January 2025

The National Revenue Agency announced on its website that the application of the VAT scheme for small enterprises in other EU Member States by taxable persons established in Bulgaria has been postponed. This delay will last until amendments aligning the VAT Act with the Amending Directive to the VAT Directive (2020/285) are adopted. Bulgarian enterprises will be able to utilize the scheme once the necessary legislative changes are implemented. The full text of the announcement, published on 2 January 2025, is available here (only in Bulgarian).   Source: IBFD Tax Research Platform News

On January 1^st,2025, the Ministry of Human Resources and Social Security (MOHRSS) has issued the Circular on Issues Related to Average Monthly Working Hours and Wage Calculation for Employees for the Full Year (the "Circular").

The Circular adjusts the methods for calculating employees' average working hours and wages throughout the year. In calculating the standard working time, the following formula applies:

• Annual working days: 365 days - 104 days (rest days) - 13 days (statutory holidays) = 248 days;
• Quarterly working days: 248 days ÷ 4 quarters = 62 days/quarter; Monthly working days: 248 days ÷ 12 months = 20.67 days/month;
• Working Hours: The number of working days in a month, quarter, or year multiplied by 8 hours per day.

Additionally, according to the Circular, employers should pay wages for statutory holidays in accordance with the law. When calculating daily and hourly wages, the 13 statutory holidays prescribed by the State should be included. Therefore, the daily and hourly wages will be calculated as follows:

• Daily wage: Monthly wage income ÷ monthly salary days;
• Hourly wage: Monthly wage income ÷ (monthly salary days × 8 hours);
• Monthly salary days: (365 days - 104 days) ÷ 12 months = 21.75 days.

The Circular is available here: https://www.mohrss.gov.cn/xxgk2020/fdzdgknr/zcfg/gfxwj/ldgx/202501/t20250101_533693.html      

On January 3^rd, 2025, the State Taxation Administration (STA) has recently drafted the Administrative Measures for the Final Settlement of Individual Income Tax on Comprehensive Income (Draft for Comment) (the "Draft"), which is now open for public consultation until February 2^nd, 2025.

The Draft maintains the fundamental framework and core content of the previous five announcements on final settlement while incorporating effective practices from recent years of service and management, thereby improving the settlement service and management system. These include institutionalizing measures that have yielded significant results and been well-received by taxpayers, such as pre-filled tax return services provided by tax authorities, appointment-based services during the initial phase of settlement, and prioritized tax refunds for taxpayers eligible for refunds but facing heavy financial burdens. These measures have simplified and expedited the final settlement process for taxpayers.

The official draft is available here: https://www.chinatax.gov.cn/chinatax/n810356/n810961/c5237598/content.html

On January 8^th,2025, the State Taxation Administration (STA) has issued the Announcement on Optimizing Annual Enterprise Income Tax Return (the "Announcement"). The announcement has revised some forms and filling instructions of the Annual Enterprise Income Tax Return of the People's Republic of China (Category A, 2017 Edition). According to the Announcement, some statements shall be canceled, and revisions shall be made to the form format and filling instructions for a number of forms

Announcement:

https://fgk.chinatax.gov.cn/zcfgk/c100012/c5237968/content.html

 

On January 22^nd, 2025, the Ministry of Commerce (MOFCOM) has issued the Announcement [2025] No. 4, announcing the ruling on expiry review of anti-dumping measures applicable to imports of ortho dichlorobenzene (ODCB) originating in Japan and India.

According to the announcement, effective from January 23^rd, 2025, an anti-dumping duty will continue to be imposed on imports of ODCB originating in Japan and India for a period of five years. The Announcement states that, on January 22^nd, 2024, upon the application of China's ODCB industry, the MOFCOM initiated an expiry review investigation into the anti-dumping measures applicable to imports of ODCB originating in Japan and India.

