July 2019

As of 1 July 2019, a recent amendment to VAT Act entered into force and the possibility for self-assessment of VAT in the VAT return (instead of effective payment at importation) is now extended to importers of goods such as aluminium, nickel, sulphur, tin, lead, zinc and organic chemical products. In order to apply the postponed accounting, the importer must meet the following requirements:

• each commodity included in the customs document for importation must have a customs value of at least BGN 50,000 (approximately EUR 25,600);
• the importer must have been registered for VAT purposes in Bulgaria (on general mandatory or voluntary grounds or on the grounds of supply of goods including assembly and installation) for at least six months before the importation; and
• the importer must not have any unsettled tax and social security liabilities.

The Ministry of Finance and the State Administration of Taxation recently issued the Announcement about Continuing Implementation of Preferential Policies on Vehicle Acquisition Tax, effective from July 1, 2019. From January 1, 2018 to December 31, 2020, buyers of new energy vehicles will be exempted from vehicle acquisition tax; from July 1, 2018 to June 30, 2021, buyers of trailers will pay half of vehicle acquisition tax.

The National Development and Reform Commission and the Ministry of Commerce released three documents on June 30, 2019, effective from July 30, 2019. The three documents are the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2019), the Special Administrative Measures (Negative List) for the Access of Foreign Investment in Pilot Free Trade Zones (2019), and the Catalogue of Industries Encouraging Foreign Investment (2019). After the latest revisions, the two negative lists, one for the piloted FTZs and one for the rest of the country, contain fewer access-limiting measures. Pilot FTZs now have 37 listed items for foreign investors, down from 45, while non-FTZ areas are required to implement 40 items instead of 48. There are three prominent changes. The service sector will see greater opening-up; market access restrictions will be eased in agriculture, mining and manufacturing industries; pilot FTZs will continue to play experimental roles in reform and opening-up. There are three significant changes to the Catalogue of Industries Encouraging Foreign Investment, including substantially increasing more areas where foreign investments are encouraged, encouraging foreign investors to push for high-quality development of China's manufacturing sector, and encouraging foreign investment in production-based service companies.

Premier Li Keqiang chaired a State Council executive meeting on July 3, 2019. The meeting said the Chinese government will support pilot free trade zones in undertaking more experiments with reform and opening-up, and refine policy incentives for cross-border e-commerce to facilitate more innovative models in foreign trade. On top of the 35-existing cross-border e-commerce zones, such zones will be launched in more cities in light of local needs. Retail goods that are exported from these pilot zones will see their value-added tax exempted in the absence of a valid purchase certificate. Simpler methods for verifying and collecting corporate income tax will be introduced.

The General Administration of Customs recently issued the Announcement about Implementing the Catalogue of Industries for Encouraging Foreign Investment (2019 Version). According to the announcement, starting from July 30, 2019 for foreign investment projects covered by the catalogue, import tariff will be exempted for self-use equipment, technology and components to be used in these projects, unless these products are listed in the Catalogue of Imported Products concerning Foreign-invested Items Without Duty Exemption and the Catalogue of Key Technological Equipment and Products Not Exempted from Tax in Imports. Value-added tax will continue to be collected for such products in the import process.

