July 2018

  • China
    • SAT Clarifies Scope of Preferential Income Tax Policies for Small Low-Profit Enterprises

      The State Administration of Taxation recently issued the Announcement about Further Expanding the Scope of Preferential Income Tax Policies for Small Low-Profit Enterprises. According to the announcement, from January 1, 2018 until December 31, 2020, eligible small low-profit enterprises can enjoy the preferential income tax policy as long as their taxable income is no more than one million yuan. They shall pay income tax with 50% of taxable income and tax rate at 20%. If an enterprise was not eligible for the tax policy in the previous tax year, or it is a newly-established small business, and it's expected to be eligible for the tax policy at the current tax year, it can enjoy the preferential tax policy as long as its profit or taxable income for the current year is estimated to be no more than one million yuan.
    • MOF, SAT Extend Loss Carry-Forward Period for High-tech Enterprises

      The Ministry of Finance and the State Administration of Taxation recently announced the Circular about Extending the Period for High-tech Enterprises and Small and Medium-sized Technology Firms to Carry Forward Losses. According to the circular that has been effective from January 1, 2018, when a firm has been recognized as a high-tech enterprise or small and medium-sized technology firm, its business losses in the previous five years can be carried forward in as long as ten years, up from five years in the past.
    • MOF Clarifies Ten Key Areas for Refunding of Ending Retained VAT in 2018

      The Ministry of Finance and the State Administration of Taxation recently released the Circular on the Tax Policy Relating to the Refunding of Ending Retained VAT for Some Sectors in 2018. The Circular specifies that sectors covered by the policy include advanced manufacturing such as equipment manufacturing, modern services such as R&D and power grid companies, etc., and the priorities shall be given to the following taxpayers: the taxpayer whose registered sector falls under any of the ten key areas as defined in Made in China 2025, such as the new generation of information technology, high-end CNC machine tools and robots, aerospace equipment, marine engineering equipment and high technology vessels, advanced rail transit equipment, energy-saving and new energy vehicles, electric power equipment, agricultural machinery, new materials, biomedical materials and high performance medical devices, as well as hi-tech enterprises, service enterprises with advanced technology and technological SMEs. The ending retained VAT eligible for the refunding shall be calculated based on the percentage of the taxpayer's tax retained for the previous period for which the taxpayer had applied for the refunding and the refunded amount and shall be capped at the taxpayer's retained tax at the end of 2017. The size of tax retained at the end of the period for refunding in sectors such as advanced manufacturing, modern services, etc. of various provinces in 2018 shall be subject to separate notices of the MOF and SAT, and the tax retained at the end of the period of power grid companies in various provinces shall be refunded after the calculation of the tax retained that shall be refunded for the period according to the Circular.
    • China Expands Tax Privileges on R&D Spending to All Enterprises

      China will adopt a combination of fiscal and financial measures in an effort to boost domestic demand and bolster support for the real economy, according to the State Council's executive meeting chaired by Premier Li Keqiang on July 23, 2018. The meeting decided that more companies will be eligible for preferential policies of additional deduction of R&D spending in taxable income, a policy that is expected to cut another 65 billion yuan in taxes this year, on top of an initial goal of cutting taxes and fees by 1.1 trillion yuan. Companies in the advanced manufacturing and modern service industries are expected to get 113 billion yuan in value-added tax rebates before the end of September 2018. Solid implementation is urged of the re-lending policy targeting small businesses. Commercial banks will also be encouraged to issue financial bonds to these businesses with the bond issuers exempted from the requirement of continuous profit-making. Local authorities that have made visible progress in expanding financing guarantee and reducing costs for small businesses will be meaningfully rewarded.
  • Hong Kong
    • Tax deduction scope expanded for capital expenditure incurred for purchase of intellectual property rights

      On 29 June 2018, Inland Revenue (Amendment) (No. 5) Ordinance 2018 was gazetted. The Ordinance enables Hong Kong to expand the scope of profits tax deductions for capital expenditure incurred by enterprises for the purchase of intellectual property (IP) rights from five types to eight with effect from the year of tax assessment 2018/19. With the expansion in scope of tax deductions provided therein, the eight types of IP rights eligible for profits tax deductions are:
      • patents;
      • know-how;
      • copyrights;
      • registered designs;
      • registered trademarks;
      • rights in layout design (topography) of integrated circuits;
      • rights in plant varieties; and
      • rights in performances.
      The Ordinance also expands the scope of tax deductions originally provided for registration expenses related to trademarks, designs and patents to include plant variety rights.
    • Inland Revenue (Convention on Mutual Administrative assistance in Tax Matters) Order gazetted