The official announcement can be read here: https://www.mofcom.gov.cn/zwgk/zcfb/art/2025/art_c9054b34f0b14c54a967e50323386a74.html

With the publication of Law No. 182/2024 in Official Gazette No. 283 on December 3, 2024, the new Double Taxation Convention between Italy and the People's Republic of China, signed in Rome on March 23, 2019, was ratified and executed. The provisions will take effect starting January 1, 2026.

Article 29 of the Convention establishes that the Agreement will enter into force on the thirtieth day following the receipt of the last ratification notification. Its provisions will apply:

• With regard to taxes withheld at source: on amounts earned from January 1 of the first calendar year following the Agreement's entry into force.
• With regard to other income taxes: for fiscal periods beginning on or after January 1 of the first calendar year following the Agreement's entry into force.

The new Convention, more aligned with the OECD 2017 Model, introduces significant changes compared to the previous one (in effect since 1990):

1. Dividends

The Agreement provides for a reduction of the withholding tax rate for Italian companies based in China and vice versa, from 10% to 5%, provided the following conditions are met:

• Direct participation: at least 25% of the capital of the company distributing the dividends.
• Holding period of shares: at least 365 days.

2. Interests

The Agreement introduces a reduction of the interest rate to 8%, which applies under the following conditions:

• Interest paid to financial institutions.
• Loans with a minimum duration of three years, intended to finance investment projects.

There is also a full exemption from withholding tax on interest payments made by:

• The government or local authorities.
• The Central Bank.
• Entities fully owned by the government.

3. Royalties (Licensing Fees)

The Agreement sets the following maximum rates applicable to royalties:

• 10% for royalties related to copyrights (including software, films, TV or radio broadcast recordings), patents, trademarks, designs and models, secret formulas or processes, as well as industrial, commercial, or scientific information.
• 10% on 50% of the gross amount (effectively 5%): for royalties related to the use of industrial, commercial, or scientific equipment.

4. Capital Gains

The Agreement establishes the following provisions for the taxation of capital gains arising from the sale of assets and shares:

• Profits from the sale of real estate located in the other contracting state are taxable in that state.
• Profits from the sale of movable assets connected to a permanent establishment in the other state are taxable in that state.
• Profits from the sale of ships, aircraft, and movable property used in international traffic are taxable exclusively in the state of residence of the selling company.
• Profits from the sale of shares deriving more than 50% of their value from real estate located in the other state are taxable in that state.
• If the seller holds at least 25% of the shares of a company resident in the other contracting state for a period of at least 12 months, the gains from this sale are taxable in the other state.
• Profits from the sale of assets other than those mentioned above are taxable exclusively in the state of residence of the seller.

Diacron is committed to providing comprehensive support and tailored solutions to address the complexities of international taxation. Contact us for dedicated consultancy.

The Hong Kong Revenue Department has clarified the main legislative changes to the tax law resulting from the proposed inward company re-domiciliation regime that will be introduced to allow companies domiciled elsewhere to transfer their domicile to Hong Kong.

Under the re-domiciliation regime, non-Hong Kong incorporated companies that register as re-domiciled companies under the Companies Ordinance are able to preserve their legal identity and maintain their business continuity. The Companies (Amendment) (No. 2) Bill 2024 was gazetted on 20 December 2024 to amend the Companies Ordinance and other related ordinances including the Inland Revenue Ordinance (IRO) in order to implement the regime.

Hong Kong does not impose tax on the basis of residence or domicile. As such, if a non-Hong Kong incorporated company has carried on a trade, profession or business in Hong Kong before it re-domiciles to Hong Kong, any profits from such trade, profession or business before its re-domiciliation will continue to be taxable in Hong Kong. If, however, a non-Hong Kong incorporated company has never carried on any trade, profession or business in Hong Kong before re-domiciling to Hong Kong, no profits tax will be charged on the company for the period before it commences business in Hong Kong.