Government has announced plans to introduce nuclear power into the country’s energy mix and will take between 10 to 15 years for the realisation of the vision to ensure affordable energy for industrial development. A team has been constituted to embark on reconnaissance trip for a preliminary assessment and collection of site data for the Nuclear Power Programme, while mass sensitization activities are being carried out to promote public acceptability of the technology and to explain the benefit Ghana stands to gain from a Nuclear Power Plant A nine-member board, known as ‘Nuclear Power Ghana’ has been constituted by government to oversee the full implementation of the programme, which will see the nation rubbing shoulders with nuclear power nations like Iran, Iraq, Russia and South Korea. The Volta River Authority, Bui Power Dam and Atomic Energy have been tasked to support the setting up of the structures for a nuclear power plant taking into consideration the timelines outlined by government. Professor Kwabena Frimpong Boateng, the Minister of Environment, Science, Technology and Innovation, who announced this when he took his turn at the Meet-the-Press Series in Accra on Tuesday, said China, France, Russia and United States have already expressed interest in Ghana’s Nuclear Energy Programme and expressed their readiness to collaborate with the nation towards the realisation of the plan. He said the Atomic Energy is currently preparing a report on the Nuclear Power Programme and upon presentation to government a decision would be taken regarding the financing of the programme. The Minister noted that the nation has competent and well-trained scientists and functional institutions, including the Nuclear Power Institute, Ghana Atomic Energy, Nuclear Regulatory Authority and School of Allied and Nuclear Sciences that are capable to champion the country’s Nuclear Energy Programme. He said the nation had been operating a research reactor for 25 years, which is a miniature of any nuclear power plant, noting that it had trained nuclear scientists from other African countries as well as students from Pakistan and Iran. He said some sites have been identified for the establishment of a nuclear power plant and that a team was collecting data on the candidate sites. Prof. Frimpong Boateng said Ghana had completed the construction of a replica of research reactor to serve as a training facility for any country embarking on reactor core conversion with a training programme completed for some Nigerians. To ensure adequate control of radiation exposure to humans and environment during nuclear and radiation activities, the Minister said the National Regulatory Authority drafted some regulations including Emergency Preparedness and Response Regulation for Operators, Regulations on the Safe Transport and Radioactive Materials, Design of Nuclear Installations Regulations, Licensing of Nuclear Installations Regulations, Transport Security Regulations and Physical Protection of Nuclear Installations Regulations. The Minister announced that feasibility studies were ongoing towards the establishment of two Foundries and Machine Tools Centres to improve the capacity of the nation for manufacturing machine parts and tools for industries.

Yield Uganda Investment Fund has launched a Shs 34 billion investment fund for agribusinesses in Uganda, a further boost for a sector that does not attract much financing. With the launch, the agribusiness impact fund has now hit the €20 million (Shs 85 billion) mark in total commitments. This took place on June 27 at Kampala Sheraton hotel and it comes on the back of new funding partners such as the Soros Economic Development Fund, part of Open Society Foundations (OSF) and FCA Investments (FCAI). The fund targets agriculture-related businesses across all value chains, including the supply of agricultural inputs, production and agro-processing within all sub-sectors, post-harvest storage and distribution, but also peripheral activities such as transportation, communications and certification. Gabriel Ajedra, the state minister for Finance, General Duties, expressed his gratitude with the new increase in the fund because the fund is wholly dedicated to providing capital through debt and equity to agriculture-related businesses across all value chains in Uganda.  Attilio Pacifici, the EU ambassador to Uganda, said the main reason for the creation for Yield Uganda Investment Fund has been to mobilize investments for the agro industrialization of Uganda. Ambassador Pacifici added that the EU was aiming at attracting capital into Uganda to foster development in agriculture, trade and industrialization. An industrialized agriculture sector shall improve the export earnings of Uganda. This is so because Uganda majorly exports raw materials instead of final goods with added value.  Yield Uganda Investment Fund was established by Deloitte Uganda and Pearl Capital Partners Uganda (PCP) and it is a partnership between public and private investors. The fund offers innovative and tailored financial solutions, using equity, semi-equity and debt, to small and medium-sized enterprises (SMEs) having the potential to generate both strong financial returns and significant social impact in Uganda. It is currently managed by Pearl Capital Partners Uganda with the mandate of making investments in the range of €250,000 to €2 million (approx. Shs 1 billion to Shs 8.5 billion).

Ethiopia, the east African nation currently facing severe energy shortage, is set to begin implementation of a new 520 MW geothermal electric power project.

The Tulu Moye Geothermal project will be implemented in West Arsi Zone in Oromia region of Ethiopia at a total cost of $2.5 billion. Chief Executive Officer (CEO) of Tulu Moye Geothermal, Darrell Boyed told the state daily paper, The Ethiopian Herald that the Company is currently performing various works in the project site including opening offices in the project site and in Addis Ababa as well as constructing road at the project site. He noted that as the project requires a high cost, it requires the support of anchor international institutions. So far, US Trade and Development Agency has shown interest to support the project, he told the paper. A study released in 2018 shows that Ethiopia has 10,000 megawatts of geothermal energy potential. According to Tesfaye Kessa, Director of Geothermal Resource Development License and Administration Directorate at Ethiopian Energy Authority, 24 geothermal potential areas are identified at different parts of the country. “When we compare with hydro energy though it is a renewable source of power, if there is shortage of rain, it does not generate the required amount of energy,” he told paper. The project would have greater advantages for the social and economic growth of the country in terms of reducing power outages, he added. The paper stated that high operational cost to construct geothermal projects and lack of skilled human power in geothermal sector has hindered Ethiopia from develop its huge geothermal source. The report indicated that the Authority has been undertaking a number of activities to commence the project and to benefit the community by enhancing energy sources, according to the state daily. Mentioning that Ethiopia had no geothermal proclamation in earlier years, he said that the newly enacted Geothermal Resource Development Proclamation plays role to develop the available energy resources and promotes the participation of private investment in the sector thereby achieve accelerated development.

