June 2024

Deputy Prime Minister and Minister of Finance Lyudmila Petkova and H.E. Kenneth Merten, the Ambassador of the United States of America to Bulgaria, signed an agreement regulating the automatic exchange of country-by-country reports.

“Administrative cooperation is an effective tool to counter tax avoidance and only a coordinated effort of countries around the world can achieve this goal. The conclusion of the agreement for exchanging country-by-country reports between the Republic of Bulgaria and the United States of America is another important step in this direction. This agreement is long-awaited by business representatives as it will result in reducing the administrative burden and will create an anxiety-free and predictable business environment”, said Deputy Prime Minister and Minister of Finance Lyudmila Petkova.

 Thanks to the agreement, our country will be receiving information about the revenues, activities, assets and taxes of the major US multinational groups operating in our country. The obligation for the local subsidiaries of these groups to file country-by-country reports under the Tax and Social Security Procedural Code will also be abolished, as this information will be exchanged on a reciprocal basis between the two countries. The automatic exchange of country-by-country reports will increase international tax transparency and will assist tax administrations in taking decisions on the effective targeting of resources to identify, control and counter the highest-risk cases of tax evasion by large multinationals.

By signing the agreement, Bulgaria and the USA are also fulfilling their commitments under the Organisation for Economic Co-operation and Development (OECD) and G20 Plan to implement measures against base erosion and profit shifting.

Source: Republic of Bulgaria Ministry of Finance

On 7 June 2024, Shanghai Municipal Tax Bureau and Shanghai Municipal Finance Bureau compiled the Guidance on Major Tax Preferential Policies in Shanghai to Support Scientific and Technological Innovation in Shanghai. It provides a menu and one-stop services for taxpayers and promotes the full utilization of preferential policies for taxes and fees.

The Guidance:https://shanghai.chinatax.gov.cn/zcfw/zcjd/202406/t472244.html

In accordance with Circular Caishui [2022] No. 3, effective from 1 January 2021 until 31 December 2025, individuals working in the Hengqin Guangdong-Macau In-depth Cooperation Zone (“Hengqin Zone”) who meet eligibility criteria are entitled to preferential IIT treatments. These measures aim to attract skilled talent to the region and support the economic integration of Macau and the Hengqin Zone.

On 7 June 2024, the tax authority of the Hengqin zone issued the 2023 Filing Guide for Macau residents preferential IIT treatments in the Hengqin Zone to assist eligible taxpayers in understanding and applying for these benefits.

2023 Filing Guide：https://guangdong.chinatax.gov.cn/gdsw/zhhqsw_tzgg/2024-06/07/content_929eb312769e429f8d86b5d82ab3c2d7.shtml

On 30 May 2024, the General Office of the State Taxation Administration and the General Office of the All-China Federation of Industry and Commerce jointly issued the 2024 Special Action Plan on Tax Measures for Supporting the Development of Micro and Small Enterprises (“Action Plan”), which outlines twelve strategic measures aimed at enhancing support for micro and small enterprises (“MSEs”).

Key initiatives of the action plan:

• Targeted policy delivery: the plan details a strategy to tailor tax and fee incentives more precisely based on the specific characteristics such as type, operational scale, and industry sector of the businesses.
• Focus on key sectors: there will be an increased emphasis on providing policy guidance to MSEs within the sci-tech innovation and manufacturing sectors, recognizing their critical role in economic growth.
• Support for cross-border MSEs: the Action Plan proposes customized support measures for MSEs engaging in cross-border activities, tailored to their needs in the various stages of growth and development.
• Collaborative dispute resolution: it encourages multi-departmental cooperation to enhance mechanisms for resolving tax and fee disputes, aiming to streamline and diversify the resolution process.

Action Plan: http://fgk.chinatax.gov.cn/zcfgk/c102424/c5232277/content.html

Corporate Income Tax (CIT) Rate

Your company is taxed at a flat rate of 17% of its chargeable income. This applies to both local and foreign companies.

CIT Rebate for the Year of Assessment ("YA") 2024 and a CIT Rebate Cash Grant

As announced in Budget 2024, to help companies manage rising costs, a CIT Rebate of 50% of the corporate tax payable will be granted to all taxpaying companies, whether tax resident or not, for YA 2024. Companies that have employed at least one local employee in 2023 (referred to as “local employee condition”) will receive $2,000 in cash payout (referred to as “CIT Rebate Cash Grant”). Such companies will therefore receive a minimum benefit of $2,000. The maximum total benefits of CIT Rebate and CIT Rebate Cash Grant that a company may receive is $40,000.