The legislative amendments to the IRO are only applicable to a re-domiciled company that has carried on a trade, profession or business outside Hong Kong before re-domiciliation and commences to carry on the same or another trade, profession or business in Hong Kong after re-domiciliation. The main aspects covered by the legislative amendments to the IRO are as follows:

• a re-domiciled company will be regarded as a company incorporated in Hong Kong and in turn a resident of Hong Kong for tax treaty purposes;
• transitional tax provisions that cover the following:
  • conditions for deduction of expenses/expenditures: generally, expenses or expenditure incurred in the production of the assessable profits of a re-domiciled company before re-domiciliation will be deductible to the extent that they have not been deducted outside Hong Kong. There are also specific conditions for the deduction of specified types of expenses or expenditures on trading stock, intellectual property, renovation or refurbishment of buildings or structures, among others;
  • depreciation allowances for plant and machinery: a re-domiciled company can claim depreciation allowances for plant and machinery in relation to a trade, profession or business carried on outside Hong Kong before re-domiciliation if it uses the plant and machinery for any Hong Kong business on or after re-domiciliation; and
  • provisions for re-domiciled insurance businesses; and
• a re-domiciled company will be allowed a unilateral tax credit for taxes paid in its place of incorporation in respect of unrealized income or profit (specified income) resulting from the re-domiciliation, and after re-domiciliation, up to the limit of Hong Kong profits tax payable on the relevant income; any excess amount will be deductible from assessable profits.

Source: IBFD Tax Research Platform News

As of 1 January 2025, the CPF Ordinary Wage (OW) ceiling has been progressively increased, with the final cap reaching $8,000 by 2026. Additionally, CPF contribution rates for employees aged 55 to 65 have been adjusted to strengthen retirement adequacy.

For a detailed overview of all the changes, please refer to our dedicated article: Singapore, CPF contribution changes from 1 January 2025 - Diacron

The digital sector, which includes data centers and cloud services, topped last year for the first time the sectorial rankings by value with 150 projects worth a combined 243.3 billion baht in pledged investment. Major projects in this sector in 2024 included applications to setup large data centers by units of large tech and cloud services companies such as Google (Alphabet) from the U.S., Australia’s NextDC, India’s CtrlS Datacenters, and Singapore-based GDS IDC Services PTE Ltd.

The electronics and electrical appliances (E&E) sector, which had attracted the largest share of investment in recent years, came in second last year with 407 projects worth 231.7 billion baht. Noticeable large projects in this sector last year included an investment by a unit of Foxsemicon Integrated Technology Inc. (Fiti Group) to build a factory to make high-precision machinery parts and equipment for the semiconductor industry, and an investment by FT1 Corporation, a Thailand-Hong Kong-Singapore wafer manufacturing joint venture between Hana Microelectronics and PTT Group to produce silicon carbide wafers.

The automotive sector came in third with 309 projects worth 102.4 billion baht. Agriculture and food ranked fourth with 329 projects worth 87.6 billion baht, followed by petrochemicals and chemicals with 235 projects worth a combined value of 49.1 billion baht.

“Investors’ response to our policy to promote Thailand as a safe and neutral location for large digital sector and smart electronics projects has been very impressive last year, with important projects by groups like Google, in cloud services, and Foxsemicon, in the semiconductor supply chain,” said Mr. Narit Therdsteerasukdi, Secretary General of the BOI. “We expect this trend to get even stronger in 2025 following the setup of Thailand’s Semiconductor Board and the need for more companies to mitigate risk in view of the current geopolitical situation.”

In December, Thailand’s newly appointed National Semiconductor and Advanced Electronics Policy Committee, or Semiconductor Board, approved the framework for the sector’s strategy, and for the development of a skilled workforce to prepare for a new wave of FDI which the Government estimates could attract 500 billion baht investment by 2029.

“In close coordination with the Government, the BOI will conduct during this year roadshows to all key FDI source markets, and technology hubs, including China, the U.S., Japan, and Europe, to promote our policies and meet potential investors,” Mr. Narit added. Later this month, Mr. Narit will join Prime Minister Paetongtarn Shinawatra’s delegation to the World Economic Forum in Davos.