      The Inland Revenue (Convention on Mutual Administrative Assistance in Tax Matters) Order (the Order) was gazetted and came into operation on 13 July 2018. The Convention on Mutual Administrative Assistance in Tax Matters (the Convention) will enter into force in Hong Kong on 1 September 2018 and will allow Hong Kong to effectively implement the automatic exchange of financial account information in tax matters (AEOI) and the Base Erosion and Profit Shifting (BEPS) package promulgated by the OECD. Hong Kong will also follow the Convention to take forward the automatic exchange of country-by-country reports and spontaneous exchange of information on tax rulings under the BEPS package. Pursuant to the reservations made under the Convention, Hong Kong will not render assistance to other tax authorities in terms of recovery of tax claims or fines or the service of documents.
    • Rules on implementation of BEPS minimum standards and codifying the transfer pricing principles – gazetted

      On 13 July 2018, the Inland Revenue (Amendment) (No. 6) Ordinance 2018 was gazetted. The Amendment Ordinance primarily implements the minimum standards of the Base Erosion and Profit Shifting (BEPS) package promulgated by the OECD and codifies the transfer pricing principles into the Inland Revenue Ordinance (Cap. 112) (IRO). Under the Amendment Ordinance, the ultimate parent entity of a multinational enterprise (MNE) group (which is tax resident in Hong Kong) is required to file country-by-country (CbC) reports to the Inland Revenue Department (IRD) for exchange with other relevant jurisdictions if the annual consolidated group revenue is not less than HKD 6.8 billion. The Amendment Ordinance also requires taxpayers to prepare master files and local files as part of the transfer pricing documentation, subject to certain exemptions. In addition, the Amendment Ordinance gives a statutory basis to the cross-border dispute resolution mechanism (i.e. mutual agreement procedure and arbitration) and advance pricing arrangement, which were previously implemented based on IRD's administrative rules. The key elements of the Amendment Ordinance are summarized below:
      Key Element Effective Date
      enhancements to double taxation relief provisions apply to tax payable for a year of assessment beginning on or after 1 April 2018
      transfer pricing rules and related provisions – apply to a year of assessment beginning on or after 1 April 2018 for arm's length principle, advance pricing arrangement and changes in trading stock; – apply to a year of assessment beginning on or 1 April 2019 for separate enterprise principle and taxation of income from intellectual property accrued to non-Hong Kong resident associates; and – grandfathering of transactions effected or income accrued before 13 July 2018.
      TP documentation requirements relating to master file, local file and CbC reporting – apply to an accounting period beginning on or after 1 January 2018 for CbC reporting; – apply to an accounting period beginning on or after 1 April 2018 for master file and local file; and – voluntary filing of CbC reporting allowed for an accounting period beginning in 2016 or 2017.
      amendments to preferential regimes, including extension of tax concession to domestic transactions and prescription of thresholds for substantial activities requirements – apply to tax payable for a year of assessment beginning on or after 1 April 2018; and – threshold requirements will be prescribed after consulting the relevant stakeholders.
      The IRD will promulgate guidance to facilitate taxpayer's understanding of the requirements under the Amendment Ordinance in due course. Further developments will be reported in due course.
  • South Africa
    • IFC mobilises $1 billion for Indorama Eleme Nigeria

      IFC, a member of the World Bank Group, has announced a new $1bn debt financing for Indorama Eleme Fertilizer & Chemicals, Nigeria. The investment will be used for the construction of a new fertilizer line that will expand Indorama’s capacity of urea fertilizer to more than 2.8 million tons. Sérgio Pimenta, IFC Vice President for Middle East and Africa, said: “IFC aims to support Nigeria’s efforts to strengthen its manufacturing base and improve stability of its financial system through greater foreign exchange earnings from exports. With Indorama Eleme, IFC is also a partner in helping farmers in West Africa increase their food production and incomes.” IFC will directly lend $100m and mobilize an additional $850m of loans from other developmental financial institutions and commercial banks. Another $50m in financing will be available from IFC’s Managed Co-Lending Portfolio Program. Joining IFC as Joint Mandated Lead Arrangers (including as lenders) are European Investment Bank, YES BANK, CDC Group PLC, African Development Bank, Bank of Baroda and Standard Bank. Also supporting the financing are Standard Chartered Bank; Bangkok Bank; FMO; DEG; PIDG company, the Emerging Africa Infrastructure Fund; PROPARCO; ICICI Bank Limited; and Citibank. The large number of participating banks signals a strong endorsement of the project, Indorama, and the country by the syndicated loan market lending though a blend of IFC A and B Loans and uncovered facilities. “Nigeria has enormous potential to achieve agricultural self-sufficiency and food security which is evident from the multi-fold increase in domestic fertilizer consumption after the start of Indorama’s first plant. Nigeria has also become a major hub for urea exports. With Line 2, we aim to further expand our ability to provide competitively priced and high-quality fertilizer to farmers in West Africa and across the globe. Indorama is looking forward to continue contributing to Nigeria’s economic development”, said Manish Mundra, CEO, Indorama Africa. Significant amounts of natural gas are wasted in Nigeria due to gas flaring. According to the World Bank, over the past three years Nigeria has flared an average of 750 million cubic feet per day of associated gas. Utilization of gas for downstream chemical industries such as fertilizer helps reduce gas flaring, a contributor to greenhouse gas emissions associated with climate change. Indorama Eleme Fertilizer & Chemicals is a subsidiary of Indorama Corporation, one of Asia’s leading chemical holding companies with subsidiaries and affiliates in Asia, Africa, CIS and the Middle East manufacturing Polyethylene, Polypropylene, Polyesters, Fertilisers, Textiles and Synthetic Disposable Gloves. Amit Lohia, Group Vice Chairman, Indorama Corporation, said: “This financing reflects our strong partnership with IFC over a span of almost three decades. We are extremely pleased to bring our financial partners to Nigeria on the back of this strong partnership.”
    • OPIC launches $1 billion Connect Africa initiative

