June 2021

  • Bulgaria
    • Economy Minister Announces New Loans to Help Small and Medium-seized Businesses in Bulgaria

      The Bulgarian Ministry of Economy has signed an agreement with several commercial banks and now small and medium-sized businesses can apply for loans without collateral. This was announced by the Minister of Economy Kiril Petkov at a briefing on Tuesday.

      Companies that have been operating for at least 3 years can apply for these loans. The loan is for up to 7 years, and the first 12 months can be requested for a grace period.

      The recovery fund secures 80% of the loan, the remaining 20% ​​is a risk for the bank.

      The maximum amount is BGN 3 million for an individual loan or up to 70% of the company's revenues for 2019 or 2020, explained Minister Vassilev.

      Source: Novinite

    • Bulgaria: Natural Gas Price Set for Sharp Jump of 20%

      Bulgaria's Energy and Water Regulatory Commission (EWRC) has endorsed a price of 45.27 leva/MWh for natural gas, effective June 1, 2021, the regulator said in a press release on Monday.

      The new price, which excludes the charges for access, transmission, excise duty and VAT, is 20 per cent higher than its May 1 level (37.71 per cent) and 122 per cent up from June 1, 2020.

      The Energy and Water Regulatory Commission specified that the new higher gas price will not result in increase in prices of heating and electricity in June.

      The press release lists three reasons for the natural gas price rise:

      • the ongoing increase of prices on international gas markets;
      • the fact that Bulgargaz has had to purchase the amounts of gas it needs at spot prices from other suppliers because the TurkStream gas pipeline is being repaired in the territory of Turkey in June;
      •  the smaller amounts of gas from Azerbaijan entering Bulgaria than those capable of being transmitted through the Interconnector Greece-Bulgaria (IGB) between Komotini and Stara Zagora, whose commissioning has been postponed for the middle of next year.
      Source: Novinite
    • Bulgaria: 60/40 Job Retention Scheme Will Be Extended

      The social partners have discussed a proposal to redesign a 60/40 job retention scheme in support of businesses and employees, Deputy Prime Minister Galab Donev told journalists on Monday after a meeting of the National Council for Tripartite Cooperation (NCTC). The measure will be considered by the government and will take effect from June 1, said Donev who is also Labour and Social Policy Minister. All procedures under the current measure will be completed, he added. The Confederation of Independent Trade Unions backs the change, whereas the Podkrepa Labour Confederation is abstaining because it does not apply to miners in the Maritsa East Complex. All social partners rallied around an extension of State support until the end of the year. Employer organizations support the proposed changes but want to add air carriers into the scope, said Vasil Velev of the Bulgarian Industrial Capital Association. Bulgaria has 20 air carriers, of which 13 are commercial and are in a dire situation. They also want support to apply to workers appointed between January and April 2021. Vanya Grigorova of Podkrepa said that with the VAT rate cut from 20 per cent to 9 per cent has cost 234 million leva in budget revenues this year, yet the government is unwilling to allocate 20 million leva to aid the mines. Grigorova added that some 2,000 miners will be laid off by the end of 2021 or the beginning of next year. "Either we keep one of our baseload capacities, which guarantees the energy stability (the Maritsa East 2 TPP), or we won't have electricity during the winter," she said. Finance Minister Assen Vassilev said the budget is being updated. Thanks to the tax authorities' performance and the improved economic situation, extra revenues will range between 1 and 1.5 billion leva. The budget update will keep the level of sovereign debt and budget deficit unchanged. The additional budget revenues will go towards anti-COVID measures targeting businesses, workers and pensioners.

        Source: Novinite
  • China
    • Stamp Tax Law to Take Effect from July 2022

      We would like to inform You of one recent piece of tax news that the Stamp Tax Law has been passed on June 10, 2021. The law will take effect from July 1, 2022, and the Interim Regulation on Stamp Duty will be abolished at the same time. The law generally maintains the current interim regulation, with appropriate simplification of tax items and rates to reduce the tax burden. We summarize main changes as below:

      1. Securities trading stamp tax will be imposed on sellers, and not on buyers, while the stamp tax rate will remain unchanged at 0.1% of the transaction value;
      2. The stamp tax rate of Processing contract, Construction engineering survey design contract and Goods transportation contract will be reduced from 0.05% to 0.03%;
      3. The stamp tax rate of Exclusive right To use trademark, Patent, Copyright and Letter of assignment of the right to use know-how will be reduced from 0.05% to 0.03%;
      4. In terms of business books, the stamp tax rate of 0.025% is only applicable to the aggregate amount of paid-in capital (share capital) and capital reserves, and stamp tax is no longer levied on licenses.

      With the legislation of Stamp Tax Law, we suppose more strict supervision would be put on its compliance by tax authority. Please pay more attention.

    • STA Optimizes and Integrates Export Tax Rebate Information Systems

      The State Taxation Administration released on June 16, 2021 the Announcement about Optimizing and Integrating Export Tax Rebate Information Systems and Providing Better Services to Taxpayers, with effect from June 3, 2021.

      The STA has integrated export tax rebate systems, streamlined and optimized tax rebate application documents, tax settlement procedures and certificate issuance procedures. The announcement has listed nine circumstances where export tax rebate (exemption) documents can be streamlined; for instance, taxpayers will no longer have to provide Registration Form for Recordation of a Foreign Trade Business Operator, the Approval Certificate for a Foreign-Funded Enterprise in the People's Republic of China, and the Registration Certificate of Customs Declaration Entities in the People's Republic of China.

    • Land Appreciation Tax Policies for Enterprise Restructuring and Reorganization to Continue into the End of 2023

      The Ministry of Finance and the State Taxation Administration released on June 16, 2021 the Announcement about Continuing the Implementation of Relevant Land Appreciation Tax Policies for Enterprise Restructuring and Reorganization, to be effective from January 1, 2021 until December 31, 2023.

      The announcement has kept the preferential policies on land appreciation tax under four circumstances, that is, land appreciation tax will not be imposed on the transfer and change of property ownership (state-owned land use right, buildings and the attached installations thereon) when an enterprise is restructured, combined, split or reorganized and land resources were accounted as a means of investment. Besides, the announcement scrapped the expression that a company should provide relevant materials if it decides not to enjoy preferential policies, and instead stated that "relevant issues should be handled according to related tax regulations".

    • State Council Unveils Preferential Tax Policies to Expedite Construction of Affordable Rental Houses

      Premier Li Keqiang chaired a State Council executive meeting on June 18, 2021, deciding to adopt favorable policies to expedite development of affordable rental housing across the country.

      It was decided at the meeting that starting October 1, 2021 housing rental enterprises will be subject to a simple method of tax collection in private rentals, with the value-added tax rate reduced from 5 percent to 1.5 percent. Enterprises and public institutions will see the property tax cut to 4 percent in rentals to individuals and large-scale, professional rental enterprises. Cities with net population inflow could use collectively owned profit-oriented construction land and land owned by enterprises and public institutions to build affordable rental housing, with unused, inefficiently used business buildings and factories allowed to be transformed into rental houses.

    • China: FDI growth to remain robust, experts say

      The growth of foreign direct investment in China will maintain its sound pace this year, thanks to the country's robust economic recovery and moves to upgrade its industries and further expand local demand, experts and business leaders said on Monday.

      Despite the fact that many foreign economies fully resumed production later last year, the completeness of their industrial and supply chains cannot compete with China's, said Liu Xiangdong, a researcher at the China Center for International Economic Exchanges in Beijing.

      Due to China's high vaccination rate and the swift recovery of its manufacturing sector, services sector and foreign trade, the nation has emerged as a safe and lucrative place for global capital, supported by the dual-circulation development paradigm-in which the domestic market is the mainstay and the domestic and foreign markets reinforce each other, Liu said.

      After surpassing the United States as the world's biggest recipient of foreign investment last year, China's actual use of foreign capital soared 35.4 percent on a yearly basis to 481 billion yuan ($75.3 billion) in the first five months of this year. The volume surged 30.3 percent from the same period in 2019, data from the Ministry of Commerce showed.

      Meanwhile, foreign investment in the service industry came in at 381.9 billion yuan between January and May, up 41.6 percent year-on-year.

      Chen Bin, executive vice-president of the Beijing-based China Machinery Industry Federation, anticipated that China's attractiveness as a location for FDI will continue to grow in the second half of 2021, as the COVID-19 pandemic has seen a resurgence in export-oriented countries, including India, Vietnam, Malaysia and Thailand, in recent months. "If both domestic and global manufacturers in those countries are severely disrupted by the pandemic and stop working, it will have an impact on the global supply chain, and more FDI may keep flowing into China this year," said Ding Yifan, a senior research fellow at the Institute of World Development at the Development Research Center of the State Council.

      Nearly 60 percent of European companies plan to expand their business in China this year, compared with 51 percent last year, according to a survey released last week by the European Union Chamber of Commerce in China.

      About half of the surveyed companies said that their profit margins in China are higher than the global average. This proportion was 38 percent last year.

      Toni Petersson, CEO of Oatly Group AB, a Swedish food and beverage company, said the company will bring its first plant in China in Ma'anshan, Anhui province, into operation later this year. Supported by a local innovation team, the company, apart from supplying plant-based milk, will tailor exclusive products such as ice cream for Chinese consumers to offer them more options, he said.

      US multinational conglomerate Honeywell said it plans to invest in China's refinery sector over the next five years. "We see China's carbon-neutral commitment as an opportunity to join hands with Chinese partners to realize the refinery transformation by converting crude oil into more and more petrochemical products, or even completely into petrochemical products," said Henry Liu, vice-president and general manager of Honeywell Performance Materials and Technologies Asia-Pacific.

      Vorwerk Group, a German industrial and technology company, will establish a digital solution center in Shanghai in the second half of this year to facilitate its transformation from a manufacturing company to a service-oriented manufacturer.

      "This move will help many global companies better adapt to China's market," said Cha Sheng, general manager of Vorwerk China.

      Source: China Daily

    • China: Hainan FTP to streamline approval process, widen market access

      China's Hainan free trade port (FTP) will further simplify its approval procedures and broaden market access through a recently enacted law on the construction of the FTP, an official said Monday.

      The FTP will streamline administrative processes, improve services and provide more institutional convenience for market entities, Feng Fei, governor of Hainan province, told a press conference.

      On June 10, China passed a law, making institutional arrangements for the construction of the FTP at the national legislative level.

      The law also enables market entities, especially foreign-invested companies, to enjoy more opportunities as it features a shortened negative list, which allows more sectors to be opened to foreign investors.

      On pooling talent from around the world to Hainan, the law stipulates visa and work permit facilitation for international talent, Feng said.

      Last June, China released a master plan to build the southernmost province into a globally influential and high-level free trade port by the middle of the century.