Other sectors expected to see growing investment in 2025 include the production of clean energy, for which the demand is rising especially due to the demand from the digital and electronics sector, Mr. Narit said. Also showing great growth potential this year are the electric vehicles (EV) and parts industry which is still building on the growth seen in recent years, the agritech and the foodtech sectors, as well as the medical and tourism infrastructures, he added.

The total number of applications for investment promotion in all sectors filed during January to December 2024 increased 40% to 3,137 projects, from 2,235 projects in the same period of 2023. The total adjusted investment value of the project applications for all of 2023 was 846.5 billion baht.

FDI Applications Up 25% Year-on-Year

FDI represented 73% of the total value of applications in 2024, after rising 25% from the previous year.

Singapore led the FDI source rankings with 305 projects mostly in digital services, and electronics manufacturing, representing a total investment value of 357.5 billion baht, or 43% of total FDI applications. Most of the investment came from Chinese and American companies using Singapore as a regional base, reflecting the competition between the two countries in the tech sector.

China was the second largest source of FDI applications with 810 projects worth a total of 174.6 billion baht led by PCB, automotive, and metal products manufacturing businesses.

Hong Kong came next with 177 projects worth a total investment value of 82.3 billion baht, including the production of wafer fab, a key raw material in the semiconductor industry, as well as data center, PCB, chemicals and plastics manufacturing.

Companies based in Taiwan filed 126 applications worth a total of 50 billion baht in investment value, with high-value projects in the production of advanced semiconductor equipment and components, PCB and smart electronic products.

Japan ranked fifth with 271 projects worth a combined investment value of 49.1 billion baht, with most projects in areas of expertise, such as the automotive and parts sector, motorcycle manufacturing, aircraft tires, digital camera and air conditioner manufacturing, all activities of importance to Thailand’s industrial sector.

Source: boi.go.th

Thailand's export sector achieved a record high in 2024, with total exports reaching 300.5 billion US dollars (approximately 10.5 trillion baht), a 5.4% increase from the previous year. December exports alone grew by 8.7%, reflecting six consecutive months of growth. Key markets driving this performance included the United States, China, Japan, and the European Union, alongside strong growth in emerging markets such as South Asia, the Middle East, and Russia.

The Ministry of Commerce forecasts export growth of 2-3% in 2025, supported by global economic stability, low inflation, and an increase in production bases relocating to ASEAN countries, including Thailand. The government’s Soft Power efforts, which promote Thai cultural identity in global markets, are also expected to contribute. Challenges remain, including geopolitical tensions, exchange rate fluctuations, and trade policy uncertainties in major economies such as the United States, which the ministry is addressing through diplomatic and economic outreach.

Commerce Minister Phichai Naripthaphan plans to visit the United States in February to discuss trade issues, including potential tariff adjustments on Thai exports. Efforts to expand market access and strengthen trade ties are expected to play a key role in sustaining export momentum in 2025.

During the Lunar New Year celebrations, Thailand is preparing to welcome over 4 million tourists, including 700,000 visitors from China, a 22.6% increase from the previous year. Airports of Thailand (AOT) has implemented measures to handle the rise in passenger traffic, with over 24,500 flights and more than 4 million travelers expected between January 24 and February 2. Additional staff have been deployed across service points, including immigration and security, to ensure smooth operations.

Safety measures at airports have been enhanced, with inspections to mitigate bird and wildlife hazards and strict adherence to international safety standards. Passengers are advised to arrive early during peak travel periods to avoid delays. AOT has established a 24-hour contact center to assist travelers with inquiries throughout the holiday season.

Source: thailand.prd.go.th

The Federal Tax Authority (FTA) has published Decision No. 8 of 2024 regarding the mechanism for correcting errors or omissions in the VAT return (the decision).

The decision provides that the following errors or omissions in the VAT return should be corrected by filing a voluntary disclosure even if there is no difference in the due tax:

• reporting standard-rated taxable supplies concerning an emirate in the box of another emirate;
• incorrect reporting of zero-rated taxable supplies, whether understating or overstating; and
• incorrect reporting of exempt supplies, whether understating or overstating.