      The Overseas Private Investment Corporation (OPIC), the US Government’s development finance institution, has launched its Connect Africa initiative, which will mobilize more than $1bn to projects that support transportation, communications, and value chains in Africa over the next three years. The announcement comes as OPIC’s President and CEO Ray W. Washburne embarks on his first official travel to the continent. “Africa is home to many of the world’s fastest-growing economies and presents both a great need for investment and a great opportunity for American businesses,” Washburne said. “But, too many barriers remain to the flow of goods and services. By focusing on connectivity, we’re not only helping build means for economic development, but also laying the foundation for future trade partners.” Connect Africa will focus on three areas in order to further integrate Africa into the global market:

      Transportation and Logistics

      • Infrastructure development supports commerce by making it easier and more efficient to move goods within countries and across borders. Connect Africa will focus on facilitating investments in roads, railways, ports and airports, as well as logistics, including elements such as vehicles, warehouses, and cold storage units.

      Information and Communications Technology

      • Technology is transforming the way people work, communicate, access information, and educate their children. The initiative will focus on technologies that provide access to information through telecommunications, including internet, wireless networks and mobile phones.

      Value Chains

      • Africa requires greater investment in order to better take advantage of global and regional value chains. The initiative will focus on facilitating investments supporting processing raw materials and helping products reach consumers. During his travel, Washburne will travel to Zambia, Rwanda, South Africa, Uganda, and Kenya where he will meet with Heads of State and visit several OPIC projects supporting economic development in Africa. Sub-Saharan Africa is a region of focus for OPIC, comprising more than one-quarter of the Agency’s $23bn active portfolio. As part of its Fiscal Year 2019 budget proposal, the Trump Administration highlighted the need for the United States Government to modernize its approach to development finance to help grow aspiring partners, promote economic relationships, and increase investment in regions important to American interests
    • More countries sign African Continental Free Trade Area Agreement

      Forty-nine of the 55 member states of the African Union have signed the Continental Free Trade Area Agreement. The AU chairman Rwandan President Paul Kagame made the announcement on Monday during the closing ceremony of the 31st African Union Summit in Mauritanian capital Nouakchott. South Africa, Sierra Leone, Namibia, Lesotho and Burundi signed the African Continental Free Trade Area (AfCFTA) agreement in Nouakchott, bring the number of countries that have inked the deal to 49. Chad and the Kingdom of eSwatini joined four other countries that have ratified the agreement. The AfCFTA will come into effect after 22 countries ratify it. It will be the largest free trade area that creates an African market of over 1.2 billion people with a GDP of $2.5 trillion. The deal has four legal instruments: The framework agreement establishing the AfCFTA; the protocols on trade in goods; protocol in trade in services; and the protocol in dispute settlement. The agreement is expected to remove taxes from up to 90 per cent of the 200 items traded on the continent, making them cheaper for consumers.
    • Djibouti inaugurates Africa’s largest Free Trade Zone

      Djibouti has launched the Djibouti International Free Trade Zones (DIFTZ), Africa’s biggest trade zone that will comprise a total investment of USD 3.5 billion and span an area of 4,800 hectares. This Free Trade Zone, which already hosts 21 companies, is expected to enhance trade in the Horn of Africa and strengthen Djibouti’s position as a trade and logistic hub. It is connected to the main ports of Djibouti, and provides benefits such as zero corporate, income and value added taxes. At a ceremony held at the Free Zone, President Ismael Omar Guelleh hailed the scheme as the culmination of infrastructure projects “boosting Djibouti’s place in international trade and commerce”. The Horn of Africa nation, located at the mouth of the Red Sea and Suez Canal, in 2017 unveiled three new ports and a railway linking it to landlocked Ethiopia, as part of its bid to become a global trade and logistics hub. Somalia’s president, Mohamed Abdullahi Mohamed, hailed the free-trade zone as a “victory for East Africa”, in comments echoed at the ceremony by Prime Minister Abiy Ahmed and presidents Paul Kagame of Rwanda and Omar al-Bashir of Sudan. The zone, which is connected to Djibouti’s main ports, aims at diversifying the economy, creating new jobs and luring foreign investment through tax-free incentives and full logistical support. The pilot phase launched on Thursday comprises a 240-hectare site. The project hopes to see foreign companies setting up manufacturing plants within the zone, adding value to products instead of merely importing and exporting raw materials. “The volume of goods travelling to East Africa keeps increasing. Every time a product arrives in the continent without being transformed it is a missed opportunity for Africa,” said Aboubaker Omar Hadi, chairperson of the Ports and Free Zones Authority. A row of Djiboutian and Chinese flags fluttered side by side above the freshly painted bright yellow walls surrounding the expansive project – a symbol of the tiny country’s close ties to the Asian giant whose loans have funded its lightning-fast infrastructure growth. Djibouti – which is also the site of China’s only overseas military base – is a critical part of China’s “Belt and Road” global infrastructure initiative and in a prime position along what has been dubbed the “Maritime Silk Road”. The free trade zone is being run by Djibouti, the majority shareholder, along with three Chinese companies: the China Merchants Group, Dalian Port Authority and Chinese big data company IZP.
    • Portugal’s Mota-Engil to invest $1.8 billion in Nigeria