    • China increases penalties for workplace safety violations in new law amendment

      China's top legislature on Thursday adopted an amendment to the Law on Workplace Safety. The amendment stipulates heavier penalties for workplace safety violations by production and business operation entities and their responsible persons. It also adds provisions concerning the new situation of workplace safety in emerging industries, including the platform economy, as well as other prominent problems affecting workplace safety efforts. Lawmakers approved the amendment at the closing meeting of a regular legislative session of the Standing Committee of the National People's Congress, which started in Beijing on Monday. The latest amendment will come into force on Sept 1, 2021.   Source: China Daily
  • Focus Africa
    • Africa in Review by the Numbers (June 2021)

      $468 million
      Upfront payment from South Africa's Hollard for the purchase of Australia's Commonwealth Bank (CBA) general insurance unit. The deal, which also includes deferred payments, will see South Africa's largest insurer distribute home and motor vehicle insurance products to CBA's retail customers in Australia (Market Watch)
      Proportion of Malawi's budget allocated to agriculture, making it the only sub-Saharan country to meet the 10% threshold for state spending on the sector outlined in the Maputo Declaration, according to the Food and Agriculture Organisation. The country is targeting 6% growth in the sector this year, against an average 2.6% growth rate over the last 20 years. (The Times Malawi)
      385 metres
      Height of Iconic Tower being built by China State Construction Engineering Corporation in Egypt's new administrative capital, making it the tallest building in Africa when completed. The tower is one of 20 high-rises in the new central business district, which will house Egypt's governmental institutions and create some 2 million jobs. (Daily News Egypt)
      $80 billion
      Investment pledge by G7 DFIs and multilateral partners into African businesses over the next five years. The G7 DFI group consists of CDC, Proparco, JICA and JBIC (Japan), the DFC, FinDev Canada, DEG (Germany) and CDP (Italy). This commitment is also supported by the IFC, the Africa Development Bank, the European Bank for Reconstruction and Development and the European Investment Bank. (CNBC Africa)
      40,000 MW
      Total expected capacity of Congo's Inga hydroelectric power project after Australia's Fortescue Metals Group confirmed talks with Congo to develop a series of dams. Fortescue's involvement is the latest twist in Congo's decades-long quest to expand Inga, whose two existing dams - completed in 1972 and 1982 - have a combined installed capacity of nearly 1800 MW. (Mining Global)
      4500 tonnes
      Daily output of urea from Dangote's fertilizer plant i Nigeria. The plant, which currently pushes out a minimum of 120 trucks per day across the country, is expected to manufacture 3 million tonnes of urea per annum, generating $400 million in export revenues. (Vanguard)
      $200 million
      Financing the World Bank has committed to investing in Uganda to expand access to high-speed and affordable internet, improving the efficiency of digitally-enabled public service delivery, and strengthening digital inclusion. (African Business Communities)
      Growth of air cargo recorded by African airlines, month-on-month this year. April was the fourth consecutive month of growth at or above 25% compared with the same month in 2019, according to the latest statistics from the International Air Transport Association (IATA) (African Review)
      6 GHz
      WiFi internet speed in Morocco after a recent upgrade, making it the fastest in Africa. Morocco also has one of the cheapest mobile internet tariffs in Africa, taking 10th place on the continent, and 45th globally, according to data from Cable.co.uk. (Morocco World News)
      $100 million
      Amount raised by Chipper Cash, a three-year-old startup that facilitates cross-border payments across Africa, in its Series C led by SVB Capital. This comes only a few months after Chipper Cash raised its $30 million Series B led by Ribbit Capital and Jeff Bezos fund Bezos Expeditions. (TechCrunch)
      330,000 tonnes
      Volume of cargo that Kenyan Jomo Kenyatta International Airport handled in 2020. This constituted the largest share of Africa's cargo even as its revenue was hit hard by Covid-19 effects, according to a report by The African Airlines Association (AFRAA). (The Star)
      Number of houses to be built by South African housing company, Property 2000 South Africa in Addis Ababa, Ethiopia at a cost of $4.2 billion. The houses will be made available to low and middle-income residents at 30-year low-interest mortgages. (Ethiopia News Agency)
    • Ethiopia Introduces New Forms of Doing Business

      Ethiopia issued a new commercial code (the Commercial Code) aimed at removing obstacles to the ease of doing business. The main changes in the new Commercial Code are as follows:

      • introduction of two new forms of doing business i.e. limited liability partnership and a one-person private limited company. This brings the number of vehicles through which a person can do business to seven. The other forms include general partnerships, limited partnerships, joint ventures, share companies, and private limited companies;
      • recognition of groups of companies/holding companies: It also recognizes the right of a parent company, acting as a shareholder in the general meeting of shareholders or through its board of directors or senior management, to give instructions to the organs of management of its subsidiaries that the management of the subsidiary should adhere to;
      • in relation to corporate governance, the Commercial Code allows companies and their shareholders to assign a board of directors that are not shareholders. Previously, only shareholders could hold seats on a board;
      • allowing the establishment of a supervisory board to share companies that will oversee the activities of the board of directors with the view of ensuring transparency. The Commercial Code also imposes detailed obligations on the board of directors in relation to disclosure, transparency, avoidance of conflict of interest and protection of minority shareholders;
      • providing detailed protection for minority shareholders; one of these being permitting minority shareholders to assign their representative to the board of directors; and
      • in connection with insolvency, the Commercial Code has introduced a broad range of schemes to save financially strained businesses, including preventive restructurings and reorganization of businesses.

      The Commercial Code replaces the old Commercial Code that has been in existence for over 6 decades. The Commercial Code will come into force upon publication in the official gazette.

  • Hong Kong
    • 2021 Mid-Year Export Review: Robust But Uneven Recovery

      Hong Kong’s exports showed a sharp rebound of 30.8% year-on-year in the first four months of 2021, along with strong growth of 10% in global trade during 1Q21. This was largely on account of subsiding pandemic restrictions and increasingly aggressive monetary and fiscal stimuli in many of the major economies. According to the International Monetary Fund (IMF), global economic growth is projected to be 6% this year and 4.4% in 2022, while the World Trade Organization (WTO) is forecasting 8% growth in world trade volume in 2021. Given the threat of the new coronavirus variants and the shortage of vaccines in less-developed economies, however, any global economic recovery is likely to be highly uneven, with the situation also being exacerbated by tense China-US relations and other geopolitical uncertainties. With a reading of 48.7 points, the latest HKTDC Export Index has, howeverindicated that exporter sentiment has continued to improve across major sectors and markets, with the figure well up on the record low of 16 points in 1Q20. As a consequence, in view of the improving sentiment and strong export performance, HKTDC Research has revised its 2021 export growth forecast to 15% from 5%, albeit from a relatively low comparison base.

      More than a year on since the start of the pandemic, the economic performance of many of the major economies remains highly uneven and unsteady. While some economies are effectively reining in any new cases and, consequently, undergoing a faster economic recovery, some are still ramping up their containment measures amid a local resurgence of the pandemic. With relatively effective containment measures and massive fiscal support, Hong Kong’s real GDP resumed appreciable year-on-year growth of 7.9% in 1Q21, bringing to an end six consecutive quarters of contraction. During the same period, the mainland’s GDP picked up by 18.3%, while the US’s increased marginally by 0.4%. The GDPs of the EU and Japan, however, contracted by 1.7% and 5.1%, respectively.

      Early 2021: A Solid Export Rebound Summary of Hong Kong’s External Trade



      January-April 2021

      HK$ mn

      Growth %

      HK$ mn

      Growth %

      HK$ mn

      Growth %

      Total Exports







      Domestic Exports





















      Total Trade







      Trade Balance




      Source: Hong Kong Trade StatisticsHKSAR Census and Statistics Department
        On the back of the uneven recovery in the major markets and from an, admittedly, low comparison base, Hong Kong exports rebounded strongly in the first four months of 2021. The general relaxation of containment measures in many of the major economies has unleashed pent-up demand, while the resumption of production has increased the demand for raw materials and intermediate goods among the key supply chain economies. In the first four months of 2021, Hong Kong exports of final consumer products increased by 32.2% from the same period a year earlier, while exports of raw materials and semi-manufactured goods surged by 41.1%. Overall, Hong Kong’s export performance was well in line with many of its neighbouring economies, an indication of a general rebound in supply chain activities among the major Asian nations. In specific terms, in the first four months of 2021, Hong Kong’s total export level rose by 30.8% year-on-year, while exports from mainland China increased by 44%, Japan was up 13.1%, South Korea 18.8% and Taiwan 28%, while Singapore’s non-oil exports recorded visible growth of 14.6%. Due to rising demand in many of its key markets, Hong Kong’s exports recorded significant growth for January-April 2021. In particular, its exports to the mainland surged by 34.2%, while exports to the EU and the US also registered strong growth of 20.2% and 19.9%, respectively. Its exports to markets with strong supply chain connections, notably Taiwan and Vietnam, also recorded increases of 45.3% and 30.7%, respectively.
        Hong Kong’s Total Exports by Primary Destination



      January - April 2021


      Growth %


      Growth %


      Growth %






















      Developing Asia







      Mainland China














      Latin America







      Middle East







      Emerging Europe














      Note (1): Hong Kong trade with the EU has excluded the post-Brexit UK since February 2020.
      Source: Hong Kong Trade StatisticsHKSAR Census and Statistics Department
        In terms of industries, electronics exports (which account for about 70% of Hong Kong’s overall total) increased by 32.8% year-on-year in the first four months of 2021. Largely as a result of both the well-established electronics manufacturing production network within the region and strong inter-regional trade, Hong Kong’s exports of electronics to mainland China (up 37.3%), Taiwan (up 38.2%) and Vietnam (up 33.2%) all demonstrated remarkable growth in the January-April period. Amid the general uptick, only the clothing industry’s exports dropped slightly (2.3%). The accuracy of this figure, however, may be compromised by the fact that the majority of Hong Kong garment companies have set up their production facilities offshore, mainly in mainland China or elsewhere in Southeast Asia. As offshore trade is not recorded in conventional trade figures, the export numbers as reported may not necessarily reflect the whole of the export business managed by Hong Kong companies. Indeed, as shown in the most recent HKTDC Export Index survey, sentiment among clothing exporters actually rose by 7.2 points to 43.3 in 2Q21 (from 36.1 in 1Q21). The apparent decline in Hong Kong clothing exports, therefore, may not necessarily accurately reflect the true state of the industry. Given that mainland China and Vietnam registered year-on-year increases in garment exports of 51.7% and 10.7%, respectively, in the first four months of 2021, it is entirely possible that the true picture of the Hong Kong clothing export sector is actually far rosier.  
      Hong Kong’s Total Exports by Selected Industry Sector



