February 2019

On 25 February 2019, the National Revenue Agency published guidance on potential VAT and customs implications of Brexit and on what businesses need to do in this respect. The main focus of the guidance is on a "no-deal" Brexit scenario. The National Revenue Agency provides various recommendations to companies doing business with the United Kingdom concerning the following main topics:

• registration with the customs authorities for trading with non-EU countries;
• checking whether they have the required human resources, technical capacity and customs permissions for trading with non-EU countries;
• requesting the customs authorities for possible customs simplifications and considering the application for obtaining the Authorized Economic Operator status;
• discussing the VAT and customs implications of the supply chain with trade partners (suppliers, intermediaries, transport companies, etc.);
• if they are registered under the MOSS scheme in the United Kingdom, considering registration for the same scheme in one of the EU-27 countries; and
• if they paid UK VAT in 2018, submitting VAT refund claims well in advance before 29 March 2019.

For the full guidance, see here (in Bulgarian).

On 21 January 2019, the National Revenue Agency published the amendments to the Tax Insurance Procedure Code (TIPC) for 2019. The proposed amendments result from a public consultation which ran until 5 December 2018. The 2019 changes are summarized below.

Changes to the rules for fiscal control over high fiscal risk goods

Companies trading in high fiscal risk goods will have to declare before the National Revenue Agency (NRA) authorities the transportation of goods carried out by means of transport with a loading capacity of over 3.5 tonnes. The obligation to declare refers to goods:

• from intra-Community acquisitions;
• from intra-Community supplies; and
• that are imported following completion of the inward processing procedure and the release of goods.

Examples of such goods are particular types of meat, milk products, vegetables, fruit, flour, sugar, and both sunflower and safflower oil. An exemption from the obligation to declare such goods is granted for goods intended for:

• final consumption;
• facilities and establishments within the country used by the declaring party;
• supplies weighing up to 300 kg and having an invoiced value of up to BGN 3,000 (EUR 1,500), excluding VAT; and
• transportation of liquid fuel, since these types of goods are subject to declaring following a special procedure.

Declarations must be filed via the NRA's electronic portal. For each declaration, the company will receive a unique number valid for 14 days after the declaration date. The transport operation cannot be declared earlier than 7 days before it takes place. The amendments also include a procedure for changing the list of declared goods during the period of transportation.

Ex-officio appointment of trustee for a company which has no representative due to death or other reasons

If a legal entity has failed to appoint a company representative for over 3 months due to the owner's death or other objective reason, the tax authorities may request the appointment of a trustee for the company from the tax court to avoid that tax proceedings are held up for an undetermined period of time.

Changes to the procedure for electronic exchange of documents in proceedings pursuant to TIPC

The following amendments are introduced for the implementation of Article 3(5) of Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market:

• electronic documents filed to the tax authorities by companies and third parties will be submitted for court proceedings also in electronic format. Thus, it will no longer be necessary to print out tax documents which are to be presented to the court; and
• a wider circle of NRA employees will be entitled to send electronically documents addressed to companies and private individuals.

Changes to the procedure for ex-officio exchange of information for the purposes of integrated administrative services

The following amendments are envisaged:

• the tax authorities will issue certificates listing all amounts due by companies, including those that have already been secured;
• the tax authorities will have access to the registry information exchange system maintained by the State Agency on e-Government (RegiX) to check all amounts due by a particular company;
• the tax authorities will have the right to withdraw from court proceedings a document issued regarding a person's social status; and
• companies will have the right to appeal against a refusal of the tax authorities to issue a document containing information on persons' social status.

Rules on transfer pricing for controlled transactions

Due to the implementation of the OECD's base erosion and profit shifting (BEPS) project, taxable persons will have to prepare two files:

• a local file containing information on the activities, controlled transactions (transactions with related parties) and the methods applied to determine market prices; and
• a summary file containing information on the group, including its organizational structure, activity, controlled transactions, functions of persons within the group and the transfer pricing policy applied. Taxable persons are required to have a summary file only where they are part of a multinational group of enterprises.

These files must be prepared annually. Companies are required to keep those files and present them to the tax authorities upon request. The following persons will be exempt from the obligation to keep local and summary files:

• persons whose net income from sales is below BGN 16 million (EUR 8 million) and whose balance sheet value of their assets does not exceed BGN 8 million (EUR 4 million); and
• persons which are not subject to corporate income tax or are subject to alternative taxation (organizers of games of chance).