      As part of its expansion plan on the African continent, Portugal’s biggest construction firm, Mota-Engil, said it plans to invest $1.8 billion in the Nigerian construction market. Manuel Antonio Mota, Chief Executive Officer of Mota’s Africa unit, disclosed this during an interview with Bloomberg. He noted that the timing to enter Nigeria was “just right”, citing higher demand for building projects as increase in oil prices bolsters the state coffers of oil producers in Africa. In his words: “The projects in Nigeria that are currently on the table vary between 20 million euros to 1.5 billion euros”. Under this new venture, Mota-Engil will hold 51 percent of Mota-Engil Nigeria Ltd. while the Shoreline Group, will hold the remaining stake. Mota-Engil announced earlier that it planned to enter new markets in Africa including Ghana, Kenya, Uganda, and Zambia. It said it is seeking $5 billion of contracts on the continent. The company recently announced plans to invest $36 million in Zambia. Mota-Engil has halted plans for its initial public offering, following a failed attempt in 2014 due to deteriorating market conditions. Previously it had revealed plans to float at least 25 percent of its share capital in a public offering on the London Stock Exchange. Shoreline group is an indigenous power solutions company with Power Generation and Power equipment manufacturing activities. The company is one of several Nigerian producers that bought fields in the oil-rich Niger-Delta after international producers including Royal Dutch Shell withdrew amid persistent attacks on infrastructure. The company didn’t pump oil for a year following the closure of the Forcados terminal in February 2016. Flows resumed after the link was reopened in June last year. Mota-Engil is a Portuguese group in the sectors of civil construction, public works, port operations, waste, water, and logistics. The group comprises of 228 companies within three major business areas – Engineering and construction, Environment and Services and Transport concessions – operating in 21 countries through its branches and subsidiaries.
    • Tunisia becomes COMESA’s twentieth member state

      Madagascar’s leader and the acting president of the Common Market for Eastern and Southern Africa (Comesa) Hery Rajaonarimampianina has welcomed Tunisia to the regional bloc.
      The northern African nation was said to have fully met the admission requirements, and thus officially became the the 20th Comesa member state.
      President Rajaonarimampianina and the Tunisian Foreign Affairs minister, Mr Khemaies Jhinaoui, signed the admission documents at the 20th Comesa Summit in Lusaka, Zambia on Wednesday.
      “I invite Tunisia to positively contribute to the Comesa’s development, to the tripartite free exchange zone Comesa-EAC-SADC, and the continental free exchange zone under the auspice of the African Union,” stated President Rajaonarimampianina.
      The Comesa’s new secretary-general, Ms Chileshe Kapwepwe, took up her role on Wednesday, following the expiry of the term of Mr Sindiso Ngwenya.
      Zambia’s Chileshe Kapwepwe taking the oath of office as the secretary-general of the Common Market for Eastern and Southern Africa (Comesa) in Lusaka on July 18, 2018. PHOTO | MADAGASCAR PRESIDENCY
      Ms Kapwepwe, a Zambian, is the first woman to hold the Comesa secretary-general’s position.
      President Rajaonarimampianina also presented awards to several African journalists whose works highlighted the Comesa activities.
      Comesa is the largest regional economic organisation in Africa with 21 member states, after the admission of Tunisia and Somalia.
      It has a population of about 390 million. The bloc has a free trade area and launched a customs union in 2009
      The theme of this year’s summit at the Mulungushi International Conference Centre was: Comesa: Towards Digital Economic Integration, and is designed to rally member states towards the full adoption of digital technologies.
    • ‘Trading in Chinese Renminbi to commence before end of July’ – Central Bank of Nigeria

      The Central Bank of Nigeria (CBN) yesterday disclosed that trading in the Chinese Renminbi would commence before the end of this month.

