acceptable.

      The VAT rules on electronic services depend on whether the services are being used and enjoyed in the United Arab Emirates or not, as follows:

      • if the place of use and enjoyment of the service is the United Arab Emirates, the supply of services is subject to a rate of 5% (0% for specific services); and
      • if the place of use and enjoyment of the service is outside the United Arab Emirates, the supply of services is not subject to VAT.

      Supplies made through the electronic market place

      With regard to the supply of goods and services made through an electronic market place, such as distribution platforms, portals gateways, etc., the guide provides that the VAT treatment would depend on the arrangement made between the supplier, the intermediary and the recipient of the supply:

      • where the intermediary acts as a disclosed agent between the supplier and the recipient of the supply, the supply is treated as made directly by the supplier to the recipient. The supplier should account for the VAT; and
      • where the intermediary acts as an undisclosed agent between the supplier and the recipient of the supply, there are two supplies for VAT purposes – from the supplier to the intermediary, and from the intermediary to the recipient. In that case, both the supplier and the agent should account for the VAT.

      The Guide, published on 13 August 2020, further clarifies that if the intermediary charges a fee or a commission, this would be considered a separate supply which needs to be analysed (including the place of supply rules) independently from the supply of goods and services underlying the services.

  • United Kingdom
    • Finance Act 2020: United Kingdom Introduces a New Digital Services Tax and Maintains the Corporation Tax Rate at 19% for 2020-2021

      Among the corporation tax measures taken in the Finance Act 2020, the corporation tax (CT) rate was maintained for year 2020/2021 and a new Digital Services Tax (DST) was introduced.

      CT rate for the financial year 2020/2021

      The CT rate has been set at 19% for the financial year 2020/2021. This is a change from the 2015 Budget announcement that the rate would be reduced to 18% from 1 April 2020, and the 2016 Budget announcement that the rate would be further reduced from 18% to 17% from 1 April 2020.


      A new 2% tax on the revenues arising from digital services which derive value from UK users is applicable as from 1 April 2020. The purpose of the measure is to ensure that large multinational businesses in the scope of the measure make a "fair" contribution to supporting vital public services (as user participation is not the test for allocating profits between different countries).

      Scope of the DST

      The DST applies to group´s businesses obtaining digital services revenues attributable to UK users. The following are considered digital services activities:
      • social media service: being services in which the main purpose (or one of the main purposes) is to promote interaction between users or between users and user-generated content and sharing user-generated content;
      • search engine: not defined as such but it does not include searches in the very same website or facility; and
      • online marketplace: being services in which the main purpose (or one of the main purposes) is to facilitate sales between users, i.e. services enabling users to sell, advertise or offer particular things to other users.

      So considered associated digital services activities (such as the ones facilitating online advertising or generating significant benefit from the association with the digital service activity) are also in the scope of the DST. Where revenues arise in connection with a digital services activity, the revenues are to be treated as arising in connection with the activity "to such extent as is just and reasonable".

      Persons liable to DST – DST calculation

      DST is imposed at the level of group businesses that provide digital services activities with the following conditions:

      • that the total amount of digital services revenues arising in an accounting period to members of the group exceeds GBP 500 million; and
      • that the total amount of UK digital services revenues arising in that period to members of the group exceeds GBP 25 million.

      If the above conditions are met, the members of the group are liable to a 2% DST in respect of the UK digital services revenues generated in an accounting period, being the first GBP 25 million of revenue derived from UK digital services activities excluded from the calculation.

      For more information about the DST, see this HMRC guidance.

      The Finance Act 2020 can be accessed here.

      Report from Rebecca Sheldon, Barrister, Old Square Tax Chambers

    • United Kingdom Introduces Income Tax Changes as Part of Finance Act 2020

      United Kingdom enacted Finance Act (FA) 2020 introducing some key changes to the UK income tax legislation. In particular, those changes concern workers' services provided through intermediaries and changes to the loan charge mechanism as summarized below.

