March 2019

  • China
    • China Unveils Details about VAT Reform

      The Ministry of Finance, the State Administration of Taxation and the General Administration of Customs released on March 21, 2019 the Announcement of Policies Related to Deepening Value-added Tax Reform, saying the unprecedented reductions of VAT rates will begin from April 1, 2019. According to the announcement, VAT rate for general taxpayers in some sectors will be lowered to 13% from 16%, and to 9% from 10% for some other sectors. Taxpayers will pay VAT at a rate of 9% for agricultural products they purchased, down from 10% in the past. If taxpayers buy agricultural products for production or processing purposes, their VAT rate will be cut from 13% to 10%. From April 1, 2019 to December 31, 2021, taxpayers in the production and service industries shall enjoy 10 percent additional input VAT deduction.
    • Five Authorities Specify Requirements for Reporting of Foreign-invested Enterprises’ Investment and Operation

      Five authorities, lead by the Ministry of Commerce, on March 19 promulgated the Circular on the Conduct of Joint Report on Foreign-invested Enterprises' Investment and Operation in 2019. According to the circular, foreign-invested enterprises set up and registered within China shall log in to between April 1 and June 30 this year to provide information on their investments and operations for 2018. Data and information so provided will be shared among the commerce, finance, taxation, statistics and foreign exchange authorities. Foreign-invested enterprises set up in 2019 are required to do the filing from the next year.
    • State Council Takes Measures to Slash Social Insurance Payment Burden of Firms

      Premier Li Keqiang chaired a State Council executive meeting on March 26, 2019 and made arrangements on reducing social insurance fee rates and clarified specific supporting measures. The meeting required local governments to reexamine and lower the upper- and lower-limits of the social insurance base and extend the policy of reducing the premium rates for unemployment and work-related injury insurances for one more year, to April 2020. If a region's industrial injury insurance fund is enough to cover payments for 18-23 months, it can cut the premium on industrial injury insurance by 20%; the reduction can reach 50% if the fund is enough to cover payments for 24 months or longer.
    • Latest news related to the IIT reform for Foreigners

      1. 6-year Rule The new period of stay will be counted from 2019. It means that all expats’ income will be IIT exempted until 2025. Foreigners who will spend in China more than 183 days each year from 2019 to 2025 and who will never leave P.R.C. for more than 30 days in a single trip, in a calendar year, will be subjected to IIT on their overseas income. A single trip of more than 30 days, during the 6 years period, will allow the employee to restart the calculation. 2. Calculation of stays in China If an expat stays in China less than  24 hours in a day (from 0 to 24), it will not be counted as a day in China. 3. Expats shall predict their days in China at the beginning of the year and declare taxes according to their position: tax resident or not tax resident 4. Foreigners with no Withholding agent in China For expats who has no salary paid in China, is it possible to declare IIT by themselves or authorize domestic employer (who is a related party of the foreign company paying salary to them) to declare IIT on their behalf. 5. Preferential IIT for non-tax resident The preferential IIT rate for annual bonus is available for non-tax residents. However, the rate is adopted according to the total amount divided by 6 (to a tax resident, it is divided by 12). 6. IIT calculation method and how to evaluate income from China or overseas have been clarified
          Domestic Salary Overseas Salary Note
        Days Paid in China Paid outside China Paid in China Paid outside China
        Less than 90 days (183 days under the Treaty) IIT exempted No IIT No IIT Non-Tax Resident
        90 days to 183 days IIT IIT No IIT No IIT
        183 days to 6 years IIT IIT IIT exempted Tax Resident
        More than 6 years IIT IIT IIT IIT
      7. Equity incentives calculation method for expats has been clarified Income from equity incentive in a calendar year can apply the preferential IIT rate and the calculation method for bonuses.
    • Two Authorities Issue Individual Income Tax Policies for Non-resident Individuals and Individuals Without Residence

      The Ministry of Finance and the State Administration of Taxation recently issued the Announcement about Length of Residence in China for Individuals without Residence Within the Territory of China, and the Announcement about Individual Income Tax Policies for Non-resident Individuals and Individuals Without Residence. According to the announcements, the annual aggregate of 183 days or more of residence in China for six consecutive years begins from the start of 2019, and any days of residence in 2018 and prior years are not included.
  • Hong Kong
    • Tax deductions for annuity premiums and MPF voluntary contributions approved