Ethiopian Airline has announced plans to construct its second five star hotel in Addis Ababa at an investment cost of US $150m. Abraham Tesfaye, Ethiopian Airlines Group manager Infrastructure Planning and Development announced the reports and said that the hotel is being built adjacent to the the first hotel on a 22,000sqm of land. The hotel will feature 637 guest rooms, restaurants, bars, conference hall, swimming pool, fitness center and a basement parking which can accommodate 550 cars. Chinese construction firm, AVIC has conducted the design work and will also undertake the construction of the second hotel. The first Ethiopian Skylight Hotel, was built at a cost of US $65m. It sits on a 20,000sqm plot of land in front of the Millennium Hall. The hotel has has eight floors with a total floor area of 42,000sqm and 373 guest rooms Ethiopian Skylight Hotel features three restaurants – a Chinese restaurant, an Ethiopian restaurant and an European restaurant, a lobby, executive roof top and a jazz club. 27 of the guest rooms are spacious suites.  The Hotel was designed and built by AVIC, while a local consulting firm, Sileshi Consult, carried out the supervision work. It also encompasses a grand ballroom designed to accommodate 2000 persons convenient for conference and wedding parties and also has five meeting rooms which can accommodate 20-30 persons. “Addis Ababa is the main gate way to Africa. The hotel will play a significant role in boosting the tourism sector and making Addis Ababa a conference hub,” said Busera Awel, VP Strategic Planning and Alliances. Busera however clarified that both hotels are catering for not only Ethiopian Airlines passengers but it is open for the public. “The hotel is hosting local, regional and international conferences. It is an ideal venue for company staff and management meetings, weddings and other events,” he said. When the second hotel is completed Ethiopian Skylight Hotel would have 1,000 guest rooms. 

Investors from the Chinese city of Kunshan are planning to invest $500m in a textile production complex in the eastern Ethiopian town of Dire Dawa.

Mayor of Kunshan, Du Xiaogang, announced the plan after visiting the town near the border with Djibouti. Du said investors were ready and work would start in the next two years. He said China was ready to share its manufacturing expertise with Ethiopians “in order to make industrial parks in the country more productive and successful”, reports New Business Ethiopia. About 30 Ethiopian professionals are now on a 10-day training course on industrial park management at a college built in Dire Dawa, the report said. Kunshan is a county-level city in southeastern Jiangsu province, west of Shanghai. Lelise Neme, chief executive of the Ethiopia Industrial Parks Development Corporation, said investment from Kunshan would create jobs and foster university–industry links. There are currently around 23 industrial parks in Ethiopia; the government aims to have 30 completed by 2025 as part of its drive to base the country’s economic development on low-cost manufacturing. In October last year, Ethiopia announced plans to build other textile-based parks in Aysha and Semera, also near the Djibouti border, and Assosa, next to the Sudanese border (see Further reading).

Government has announced a joint partnership deal with the Chinese to construct a 100 million dollar chocolate factory at Sefwi-Wiaso in the Western North region. The facility is expected to process about 50,000 tonnes of cocoa beans into chocolate in a year. This is expected to help the country add value to its cocoa beans before export. Speaking at programme organized by Ecobank Ghana on the Cocoa Supply Chain, Minister for Agriculture, Dr. Owusu Afriyie Akoto stated that the agreement will soon be signed in Ghana. “We have agreed with the Chinese who are ready to bring 60 million dollars while Ghana looks for some Ghanaian investors who will to bring 40 million dollars,” he said. Dr. Afriyie Akoto explained that the Western North area is known to be major cocoa growing area, contributing to the export earnings of the country over the years. He maintained that the move, apart from creating jobs will also provide an opportunity for the people in the area to be part of the value addition in cocoa production. Background Even though Ghana is among the leading producers of cocoa in the world, less than 15 percent of the beans is processed in the country for cocoa products such as chocolate. This has also negatively impacted the consumption of locally made Chocolate in the country. The consumption of locally made chocolate remains low despite the celebration of the National Chocolate Day for over a decade. According to the Cocoa Processing Company (CPC), Ghanaians consume only 400 grams of chocolate daily compared other developed countries that consume thrice the number. Meanwhile, the global chocolate market is worth some 103.28 billion dollars and has been estimated to reach approximately 161.56 billion dollars by 2024. Ghana’s major producer of Chocolate, the Cocoa Processing Company produces 2000 metric tons of chocolate annually.