      January - April 2021

      HK$ mn

      Growth %

      HK$ mn

      Growth %

      HK$ mn

      Growth %








      Precious Jewellery














      Watches & Clocks














      Household Electrical Appliances







      Source: Hong Kong Trade StatisticsHKSAR Census and Statistics Department

      Mainland China Takes the Lead

      While the pandemic undoubtedly triggered a severe global recession in 2020, it is also fair to say that effective containment measures limited the extent of the economic downturn in mainland China. In fact, the mainland’s GDP rose by 2.3% in 2020, making it one of the few economies in the world to register growth. For the first four months of 2021, there has also been every sign that this upward momentum is likely to be sustained. Looking more generally to the future, economic growth in a number of the advanced economies has begun to resume following the gradual relaxation of local lockdowns and other containment measures. Typically, business activities are slowly returning to pre-pandemic levels, with many governments providing fiscal support to designated business sectors in order to stimulate economic growth. Elsewhere, though, especially among the developing nations, economic recovery has been hindered by a resurgence of coronavirus infections and limited access to vaccines. Now, as well as the negative legacy of the pandemic, many developing economies may have to contend with the additional challenges of an overall tightening in global financial conditions and fluctuations in external demand. In April the IMF estimated the global economy would rebound by 6% in 2021, with an anticipated vaccine-driven recovery in the second half of the current year, before moderating to growth of 4.4% in 2022.
      Among Hong Kong’s major export markets, mainland China was the first key economy to recover from the pandemic, a development that has become a prime driver of Hong Kong’s exports. In the first quarter of 2021, the mainland’s GDP surged by 18.3% year-on-year in real terms. At the same time, a number of other economic indicators, including industrial output, fixed investment and the Manufacturing Purchasing Mangers’ Index, also indicated the scale of the rebound. In particular, it is believed that the activities of local manufacturers have now returned to their pre-pandemic levels. In the wake of this recovery, in March mainland China announced its 14th Five-Year Plan (the Plan). Covering the period 2021-2025, it targets economic growth in excess of 6% for the current year. It also advocates a new “dual circulation” strategy aimed at supporting domestic demand and technological development. It is believed this will deliver considerable business opportunities for any Hong Kong exporter targeting the mainland market, particularly in the high-tech sector. Looking further afield, among the developed economies, US GDP grew 0.4% year-on-year in 1Q21 but expanded by a more impressive 6.4% sequentially, its second-highest rate of growth since 2Q03. This is seen as stemming from the reopening of establishments and government assistance payments, which have boosted consumer demand and business confidence. This helped the US PMI rebound to 60.7 points in April 2021 from its pandemic-era low at 41.5 points in April 2020, while the country’s unemployment rate dropped to 6.1% in April from its record high of 14.8% a year earlier. It is now expected that consumer spending and the overall business sentiment will both continue to rise in the second half of the year. These developments have led to many Hong Kong exporters adopting a more positive outlook towards the US market. This was reflected in the most recent HKTDC Export Index survey, which saw the positive sentiment towards the US market rise for the fourth consecutive quarter to 49 in 2Q21 (from 39.3 in 2Q20), leaving it just slightly below the neutral threshold of 50. In another positive sign, in the first four months of the year, telecommunications equipment and parts, which account for about one-fifth of Hong Kong’s total exports to the US, surged by 40.6%. Turning to the EU, the bloc recorded a slight GDP contraction of 1.7% in 1Q21 from a year earlier. This, however, may be mitigated by the Recovery and Resilience Facility (RRF), an initiative launched in February this year with the aim of providing €672.5 billion in loans and grants to support reforms and investments undertaken by member states, as they look to make good on the economic and social damage resulting from the pandemic, while also helping to bankroll the bloc’s transition to a green and digital economy. Within its remit, the key areas for investment and reform are seen as upgrading broadband services, improving the energy efficiency of buildings, upgrading clean technology and renewable energy facilities, encouraging sustainable transportation, and boosting education / training related to digital skills. All in all, the RRF is expected to have an immediate and direct impact on the EU’s economic growth as greater demand is generated from higher public and private investment. Accordingly, Hong Kong exporters with a focus on environmental facilities and parts or components for digitalisation upgrades may find a number of new business opportunities emerging within the EU. In the case of Japan, its economy shrank by an annualised 5.1% in 1Q21, largely on account of the fall in private consumption occasioned by the slow vaccine rollout and the rise in Covid infection levels. The country’s extended state of emergency has curbed consumer spending, which also makes the prospects for this summer’s Tokyo Olympic Games seem uncertain. Although the Suga government has already introduced three pandemic-specific packages worth a combined US$3 trillion, the vast majority of Japanese firms maintain further government spending is needed to stimulate the economy. More positively, there have been signs that manufacturing is picking up in the country, particularly in the automobile industry. This has seen the new-vehicle market continue to perform positively despite the global shortage of semiconductors. For Hong Kong exporters, there may now be opportunities related to the procurement of raw materials and semi-manufactured goods. Economic growth within the ASEAN bloc, meanwhile, varies from member to member in line with their differing levels of success in containing their domestic coronavirus outbreaks. On the positive side, Singapore and Vietnam recorded year-on-year expansion of 1.3% and 4.5%, respectively, in 1Q21. Other economies, however, notably the Philippines, Malaysia, Indonesia and Thailand, are still hamstrung by their respective domestic caseloads. Among the other causes for optimism is the Hong Kong-ASEAN Free Trade Agreement, which came fully into force in February this year. It is expected that this will lead to an increased flow of capital goods and components between Hong Kong and the bloc. In another development, although some manufacturers may have relocated their production and sourcing networks to ASEAN in a bid to mitigate the consequences of the China-US trade tension, among other factors, the mainland’s highly integrated supply chains may prove difficult to replace or replicate over the short term. As an international logistics and trading hub, Hong Kong has played an active role in the re-export of goods between mainland China and the ASEAN region. In fact, in the first four months of 2021, re-exports of mainland-origin goods to the bloc via Hong Kong increased by 10.2% year-on-year to HK$70 billion. Over the same period, re-exports of ASEAN-origin goods to the mainland via Hong Kong surged by 30.4% to HK$113 billion.

      Key Risks: Pandemic Resurgence and Trade Protectionism

      The re-emergence of Covid-19 and the potential spread of new variants are seen as the key risks for many economies, particularly in the case of less-developed nations or those with limited access to vaccines and related medical supplies. Inevitably, this will lead to continued uncertainty with regard to the global economic recovery, while also hindering the revival of global demand to a certain extent. As reported in the latest HKTDC Export Index, 41.5% of exporters see the pandemic as a primary concern in the near term, followed by weakened global demand (16.7%). In addition, concerns relating to the global supply chain disruptions triggered by the pandemic and rising trade protectionism – most notably the prolonged China-US trade dispute – have prompted some companies to rethink their sourcing and manufacturing networks, including relocating manufacturing facilities back home or shifting their sourcing operations to other Asian countries. As the trade talks between China and the US were stalled by the pandemic following January 2020’s phase-one trade agreement, little progress has been made towards resolving the issue. There have also been concerns that even this phase-one deal has yet to be fully implemented. Under the terms of phase one, China agreed to buy at least US$200 billion more US goods and services (relative to 2017 levels) before the end of the two-year agreement in December this year. According to estimates from the US-based Peterson Institute for International Economics, however, China’s purchase of US goods fell short by more than 40% in 2020. Furthermore, in the first four months of this year, China’s purchases of US goods represented just 60% of the year-to-date target. While it is still unclear how the two economies will manage their trade conflict, the risk to Hong Kong seems tilted more to the downside. Should mainland China purchase more products from the US, it will have only limited impact on Hong Kong’s trade, largely because mainland imports of US goods largely take the form of direct shipments. For 2020 overall, mainland China imported US$134.9 billion of goods from the US and, of that, just 7.9% (about US$10.7 billion) was routed via Hong Kong. Regardless of this, though, should China-US trade tension worsen, Hong Kong exporters may suffer on account of the deteriorating sentiment and growing uncertainty, a trend that has been evident in the past two years.

      Hong Kong Exports: Strong Recovery From a Low Base

      Given the improving economic outlook in the major markets and the generally more stable trading environment, we remain optimistic as to Hong Kong’s performance in the latter half of this year. Accordingly, HKTDC Research has revised its 2021 Hong Kong export performance forecast upward to 15% from 5%, while acknowledging it is from a low base. This is, potentially, the highest level of growth since 2010 when exports surged by 22.8% in the post-global financial crisis recovery period.

      With regard to individual major industry sectors, electronics – which accounts for 70% of Hong Kong’s total exports – regained much of its growth momentum in the first four months of 2021. This is partly because, although many of the Covid-related lockdown and social-distancing measures have been lifted, work-from-home / e-learning arrangements have become the new normal for many office workers and students. As a result, some companies have adopted a hybrid model, allowing staff to split their work time between the home and office while, similarly, many students are now opting to take online courses after school in order to save on commuting time. The upshot of this is that demand is continuing to grow for electronics items such as computers, webcams, microphones and medical devices.

      Less upbeat, however, is the outlook for the clothing sector. The continued relocation of production facilities to South and Southeast Asian countries, in tandem with depressed consumer demand, has resulted in a tough environment for Hong Kong’s clothing exporters. Regardless of this, there are a number of clear new product trends – most notably, multi-purpose and athleisure wear is on the rise as people are becoming more health conscious and keen to engage in different indoor and outdoor physical activities.

      It is a very different picture with regard to Hong Kong’s toy exports, which surged by 42.7% in the first four months of 2021. Looking at this in more depth, exports of electronic and video games were up by 66%, while exports of more traditional toys and games climbed by 28%. Over the coming summer, a number of new 3D live-action and computer-animated movies are scheduled to be released, which is expected to boost demand for related digital games and peripheral toy products. In addition, the growing popularity of electronic gadgets and e-sports products / equipment is also seen as a potential driver of Hong Kong’s toy exports.

      In the watches and clocks sector, although Hong Kong remains one of the world’s key exporters, in order to stay competitive, it is believed it will be necessary for the industry to move upmarket. In line with this, many of the city’s clock / watch makers are looking to develop locally designed and produced mechanical movements, while considering beginning the mass production of chronometers. At the same time, growing demand for smartwatches is seen as likely to continue to drive exports, especially as many consumers are thought to be more concerned about digitally monitoring their health in the wake of the pandemic.

      Finally, turning to Hong Kong’s jewellery exports, these are also expected to pick up dramatically in line with the ongoing economic recovery. In particular, it is thought that demand for high-end jewellery items and related components – such as articles of goldsmith / silversmith ware, pearls and semi-precious stones – will rebound as consumer sentiment continues to improve. At the more affordable end of the scale, sales of stylish fashion jewellery, designer pieces and wedding / special occasion items are also expected to perform well.

      Source: HKTDC

    • Perfect pad for economic re-launch

      European businesses looking to Asia for new opportunities can find a good partner in Hong Kong.

      As the world of trade and industry resets and consolidates following the acute phase of the COVID-19 pandemic, Asia has re-emerged as a promising market for international companies. In tapping these new opportunities, successful companies soon realise that working with Hong Kong adds value to their business.