      A top CBN official, who disclosed this in a chat with THISDAY, said the CBN was finalising modalities for the trading in the Chinese currency.

      This followed a $2.5 billion bilateral currency swap agreement signed in May between the CBN and the People’s Bank of China (PBoC).

      According to the source, the CBN wants to ensure that the regulations around the trading of the Renminbi are tightened so as not to create any room for arbitrage and currency manipulation.

      “All hands are on deck, all the work is being done and in the next two weeks trading will commence.

      “There will be very marginal discount to encourage people to go for it. But the discount will be so small as not to encourage arbitrage, but encourage those who really want to do so that they can get an advantage for embracing the Renminbi currency,” the source added.

      The CBN recently held town hall meetings in some cities in the country in its bid to woo businesses importing goods from China to use the Yuan instead of the United States dollar in its effort to support its naira currency and boost reserves.

      Officials said the deal was aimed at reducing reliance on the dollar and “as such, reduce the pressure on the naira-dollar exchange rate.”

      Under the swap arrangement, the central bank would hold N720 billion in an account in favour of the PBoC while the Chinese central bank would hold 15 billion Yuan, implying an exchange rate of N48 to the Yuan.

      The bank also said the move was aimed at encouraging Chinese firms buying local raw materials and semi-finished goods to pay in naira.

      THISDAY had reported that First Bank of Nigeria Limited, Stanbic IBTC, Standard Chartered Bank (SCB) and Zenith Bank Plc had been appointed the settlement banks for the bilateral currency swap deal.

      Meanwhile, the CBN has warned that hard times now await hawkers of the naira, especially those who exchange new currency notes for old ones at motor parks or parties and other social functions.

      CBN over the weekend in Ibadan assured economic agents such as the marketers, merchants, shopping malls, supermarkets of the bank’s continuous and direct supply of huge volumes of the banknotes to traders’ unions.

      The development, according to the acting Director, Currency Operations Department, CBN, Mrs. Priscilla Eleje, was to ease difficulties being encountered by the traders and customers occasioned by the inadequate circulation of the lower denomination banks notes like N200, N100, N50, N20, N10 and N5.

      Eleje who was represented at the public sensitisation and enlightenment campaign on CBN direct intervention on lower denomination banknotes at the Alesinloye market by a Deputy Director of the bank, Mrs. Olufolake Ogundero, added that the bank recognises the important role markets play in economic transaction hence the need for ease accessibility of the lower denominations to carry out economic transactions.

      She said the objectives of the CBN’s intervention was principally to ease accessibility and consequently address the dearth of these denominations in circulation adding that the disbursement has commenced in Abuja and was being extended to Lagos, Kano, Enugu, Onitsha, Ibadan, Yola, Gombe, Katsina and Jos.

      Eleje added: “It is a criminal offence punishable by six months imprisonment or a fine of N50,000 or both to sell, spray or mutilate the banknotes. It is also a criminal offence which attracts five years imprisonment without an option of fine for anybody to counterfeit the naira. The naira is our pride as a country. So respect it.”

      The Ibadan zonal Controller of the bank, Mr. Musibaudeen Olatinwo, said since a large number of the businesses deal in Fast Moving Consumer Goods (FMCG) and service, the CBN would henceforth supply the banknotes directly to the Joint Traders Association of Oyo State and major retail outlets to meet the high demand for the notes.

      Olatinwo said the intervention was timely because of the experience of scarcity of lower denominations in circulation due to hoarding and racketeering, saying: “The CBN has tried to increase the supply of these notes only for it to be diverted from its expected users and sold in the open market.

      The leader of the market women in the state, Mrs. Labake Lawal, assured the CBN of the cooperation of her members, stressing that “we will comply strictly with the agreed guidelines and utilise the banknotes for the intended purpose.”