      Workers' services provided through intermediaries

      The off-payroll rules (IR35) were designed to ensure individuals who are in reality employees but work through an intermediary, such as a limited company, pay the income tax and national insurance contributions of an employee, rather than a self-employed worker. On 27 April 2020, the House of Lords Finance Bill Sub-Committee released its report entitled "Off-Payroll Working: Treating People Fairly", which in summary argued for caution in extending the rules as there has been evidence that the existing rules were problematic. However, the FA 2020 extended the rules in the following way having effect from 6 April 2021:
      • all public sector clients and medium or large sized private sector clients will be responsible for deciding a worker's employment status; and
      • as a result of the above, if a worker provides services to either public sector or medium-sized or large private sector clients, they should obtain an employment status determination from the client, being provided, however, with the right to dispute it.

      Loan charge mechanism

      The 2019 loan charge mechanism was announced at Budget 2016 and applied to disguised remuneration loans from as far back as 1999 that were outstanding on 5 April 2019. The loan charge mechanism constitutes an anti-avoidance measure to prevent individuals from being paid in loans instead of a salary and, thereby, avoiding income tax and national insurance contributions. It works by stacking the years so that income received as loans across multiple years is taxed as if it had been paid all in one. The following changes were introduced by FA 2020:
      • the loan charge mechanism now only applies to loans made on or after 9 December 2010;
      • the loan charge mechanism will not apply to outstanding loans made in any tax years before 6 April 2016 where a reasonable disclosure of the use of the tax avoidance scheme was made to HM Revenues and Customs (HMRC) and HMRC did not take action;
      • an individual subject to the loan charge can elect to pay their loan balance across three tax years;
      • HMRC will refund "voluntary payments" made to prevent the loan charge arising and included in a settlement agreement since March 2016 for any tax years where the loan charge no longer applies (i.e. before 9 December 2010) or there was reasonable disclosure of a loan made before 6 April 2016 and HMRC did not take action; and
      • there has been additional flexibility over the way payments can be made relating to the level of income a person has (to prevent undue hardship).
      It should be noted that the independent review made by Sir Amyas Morse indicated a number of issue concerning the aforementioned changes to the loan charge mechanism. In particular, it was considered that the loan charge was disproportionate in that it went too far back in time to when the legal position was unclear and that stacking years together was too different from how income would normally be taxed.
    • United Kingdom Enacts Finance Act 2020

      On 22 July 2020, the Finance Bill 2019-2021 received royal assent becoming an Act of the British Parliament (the Finance Act 2020). The Finance Act 2020 introduces a number of important amendments, including, without being limited to, the following highlights:
      • changes to the IR35 legislation that concerns cases according to which a worker, who is engaged through an intermediary, should be treated as an employee rather than a worker for tax purposes. From 6 April 2021, the changes will entail that all public sector clients in addition to medium-sized or large private sector clients will be responsible for deciding a worker's employment status;
      • changes to the Loan Charge legislation that concerns the loan charge imposed on disguised remuneration under which a person is paid via a loan that is never repaid. The changes limit the loan charge's application to loans entered into force after 9 December 2010;
      • changes to principal private residence relief concerning, in particular, the exemption period at the end of ownership that is reduced to 9 months in most cases;
      • the introduction of the Digital Services Tax; and
      • changes to the General Anti Abuse Rule (GAAR), including protecting adjustments under the GAAR before the time limit expires and the issuing of protective GAAR notices.
      The Finance Act 2020 can be accessed here.
  • United States
    • Switzerland and United States Sign Mutual Agreement on Conducting Arbitration Procedures to Tax Treaty

      On 30 July 2020, the Swiss Ministry of Finance published a mutual agreement, signed by Switzerland on 28 July 2020 and by the United States on 23 July 2020, respectively, on mandatory binding arbitration under article 25(6) and (7) of the Switzerland - United States Income Tax Treaty (1996), as amended by the 2009 protocol and exchange of notes.   Cases eligible for arbitration The cases eligible for arbitration are:
      • cases in which no agreement under a mutual agreement can be reached, generally, within 2 years and all conditions for starting an arbitration procedure are satisfied; and
      • unresolved bilateral Advance Pricing Agreement (APA) requests.
      Cases not eligible for arbitration The cases not eligible for arbitration are:
      • cases not accepted by a competent authority or cases where no assistance is provided to a taxpayer because the procedural requirements are not met;
      • cases which are deemed not to be suitable for arbitration by the competent authorities; and
      • cases solved by a decision of a Court or Administrative Tribunal.
      Interested parties have to decide within 30 days whether or not they agree with the outcome of the arbitration procedure. For the full text of the Memorandum of Understanding, see here.
    • Corrections to Final Regulations on Cross-Border Reorganizations