      To help European businesses capitalise on Asia’s potential, the Hong Kong Trade Development Council (HKTDC) hosted a webinar entitled “Hong Kong: Enhanced Value for Capturing New Opportunities in Asia” on 10 June. Twenty European trade and business groups were involved as co-organisers or supporting organisations.

      Bright spots

      In welcoming remarks, HKTDC Deputy Executive Director Patrick Lau highlighted the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) and the Association of Southeast Asian Nations (ASEAN] regions as high-potential markets. “More than a year into the pandemic, despite vaccination programmes in many parts of the world, global business landscape remains fraught with challenges. The way forward is to identify and capture new opportunities,” he said. “On economic growth, one of the obvious bright spots is Mainland China, which presents a key growth driver for the world. The Greater Bay Area, in turn, is a key growth driver for the Mainland China,” he shared. “The Greater Bay Area offers a myriad of opportunities for overseas companies in various sectors, including innovation and technology, sustainability, healthcare, creative industries, consumer products, and much more.” Dr Lau also explained the potential of the ASEAN market. “The region has a huge population of more than 650 million, almost twice that of the United States and these economies are on a robust uptrend,” he remarked. “For international businesses, the most efficient way to tap these markets would be by working with Hong Kong – which is a two-way business and investment hub with close connections with ASEAN and the mainland, and is itself part of the Greater Bay Area,” said Dr Lau. The Greater Bay Area links Hong Kong and Macao with nine cities in Guangdong Province, including the provincial capital Guangzhou and Hong Kong’s neighbouring metro, the innovation and technology hub of Shenzhen (main picture). HKTDC Research Director Nicholas Kwan said the GBA is fastest growing part of China, which in turn is among the fastest growing economies in the world. The GBA is also the most open, and market-driven part of China. He noted that the GBA has a population of 86 million, comparable to that of Germany. He said Hong Kong’s strengths, including its open and market-driven economy and international connections, would help European businesses access the GBA.

      Resilient, competitive city

      Veteran investor Victor Chu, Chairman and CEO of First Eastern Investment Group and Chairman of the Hong Kong-Europe Business Council, told the webinar that the city is resilient and competitive. Overseas firms seek a centre with innovation, uniqueness, differentiation, competitiveness, which Hong Kong offers, he said. As an international financial hub, Hong Kong had done very well even over the past two years, he added. Hong Kong is the world’s second largest initial public offering (IPO) hub and the second largest IPO hub for biotechnology. Traditionally Hong Kong is a centre of excellence in property, logistics and financial services but growing connections with the mainland brought new opportunities, including in synthetic biology, which calls for a cluster of expertise. Digitisation or the fourth industrial revolution is another promising new development, said Mr Chu. “Hong Kong and the GBA have it all” when it comes to grasping these opportunities, he said. The GBA is an exciting development with tremendous potential, he said. The three Chinese stock markets – in Hong Kong, Shanghai and Shenzhen – had market capitalisation of greater than US$10 trillion, making up more than one-tenth of the global equities market.


      Sustainability finance was also becoming a key growth area, Mr Chu said. The Hong Kong government has mandate green finance projects worth up to US$20 billion in green bonds over the next five years. Globally US$30 trillion is committed to sustainable finance but now Asia just accounts for just 1% of this, meaning there is huge potential to grow. “My firm, which is a big investor in sustainable projects in Europe, Japan and ASEAN, uses Hong Kong as springboard to international investment,” Mr Chu said. “But closer to home, we will be doing more in Hong Kong and the GBA in the months to come.”

      Mainland link

      Arnold Cheng, Director, Hong Kong & PRD for John Swire & Sons (China) Ltd, said his firm, a conglomerate with interests ranging from airlines to property and beverages, had a lengthy history in Hong Kong, which it has used as a platform to access the mainland. The firm had been expanding in the mainland for many years and was looking to expand further, he said. “We managed to capture and capitalise on opportunities arising as a result of the reform and opening up of [Mainland] China over the past 40 years,” he said. “We believe the next opportunities for growth will come from the GBA,” he said. The initiative to integrate Hong Kong and Macao with the mainland area offers Swire excellent opportunities in terms of scale, demographics and infrastructure. Mr Chu said Hong Kong’s advantages over mainland special economic zones and free trade ports included a solid track record as a bridge connecting businesses from different parts of the world, and its use of language.


      Turning to a query about Hong Kong as a launch pad for business elsewhere in Asia, Mr Kwan said that historically many of the connections between Hong Kong and the mainland had in fact originated in ASEAN countries.

      For example, much of the capital entering the mainland from Hong Kong originated in ASEAN centres. Hong Kong has a free trade agreement with ASEAN, he pointed out. The Regional Comprehensive Economic Partnership for leading Asia-Pacific countries had already benefited Hong Kong, he said. Last year the mainland became the largest trading partner of the European Union, he pointed out, while remaining the largest trading partner of ASEAN. This underlined how East Asia was becoming the centre of globalisation, he added.

      Hans Poulis, Vice Chairman of the Federation of Hong Kong Business Associations Worldwide, noted Europeans are keen to leverage Hong Kong as a link to other markets.

      "Europe is very interested in using Hong Kong as a bridge to other [markets], particularly [Mainland] China," he said.

      Source: HKTDC
  • India
    • Proposed Amendments to Consumer Protection (E-Commerce) Rules, 2020

      On Monday, June 21, 2021, the Department of Consumer Affairs made available, in public domain, the proposed amendments to Consumer Protection (E-Commerce) Rules, 2020. The document made available has been released with the view of inviting comments/suggestions of the industry on the proposed amendments to the rules that were notified in July 2020. This comes in the backdrop of a growing impetus to the e-commerce industry, which is estimated to rise to nearly $200 bn in size by 2026, due to COVID-19 and increasing digitization in trade of goods and services.

      The following table envisages to deduce the implications of the proposed amendments as instituted by the Department of Consumer Affairs, highlighting the changes, including additions and omissions proposed by the amendment.

      (Additions are marked in green, with omissions in pink)