    • UAE Exchange announces rebrand and $100 million earmark for Africa expansion

      UAE Exchange, a leading global money transfer, foreign exchange and payment solutions brand, announced the rebranding of its Africa operations as “Unimoni”. The announcement was made by Promoth Manghat, Executive Director of Finablr and Group CEO, at an event held in Nairobi, Kenya, in the presence of dignitaries, partners and other guests. Short for ‘Universal Money’, the new brand “Unimoni” reflects the company’s aspirations to strengthen its global presence and provide a broader spectrum of innovative financial services to its customers. Following the announcement, Unimoni will be launched across Botswana, Kenya, Rwanda, Seychelles, Tanzania, Uganda and Zambia, subject to regulatory approvals. As part of its Africa growth strategy, Unimoni plans to be present in 14 African markets by the year 2020, and has developed a healthy pipeline of digital payment solutions designed to cater to the specific needs of the African customers. Promoth Manghat, Executive Director of Finablr, said,“Home to some of the fastest growing economies globally, Africa holds tremendous potential and is a critical component of our growth strategy as a group. We will continue to invest in enhancing the breadth of our reach and depth of our operations in the African continent. As a group, we have earmarked USD 100 million in investments to support our growth and expansion efforts in Africa over the next decade. ” As Unimoni, the company plans to facilitate seamless and connected experiences for customers and pave the way towards sustainable development and inclusive growth of the various African markets. Through its category-leading brands such as Unimoni, UAE Exchange, Travelex and Xpress Money, the Finablr network extends across 45 African markets. With 29 branches in Africa offering affordable money transfer and foreign exchange services, Unimoni plans to significantly increase its retail footprint over the coming years. Additionally, the brand is also making aggressive investments in customer-focused technology innovations as well as collaborating with ecosystem partners to provide an enhanced service proposition to its customer base. Speaking about the future expansion plans for its Africa operations, Allen Semboze, Regional Head Africa, Unimoni, said,“The next few years are going to be very eventful for us at Unimoni, as we set out to achieve our ambitious growth strategy. We are in advanced discussions with various ecosystem partners including Mobile Network Operators and aggregators to develop new money transfer solutions. He added, “These services will be available in four of our seven markets in Africa by the second half of 2018. We are also working on developing our digital capabilities including an online remittance platform, a white-label solution for our corporate customers and an online forex solution. While we are adopting a phased approach towards our growth in Africa, all these offerings will be live by 2020 across all our African markets.” The rebranding exercise follows an earlier announcement made by noted UAE-based businessman and philanthropist, Dr. Bavaguthu Raghuram Shetty, Founder and Chairman of the UAE Exchange Group. In April 2018, Dr. Shetty launched “Finablr”, a holding company which, subject to regulatory approvals, aims to bring together his global portfolio of category-leading financial services brands including Unimoni, UAE Exchange, Travelex and Xpress Money under one umbrella.
    • Old Mutual returns to African roots with JSE and ZSE listings

      Old Mutual Plc returned to its roots on Tuesday when it listed its $11 billion African financial services business in Johannesburg, a move which largely completes a major overhaul of the company. The group also simultaneously listed on three regional exchanges to complete the return to its African roots. The 173-year old group has been disentangling its conglomerate structure created after a series of acquisitions since it moved its headquarters and primary listing to London in 1999. Chief executive Bruce Hemphill set the break-up in motion in 2016, saying the company’s four main businesses — a U.S. asset manager, a British wealth manager, an African financial services division and a South African bank — would achieve higher investor ratings as separate entities. The financial conglomerate broke into four independent businesses namely Old Mutual Emerging markets (OMEM), NedBank Group, Old Mutual Wealth (OMW) and Old Mutual Asset Management as part of a strategy to unlock and create significant long-term value as well as removing the significant costs arising from the previous structure. Old Mutual Plc’s African financial services business, Old Mutual Ltd, listed roughly 5 billion shares on Tuesday. They traded at 29.39 rand each during the session, valuing the company at roughly 145 billion rand ($10.7 billion). Old Mutual Ltd, now the parent to what is left of Old Mutual plc, has a standard listing in London, and secondary listings on the stock exchanges of Malawi, Namibia, and Zimbabwe. It is expected that Old Mutual plc shares will be delisted from the Johannesburg Stock Exchange, the Namibian Stock Exchange, the Zimbabwe Stock Exchange and the Malawi Stock Exchange on 29 June 2018. The company also had its secondary listing in Zimbabwe — where it opened its first office  120 years ago — on Tuesday at an event officiated by the finance minister, Patrick Chinamasa. Secondary listings on the Namibian Stock Exchange and the Malawi Stock were expected also on Tuesday. Hundreds of Old Mutual Ltd’s employees, blowing green vuzuzelas and beating drums, danced through the streets of Johannesburg ahead of the listing. “What’s most exciting about our listing as an independent, standalone entity is that it enables us to unlock shareholder value and create a business with a strong strategic focus on sub-Saharan Africa,” Old Mutual Ltd’s chief executive Peter Moyo said. Old Mutual, which traces its roots back to the mid-19th as South Africa’s first mutual aid society with 166 members, has already sold its U.S. asset management business and on Monday separately listed its U.K wealth arm, renamed Quilter. The break-up is part of a growing global trend for conglomerates to hive off bits of their businesses, sometimes in response to pressure from activist investors. General Electric said earlier on Tuesday it would spin out its healthcare business and sell its stake in oil firm Baker Hughes, leaving the U.S. company focused on jet engines, power plants and renewable energy. “The nice thing about this Old Mutual break up is that you now have a vehicle that’s purely emerging market, if you want to buy that, and another vehicle that’s purely UK,” Michael Treherne, a portfolio manager at Vestact, said. Later this year, Old Mutual’s African business will spin off part of its 53 percent interest in South Africa’s fourth largest lender, Nedbank. Old Mutual, which will retain a roughly 20 percent stake in Nedbank, bought into the bank in 1986 when it was forced by apartheid South Africa’s strict capital controls into being a major shareholder in several local companies. The company’s head office in London will be wound down this year. It has been cutting staff in London since it first announced the demerger two years ago. Staff numbers in London are expected to fall to around 40 this year from 120, Old Mutual has said.
    • Nigeria to receive $1.57 billion power boost from donors