Bank of Kigali has selected Temenos, a banking software company based in Geneva, Switzerland, to power its digital transformation journey as it continues to expand regionally and realize its financial inclusion objectives. With the services of the Swiss firm, Bank of Kigali aims to gain business agility and dramatically lower the cost of deployment. With the new system, the bank could deliver innovative products and services specifically to underserved segments of the economy and key population demographics like the youth and the unbanked. Bank of Kigali plans to grow the number of customers to one million by 2021, from the over 400,000 the bank currently has, according to the lender’s projections The bank is the biggest commercial bank in the country by total assets. The new system has capabilities and functions such as advanced analytics, reporting, risk and compliance modules among others provided by the Temenos Payments product. Bank of Kigali is currently looking to drive its transactional growth revenue through both retail and insurance and brokerage business. Temenos banking software could help the bank simplify and automate its processes, significantly grow its digital banking customer base and provide a 360-degree customer view through a single digital banking platform. By implementing Temenos’ software, the bank will be in position to introduce innovative products and services more quickly to support its growth ambitions and continue to pursue its vision of becoming the financial institution of choice. The bank will leverage Temenos' global expertise and 25 years of banking software experience as well as the firm’s commitment to invest 20 per cent of revenues into research and development every year. Dr. Diane Karusisi, Chief Executive of Bank of Kigali said that the development will form the foundation to drive their three-year digital transformation strategy. “Temenos' cloud-native and cloud-agnostic banking software will help reduce deployment costs and drive simplicity and efficiency of operations. The new open digital banking platform will enable us to gain a deeper understanding of our customers’ needs and allow us to provide the best-in-class customer experience,” she said. Jean-Paul Mergeai, the Managing Director Middle East and Africa at Temenos, said: “We believe that financial institutions can only become truly digital when they transform their end-to-end operations and we are the best provider to help them realize their digital vision,” Mergeai said. He added that the system functionality and cloud technology will place the lender in an ideal position to drastically reduce time to market and cost and at the same time expand its digital customer base and promote financial inclusion both in Rwanda and throughout the region. Temenos has a longstanding presence with over clients in the East African providing real-time and scalable banking software.

JOHANNESBURG (Reuters) - PepsiCo has struck a deal to buy South Africa’s Pioneer Food Group for $1.7 billion, the companies said on Friday, lifting Pioneer’s shares and boosting a sector that has been hit by drought and tough trading conditions. The U.S. drinks and snack group said on Friday that Pioneer’s product portfolio was complementary to its own and would help PepsiCo to expand in sub-Saharan Africa by adding manufacturing and distribution capabilities. “Pioneer Foods forms an important part of our strategy to not only expand in South Africa, but further into sub-Saharan Africa as well,” PepsiCo Chairman and CEO Ramon Laguarta said in a statement. PepsiCo has offered 110 rand ($7.94) per Pioneer ordinary share in what would be its second largest deal since 2010, the companies said, with the news lifting the South African company’s shares by 29.32% to more than 100 rand. Shares in agribusiness investment company Zeder Investments, which holds Pioneer as part of its portfolio, also rose more than 22%. “It’s a vote of confidence in South Africa at a time when we really need it,” Pioneer CEO Tertius Carstens told Reuters. Food producers have struggled amid a slump in retail sales as consumers cut back and dry weather hit maize and other produce. Pioneer, which uses maize in many of its products, reported a decline in half-year earnings in May, weighed down by shortages in the staple food. “It’s almost a signal to other overseas companies that we are open for business. If PepsiCo is willing to put money down it may lift sentiment of other foreign investors that might come looking at South Africa for bargains,” said Greg Davies, equities trader at Cratos Capital. Pioneer, whose brands include Weet-Bix cereal, Liqui Fruit juice and Sasko bread, is the latest consumer goods firm to be the target of a buyout after South Africa’s Clover Industries, which processes products including yoghurt, beverages, and olive oil, began takeover talks with a consortium of companies called Milco SA last year. Pioneer was in talks over a potential deal with “a multinational organisation” in 2017, but that fell apart after South Africa’s credit rating was cut to junk status. Pioneer and PepsiCo declined to comment whether those talks referred to them. Pioneer exports to more than 80 countries. Its deal with PepsiCo is conditional on regulatory approvals. ($1 = 13.8613 rand)