The CIT Rebate Cash Grant is to provide support for smaller companies which would otherwise receive little or no CIT Rebate. To be eligible for the CIT Rebate Cash Grant, a company must have met the local employee condition, that is, the company has made CPF contributions to at least one local (Singapore Citizen or Permanent Resident) employee, not including shareholders who are also directors of the company, in the calendar year 2023. Companies, whether tax resident or not, that have met the local employee condition will automatically receive the CIT Rebate Cash Grant by the third quarter of 2024. The CIT Rebate Cash Grant is also extended to registered business trusts and variable capital companies, whether resident or not, that meet the local employee condition. The CIT Rebate Cash Grant will not be taxable.

The CIT Rebate will apply to income taxed at a concessionary tax rate but will not apply to income that is subject to a final withholding tax. The CIT Rebate is also extended to registered business trusts and variable capital companies.

Source: IRAS

A total of 317 foreign companies received approval to invest in Thailand under the Foreign Business Act during the first five months of 2024. The foreign investment in the period reached 71,702 million baht, representing an increase of 58 percent in value and 16 percent in volume over the same period of 2023.

Deputy Government Spokesperson Karom Polpornklang stated that, from January to May this year, Japan was the largest group of foreign investors in Thailand, with 84 projects (40,214 million baht). Singapore came second, with 51 projects (5,189 million baht), followed by the United States, 50 projects (1,196 million baht), China, 38 projects (5,485 million baht), and Hong Kong, 28 projects (12,048 million baht).

During this period, 99 foreign investors, accounting for 31 percent of the total foreign investors in Thailand, showed interest in investing in the Eastern Economic Corridor (EEC). The foreign investment value was 18,224 million baht, accounting for 25 percent of the total value of foreign investment during the five-month period.

Among the 99 foreign investors, 31 were from Japan (3,523 million baht), 19 from China (1,803 million baht), 11 from Hong Kong (5,005 million baht), and 38 from other countries (7,893 million baht).

Previously, the Thailand Board of Investment (BOI) reported that the value of applications for investment promotion in Thailand in the first quarter of 2024 increased by 31 percent to 228,207 million baht (USD 6.2 billion) over the same period of 2023.

From January to March 2024, domestic and foreign investors filed a total of 724 project applications to BOI, an increase of 94 percent over the same period of last year. Out of this number, 460 projects involved foreign investment.

The Deputy Government Spokesperson said that the upward trend reflects Thailand's potential and investor confidence and that it was a result of the Government’s efforts to attract leading companies worldwide to invest more in Thailand.

The sector that saw the highest value of investment applications in the first quarter was the electronics and electrical appliances industry, followed by automotive and parts, petrochemicals and chemicals, digital, and agriculture and food processing.

Source: The Government Public Relations Department

The Thai government has initiated a strategic plan to transform Thailand into a hub for skilled foreign workers, enhance its economic competitiveness, and ensure sustained growth. Led by Prime Minister Srettha Thavisin, the initiative will lead to the introduction of several new visa categories to attract global talent.

Official data from the Board of Investment (BOI) reveals that Thailand has issued working visas and work permits to over 56,000 foreign experts engaged in projects that promote investment. Moreover, the Long-Term Resident (LTR) visa program now boasts over 4,000 holders from diverse countries, including the US, Russia, the UK, China, Germany, Japan, and France. This particular type of visa is designed for specialists, remote workers, wealthy individuals, and retirees with companions, offering perks such as a ten-year residency, substantial tax reductions for specialists, and less frequent immigration check-ins.

Government Spokesperson Chai Wacharonke revealed that there are currently 2,170 individuals with smart visas, attracting skilled professionals, investors, and entrepreneurs in key sectors, predominantly from the US, Russia, the UK, Japan, and Germany.

According to Chai, the forthcoming “Destination Thailand Visa” (DTV), slated for launch this month, is also expected to draw even more foreign nationals with digital skills, further enhancing Thailand's appeal as a destination for professionals.

To facilitate the arrival and integration of foreign talent, the BOI has collaborated with the Immigration Bureau and the Labor Ministry to establish the One Start One Stop Investment Center (OSOS) to simplify administrative procedures for foreign specialists and investors.

Source: The Government Public Relations Department

On 17 June 2024, the Council of the Organisation for Economic Co-operation and Development (OECD), which comprises the permanent representatives to the OECD from its member countries, has decided to invite Thailand to start accession discussions, making Thailand an OECD candidate country.

The decision is a monumental step towards Thailand’s membership in the OECD, for which Thailand submitted the Letter of Intent on 12 February 2024. Going forward, Thailand and the OECD will draft the Accession Roadmap to set the goals, conditions and timeframe for the alignment to and implementation of relevant OECD’s instruments. When the Roadmap is successfully implemented, the OECD Council will consider inviting Thailand to become a member.

The decision attests to the fact that Thailand shares values and goals with OECD members; namely, democracy, rule of law, human rights and open and transparent market economy, and that Thailand conducts impactful economic diplomacy at all levels and has continuous and meaningful cooperation with the OECD. Moreover, the decision, taken by consensus among OECD members, also reflects close and cordial relations between the members and Thailand.