Changes to the sanctions for non-compliance with the retention periods for data from software used in the commercial premises and in an e-store

Various pecuniary sanctions are introduced for companies that fail to comply with the retention periods for data on paper or on a technological medium, where such data are relevant for taxation. The fine will be higher when the violation concerns data stored on technological media, because these media are the only sources of such information.

Improvement of methods for collection of public receivables

The following amendments are envisaged:

• a 10-year absolute statute of limitations period will not apply to receivables claimed by the tax authorities in insolvency proceedings of companies;
• items purchased at a compulsory sale by auction which are not claimed by the buyer within 6 months will be considered abandoned in favour of the state;
• if a person has multiple tax liabilities, the oldest liabilities must be repaid first. Thus the order of repayment will not be determined by the liable person;
• it will not be possible to preserve funds constituting such a portion of a person's salary, stipend or pension that is equal to the statutory minimum salary; and
• the value of property used for securing tax liabilities will be determined in a manner applicable to all taxable persons, as follows:
  • for real estate, according to the estimated value for taxes;
  • for insured property, at insurance value; and
  • for uninsured property, at balance sheet or acquisition value.

The 13th National People's Congress opened its second session on March 5, 2019 in Beijing. Premier Li Keqiang delivered a report on the government work, and he said China would implement a larger scale of tax reductions in 2019. He said China will introduce both general-benefit and structural tax cuts, focusing primarily on reducing tax burdens on the manufacturing sector and on small and micro businesses. China will reduce the current value-added tax rate of 16 percent for manufacturing and other industries to 13 percent, and lower the rate for such industries as transportation and construction from 10 percent to 9 percent. Supporting measures, like increased tax deductions for producer and consumer services, will be taken to make sure that tax burdens in all industries do not go up.

China has set its GDP growth target at 6-6.5 percent for 2019, said Premier Li Keqiang when he delivered a government work report at the opening meeting of the annual legislative session. He said state-owned larger commercial banks must increase loans to small and micro firms by at least 30% this year, and China will reduce the tax burdens and social insurance contributions of enterprises by nearly 2 trillion yuan this year. China will announce more targeted reductions to required reserve ratios for small and medium-sized banks, and capital unleashed from these measures will be used to meet financing needs of small and private companies. Large banks are encouraged to replenish capital through different means and increase medium and long-term credit supply to the manufacturing sector. The country will lower the share borne by employers for urban workers' basic aged-care insurance, and local governments may cut contributions down to 16 percent, but they must ensure that small firms' social security payments will not be increased.

The Ministry of Finance, the State Administration of Taxation and the People's Bank of China recently issued the Circular on Further Strengthening Management on Handling Fees for Commissioned Collection of Taxes. The circular stipulates the scope of commissioned collection of taxes, and states that tax agencies shall pay handling fees of no more than 2% of the commissioned tax collections, and payment of handling fees to a single tax withholding agent is capped at 700,000 yuan a year.

The State Administration of Taxation recently issued its Announcement on Expanding the Scope of the Pilot Program of Allowing Small-scale Taxpayers to Issue Their Own Special Value Added Tax Invoices, with effect from March 1, 2019. According to the circular, all general taxpayers will be qualified to be exempt from the VAT invoice verification requirement, and small-scale taxpayers that are allowed to produce their own special VAT invoices will be further expanded to cover those specializing in the leasing and commercial services, science research and technical service, household services, repair and other sectors in addition to the previous accommodation, authentication and consulting industries, construction, industry, information transmission, software and IT sectors.

The Budget for 2019/20 was presented to the Legislative Council by the Financial Secretary on 27 February 2019. The tax-related proposals require legislative amendments before implementation. Once enacted, the amendments will apply from 1 April 2019. The main proposals include:

• a one-off tax reduction of 75% on profits tax, salaries tax and tax under personal assessment for the year of assessment 2018/19, subject to a maximum of HKD 20,000 per case; and
• a waiver of business registration fees for 2019/20.

Further details of the Budget will be reported in due course.

Radisson Hospitality AB, part of Radisson Hotel Group, signed 16 new hotel deals across Africa during the last 12 months, doubling the company's original 2018 target set for the first year of Destination 2022, the company’s five-year strategy. The company has 96 hotels and 20,000 rooms open and under development across 31 countries in Africa and is on track to reach 130 hotels and more than 23,000 rooms by 2022.