The construction of US $180 million brewery plant in Mozambique is on track despite the late start of the ambitious project by beverage company Cervejas de Moçambique’s (CDM’s).  The late start and constraints saw geotechnical specialist Franki Africa make efforts to ensure partial handover of the foundations and lateral support to allow the main contractor progress with construction works. “We have managed to partially handover different areas to allow the main contractor carry on with works smoothly. The design team is working in hand with the client’s engineers are working tirelessly to overcome any arising challenges,” said Botelho. CDM, the project owner broke ground last year December for construction of the two million hectolitre brewery in Mozambique’s Marracuene district which is about 30 KM North of Maputo. The project is one of the largest in the beer sector in Mozambique since the inception of CDM in 1995. The new brewery is scheduled to begin producing its first batch of beer at the end of the year. The plant is expected to produce about 200 million litres of beer annually. Franki will carry out geotechnical works on the project and will also be responsible for the installation of foundation and lateral support piling for different structures of the brewery, according to the company’s engineer Marta Botelho. The project’s duration has been extended from five weeks to ten weeks and as a result, the contract value has increased from US $1.5m to US $2.5m owing to additional works required. This is attributed to the late start of the project which has attributed to the project’s stringent timeline.

On 19 July 2019, the Hong Kong Inland Revenue Department issued three Departmental Interpretation and Practice Notes (DIPN) to set out the Department's interpretation and practices on the relevant rules and requirements, and the latest international standards relating to transfer pricing. The main contents of these DIPNs are summarized below.

DIPN 58 - Transfer pricing documentation and country-by-country reports

Master file and local file

DIPN 58 was issued to further supplement the implementation of the previously gazetted Ordinance to implement BEPS minimum standards and codifying the transfer pricing principles (see Hong Kong-1, News 18 July 2018). A Hong Kong entity should explain its transfer pricing treatment by documenting all material facts and circumstances making it clear how the Hong Kong entity understands the law that applies to those facts and circumstances, and why and on what basis adjustments are made for any material differences. The master file and local file must be prepared within 9 months after the end of each accounting period of the Hong Kong entity.

Exemption from preparing master file and local file

A Hong Kong entity of a group is exempt from preparing both a master file and a local file if they meet any of the two following exemption thresholds:

• the total amount of annual revenue for the accounting period does not exceed HKD 400 million;
• the total value of assets at the end of the accounting period does not exceed HKD 300 million; and
• the average number of the entity's employees during the accounting period does not exceed 100.

A Hong Kong entity is exempt from preparing a local file for a particular type of controlled transaction if the amount of that type of controlled transaction does not exceed the following threshold:

• transfers of properties (movable or immovable, but excluding financial assets and intangibles) do not exceed HKD 220 million;
• transactions in respect of financial assets do not exceed HKD 110 million;
• transfers of intangibles do not exceed HKD 110 million; and
• other transactions do not exceed HKD 44 million.

Country-by-country (CbC) reporting

DIPN 58 also sets out the obligations for filing CbC returns, contents of the CbC report and its notification requirements. DIPN 58 is available here.

DIPN 59 - Transfer pricing between associated persons

Arm's length principle for provision between associated persons

DIPN 59 discusses the arm's length principle for transactions between associated persons to be computed on an arm's length basis.

Concepts and terminologies

The concepts and terminologies relevant to transfer pricing is defined under DIPN 59, including provision, affected persons, transaction and a series of transactions, participation, control, beneficial interest, indirect beneficial interest through interposed person, and potential advantage in relation to Hong Kong tax.

Exempted domestic transactions

DIPN 59 sets out the following exempted domestic transactions that are not subject to the operation of Rule 1, including actual provisions that do not give rise to any potential advantage, domestic nature condition, no actual tax differences, non-business loan condition, as well as non-tax avoidance condition.