The decision became effective on 1 January 2025.

Source: IBFD tax research platform news

As the self-assessment deadline for the 2023/2024 tax year approaches, it is crucial to ensure timely filing and payment to avoid penalties. The deadline for online submissions to HMRC is 31 January 2025, while the deadline for paper returns was 31 October 2024. Filing on time not only avoids late filing penalties but also ensures peace of mind.

Who Needs to File a Self-Assessment Tax Return?

Not everyone in the UK is required to submit a self-assessment tax return. You need to file if you:

• Earned more than £100,000 in employment or self-employment income
• Are self-employed, a partner in a business, or a director receiving dividends
• Have additional untaxed income such as rental income, dividends, or capital gains
• Claimed child benefit and your income exceeds £50,000 (High-Income Child Benefit Charge)
• Need to report foreign income or claim tax relief under double taxation treaties
• Received income from savings, investments, or trusts exceeding the tax-free allowances

Key Dates and Penalties

Below are the important dates for the 2023/2024 self-assessment cycle:

• 6 April 2024: Start of the tax year 2024/2025
• 31 October 2024: Deadline for paper returns
• 31 January 2025: Deadline for online submissions and payment of any tax owed

Failure to meet these deadlines may result in penalties.

Preparing to File

To submit your return accurately and efficiently, you will need the following:

1. Unique Taxpayer Reference (UTR): This 10-digit number is essential for logging into HMRC’s system.
2. National Insurance Number: Ensure it is current and matches HMRC’s records.
3. Income Documents: Gather payslips, P60s, P45s, bank interest statements, and investment reports.
4. Expenses and Deductions: Record eligible expenses, such as business costs, professional subscriptions, and home office expenses.
5. Foreign Income and Tax Credits: If applicable, include details of income earned abroad and any corresponding relief claimed under international agreements.

Maximising Allowances and Deductions

Careful preparation ensures you make the most of available reliefs and allowances, including:

• Personal allowance: Up to £12,570 (if your income is below £100,000)
• Capital gains tax annual exemption: £3,000 for the 2023/2024 tax year
• Reliefs for pension contributions: Contributions to registered schemes can be tax efficient
• Charitable donations: Qualify for Gift Aid relief

For those filing complex returns, such as reporting overseas income or utilising relief under double taxation treaties, seeking professional advice can be highly beneficial.

Common Mistakes to Avoid

Avoid these common errors when completing your self-assessment:

• Incorrect figures: Ensure income figures match employer records and financial statements.
• Failure to report foreign income: Even if taxed abroad, foreign income must be declared.
• Claiming ineligible expenses: Expenses must be wholly, exclusively, and necessarily incurred for your work or business.
• Missing deadlines for amendments: Corrections can be made up to 12 months after the filing deadline, i.e., until 31 January 2026.

Payment Options and Time to Pay Arrangements

If you anticipate difficulty in meeting your tax obligations, HMRC offers a "Time to Pay" arrangement that allows you to spread payments over a longer period. Applications can be made via your online account. However, interest will accrue on the outstanding balance.

Conclusion

Timely filing of your self-assessment tax return is essential to avoid penalties and interest charges. It also provides an opportunity to ensure your finances are optimised for tax efficiency. If you are unsure whether you need to file or have any concerns regarding your obligations, it is advisable to seek professional assistance.

For personalised support, reach out to us: info.uk@diacrongroup.com   Author: Angelo Chirulli, Head of Tax Diacron London

From 31 January 2025, businesses importing goods from the European Union (EU) into Great Britain (GB) must comply with new customs requirements, mandating the submission of safety and security declarations for EU imports.

What’s changing?

Currently, entry summary declarations are required only for goods entering GB from non-EU countries. However, starting next week, this requirement will extend to goods imported from the EU, aligning EU imports with existing global standards.