New Leadership

To support and drive the rapid growth of its Africa portfolio, Radisson Hotel Group has added Ramsay Rankoussi as VP of development, Middle East, Turkey and French-speaking Africa. Rankoussi has been with Radisson Hotel Group for more than five years, initially overseeing the growth of the company in the Middle East and Turkey and now leads the development activities across French-speaking Africa. He is supported by Erwan Garnier, director, development French- and Portuguese-speaking Africa. Together, they will take steps to accelerate the introduction of all Radisson brands in the region with a focus on key capital and economic cities. Also joining the group’s African development team is Caryn Venter, coordinator, development, sub-Sahara Africa. The new organizational structure follows the recent appointment of Frederic Feijs, who leads operations as regional director Africa-French-speaking countries for Radisson Hotel Group, and William McIntyre, the group’s regional director, Africa, overseeing the remaining Anglophone markets in sub-Sahara Africa. “We have ambitious plans for this important market and it is imperative that we have the right resources in place to support our growth,” said Rankoussi. “This means communicating effectively with owners and investors, as well as providing first-class levels of expertise, as we establish long-term relationships with our business partners in this market.” “We will continue to execute our five-year strategy with our expanded team, creating scaled hotel growth in key cities and resort locations across Africa during 2019,” said Andrew Mclachlan, SVP, development, sub-Saharan Africa, Radisson Hotel Group. “Cape Town, Johannesburg and Lagos are our three gateway cities in sub-Saharan Africa where we aim to have scaled growth and an ambition of up to 10 hotels within the same city," Mclachlan continued. "Dakar, [Senegal]; Abidjan, [Côte d'Ivoire]; Douala, [Cameroon]; Luanda, [Angola]; Nairobi, [Kenya]; Dar es Salaam, [Tanzania]; and Addis Ababa, [Ethiopia] are proactive cities where we aim to have between three and five hotels...We expect our future growth to arise from existing hotel take-overs and new-build hotels, “With economic headwinds in some African markets, we have identified opportunities to exploit our vast knowledge and experience in converting unbranded, underperforming hotels or underperforming office or apartment buildings and reposition them to the right brand and market segment within the Radisson Hotel Group brand portfolio. In addition, we are not ignoring the smaller cities and larger towns across Africa where we’ve identified potential to penetrate the market with either our midscale Park Inn by Radisson brand or upscale Radisson," said Mclachlan. Radisson Hotel Group plans to open a further five hotels across Africa in 2019, pushing the African portfolio to more than 50 hotels in operation before the end of the year. These openings include the first Radisson Blu hotel in Casablanca (also the group’s second hotel in Morocco), scheduled to open within the next six months, as well as the Radisson Blu Hotel Niamey, the first internationally branded hotel in Niger. That property is slated to open in second quarter. “Our strategy will most certainly reinforce our presence in key markets across Africa as we continue to focus on delivering on our expanding pipeline,” said Mclachlan.

ETHIOPIA – Ethiopia is set to complete construction of its 4 pilot Integrated Agro-Processing Industrial Parks (IAIPs), an investment worth US$10 billion, by the end of June this year reports Ethiopia News Agency. The pilot agro-processing parks have been under construction since 2016 and features; a Baeker for sesame, sorghum and livestock; Bulbula for cereal and milk; Bure for cereals, pulses and spices, and Yirgalem for coffee, fruit and vegetables. The mega project was scheduled for completion by December 2018 but Ayalneh Abawa, Advisor for Integrated Agro-processing Parks in the ministry of Trade and Industry revealed that redesigning of the parks caused the major delay. “The study for the parks took 2 years and the construction was expected to be completed at the end of December 2018. Electric power is the challenge at present as budget was not allocated. Shortage of foreign currency inhibited the construction of substations. Electric power is a challenge as each of the parks consumes 40-50 MW; but shortage of foreign currency has inhibited the construction of electric infrastructure,” he explained. Ayalneh further revealed that about 80-100 investors are expected to engage in each park of which 80% will be local and 20% will be foreign investors. In its efforts to restructure and invest in the agricultural sector, Ethiopia plans to further commission the remaining agro-industry corridors countrywide following a successful completion of the 4 IAIPs. The agro-industrial parks are intended to attract private investors into establishing food processing plants in high producing areas that will add value on agricultural produce. Subsequently, this will create employment opportunities, improve the livelihoods in agriculture dependent regions, reduce post-harvest losses, contribute to food security and accelerate economic growth in the country Last year, the African Development Bank (AfDB) have granted Ethiopia US$15 million to finance the agro-industrial parks which is also aimed at linking producers and Small and Medium Enterprises with strategic industrial clusters. With agricultural sector being the mainstay of Ethiopia’s economy, the government identified increasing productivity of smallholder farms and expanding large-scale commercial farms as two of its priority areas. In addition, as part of the second Growth & Transformation Plan (GTP II), the government wants to ensure the agro-processing sector – processed food, beverages, and livestock products – as one engine to spur future economic growth.