Determining the arm's length price

DIPN 59 examines the key aspects in a comparability analysis, the functional analysis, comparability analysis, economically relevant characteristics of comparability factors, contractual terms of the transaction, as well as characteristics of property transferred or services provided in determining the arm's length price.

Transfer pricing methodologies

DIPN 59 explains the various transfer pricing methods, which comprise the traditional transaction methods and the transactional profit methods. As for the most appropriate method, DIPN 59 sets out that although both the traditional transaction method and the transactional profit method can be applied in an equally reliable manner, the traditional transaction method is preferred to the transactional profit method. However, the Commissioner of the Inland Revenue Department agrees that MNE groups should retain the freedom to apply methods not described above to establish that those prices satisfy the arm's length principle. In cases where other methods are used, their selection should be supported by documentation including an explanation of why OECD-recognized methods were regarded as non-appropriate or non-workable in the circumstances of the case and of the reason why the selected other method was regarded as providing a better solution. DIPN 59 is available here.

DIPN 60 - Attribution of profits to permanent establishments (PEs) in Hong Kong

Hong Kong attribution rules

DIPN 60 discusses mainly the attribution of profits to a PE in Hong Kong. Rule 2 in section 50AAK of the Inland Revenue Ordinance requires the income or loss of a non-Hong Kong resident person attributable to the person's PE in Hong Kong to be determined as if the PE were a distinct and separate enterprise, taking into account the functions performed, assets used and risks assumed by the non-Hong Kong resident person through the PE.

Artificial avoidance of PE

DIPN 60 also examines the strategies that seek to avoid having a PE in Hong Kong, including fragmentation of activities between closely related parties, complementary functions, commissionaire arrangement and similar strategies.

Attribution of profits

The rule for attribution of profits is the separate enterprises principle. Profits are attributed to the PE in the amount that it would have made if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions dealing wholly independently with the non-Hong Kong resident person. This includes the assumption that the PE would have such equity and loan capital attributed to it, as it would reasonably be expected to have if it were a separate entity. Expenses are only attributable to the PE in Hong Kong where they are incurred for the purposes of producing chargeable profits of the PE. Meanwhile, expenses incurred for other purposes apart from those of the PE in Hong Kong alone will be subject to an apportionment method to calculate the amount that is attributable to the PE of the non-Hong Kong resident person.

Attribution of "free capital"

The attribution of "free capital" (i.e. funding that does not give rise to a tax-deductible interest expense) should be carried out in accordance with the arm's length principle to ensure that a fair and appropriate amount of profits is allocated to the PE. DIPN 60 is available here.

On 19 July 2019, Hong Kong's Inland Revenue Department issued an updated Departmental Interpretation and Practice Notes (DIPN) 28 to set out the Department's interpretation and practice on the provisions relating to foreign tax deduction after the enactment of the Inland Revenue (Amendment) (No. 6) Ordinance 2018. The main contents of DIPN 28 are summarized below.

Rules of tax on profits

All outgoings and expenses that are not capital in nature, to the extent that they are incurred in the production of taxable profits, are deductible for profits tax purposes.

Deduction of foreign taxes on specified interest and gains

If a foreign tax is paid in a territory outside Hong Kong that has a treaty in force with Hong Kong, and the relevant treaty provides relief from double taxation by way of a tax credit, a Hong Kong resident person can only apply for a tax credit under section 50 of the Inland Revenue Ordinance (IRO). A non-Hong Kong resident person not covered under the relevant treaty may seek unilateral relief from its residence jurisdiction or bilateral relief under the treaty between its residence jurisdiction and the treaty territory (if any).

On 27 June 2019, the UAE Cabinet published a decision listing activities eligible for up to 100% foreign ownership in the UAE. A total of 122 economic activities across 13 sectors were specified to be eligible for up to 100% foreign ownership including agriculture, manufacturing, renewable energy, e-commerce, transportation, arts, construction and entertainment. The decision also provides investors with an opportunity to acquire various shares in a number of economic activities including the production of solar panels, power transformers, green technology and hybrid power plants. The decision also provides that foreign ownership will be allowed in sectors such as:

• transport and storage: including e-commerce transport, supply chain, logistics and cold storage for pharmaceutical products;
• hospitality and food services;
• information and communications; and
• scientific and technical activities including laboratories for research and development in biotechnology.