Businesses are encouraged to begin submitting these declarations immediately if they are operationally ready, to avoid potential disruptions and ensure a smooth transition.

Who is responsible?

The legal responsibility for submitting the declaration rests with the carrier, defined as "the operator of the active means of transport on, or in, which the goods are brought into the customs territory."

Failure to submit a declaration may lead to border delays, unnecessary inspections, or financial penalties.

According to HMRC, these declarations are vital for safeguarding UK borders, aiding in the detection and prevention of illicit goods such as drugs and weapons.

Simplified compliance: The reduced dataset

To facilitate compliance, the UK government has reduced the amount of safety and security data required on these declarations.

From 31 January 2025, businesses will need to complete:

• 20 mandatory fields applicable to all declarations,
• 8 conditional fields required in specific circumstances, and
• 9 optional fields that may be left blank.

For businesses already submitting safety and security declarations, existing systems and procedures remain unchanged. However, they will benefit from the streamlined dataset by only needing to complete the mandatory and relevant conditional fields.

Immediate Steps for Businesses

With the implementation date just days away, it is critical for businesses to understand their obligations and take immediate action to incorporate safety and security declarations into their import processes.

Compliance will be essential to prevent disruptions at the border and avoid penalties.

HMRC guidance

HMRC’s guidance can be accessed from the collection page  Preparing for the new safety and security declaration requirements - GOV.UK

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For more information on how these changes may impact your supply chain and to receive tailored support in ensuring compliance, send a request to be contacted shortly by one of our consultants.

Author: Angelo Chirulli, Head of Tax Diacron London

The US Treasury Department and the Internal Revenue Service (IRS) have finalized regulations for Clean Electricity Investment and Production Tax Credits aimed at boosting zero-emission electricity production. The credits, added as sections 45Y and 48E by the 2022 Inflation Reduction Act, offer incentives for facilities achieving net-zero emissions, regardless of the technology used.

According to the analysis by the Department of Energy, the credits aim to lower energy costs and boost power production, potentially saving American families up to USD 38 billion on electricity bills by 2030.

The finalized rules detail the eligibility criteria for the clean electricity production credit (Section 45Y) and the investment credit (Section 48E). The existing Production Tax Credit (Section 45) and Investment Tax Credit (Section 48) will be available to projects that began construction before 2025. Qualifying projects placed in service after 31 December 2024 will be eligible for the new Clean Electricity Credits.

Key provisions from the proposed regulations, released in May 2024, were retained with a few minor adjustments.

The rules maintain the classification of clean energy facilities into two groups: those using combustion or gasification technologies and those that do not. Facilities in the first category must conduct a lifecycle analysis of greenhouse gas emissions. Wind, solar, and hydropower technologies, assumed to have zero emissions, are exempt from this requirement. Treasury will publish an annual table identifying eligible zero-emission technologies, with the first installment expected imminently. In a change from the proposed rules, nuclear fission facilities will not be considered combustion or gasification facilities.

The preamble to the regulations clarified that the "80/20 rule" governs eligibility for new additions to existing facilities. The 80/20 rule allows a facility that includes pre-existing or previously placed in service parts or elements to qualify for credits so long as new elements constitute at least 80% of the total value of the facility. The IRS also clarified that ownership requirements specify that taxpayers must directly own at least a fractional interest in an entire qualifying facility or energy storage unit, and not just an interest in integral property that is a component of such a facility, to claim Section 48E credits. These ownership rules are significant for offshore wind projects.

One notable adjustment from the proposed regulations was the removal of an end-use requirement for hydrogen storage projects. Initially, only hydrogen storage used for electricity qualified for credits. Following industry feedback, the restriction was lifted, acknowledging that storage providers cannot always determine hydrogen's end use. To claim the full value of the credits, projects must adhere to prevailing wage and apprenticeship requirements. Rules on those requirements were issued in June 2024.

The regulations were finalized by the Treasury Department and IRS on 7 January 2025, and have been published here

Source: IBFD tax research platform news