      Nigeria’s quest to improve power supply will receive US $1.57 bn donor support from the World Bank, African Development Bank AfDB, Japan International Cooperation Agency (JICA) and French Development Agency. The fund will be used for the Transmission, Rehabilitation and Expansion Programme ,TREP of the Transmission Company of Nigeria TCN for an initial 20,000 MW in the next four years. TCN Managing Director, Usman Mohammed said the programme which was approved by the federal government was designed to steadily grow, stabilize and modernize Nigeria’s transmission network to take more electricity from generation companies, to distribution networks. “In the last one year, we have been able to deliver a 20-year least-cost transmission plan, present a generation adequacy report which is part of the requirement of the function of system operation, and we have been able to also audit TCN from 2010 to 2016 and now working to deliver the 2017 audit,” said Mohammed.

      Industrial Growth

      Nigeria’s current electricity situation continues to be problematic, with the highest generation put at about 4,000MW, far below the national need. According to the National Bureau of Statistics, the inability of Nigeria to meet the electricity requirement has adversely affected industrial growth and also caused the closure and relocation of many companies. TCN will host a workshop to review the plan to procure and install new supervisory control and data acquisition (SCADA) and electricity management system (EMS) for the national grid.Mr Mohammed further disclosed that TCN had set aside a US $65 m to procure the brand new SCADA and EMS, adding that the facility would help it manage the grid efficiently.
  • United Kingdom
    • Office of Tax Simplification: 2017-18 annual report

      The Office of Tax Simplification (OTS) published its 2017-18 annual report on 23 July 2017. The OTS's work programme includes:
      • the ongoing review of inheritance tax, on which it intends to report in Autumn 2018;
      • a project on HMRC guidance, also to report in Autumn 2018;
      • further work to develop and expand on key areas highlighted in the business lifecycle review;
      • personal tax issues; and
      • ongoing consideration of the role and impact of technological changes.
    • Treaty between Cyprus and United Kingdom enters into force

      According to information published by the Cypriot Ministry of Finance, the Cyprus - United Kingdom Income Tax Treaty (2018) entered into force on 18 July 2018. The treaty generally applies from: In Cyprus:
      • 1 January 2019: for withholding and other taxes.
      In the United Kingdom:
      • 1 January 2019: for withholding taxes;
      • 1 April 2019: for corporation taxes; and
      • 6 April 2019: for income and capital gains taxes.
      In Cyprus and the United Kingdom:
      • 18 July 2018: for the provisions of article 25 (mutual agreement procedure) and article 26 (exchange of information).
      From these dates, the new treaty will replace the Cyprus - United Kingdom Income Tax Treaty (1974). However, the provisions of article 27 (Assistance in collection) shall not have effect until Cyprus confirms through diplomatic channels that it is able to provide such assistance under its domestic law whereupon (and to the extent permitted under that law) the provisions shall have effect without regard to the taxable period to which the revenue claim relates. In addition, notwithstanding the entry into force of the new treaty, an individual who is entitled to the benefits of article 20 (Teachers) or article 21(Students and trainees) of the prior treaty at the time of entry into force of the new treaty shall continue to be entitled to such benefits until such time as the individual would have ceased to be entitled to such benefits if the prior treaty had remained in force, but in no case shall such entitlement continue for a period exceeding five years from the date of entry into force of the new treaty. Details of the new treaty will be reported subsequently.
  • United States
    • IMF releases 2018 Staff Report with recommendations for US tax reform

      On 3 July 2018, the International Monetary Fund (IMF) issued a Press Release to announce that, on 29 June 2018, the IMF Executive Board concluded the Article IV consultation with the United States. In connection with the consultation, the IMF published a package of documents that includes the Press Release, a Staff Report, an Informational Annex and a Statement by the Executive Director. The Staff Report states that many of the objectives of the Tax Cuts and Jobs Act could be better achieved by:
      • replacing lost revenues with increases in indirect taxes;
      • targeting personal income tax relief solely to those earning close to or below the median income;
      • imposing a higher tax rate on unrepatriated profits;
      • reformulating the business tax as a cashflow tax; and
      • redesigning the international provisions to impose a minimum tax on low-tax jurisdictions and to avoid giving more favourable treatment to exports than to imports and domestic sales.
  • Switzerland
    • Draft guide on VAT treatment of virtual currency – consultation launched

      On 21 July 2018, the Ministry of Finance published a draft guide on the VAT treatment of virtual currency. The draft guide, among other things, addresses the following:
      • the acceptance of virtual currency as a payment method;
      • calculation of the taxable amount in virtual currency based on the fair market price;
      • currency exchanges;
      • the transfer of coins or tokens;
      • the mining of virtual currency;
      • the initial coin and token offering;
      • conversion of virtual currency amounts received in CHF;
      • VAT deductions in the case of invoices in cryptocurrency;
      • conversion of virtual currency amounts stated in an invoice to CHF or a foreign currency; and
      • bookkeeping obligations for invoices received in virtual currency.
      Comments are due by 16 September 2018.
  • Tax Treaties
    • Tax Treaties