      Section Sub-Section and Proposed Amendment Implications of Proposed Amendment
      3. Definitions (b) “e-commerce entity” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, including any entity engaged by such person for the purpose of fulfilment of orders placed by a user on its platform and any ‘related party’ as defined under Section 2(76) of the Companies Act, 2013, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity.
      • Extends the definition of e-commerce entities to include entities utilized by platforms for fulfilment, etc., of goods and services delivered on their platforms.
      • Companies may ensure that entities such as those rendering last mile delivery services comply with the relevant rules and regulations e-commerce entities themselves are mandated to follow.
      (c) “Cross-selling” means sale of goods or services which are related, adjacent, or complimentary to a purchase made by a consumer at a time from any e- commerce entity with an intent to maximise the revenue of such e-commerce entity.
      • Clause intends to ensure transparency, thereby, preventing any practices that may be construed as misleading and manipulative. This is to ensure a fair opportunity to domestic products.
      (d) “Fall back liability” means the liability of a marketplace e-commerce entity where a seller registered with such entity fails to deliver the goods or services ordered by a consumer due to negligent conduct, omission or commission of any act by such seller in fulfilling the duties and liabilities in the manner as prescribed by the marketplace e-commerce entity which causes loss to the consumer;
      • Definitional information meant as guidance for compliance.
      (e) “Flash sale” means a sale organized by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services or otherwise with an intent to draw large number of consumers. Provided such sales are organised by fraudulently intercepting the ordinary course of business using technological means with an intent to enable only a specified seller or group of sellers managed by such entity to sell goods or services on its platform.
      • Proposal intends to prevent instant, unannounced sales that maybe manipulated to give advantage or preferential treatment to a particular seller or a group of sellers; It also intends to prevent cheating and unfair trade practices on e-commerce platforms and bring transparency for the benefit of the consumers.
      • Definitional information meant as guidance for compliance.
      (k) “mis-selling” means an e-commerce entity selling goods or services by deliberate misrepresentation of information by such entity about such goods or services as suitable for the user who is purchasing it. Explanation: Misrepresentation here means:
      1. the positive assertion, in a manner not warranted by the information of any entity making it, of that which is not true;
      2. any display of wrong information, with an intent to deceive, gain an advantage to the e-commerce entity committing it, or any seller claiming under it; by misleading consumer to the prejudice of e-commerce entity, or to the prejudice of anyone claiming under it;
      3. causing, however innocently, a consumer to purchase such goods or services, to make a mistake as to the substance of the thing which is the subject of the purchase.
      • Intends to prevent misrepresentation of information of goods and services by e-commerce entities that hold a dominant position to abuse its position.
      • Definitional information meant as guidance for compliance.
      4. Registration of e-commerce entities
      1. Every e-commerce entity which intends to operate in India shall register itself with the Department for Promotion of Industry and Internal Trade (DPIIT) within such period as prescribed by DPIIT for allotment of a registration number. Provided that the DPIIT may extend the period for registration of such e- commerce entity for sufficient reason, to be recorded in writing.
      2. Every e-commerce entity shall ensure that such registration number and invoice of everyday order is displayed prominently to its users in a clear and accessible manner on its platform
      • Registration with DPIIT ensures transparency of e-commerce entities and their system of working, as well as restricts them to display or promote any misleading advertisement to the users.
      • E-Commerce entities must ensure such registration to showcase to show for their compliance and authenticity of operations.
      5. Duties of e-commerce entities
      1. Where an e-commerce entity is a company incorporated under the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013) or a foreign company covered under clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) or Partnership incorporated under the Indian Partnership Act, 1932 (9 of 1932) or a Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) an office, branch or agency outside India owned or controlled by a person resident in India as provided in sub-clause (iii) of clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), it shall appoint a nodal  person of contact or an alternate senior designated functionary who is resident in India, to ensure compliance with the provisions of the Act or the rules made there under.
      • Proposed amendment aims to widen the definition of entities covered under the clause.
      • Additional e-Commerce entities that are currently incorporated as LLPs and Partnerships must also appoint a nodal person of contact, in compliance with necessary rules prescribed.
      1. No e-commerce entity shall allow any display or promotion of misleading advertisement whether in the course of business on its platform or otherwise.
      Proposed amendment aims to protect consumers from all forms of misleading advertisements. It requires e-commerce entities to take measures to prevent misleading advertisements on their respective platforms.
      1. Every e-commerce entity shall establish an adequate grievance redressal mechanism having regard to the number of grievances ordinarily received by such entity from India, and shall appoint :a grievance officer for consumer grievance redressal, and shall display the name, contact details, and designation of such officer on its platform.
        1. appoint a Chief Compliance Officer who shall be responsible for ensuring compliance with the Act and rules made thereunder and shall be liable in any proceedings relating to any relevant third-party information, data or communication link made available or hosted by that e-commerce entity where he fails to ensure that such entity observes due diligence while discharging its duties under the Act and rules made there under: Provided that no liability under the Act or rules made thereunder may be imposed on such e-commerce entity without being given an opportunity of being heard.Explanation. — For the purpose of this clause “Chief Compliance Officer” means managerial personnel or such other senior employee of an e-commerce entity who is a resident and citizen of India.
        2. appoint a nodal contact person for 24x7 coordination with law enforcement agencies and officers to ensure compliance to their orders or requisitions made in accordance with the provisions of law or rules made thereunder. Explanation. — For the purpose of this clause “nodal contact person” means employee of an e-commerce entity, other than the Chief Compliance Officer, who is resident in India and a citizen of India;
        3. appoint a “Resident Grievance Officer”, who shall, subject to clause (b), be responsible for the functions referred to in sub-rule (2) of rule 3. Explanation. — For the purpose of this clause, “Resident Grievance Officer” means the employee of an e-commerce entity, who is resident and a citizen of India;
        4. Grievance redressal mechanism of e-commerce entity:
          1. The e-commerce entity shall prominently publish on its website, mobile based application or both, as the case may be, the name of the Grievance Officer and his contact details as well as mechanism by which a user may make complaint against violation of the provisions of this rule or any other matters pertaining to the resources and services made available by it on its platform, and the Grievance Officer shall –
            1. receive and acknowledge any order, notice or direction issued by the appropriate government, any competent authority or a court of competent jurisdiction.
      Proposed amendment aims to institute sound consumer grievance redressal mechanisms and inform the consumers of the same. As against requiring e-commerce entities to appoint a grievance officer and displaying the name, designation and contact details, under the proposed amendment under clause, instead of just one grievance officer, e-commerce firms will now be required to appoint a “Chief Compliance Officer”, a “Nodal contact person,” a “Resident Grievance Officer” and also prominently display the “Grievance redressal mechanism” in the interest of consumer protection.
      (6) Where an e-commerce entity offers imported goods or services for sale, it shall mention the name and details of any importer from whom it has purchased such goods or services, or who may be a seller on its platform. (7) Where an e-commerce entity offers imported goods or services for sale, it shall:
      1. mention the name and details of any importer from whom it has purchased such goods or services, or who may be a seller on its platform;
      2. identify goods based on their country of origin, provide a filter mechanism on their e-commerce website and display notification regarding the origin of goods at the pre-purchase stage, at the time of goods being viewed for purchase, suggestions of alternatives to ensure a fair opportunity for domestic goods;
      3. provide ranking for goods and ensure that the ranking parameters do not discriminate against domestic goods and sellers.
      • Against requiring mentioning of the name and details of any importer or seller, proposed amendment requires e-commerce entities engaged in selling imported goods and services to offer additional mechanisms to help consumers make an informed decision when buying imported products; disclosures on imported goods and services are meant to be instructive to consumers when making a decision based on country of origin of the products and exercising an informed choice.
      (11) No e-commerce entity shall indulge in mis-selling of goods or services offered on its platform.
      • Proposed amendment intends to implore e-commerce entities to refrain from mis-selling of goods or services offered on their platform.
      (12) An e-commerce entity which is engaged in cross-selling of goods or services shall provide adequate disclosure to its users displayed prominently in a clear and accessible manner on its platform:
      1. Name of the entity providing data for cross-selling, 
      2. Data of such entity used for cross-selling.
      • Proposed amendment aims to help consumers make an informed decision when buying products; disclosures on cross-selling of goods and services are meant to be instructive to consumers when making a decision based on the identity of entity gathering and providing such data and the nature of data being used.
      (14) No e-commerce entity shall-
      1. mislead users by manipulating search result or search indexes having regard to the search query of the user;
      2. permit usage of the name or brand associated with that of the marketplace e-commerce entity for promotion or offer for sale of goods or services on its platform in a manner so as to suggest that such goods or services are associated with the marketplace e-commerce entity;
      3. make available any information pertaining to the consumer to any person other than the consumer without the express and affirmative consent of such consumer, no such entity shall record such consent automatically, including in the form of pre-ticked checkboxes;
      4. use information collected by marketplace e-commerce entities, for sale of goods bearing a brand or name which is common with that of the marketplace e-commerce entity or promote or advertise as being associated with the marketplace e-commerce entity, if such practices amount to unfair trade practice and impinges on the interests of consumers.
      • Proposed amendment aims to help consumers exercise an unbiased choice when purchasing goods and services and ensure customer data privacy, it also aims to prevents cheating and unfair trade practices on e-commerce platforms and bring transparency to the consumers.
      (15) Every e-commerce entity shall ensure that sponsored listing of products and services are distinctly identified with clear and prominent disclosures.
      • Proposed amendment aims to help consumers make an informed decision when buying products; disclosures on sponsored listings are meant to be instructive to consumers when making a decision based on product listing, placement, etc.
      (16) No e-commerce entity shall organize a flash sale of goods or services offered on its platform.
      • Proposed amendment intends to prevent unplanned, unannounced sales that maybe manipulated to give advantage or preferential treatment to a particular seller or a group of sellers, and to prevent unfair trade practices and ensure transparency for the consumers.
      (17) No e-commerce entity which holds a dominant position in any market shall be allowed to abuse its position. Explanation - For the purpose of this clause “abuse of dominant position” shall have the same meaning as prescribed under Section 4 of the Competition Act, 2002.
      • Guidance on expected ethical behaviour.
      • E-Commerce entities must aim to promote fair market practices.
      (18) Every e-commerce entity shall, as soon as possible, but not later than seventy two hours of the receipt of an order, provide information under its control or possession, or assistance to the government agency which is lawfully authorised for investigative or protective or cyber security activities, for the purposes of verification of identity, or for the prevention, detection, investigation, or prosecution, of offences under any law for the time being in force, or for cyber security incidents: Provided that any such order shall be in writing clearly stating the purpose of seeking information or assistance, as the case may be.
      • Proposed amendment seeks to establish dedicated timelines for e-commerce entities to comply with requests from law enforcement agencies.
      • Companies may accordingly institute internal mechanisms to ensure compliance with such requests.
      (19) Every e-commerce entity shall display clearly and prominently in its invoice the name of the seller in the same font size as that of the e-commerce entity’s name
      • Guidance on compliance.
      6. Liabilities of marketplace e-commerce entities (3) Every marketplace e-commerce entity shall provide the following information in a clear and accessible manner, displayed prominently to its users at the appropriate place on its platform:
      1. details about the sellers offering goods and services, including the name of their business, whether registered or not, country of origin, their geographic address, customer care number, any rating or other aggregated feedback about such seller, and any other information necessary for enabling consumers to make informed decisions at the pre-purchase stage;
      2. information relating to return, refund, exchange warranty and guarantee, best before or use before date delivery and shipment, modes of payment, and grievance redressal mechanism, and any other similar information which may be required by consumers to make informed decisions;
      • The proposed amendment is corollary to provisions requiring display of ‘Country of Origin’ on commodities by importers, manufactures, packers and e-commerce entities under the amendments made to Legal Metrology (Packaged Commodities) Rules, 2011, in 2018. This proposal is necessary to ensure that consumers can make an informed decision when buying products from the online platform.
      • Proposed amendment under clause (c) on inclusion of information on ‘best before or use before date’ is corollary to amendment under Section 7 (5)(d), that requires sellers to disclose such information to marketplaces. Further, existing rules for disclosure of product information, such as rule 6, sub-rule (1) (da) of Legal Metrology (Packaged Commodities) (Amendment Rules) 2017, require display of information on ‘best before or use before date’ on commodities for human consumption. Inability to provide such information is an omission that would incur penalty, as applicable under relevant laws.
      (5) No logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category. Provided that each logistics service provider of a marketplace e-commerce entity shall provide a disclaimer including terms and conditions governing its relationship with sellers on the marketplace e-commerce entity platform, a description of any differentiated treatment which it gives or might give between sellers of the same category. Explanation:  Logistics service provider for all extent and purposes of this rule shall be a company engaged in business of providing any one or more services, which include rail/road/sea/air transportation, air cargo, cargo consolidation, ware housing, inland container depot, cold chain services, port terminal services or any other such services for the goods and services sold on any marketplace e- commerce entity platform.
      • Proposed amendment provides guidance to e-commerce entities that their logistics providers cannot differentiate between sellers within the same category. This is to ensure that no preferential treatment is accorded to a few sellers at the cost of other sellers on the platforms, eventually allowing consumers access to wider pool of products.
      • Definitional information meant as guidance for compliance.
      (6) Every marketplace e-commerce entity shall
      1. ensure that it does not use any information collected through its platform for unfair advantage of its related parties and associated enterprises;
      2. ensure that none of its related parties and associated enterprises are enlisted as sellers for sale to consumers directly;
      3. ensure that nothing is done by related parties or associated enterprises which the e- commerce entity cannot do itself;
      1. Related parties shall have the same meaning as assigned to it in section 2(76) of the Companies Act, 2013;
      2. Two enterprises shall be deemed to be associated enterprises, if:
        1. enterprises are related to each other through a common chain of directors or managing partners;
        2. enterprises are related to each other through a common chain of shareholders, where such shareholders hold not less than 5 per cent of the shareholding in the related enterprises;
        3. enterprises having 10 per cent or more common ultimate beneficial ownership;
        4. where one enterprise can exercise a right to veto any decision, appoint one or more director(s) or in any other manner influence other entity’s decision making on any matter either through its shareholding or through an agreement including a shareholders’ agreement;
        5. where one enterprise holds, directly or indirectly, shares carrying the voting power in the related entities; 
        6. where any person or enterprise holds, directly or indirectly, shares carrying the voting power in the related entities;
        7. there exists between the enterprises, any relationship of mutual interest, as may be prescribed.
      • The norms under the proposed amendment are meant to safeguard interest of consumers and define duties of sellers/marketplace across the following aspects:
      • e-commerce entities are requested to ensure that their platforms aren’t used to provide an unfair advantage of a set of related parties. Further, marketplace may not have any related/affiliated parties enlisted as sellers on the portal.
      • Section 6 (6) (c) further offers guidance to help ascertain to how and when entity might be construed to be an associated enterprise.
      • In adhering to the proposed norms, existing rules as defined under relevant rules and regulations such as Foreign Direct Investment Policy (FDI) and Companies Act, 2013 should be referred.
      (7) No marketplace e-commerce entity shall sell goods or services to any person who is registered as seller on its platform;
      • Proposed amendments intends to ensure that e-commerce entities do not sell goods & services to sellers who are registered on their platforms for conducting business.
      (8) No marketplace e-commerce entity shall advertise a body of sellers for the purpose of subsidizing a sale on its platform;
      • Guidance on expected ethical behaviour.
      • No such preferential treatment may be facilitated on the platform, thereby, giving equal visibility to sellers and extending the right of choice of consumers.
      (9) A marketplace e-commerce entity shall be subject to a fallback liability where a seller registered on its platform fails to deliver the goods or services ordered by a consumer due to negligent conduct, omission or commission of any act by such seller in fulfilling the duties and liabilities in the manner as prescribed by the marketplace e-commerce entity which causes loss to the consumer.
      • Under the proposed amendment, the scope of liability for e-commerce entities maybe extended in case where the seller registered on the "platform fails to deliver the goods or services ordered by a consumer due to negligent conduct, omission or commission of any act by such seller in fulfilling the duties and liabilities in the manner as prescribed by the marketplace"
      7. Duties of sellers on marketplace (5) Any seller offering goods or services through a marketplace e-commerce entity shall provide the following information to the e-commerce entity to be displayed on its platform or website:
      1. all relevant details about the goods and services offered for sale by the seller including country of origin best before or use before date, information related to return, refund, exchange, expiration date, details of best before usage, warranty and guarantee, delivery and shipment, cost and return shipping, mode of payments, and any other similar information which are necessary for enabling the consumer to make an informed decision at the pre-purchase stage;
      • ‘Best before or use before date, exchange expiration date, details of best before usage, mode of payments’ are the new standalone additions to the sub-section, encapsulating duties of a seller on marketplace. These constitute necessary safeguards for consumers to assess viability of the purchase of commodities and its implications on health.
      • Amendments, such as those related to ‘return, refund, exchange, warranty or guarantee’ supplement existing provisions as separate line items under clause (g)-(i) of sub-section (5).
      8. Duties and liabilities of inventory e-commerce entities (1) Every inventory e-commerce entity shall provide the following information in a clear and accessible manner, displayed prominently to its users:
      1. accurate information related to return, refund, exchange, best before or use before date, warranty and guarantee, delivery and shipment, cost of return shipping, mode of payments, grievance redressal mechanism, and any other similar information which may be required by consumers to make informed decisions.
      • Proposed amendment on inclusion of information on ‘best before or use before date’ is corollary to proposed amendment under Section 7 (5)(d), that requires sellers to disclose such information to marketplaces. Further, existing rules for disclosure of product information, such as rule 6, sub-rule (1) (da) of Legal Metrology (Packaged Commodities) (Amendment Rules) 2017, require display of information on ‘best before or use before date’ on commodities for human consumption. Please refer to relevant sub-rule under the rules for further information.
        Authors: Sriram Ganesh, Taksh Sharma, Rajat Yadav Source: Invest India
    • COVID-19 Pandemic: India Announces Further Tax Compliance Extensions and Other Reliefs