Local governments will determine the ownership percentage of foreign investors in these activities. Further developments will be reported as they occur.

On 26 May 2019, the Federal Tax Authority (FTA) published a new decision (Decision No. 7 of 2019) on tax invoices and tax credit notes. The decision is effective retroactively from 1 January 2018 and supersedes Decision No.3 of 2018. The new decision states the following:

• in the case where tax invoices or tax credit notes are required to be issued for different supplies, the taxable person may issue a single document that displays the wording as "Tax Invoice/Tax Credit Note"; and
• the tax invoices or tax credit notes need not include the physical address of the supplier or the recipient if the respective mailing addresses are stated in the invoices and credit notes.

The Federal Tax Authority (FTA) recently released the VAT administrative exceptions user guide and the form for requesting an exception with the authority on specific matters. The VAT administrative exceptions can be requested by applicants registered with the FTA. The exceptions are grouped into 5 categories, namely tax invoices, tax credit notes, length of the tax period and stagger and extension of time for export of goods. The user guide provides detailed requirement criteria in respect of each exception category. The request may be submitted through the registrant's authorized signatory, appointed tax agent or appointed legal representative. The guideline specifically states that tax advisors who are not tax agents are not permitted to submit any VAT administrative exception request on behalf of a registrant. The main contents of the form are as follows:

• applicant details;
• reason for VAT administrative exception;
• details of authorized signatory; and
• declaration and date of submission.

The registrants are required to submit the exception request by email along with supporting documents to specialexceptions@tax.gov.ae FTA will respond to the request within 20 to 40 business days according to the exception category. The final response to the request will be sent by email within 5 business days of the decision being made. The VAT Administrative Exception request form is made available in VAT section of the FTA portal.

The Federal Tax Authority recently issued a new decision which reduces the daily limit of VAT refunds for tourists. Accordingly, the daily limit of VAT refunds for tourists is reduced from AED 10,000 to AED 7,000. The requirement to purchase goods from the same taxable person with a minimum value of AED 250 is still applicable. The taxable person must also be registered with the Merchant Tourist Refund Scheme. The new decision is applicable as of 1 June 2019.

The Federal Tax Authority (FTA) has recently issued a public clarification on importation of goods by agents on behalf of VAT registered persons. When a VAT registered importing agent imports goods on behalf of the VAT registered owner of the goods, the VAT amount is automatically pre-populated in Box No. 6 of the VAT return of the importing agent. The clarification highlights the adjustments to be made in the VAT return of both the importing agent and the owner of the goods to enable the recovery of the VAT on importation from the actual owner of the goods. The importing agent is required to make a negative adjustment in Box No. 7 of the VAT return to nullify the pre-populated value of the imported goods whereas the VAT registered owner of the goods needs to make a positive adjustment in Box No. 7 of the VAT return to include the value of goods imported on behalf by the importing agent. The owner is thus entitled to recover the import VAT as per normal input VAT recovery procedure in Box No.10 of the VAT return. The clarification requires the owner and the importing agent to enter into a written agreement to make the above adjustments and such agreement is to be retained as record evidence in addition to customs documentation. The clarification also states that if the owner and the importing agent do not wish to make such adjustments, the importing agent would need to issue a statement to the owner as prescribed in Article 50(7) of the VAT executive regulations. This statement needs to contain the following details:

• the name, address, and tax registration number of the agent;
• the date upon which the statement is issued;
• the date of import of the relevant goods;
• a description of the imported goods; and
• the amount of tax paid by the agent to the authority in respect of the imported goods.

Such statement from the importing agent is considered as a tax invoice for the owner of the goods to recover the input tax in Box No. 7 of the VAT return.

The Office of Tax Simplification (OTS) published its 2018-19 annual report on 18 July 2019. The OTS's work programme covers a wide range of themes, including:

• inheritance tax;
• technology and self-employed people's taxation;
• guidance and tax administration; and
• small businesses and individuals.

On 11 July 2019, HMRC announced that Finance Bill 2019-20 was published on the same day. The Bill delivers on Budget 2018 commitments. Significantly, it moves to implement the digital services tax and off-payroll working rules.

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 2019  

Date	Country A	Country B	Object	Status
23.07.19	Switzerland	Zambia	Income and Capital Tax Treaty	Entered into force