      A tax treaty is a bilateral agreement made by two countries to resolve issues involving double taxation of passive and active income. Treaties Update – July 2018
      Date Country A Country B Object Status
      11.07.18 San Marino United Arab Emirates Income Tax Treaty Signed
      18.07.18 Maldives United Arab Emirates Income and Capital Tax Treaty Enters into force
      02.07.18 Isle of Man United Kingdom Income Tax Treaty Signed
      02.07.18 Jersey United Kingdom Income Tax Treaty Signed
      02.07.18 Guernsey United Kingdom Income Tax Treaty Signed
      25.07.18 Cyprus United Kingdom Income Tax Treaty Enters into force
  • Bulgaria
    • 2018 manual on personal income tax published

      On 9 July 2018, the National Revenue Agency published the 2018 version of the manual on personal income taxation on its website. The manual provides a detailed overview of applicable legislation as well as numerous examples with comments from the authorities.
    • Amendments to legislation on fiscal devices – consultation launched

      On 19 July 2018, the Ministry of Finance launched a public consultation by suggesting amendments to Ordinance N-18 from 13 December 2006 concerning registration and reporting of sales on commercial sites through fiscal devices. The main suggestions concern the following topics:
      • new requirements for cash receipts and information to be submitted to the tax authorities in the case of sale/refuelling of liquid fuels;
      • a proposal for adjustments of cash receipts in such cases as return of goods, mistake by the operator or decrease of the taxable base to be performed through fiscal devices. Currently, such adjustments are performed via cancellation cash receipts on paper;
      • introduction of requirements for sales management software on commercial sites as well as for producers, distributors and users of such software; and
      • a new obligation for persons performing sales through e-shops to submit information to the tax administration on the owner of the shop, goods/services sold, hosting and maintenance of the website, software used, etc.
      Further developments will be reported as they occur.
    • VAT aspects of activities of Bulgarian branch of Italian company

      On 22 June 2018, on a taxpayer's request, the National Revenue Agency (NRA) issued a letter concerning the VAT aspects of the activity of the Bulgarian branch of an Italian company. (a) Facts. An Italian company involved in machine building registered a Bulgarian branch. The head office sent materials to Bulgaria, and the branch manufactured cranes, which were dispatched only to the principal in Italy. The head office and the branch were registered for VAT purposes in Italy and Bulgaria, respectively. (b) Questions. The company raised a question regarding the right to deduct input VAT by the branch if the branch provides services only to the head office and does not perform sales to third parties. In addition, the company asked about the VAT aspects of the transfer of goods to and from Bulgaria. (c) Comments. The NRA commented that, based on article 3(3) of the Regulations for Application of the VAT Act (RAVATA), the transfer of goods between the head office in Italy and the branch in Bulgaria should be considered as taxable supplies subject to the general VAT rules. Therefore, the transfer of goods from Italy to Bulgaria should be reported as an intra-Community acquisition by the Bulgarian branch, and the transfer from Bulgaria to Italy should be considered as an intra-Community supply. With regard to the right to input VAT deduction, the NRA considered that, because the branch is performing taxable supplies to its head office in Italy, it should be allowed to deduct input VAT on its purchases.
    • Self-invoicing between parties in different EU Member States – letter issued by tax authorities

      On 20 June 2018, on a taxpayer's request, the National Revenue Agency (NRA) issued a letter concerning the application of self-invoicing rules when the supplier and the recipient are established in two different EU Member States. (a) Facts. A Bulgarian company involved in freight road transport concluded an agreement for self-invoicing with its client from another EU Member State. The Bulgarian company received invoices issued on its behalf with numbers that differed from its own numbering. (b) Question. The company raised a question whether, in the case of self-invoicing when a foreign client is issuing the invoices, the Bulgarian company must issue and report duplicates of the invoices that have already been issued on its behalf by the client. (c) Comments. The National Revenue Agency confirmed that, based on article 79b of the Regulations for Application of the VAT Act (RAVATA), self-invoicing is also possible in cases when the supplier and the recipient are established in two different EU countries. Furthermore, according to article 79b(5) of the RAVATA, when the service has a place of supply in another EU Member State, and the recipient is also established in another EU Member State, the supply should be documented according to the rules of the country where the place of supply is. The NRA therefore determined that the documents issued by the foreign client should be valid for Bulgarian VAT purposes and should be reported in the sales ledger and in the VAT and VIES returns of the Bulgarian supplier. The NRA also noted that the Bulgarian VAT legislation does not envisage a possibility for issuing invoices by the supplier in the case of a self-invoicing arrangement.