      The Central Board of Direct Taxes (CBDT) has announced a further extension of due dates under the Vivad Se Vishwas Act, 2020 (the Scheme) and the Income Tax Act, 1961 (the Act), and tax exemptions for certain payments to individuals due to the outbreak of COVID-19.

      The key announcements are summarized below.

      Extension of due dates under the Scheme

      • The last date for payment under the Scheme without any additional amount has been extended further from 30 June 2021 to 31 August 2021.
      • For applications under the Scheme with certain additional amounts, the last date for payment is 31 October 2021.

      Extension of due dates under the Act

      The due dates for the following actions or submission of certificates, statements, returns and other documents have been extended as follows:

      • objections to the Dispute Resolution Panel (DRP) and assessing officer under section 144C due on 1 June 2021 or thereafter: extended to 31 August 2021;
      • statement of deduction of tax for the last quarter of the financial year (FY) 2020/21: further extended from 30 June 2021 to 15 July 2021;
      • certificate of tax deducted at source in Form No. 16: further extended from 15 July 2021 to 31 July 2021;
      • statement of income paid or credited by an investment fund to its unit holder in Form No. 64C for FY 2020/21: further extended from 15 July 2021 to 31 July 2021;
      • statement of income paid or credited by an investment fund to its unit holder in Form No. 64D for the FY 2020/21: further extended from 30 June 2021 to 15 July 2021;
      • application under section 10(23C), section 12AB, section 35(1)(ii), section 35(1)(iia), section 35(1) (iii) and section 80G in Form 10A or Form 10AB: extended from 30 June 2021 to 31 August 2021;
      • compliances for claiming any exemption under section 54 to section 54GB where the time limit falls between 1 April 2021 and 29 September 2021 (both days inclusive): extended to 30 September 2021;
      • quarterly statement in Form No. 15CC: extended from 15 July 2021 to 31 July 2021;
      • equalization levy statement in Form No. 1 for the FY 2020/21: extended from 30 June 2021 to 31 July 2021;
      • annual statement to be furnished under section 9A(5) by an eligible investment fund in Form No. 3CEK for FY 2020/21: extended from 29 June 2021 to 31 July 2021;
      • uploading of declaration in Form No. 15G/15H for the quarter ending 30 June 2021: extended from 15 July 2021 to 31 August 2021;
      • exercise of option to withdraw pending applications filed before the Income Tax Settlement Commission under section 245M(1) in Form No. 34BB: extended from 27 June 2021 to 31 July 2021.
      • last date of linkage of Aadhar with the permanent account number (PAN) under section 139AA: further extended from 30 June 2021 to 30 September 2021;
      • passing of assessment orders: further extended from 30 June 2021;
      • passing of penalty orders: further extended from 30 June 2021 to 30 September 2021; and
      • processing of equalization levy returns: further extended from 30 June 2021 to 30 September 2021.

      Tax exemptions

      The following payments are exempt from income tax:

      • amount received by a taxpayer for the treatment of COVID-19 from an employer or from any person during FY 2019/20 and subsequent years; and
      • ex-gratia payment received by family members of an employee from the employer of such employee (without limit) or from other persons (limited to INR 1 million in aggregate) on the death of the employee on account of COVID-19 during FY 2019/20 and subsequent years.

      The extensions and tax exemptions are available via a press release issued on 25 June 2021 and CBDT Circular No. 12/2021 dated 25 June 2021.

    • Inside India’s Production Linked Incentive Schemes: Solar PV Modules

      India has set an ambitious target of setting up 175 GW capacity of renewable energy by 2022 and 450 GW capacity by 2030. On the basis of techno-economic analysis, Central Electricity Authority (CEA) has indicated in their ‘Optimum Energy Mix’ report that 280 GW capacity from solar energy will be needed by 2029-30. To achieve the target, around 25 GW solar energy capacity is needed to be installed every year, till 2030.

      But at present, solar capacity addition in India majorly depends upon imported solar PV cells and modules. The domestic manufacturing industry has limited operational annual capacities of around 2.5 GW for solar PV cells and 9-10 GW for solar PV modules. The PLI scheme for high-efficiency solar PV modules aims to provide impetus to the domestic industry to scale up manufacturing in the coming years so that majority of this demand can be met domestically itself and India does not have to depend on imports to fulfill its demands. This will also help build India’s capacity and technological capability to become part of the global supply chain for high-efficiency solar PV modules and cater to the international market as well.

      You can download the full report here

      Authors: Mishika Nayyar, Azaad Sandhu, Devika Chawla, Vidhi Khabya and Chitra Negi Jain

      Source: Invest India

  • Switzerland
    • Swiss Economy is the most competitive in the World

      Switzerland heads the ranking of the most competitive economies in the world. The country managed to navigate the coronavirus crisis more effectively than others. The ranking, which has been compiled by the Lausanne-based IMD since 1989, was previously topped by Singapore.

      The coronavirus crisis has left an indelible mark on the competitive standing of global economies. This is also reflected in the ranking of the world’s most competitive countries, now published by the IMD Business School in Lausanne for the 33rd time.

      Switzerland dethrones Singapore

      For the first time, Switzerland has claimed top spot among the 64 examined economies in this ranking. In so doing, it has overtaken Singapore, which has slipped four places down to fifth spot. “Although Switzerland was slow to fight the pandemic, it has not jeopardized its future economic growth because it has kept a disciplined financial strategy by not spending too much”, explains Arturo Bris, Director of the IMD World Competitiveness Center, in a press release covering the report.

      Swiss infrastructure second to none

      According to its country profile, Switzerland scored well also due to its infrastructure, which is currently regarded as the best in the world. In terms of government efficiency, Switzerland takes second place, while the country is ranked fifth for the category of business efficiency. Switzerland was also among the best countries in the world for economic performance, claiming seventh position for this metric.

      The strong performance in the present ranking makes up for the decline recorded over recent years. Switzerland, which was ranked second overall last year, had fallen as far as fifth place in 2018. It has therefore managed to climb the rankings since then.

      An eye on the future

      Nevertheless, Switzerland will continue to face challenges in 2021. These include ensuring a rapid recovery following the crisis as well as keeping the markets open and defending against protectionism. Competition in the domestic market needs to be strengthened in order to increase productivity, while improvements must also be realized in connection with the sustainability of social works and the pension system in particular.

      Behind Switzerland, Sweden takes second place (rising four places in the process), with Denmark and Norway in third and fourth respectively. Taiwan is also among the climbers, moving up three places to finish in eighth position, as is China which jumped four places to 16th position. Germany rose two places to finish in 15th.

      The IMD produces the ranking on the basis of 334 separate criteria in collaboration with local partner institutes located in 58 countries.

      Source: Switzerland Global Enterprise

    • COVID-19 Pandemic: Germany and Switzerland Prolong Mutual Agreement on Frontier Workers Until 30 September 2021

      According to an update of 23 June 2021, published by the German Ministry of Finance, the mutual agreement between Germany and Switzerland, signed on 11 June 2020, regarding the taxation of income earned by frontier workers during the COVID-19 pandemic is prolonged until 30 September 2021. Previously, the mutual agreement had already been prolonged until 30 June 2021.

      The text of the extension can be found here (in German).

    • COVID-19 Pandemic: France and Switzerland Prolong Mutual Agreement on Cross-Border and Frontier Workers Until 30 September 2021

      The mutual agreement concluded between France and Switzerland on 13 May 2020 regarding the taxation of income earned by cross-border and frontier workers during the COVID-19 pandemic has been prolonged until 30 September 2021. The Swiss tax authorities made this announcement on 16 June 2021.

      The mutual agreement applies with effect from 14 March 2020. Previously, the mutual agreement had been prolonged until 30 June 2021.