Lekela Power has signed a power purchase agreement (PPA) with the Egyptian Electricity Transmission Company (EETC) for its 250MW wind farm project in the Gulf of Suez, near Ras Ghareb. Present at the signing were H.E. the Egyptian Prime Minister Dr. Mostafa Madbouly; H.E. Dr. Mohamed Shaker El-Markabi, Egypt’s Minister of Electricity and Renewable Energy; Eng. Sabah Mashaly Chairperson of the EETC, Chris Antonopoulos, Chief Executive Officer, Lekela and Faisal Eissa, Egypt General Manager, Lekela. Located 30 kilometres north-west of Ras Ghareb, the project is part of the Government’s Build, Own, Operate (BOO) scheme. Once constructed, it will increase Egypt’s wind energy capacity by 14%. The project will produce more than 1000GWh a year, powering the equivalent of over 350,000 homes in Egypt. The total investment for the project is estimated at $325 million and leading Development Finance Institutions have been mandated to provide financing. The Network Connection Agreement with EETC has been signed. The project will be constructed on a turnkey EPC basis and an announcement regarding the EPC contractor will be made at a later date. Financial close is expected to take place later this year, and the project is expected to be operational in 2021. Chris Antonopoulos, Chief Executive Officer at Lekela commented: “Egypt has a target of achieving 20% renewable power in its overall energy mix by 2022. Today’s agreement is a major milestone for delivering a 250MW wind farm to help achieve that goal. We would like to thank the Minister of Electricity and Renewable Energy, EETC, The Egyptian Electricity Holding Company (EEHC), Egypt's New and Renewable Energy Authority (NREA), the Minister of Investment and all those people, both in Egypt and beyond the country, who have helped us get to this point. Across Africa we are starting to see the positive impact renewable energy can have on communities and on enterprise. Egypt is a key part of our strategy to develop 1,300MW of clean energy across Africa which will drive economic and social prosperity for its communities.” Faisal Eissa, General Manager, Egypt, Lekela commented: “We are excited to progress this project with the signing of the PPA. Egypt has favourable conditions to produce renewable energy and it is great to see that the government has ambitions to bring more clean energy onto the grid. "Further, we look forward to working with the local community to develop a Community Investment Plan that will leave an impact that lasts even longer than the wind farm itself.”

The Ambassador of the State of Kuwait to Nigeria, Abdulaziz Albisher, has said that the Emir of Kuwait has approved $2 billion as grants and concessionary loans to African countries. He said the loans, reserved for investment and development, will be spread over five years. Besides, the envoy said that Kuwait has initiated another Annual Prize of $1 million for researches and research projects on agriculture, health and Ebola eradication. Mr. Albisher, who made the disclosures at a pre-58th National Day interaction with select media in Abuja, urged African nations to take advantage of the loan facility. He said: “Kuwait has always had Africa at heart, that need not to be underlined, for it fashioned numerous contributions and initiatives meant to enhance Africa’s development. The presence of my government`s developmental efforts is well recognised. “Let me first of all throw the light on the Arab-African Summit held in Kuwait during which His Highness, the Emir of the State of Kuwait gave his directive to the Kuwaiti Fund for Arab Economic Development to facilitate grants and concessionary loans to African countries to the tune of $2 billion reserved for investment and development spread over five years. “It (the $2 billion) is meant to support the efforts of the African countries towards realising their developmental aspiration in various fields, particularly infrastructure.  As this initiative is to be executed through the Kuwait Fund it goes through legal procedures. “In line with the interest of His Highness on Africa, he attended the 19th African Union Summit held in Ethiopia as guest of honors where he offered to well equip the then newly build African Union secretariat. “The same summit witnessed granting the State of Kuwait membership to the African Union in the capacity of an observer.” Albisher also informed that Kuwait has set aside another $1 million annually for researches in agriculture, health interventions and Ebola eradication, among others. He added: “Let me also make mention that the Emir of the state of Kuwait has also announced the intention of his country to grant an Annual Prize of one $1 million U.S. in the memory of late Dr. Abdulrahman Al-Sumit. “This prize is meant for development researches and research projects in agriculture, health and Ebola eradication. This prize is under the auspices of Kuwait Scientific Institution and the theme for the 2019 prize is food security.” On his assessment of Nigeria, Albisher said it has the potentials of emerging as one of the best economies in the world.