      The US Treasury Department and Internal Revenue Service (IRS) have corrected errors in final regulations on property transfers and stock distributions in cross-border reorganizations. The corrections regard, in particular, the treatment of transfers of stock or securities to foreign corporations in outbound transactions. The final regulations (TD 9614) that are the subject of this correction were issued in 2013 under section 367 of the US Internal Revenue Code. The corrections were published in the Federal Register on 20 August 2020 (85 FR 51346) and are effective on that date.
    • IRS Issues Guidance on Tax Treatment of Distributions in the Absence of Accumulated Earnings and Profits

      The US Internal Revenue Service (IRS) has released guidance on the taxability of distributions from S corporations with no accumulated earnings and profits (AE&P). The guidance also addresses the items to consider to determine the taxability of non-dividend distributions, liquidating distributions, and sale-or-exchange redemption distributions. S corporations are small business corporations that are generally treated as flow-through entities under the US Internal Revenue Code (IRC). They are required to be organized as US domestic corporations and are not permitted to have non-resident shareholders or shareholders who are not individuals. Under IRC section 1368, all distributions made by an S corporation without AE&P, and non-dividend distributions, are non-taxable up to the shareholder's stock basis. Distributions exceeding the shareholder's stock basis are taxed as gain from the sale or exchange of property (generally capital gain). The IRS notes in its guidance that an S corporation will only have earnings and profits (E&P) if it was formerly a C corporation, i.e. a regular business corporation under the IRC, that converted to S status, or if the S corporation acquired assets from a C corporation in certain types of transactions. The guidance is in the form of a Practice Unit, and was released on 19 August 2020. It bears a Document Control Number of SCO-T-007 and indicates a date of last update of 29 June 2020. Practice Units are issued by the Large Business and International (LB&I) division of the IRS for the purpose of internal staff training. The document states that it is not an official pronouncement of law, and cannot be used, cited or relied upon as such.
    • COVID-19 Pandemic: US President Orders Payroll Tax Deferral, Including Possible Forgiveness

      US President Trump has ordered that the employee share of payroll taxes should be deferred until the end of the year. President Trump has directed the Secretary of the US Treasury to take the necessary steps to defer the withholding, deposit, and payment of the employee share of payroll taxes (i.e. the 6.20% FICA tax) from 1 September 2020 until the end of the year, as a further response to the economic impact of the COVID-19 pandemic. The deferral would be made available with respect to any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than USD 4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods. The Treasury Department is expected to issue guidance to implement the measure. In addition, the Treasury Department has been directed to explore avenues, including Congressional legislation, to forgive the taxes deferred. This Presidential order follows measures enacted under the CARES Act that permit deferral of the employer share of payroll taxes for the period beginning on 27 March 2020 and ending on 31 December 2020.
    • COVID-19 Pandemic: Guidance on Leave-Sharing Plans To Address Crisis

      Employers can set up a leave-sharing plan that permits employees to deposit leave in a "leave bank" for use by other employees who have been adversely affected by the COVID-19 pandemic. This will have no tax consequences for an employee who deposits leave but the employee will also not be able to claim a deduction for the deposited leave. The US Internal Revenue Service (IRS) has clarified the above in guidance in the form of frequently asked questions (FAQs). The FAQs refer to Notice 2006-59 that provides guidance on the federal tax consequences of certain leave-sharing plans as well as the requirements of a qualifying leave-sharing plan. The FAQs specifically provide that an employee who deposits leave in the leave-sharing plan need not include the deposited leave in income or wages. The FAQs indicate a last reviewed or updated date of 3 August 2020.
    • COVID-19 Pandemic: New Guidance on Payroll Tax Deferral

      The US Internal Revenue Service (IRS) has provided further clarification on deferring employment tax deposits, under rules introduced in the CARES Act to address the economic impact of the COVID-19 pandemic. The guidance is in the form of frequently asked questions (FAQs). The CARES Act permits deferral of payroll tax for the period beginning on 27 March 2020 and ending on 31 December 2020. The FAQs note that deposits can be deferred by reducing required deposits or payments for the relevant period, less credits against the employer's share of social security tax. The new guidance also explains how to report deferrals, how deferral works for employers that file annual employment tax returns, timing issues, the interaction with the "next-day deposit" rule, deferral by third-party payers, and certain other technical aspects.