    • Switzerland and the United Kingdom Sign MoU on Implementation of Mutual Agreement Procedures under Tax Treaty

      On 16 June 2021, Switzerland and the United Kingdom signed a mutual agreement to establish the mode of application of the arbitration process provided for in Article 24(5) of the Switzerland - United Kingdom Income Tax Agreement (1977) (as amended through 2017). The competent authorities further agreed that they may modify or supplement the mutual agreement by an exchange of letters between them. The mutual agreement applies to any request for arbitration made pursuant to paragraph Article 24(5) of the treaty after that provision has become effective. In respect of cases presented to the competent authorities before the date of signature of the mutual agreement, the time limit for the competent authorities to request further information from the taxpayer under the provisions of subparagraph b) of paragraph 3 of the mutual agreement will be 90 days from the date of signature of the mutual agreement.
  • United Arab Emirates
    • Dubai Economy clarifies full ownership procedures for foreign investors

      Dubai Economy clarifies full ownership procedures for foreign investors:

      • 59 investors in Dubai have benefited from the decision so far
      • No additional fees, guarantees or capital required for full foreign ownership
      • 100% foreign ownership is available for more than 1,000 commercial and industrial activities
      • Branches of foreign companies do not require an Emirati agent

      Dubai Economy has issued guidelines clarifying the procedures for full ownership for foreign investors that started from the beginning of this month in accordance with the Federal Decree-Law No. (26) of 2020 that amended some provisions of Federal Law No. (2) of 2015 regarding ownership of commercial companies. The strategic decision enhances the investment attractiveness of the UAE and its advanced position on the global business map while also reinforcing the competitive advantages that Dubai enjoys as an ideal investment destination, Dubai Economy stated. The decision will accelerate the UAE’s economic recovery and add to the gains the country has made so far. It will also help further enhance Dubai’s already high rankings in international investment indicators and leading global indices related to ease of doing business and business expansion. Dubai Economy has started implementing the new decision on foreign ownership effective 1 June. Investors seeking full ownership can complete the procedures as required through the service channels of Dubai Economy or the ‘Invest in Dubai’ digital platform. A total of 59 investors in Dubai have already taken advantage of the new decision. The commercial activities in which full ownership was sought include general trade, contracting, jewellery, gold, pearls, luxury watches, foods, as well as cars and trucks trading. In the industrial category, full ownership was sought in the metals and construction, flooring, building materials, foods, water production and paints sectors. A kindergarten, an elementary and middle school, and a hotel also sought 100% ownership. As per the guidelines published by Dubai Economy on its website, 100% foreign ownership is available for more than 1,000 commercial and industrial activities excluding economic activities with a strategic impact, which are in seven sectors only. The full list of activities open for 100% foreign ownership can be viewed on:

      https://ded.ae/DED_Files/ded_other/Full_Foreign_Ownership_Activities.pdf The status of existing business licenses, where full ownership of the activities is available, and that include an Emirati partner, remains unchanged as per the Memorandum of Association (MOA) and the partners’ decision. Dubai Economy clarified that a reduction of the percentage share of the Emirati partner from 51% or his /her withdrawal from the partnership is possible according to the legal procedures followed. Full ownership does not bring any change to current procedures or requirements for licensing, except that it’s no longer mandatory to have an Emirati partner or specify a fixed quota ratio for him/her. The guidelines also state that no additional fees, guarantees or capital required for full foreign ownership. Dubai Economy also explained that though it’s not possible to convert the legal form of a company from LLC (Limited Liability Company) to a Sole Proprietorship under a foreign name as per the existing law, the license can be transferred to a one-person company with limited liability. Full ownership does not apply to commercial agencies, as they are regulated by the Commercial Agencies Law. Branches of foreign companies do not require an Emirati agent.

    • Tax Authority Clarifies Penalties Regime Amendments

      The UAE Federal Tax Authority (FTA) has clarified the new administrative penalties and detailed the following violations, which are specified in table 1 on violations and administrative penalties related to the implementation of federal law No. 7 of 2017 on tax procedures:

      • violation 9: failure of the taxable person to settle the payable tax stated in the submitted tax return or voluntary disclosure, or the tax assessment he was notified of, within the timeframe specified in the tax law;
      • violation 10: submittal of an incorrect tax return by the taxpayer;
      • violation 11: submittal of a voluntary disclosure by the person/taxpayer with errors in the tax return, tax assessment or refund application (according to article 10(1) and 10(2) of the tax procedures law);
      • violation 12: failure of the person/taxpayer to voluntarily disclose an error in the tax return, tax assessment, or refund application (pursuant to article 10(1) and 10(2) of the tax procedures law) before being notified by the authority that it will be subject to a tax audit; and
      • violation 14: failure of the taxpayer to calculate tax on behalf of another person where the taxable person is obliged to do so under the tax law.

      In addition, the FTA clarifications specify that the mechanism to determine the imposition date of some penalties is as follows:

      • where the new month includes a date corresponding to the date the penalty was originally imposed on, the date on which the penalty will be imposed in the new month is the date it was originally imposed the first time; and
      • where a month does not include a date corresponding to the date the penalty was originally imposed on, the date on which the penalty will be imposed for such month will be the first day of the following month. However, for the month following the month which did not include a corresponding date, the penalty shall be imposed on the date corresponding to the date the penalty was originally imposed.
  • United Kingdom
    • Scams warning for tax credits customers

      Tax credits customers should be alert to potential scams as HMRC responds to more than one million referrals of suspicious contact in the last year.

      Tax credits customers should be vigilant and alert to potential scams, HM Revenue and Customs (HMRC) has warned, as the remaining annual renewal packs will arrive in the post this week.

      In the 12 months to 30 April 2021, HMRC responded to more than 1,154,300 referrals of suspicious contact from the public. More than 576,960 of these offered bogus tax rebates.

      In the same period, HMRC has worked with telecoms companies and Ofcom to remove more than 3,000 malicious telephone numbers, and with internet service providers to take down over 15,700 malicious web pages. HMRC responded to 443,033 reports of phone scams in total, up 135% on the previous year.

      Anyone doing their tax credits renewal who has received a tax or benefits scam email or text might be tricked into thinking it was from HMRC and share their personal details with criminals, or even transfer money for a bogus overpayment.

      HMRC’s Cyber Security Operations identifies and closes down scams every day. The department has pioneered the use in government of technical controls to stop its helpline numbers being spoofed, so that fraudsters can no longer make it appear that they are calling from those HMRC numbers.

      Myrtle Lloyd, HMRC’s Director General for Customer Services, said:

      We’re urging all of our customers to be really careful if they are contacted out of the blue by someone asking for money or bank details.

      There are a lot of scams out there where fraudsters are calling, texting or emailing customers claiming to be from HMRC. If you have any doubts, we suggest you don’t reply directly, and contact us yourself straight away. Search GOV.UK for our ‘scams checklist’ and to find out ‘how to report tax scams’.

      Many scams mimic government messages to appear authentic and reassuring. HMRC is a familiar brand, which criminals abuse to add credibility to their scams.

      If customers cannot verify the identity of a caller, HMRC recommends that you do not speak to them. Customers can check GOV.UK for HMRC’s scams checklist to find out how to report tax scams and for information on how to recognise genuine HMRC contact.

      Tax credits help working families with targeted financial support, so it is important that people do not miss out on money they are entitled to. Customers have until 31 July to notify HMRC of any change in circumstances that could affect their claims.

      Renewing online is quick and easy. Customers can log into GOV.UK to check on the progress of their renewal, be reassured it is being processed and know when they will hear back from HMRC. Customers can also use the HMRC app on their smartphone to:

      • renew their tax credits
      • check their tax credits payments schedule, and
      • find out how much they have earned for the year

      Tax credits customers must report the changes to HMRC. Circumstances that could affect tax credits payments include changes to:

      • living arrangements
      • childcare
      • working hours, or
      • income (increase or decrease)

      Customers do not need to report any temporary falls in their working hours as a result of coronavirus. They will be treated as if they are working their normal hours until the Coronavirus Job Retention Scheme closes.

    • New UK Subsidy Control System Envisages Supporting Businesses Post-Brexit

      Following the Queen's key speech of 11 May 2021, on 30 June 2021, the United Kingdom introduced a new subsidy control system (the Subsidy Regime), which envisages replacing the EU State aid regulatory framework, to Parliament. The new UK subsidy regime aspires to provide UK businesses with quick and flexible financial support and encourages economic growth across the United Kingdom post-Brexit.

      The key elements of the new UK subsidy regime are the following:

      • it will be based on the premise that subsidies are permitted on condition that they follow UK-wide principles, such as the delivering of good value for the UK taxpayer in a timely and effective manner;
      • UK public authorities enforced with implementing the new UK subsidy regime will deliver subsidies where they are needed without having to comply with excessive prerequisites;
      • the devolved governments of Scotland, Wales and Northern Ireland will be enforced to decide on the issuance of subsidies by following a set of UK-wide principles;
      • the new UK subsidy regime will prohibit the issuance of subsidies that will result in the relocation of jobs and economic activity from one part of the United Kingdom to another;
      • unlimited government guarantees to businesses, as well as subsidies granted to "ailing or insolvent" enterprises, will be abolished in cases where no credible restructuring plan is presented;
      • towards protecting and maintaining competition and investment, the new UK subsidy regime will introduce two specific categories of subsidies, i.e. "subsidies of interest" and "subsidies of particular interest", for which public authorities may conduct a more extensive analysis in order to assess compliance with UK-wide principles; and
      • compliance with the new UK subsidy regime will be enforced through the UK courts and tribunal system. The Competition Appeal Tribunal will also be responsible for judicially reviewing the issuance of subsidies.

      The new UK subsidy regime will take effect in 2022 subject to parliamentary approval.

      The press release can be accessed here.

    • G7 Finance Ministers Agree on Global Tax Reform; 15% Minimum Tax Rate

      On 5 June 2021, the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) agreed on supporting an international global tax reform agreement for multinational companies, creating new guidelines for corporations worldwide once a global deal is established at the end of 2021.

      A face-to-face meeting was held in London on 4 and 5 June 2021 to help negotiate key elements of the deal. Now that an informal agreement is reached, the G7 leaders can subsequently officially sign it during the G7 Summit, scheduled to be held in Carbis Bay (Cornwall) from 11 to 13 June 2021.

      Highlights of the agreement are:

      • counterparts agree to reforms which will see multinationals paying tax in the countries where they do business; and
      • a global minimum rate that ensures multinationals pay tax of at least 15% in each country they operate.

      More information can be found on the website of the UK government and on the OECD website. Further developments will be reported as they occur.

  • United States
    • IRS announces “Dirty Dozen” tax scams for 2021

      Americans urged to watch out for tax scams during the pandemic.

      The Internal Revenue Service today began its "Dirty Dozen" list for 2021 with a warning for taxpayers, tax professionals and financial institutions to be on the lookout for these 12 nefarious schemes and scams.

      This year's "Dirty Dozen" will be separated into four separate categories:

      • pandemic-related scams like Economic Impact Payment theft;
      • personal information cons including phishing, ransomware and phone "vishing;"
      • ruses focusing on unsuspecting victims like fake charities and senior/immigrant fraud; and
      • schemes that persuade taxpayers into unscrupulous actions such as Offer In Compromise mills and syndicated conservation easements.

      The agency compiled the list into these categories based on who perpetuates the schemes and who they impact. In addition to today's scams the IRS will highlight the other schemes over the next three days.

      The IRS urges all taxpayers to be on guard, especially during the pandemic, not only for themselves, but also for other people in their lives.