The accession process may take many years to complete. Nevertheless, from the early stages, various reforms will help Thailand attract more foreign investment, increase income, improve the living standard of the people, and also increase Thailand’s role in international policy-making. The Thai government is firmly committed to advancing the accession process towards its successful completion.  The process will be inclusive, involving all stakeholders, with the Ministry of Foreign Affairs and the National Economic and Social Development Council as the focal agencies.

Source: Ministry of Foreing Affairs, Kingdom of Thailand

The Thai Ministry of Commerce has reported that the third round of Thailand-EU Free Trade Agreement (FTA) negotiation just held in Bruxelles from 17-21 June has made progress, with the aim of finalizing the FTA by mid-2025.

The discussions included both head of delegation meetings and 20 expert subgroup sessions. Each group has outlined steps for further work, such as information and opinion exchanges and intersessional discussions, to ensure the timeline is met. Thailand will host the fourth round of negotiations in Bangkok on 4^th of November, this year.

Additionally, the Ministry of Commerce has prioritized the FTA negotiations with the EU, as it considers a top government task. This will enhance Thailand's trade opportunities in the large and high-demand EU market, as well as attract investments from the EU and other countries seeking to benefit from exports to the EU. The private sectors from both sides have consistently pushed for these negotiations however the negotiations still face challenges from the inclusion of new issues, such as government procurement, state enterprises, competition, trade and sustainable development, energy, and raw materials. The Thai negotiating team from various agencies is prepared to move forward to reach a balanced and beneficial conclusion for the Thai economy.

In 2023, the EU was Thailand's fifth-largest trading partner, following ASEAN, China, the United States, and Japan. Trade between Thailand and the EU was valued at USD 41.58 billion, an increase of 1.43% from the previous year. Thailand's exports to the EU amounted to USD 21.84 billion, a decrease of 4.21%, while imports from the EU were valued at USD 19.74 billion, an increase of 8.50%. For the first five months (January-May 2024), trade between Thailand and the EU totaled USD 17.98 billion, an increase of 1.58% from the same period of the previous year. Thailand's exports to the EU were valued at USD 9.82 billion, an increase of 3.75%, and imports from the EU were valued at USD 8.16 billion, a decrease of 0.92%.

Source: Thailand Department of Trade Negotiations

The Federal Tax Authority (FTA) has issued a clarification regarding the distinction between the VAT implications of labour services and facilitation services (VATP038). The clarification states that the identification, recruitment and hiring of candidates, as well as their placement with other companies, can generally be considered as labour services. The total amount received (or expected) by the employer from the service recipient, such as wages and benefits, should be considered when considering these services. However, in certain circumstances, labour services may be visa facilitation services. The following conditions must be met for this to be the case:

• the employment visa holder ("facilitator") and the customer are part of the same corporate group but are not part of the same tax group in the sense of the VAT legislation and the corporate tax legislation;
• the facilitator's business activities do not include the supply of manpower;
• the facilitator is not responsible for any of the obligations related to the employee; and
• the facilitator sponsors these employees to exclusively work for and under the supervision and control of the customer.

The consideration for visa facilitation services includes any amount charged for processing visas for natural persons employed by another person, such as the visa fee.

The clarification regarding the VAT treatment for manpower and visa facilitation services, issued by the FTA, was published on 31 May 2024.

Source: IBFD tax research platform news

Deputy Prime Minister and Minister of Finance Lyudmila Petkova and H.E. Kenneth Merten, the Ambassador of the United States of America to Bulgaria, signed an agreement regulating the automatic exchange of country-by-country reports.

“Administrative cooperation is an effective tool to counter tax avoidance and only a coordinated effort of countries around the world can achieve this goal. The conclusion of the agreement for exchanging country-by-country reports between the Republic of Bulgaria and the United States of America is another important step in this direction. This agreement is long-awaited by business representatives as it will result in reducing the administrative burden and will create an anxiety-free and predictable business environment”, said Deputy Prime Minister and Minister of Finance Lyudmila Petkova.

 Thanks to the agreement, our country will be receiving information about the revenues, activities, assets and taxes of the major US multinational groups operating in our country. The obligation for the local subsidiaries of these groups to file country-by-country reports under the Tax and Social Security Procedural Code will also be abolished, as this information will be exchanged on a reciprocal basis between the two countries. The automatic exchange of country-by-country reports will increase international tax transparency and will assist tax administrations in taking decisions on the effective targeting of resources to identify, control and counter the highest-risk cases of tax evasion by large multinationals.

By signing the agreement, Bulgaria and the USA are also fulfilling their commitments under the Organisation for Economic Co-operation and Development (OECD) and G20 Plan to implement measures against base erosion and profit shifting.

Source: Republic of Bulgaria Ministry of Finance