Ghana is set to construct first industrial and business park in Africa wholly powered by renewable energy in Takoradi, Western Ghana. According to Sabine Dall’Omo, CEO of Siemens who confirmed the report, a Memorandum of Understanding (MOU) with WestPark Enterprises was signed to develop an expandable microgrid solution for the fast-growing industrial and business park.

RE industrial park

The new industrial park is poised to accelerate the transformation of Takoradi – Ghana’s third-largest city. As part of the agreement, Siemens will develop a 250kW microgrid that controls the energy generation and throughput for the initial phase of buildings to be constructed at WestPark. The microgrid will be powered by onsite photovoltaic panels. A back-up battery storage solution will be sourced as well. The grid can be expanded as more buildings are added with the aim to ensure that the park remains powered by renewable energy.   “This project is perfectly in line with Siemens’ vision for future business in Ghana and other African countries. As a company we are continuously looking for new responsible and efficient energy and infrastructure solutions, and our collaboration with WestPark is a good example of how we can support partners with similar goals,” said Sabine Dall’Omo. Economic growth across Africa Siemens is committed to economic growth across Africa, and in doing so in a forward-thinking manner by implementing environmentally sustainable solutions that will help its partners and customers succeed in today’s environmentally-conscious global market. The WestPark aims to eliminate many of the challenges faced by companies doing business in Sub-Sahara Africa, such as access to reliable power, water, broadband internet, and transport.

On 1 February 2019, the Federal Tax Administration published circulars announcing the safe haven interest rates applicable to shareholder and related party loans.

Circular of 31 January 2019: loans denominated in CHF

The minimum interest rates for loans in CHF granted to shareholders or related parties are:

• on loans financed through equity: 0.25%; and
• on loans financed through debt: the interest incurred (prime costs) plus 0.5% on amounts up to CHF 10 million, or plus 0.25% on amounts exceeding CHF 10 million; in all cases, however, the percentage involved is at least 0.25%.

Conversely, the maximum interest rates payable for loans in CHF granted by shareholders or related parties are:

• on real estate loans: 1.0% to 2.25% (depending on loan type and level of debt financing); and
• operational loans received by a Swiss trading or production company: 3.0% for loans up to CHF 1 million and 1.0% on the excess; by a Swiss holding or administration company: 2.5% for loans up to CHF 1 million and 0.75% on the excess.

Circular of 1 February 2019: loans denominated in foreign currencies

For loans in foreign currencies (e.g. EUR and USD) granted to shareholders or related parties, the minimum interest rates are:

• on loans financed through equity: EUR: 0.75%, USD: 3.0%; in all cases, however, at least the safe haven interest rate for loans denominated in CHF, i.e. 0.25%, applies; and
• loans financed through debt: the interest incurred (prime costs) plus 0.5%; in all cases, however, at least 0.75% for loans denominated in EUR, or 3.0% for loans in USD.

These safe haven interest rates are also applicable to loans in EUR and USD received from shareholders or related parties. However, higher interest rates based on the arm's length principle can be paid if they are justified by a business purpose.

The Finance (No. 3) Bill 2017-19, which legislates for Budget 2018 measures, was enacted on 12 February 2019 as Finance Act 2019 (2019 c. 1).

The US Internal Revenue Service (IRS) released Publication 17 (Tax Guide 2018 for Individuals). The publication is dated 30 January 2019 and is intended for use in preparing tax returns for 2018. Publication 17 describes the general rules for filing a US federal individual income tax return. It supplements the information contained in the Instructions for IRS Form 1040 (US Individual Income Tax Return). Publication 17 includes a summary of important tax changes that took effect in 2018 pursuant to the Tax Cuts and Jobs Act (TCJA).

A tax treaty is a bilateral agreement made by two countries to resolve issues involving double taxation of passive and active income. Treaties Update – February 2019

Date	Country A	Country B	Object	Status
01.02.19	China	Germany	Income Tax Treaty	Negotiations ongoing
04.02.19	Argentina	United Arab Emirates	Income and Capital Tax Treaty	Entered into force
05.02.19	Saudi Arabia	United Arab Emirates	Income and Capital Tax Treaty	Approved by Saudi Arabian cabinet
13.02.19	Austria	United Kingdom	Income Tax Treaty	Ratified by United Kingdom
18.02.19	Greece	United Kingdom	Income Tax Treaty	Negotiations underway