      "We continue to see scam artists use the pandemic to steal money and information from honest taxpayers in a time of crisis," said IRS Commissioner Chuck Rettig. "We provide this list to alert taxpayers about common scams that fraudsters use against their victims. At the IRS, we are dedicated to stopping these criminals, but it's up to all of us to remain vigilant to protect ourselves and our families."

      Taxpayers are encouraged to review the "Dirty Dozen: list in a special section on IRS.gov and should be alert to these scams during tax filing season and throughout the year.

      Economic Impact Payment theft

      A continuing threat to individuals is from identity thieves who try to steal Economic Impact Payments (EIPs), also known as stimulus payments. Most eligible people will get their payments automatically from the IRS. Taxpayers should watch out for these tell-tale signs of a scam:

      • Any text messages, random incoming phone calls or emails inquiring about bank account information or requesting recipients to click a link or verify data should be considered suspicious and deleted without opening.
      • Be alert to mailbox theft. Frequently check mail and report suspected mail losses to Postal Inspectors.
      • Don't fall for stimulus check scams. The IRS won't initiate contact by phone, email, text or social media asking for Social Security numbers or other personal or financial information related to Economic Impact Payments.

      Taxpayers should remember that the IRS website, IRS.gov, is the agency's official website for information on payments, refunds and other tax information.

      Unemployment fraud leading to inaccurate taxpayer 1099-Gs

      Because of the COVID-19 pandemic, many taxpayers lost their jobs and received unemployment compensation from their state. However, scammers also took advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal information of individuals who had not filed claims. Payments made on these fraudulent claims went to the identity thieves.

      The IRS reminds taxpayers to be on the lookout for receiving a Form 1099-G reporting unemployment compensation that they didn't receive. For people in this situation, the IRS urges them to contact their appropriate state agency for a corrected form. If a corrected form cannot be obtained so that a taxpayer can file a timely tax return, taxpayers should complete their return claiming only the unemployment compensation and other income they actually received. See Identity Theft and Unemployment Benefits for tax details and DOL.gov/fraud for state-by-state reporting information.

      Additional protection to help protect taxpayers

      IRS makes IP PINs available to all taxpayers – adding another layer of security

      To help taxpayers avoid identity theft, the IRS this year made its Identity Protection PIN (IP PIN) program available to all taxpayers. Previously it was available only to victims of ID theft or taxpayers in certain states. The IP PIN is a six-digit code known only to the taxpayer and to the IRS. It helps prevent identity thieves from filing fraudulent tax returns using a taxpayer's personally identifiable information.

      Using an IP PIN is, in essence, a way to lock a tax account. The IP PIN serves as the key to opening that account. Electronic returns that do not contain the correct IP PIN will be rejected and paper returns will go through additional scrutiny for fraud.

      Reducing fraud

      The IRS and its Security Summit partners in the states and the private-sector tax community have made changes to help reduce identity theft-related refund fraud that are noticeable to the average person filing a return:

      • Tax software providers agreed to strengthen password protocols. This is the first line of defense for these companies to make sure their products are secure.
      • State tax agencies began asking for taxpayers' driver's license numbers as another way for people to prove their identities.
      • The IRS limited the number of tax refunds going to financial accounts or addresses.
      • The IRS masked personal information from tax transcripts.

      Multi-factor authentication can help

      It is important for taxpayers filing in 2021 to know that online tax software products available to both taxpayers and tax professionals will contain options for multi-factor authentication. Multi-factor authentication allows users to better protect online accounts. One way this is accomplished is by requiring a security code sent to a mobile phone in addition to the username and password used to access the account.

      The IRS and its Security Summit partners have formed an information sharing center that allows them to quickly identify emerging scams and react to protect taxpayers. The Identity Theft Tax Refund Fraud Information Sharing and Analysis Center PDF is now operational.

      Also, check out our recent A Closer Look column for more on how to be vigilant about tax scams. Visit Identity Theft Central and Tax Fraud Alerts for more information on how to protect against or report identity theft or fraud.

      Source: Internal Revenue Service

    • G7 Finance Ministers Agree on Global Tax Reform; 15% Minimum Tax Rate

      On 5 June 2021, the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) agreed on supporting an international global tax reform agreement for multinational companies, creating new guidelines for corporations worldwide once a global deal is established at the end of 2021.

      A face-to-face meeting was held in London on 4 and 5 June 2021 to help negotiate key elements of the deal. Now that an informal agreement is reached, the G7 leaders can subsequently officially sign it during the G7 Summit, scheduled to be held in Carbis Bay (Cornwall) from 11 to 13 June 2021.

      Highlights of the agreement are:

      • counterparts agree to reforms which will see multinationals paying tax in the countries where they do business; and
      • a global minimum rate that ensures multinationals pay tax of at least 15% in each country they operate.

      More information can be found on the website of the UK government and on the OECD website. Further developments will be reported as they occur.

    • IRS Issues Data Book Describing FY 2020 Activities

      The US Internal Revenue Service (IRS) has released the Fiscal Year 2020 Internal Revenue Service Data Book detailing tax administration activities conducted by the IRS during Fiscal Year 2020 (i.e. 1 October 2019 through 30 September 2020).

      The 2020 Data Book comprises 33 tables presenting all IRS activities from returns processed and revenue collected to numbers and amounts from examinations of returns and collection methods, as well as budget and personnel information.

      During Fiscal Year 2020, the IRS processed more than 240 million tax returns and collected nearly USD 3.5 trillion in federal taxes, which accounts for approximately 96% of the US federal revenue from all sources.

      Particularly in response to the COVID-19 pandemic, the IRS:

      • developed new technologies and provided the equipment necessary to allow thousands of IRS employees to work from home;
      • mitigated taxpayers' burdens by:
        • extending the deadline to file and pay US federal income taxes from 15 April 2020 to 15 July 2020;
        • easing payment guidelines; and
        • postponing compliance actions and suspending most collection enforcement activities, such as new notices of lien or levy, from 15 April 2020 to 15 July 2020; and
      • issued Economic Impact Payments (EIPs) totalling USD 412.9 billion during the 2020 calendar year.
    • Congressional Research Service Explains US International Corporate Tax Issues

      The Congressional Research Service (CRS) of the US Library of Congress has outlined issues and proposals related to the US international corporate tax system in a recently released report. The CRS report is entitled "Issues in International Corporate Taxation: The 2017 Revision (P.L. 115-97)" (R45186-Version 16, 17 June 2021).

      The CRS report explains:

      • prior international tax rules and the revisions made in the Tax Cuts and Jobs Act of 2017 (TCJA);
      • the four major issues of concern under prior law:
        • allocation of investment between the United States and other countries;
        • artificial profit shifting out of the United States;
        • repatriation of income earned by foreign subsidiaries; and
        • inversions (US firms shifting their headquarters to other countries for tax reasons);
      • how the TCJA addresses those four concerns or raises new ones;
      • issues associated with international agreements (including tax treaties, the WTO and OECD minimum standards);
      • problems and issues (such as legal challenges, uncertainty and new regulations) within the new international tax regime; and
      • options that have been suggested in President Biden's legislative proposals and bills introduced in Congress.

      Note: The CRS is an agency within the US Library of Congress and serves the US Congress throughout the legislative process by providing legislative research and analysis for an informed national legislature.

    • Joint Committee on Taxation Explains Tax Gap

      The Joint Committee on Taxation (JCT) of the US Congress has released a report with a description of US federal tax law, and an analysis of selected issues, related to the tax gap.

      The JCT report is entitled "Joint Committee on Taxation, Tax Gap: Overview of Federal Tax Provisions and Analysis of Selected Issues." The report, designated JCX-30-21, is dated 7 June 2021.

      A standard definition of the tax gap is the shortfall between the amount of tax voluntarily and timely paid by taxpayers and the actual tax liability of taxpayers. It measures:

      • taxpayers' failure to accurately report their full tax liabilities on tax returns (i.e. underreporting);
      • taxpayers' failure to pay taxes due from filed returns (i.e. underpayment); and
      • taxpayers' failure to file a required tax return altogether or on time (i.e. non-filing).

      The tax gap includes shortfalls in individual income taxes, corporate income taxes, employment taxes, estate taxes, and excise taxes.

      According to the JCT report, the most recent study shows that the estimated average annual tax gap for tax years 2011-2013 was USD 441 billion, and the annual net tax gap (i.e. the gross tax gap adjusted for late payments and collections due to enforcement activities) was USD 381 billion.

      With total average tax liabilities of USD 2.7 trillion per year between 2011 and 2013, the voluntary compliance rate was 83.6% and the net compliance rate was 85.8%.

      In 2011-2013, the largest source of the tax gap was the individual income tax, followed by employment taxes, and the corporate income tax. Underreporting was the largest component of the tax gap. Only 20% of the gross tax gap was attributable to non-filing (including late filing) and underpayment.

      The JTC report was prepared in connection with a public hearing titled "Minding the Tax Gap: Improving Tax Administration for the 21st Century," which the Subcommittee on Select Revenue Measures and the Subcommittee on Oversight of the House Committee on Ways and Means will jointly hold on 10 June 2021.

      Note: The JCT is a non-partisan committee of the US Congress that assists members of the majority and minority parties in both chambers on tax legislation.

    • COVID-19 Pandemic: IRS Issues COVID-Relief FAQs for Families and Small Businesses

      The US Internal Revenue Service (IRS) has issued two sets of frequently asked questions (FAQs) to provide guidance on the child and dependent care credit and the paid sick and family leave credit, as enhanced by the American Rescue Plan Act of 2021 (ARP). The IRS has also issued an accompanying News Release (IR-2021-128), dated 11 June 2021.

      The child and dependent care tax credit is allowed for a percentage of work-related expenses that a taxpayer incurs for the care of qualifying persons to enable the taxpayer to work or look for work.

      For 2021, the ARP:

      • increases the maximum amount of work-related expenses for qualifying care that may be taken into account in calculating the credit;
      • increases the maximum percentage of those expenses for which the credit may be taken;
      • modifies how the credit is reduced for higher earners; and
      • makes it refundable.

      The paid sick and family leave credit reimburses eligible employers for the cost of providing paid sick and family leave to their employees for reasons related to COVID-19. Self-employed individuals are eligible for similar tax credits.

      The ARP:

      • amends and extends the credit;
      • treats leave wages paid to an employee who is seeking or awaiting the results of a test for, or diagnosis of, COVID-19, or is obtaining immunizations related to COVID-19 or recovering from immunization, as leave wages that can be eligible for the credit; and
      • permits eligible employers to claim the credit for paid family leave wages for all the same reasons that they can claim the credit for paid sick leave wages.

      The two sets of FAQs, both of which were last reviewed or updated on 11 June 2021, provide information on eligibility, computing the credit amounts, and how to claim the credits.

      Note: The ARP was enacted on 11 March 2021 to assist families and businesses, as well as state and local governments, with the fallout of the COVID-19 pandemic and recovery underway.