      The Inland Revenue and MPF Schemes Legislation (Tax Deductions for Annuity Premiums and MPF Voluntary Contributions) (Amendment) Bill 2018 was approved by the Legislative Council on 20 March 2019. The new Ordinance gives effect to the tax deductions that were proposed in the 2018-19 Budget. From the year of assessment 2019/20, taxpayers are entitled to tax deductions under salaries tax and personal assessment for their premiums paid to qualifying deferred annuities and contributions made to tax deductible Mandatory Provident Fund (MPF) voluntary contribution accounts. The maximum tax-deductible limit for a taxpayer is HKD 60,000 per year. Under the new arrangement, a taxpayer can claim tax deduction for deferred annuity premiums covering the taxpayer's spouse as joint annuitant, or either the taxpayer or the taxpayer's spouse as a sole annuitant. A taxpaying couple is allowed to allocate tax deduction for deferred annuity premiums between themselves in order to claim total annual deductions of HKD 120,000, provided that the deduction claimed by each taxpayer does not exceed the individual limit. Tax-deductible MPF voluntary contributions are subject to "preservation requirements", meaning that the accrued benefits can be withdrawn only upon reaching the age of 65 or based on statutory grounds.
  • South Africa
    • Turkish diaper firm Hayat Kimya sets sights on Kenyan babies

      Turkish fast moving consumer goods gıant Hayat Kimya has injected Sh600 million in the launch of its Kenyan operations in a move that has seen the firm formally unveil one of its flagship products Molfix Diapers.
      The move marks the firm’s official entry into the East African region, having previously ventured into 15 other markets across the continent, including Nigeria, Cameroon, Algeria, Egypt and Morocco.
      The company, which used agents to sell locally, has chosen Kenya as the regional hub.
      “Kenya is a developing country, carrying a lot of potential, with her growing, young population, with her strategic location for Central and East of Africa. Hayat would like to be part of this rapidly modernising and developing country. So, we offer our quality and innovation, we offer our brand investment with Molfix, we offer our sincerity to you,” said Hayat Kimya CEO Avni Kigili.
      World’s fifth largest
      Hayat Kimya has 14 global brands in the diapers, hygienic pads, detergents and cleansing tissue categories.
      It employs 8,000 people and has operations in countries across Middle East, Asia and Africa.
      The firm will battle out for a slice of the local market dominated by Chinese diaper brand Softcare, Proctor & Gamble’s Pampers and New York-listed firm Kimberly-Clark, the manufacturers of Huggies diapers.
      Hayat Kimya is ranked the world’s fifth largest branded baby diaper manufacturer and the largest tissue manufacturer in the Middle East, Eastern Europe and Africa by capacity.
      The Turkish giant estimates that Kenya’s annual diaper consumption is nearly 750 million.
    • Rwanda to invest US $400m in a gas extraction plant

      The government of Rwanda has signed an US $400m agreement with Gasmeth Energy Limited in the construction and maintenance of a gas extraction plant, processing and compression project in Lake Kivu. The firm signed the agreement to the effect with the government through Rwanda Mines, Petroleum and Gas Board (RMB) and Rwanda Development Board (RDB). RDB Chief Executive Officer, Clare Akamanzi said the move is a positive step forward towards implementing environmental friendly fuels to reduce over dependence on charcoal and wood as the main cooking fuel in the country. “Lake Kivu contains dissolved carbon dioxide and methane gases which poses a great risk to plants and animals dependent on oxygen at the lake. However Methane gas is an energy resource which is valued at billions for Lake Kivu region”, said Clare Akamanzi.
      Lake Kivu gas extraction plant
      Methane at the lake is estimated to generate 700 MW of electricity for the next 55 years. Gasmeth Energy is the latest private investor with already two other investors Contour Global and Symbion Power extracting methane gas from Lake Kivu. Contour Global’s produces 26.4 MW currently with plans underway to increase production to 100 MW in the second phase of the project. Akamanzi added that from this development hundreds will be employed, gas exports would increase, reduction in gas import bill and provision of cleaner cooking fuel for citizens would mean a cleaner environment too. Already efforts have been made to attract more private investors to take on energy production activities and also provide alternative energy resources. Symbion Power which is a US Based energy development company on the hand separately owns Kibuye Power (KP1) and Lake Kivu 56 projects. The project which is estimated to  employ 600-800 people during construction and another 400 after completion.
    • Egypt to construct over 40,000 housing units at New Administrative Capital

      The government of Egypt is set to construct over 40,000 housing units in the new administrative capital by the end of June 2020. Minister of Housing, Utilities and Urban Communities, Essam al-Gazzar said that the project is being implement by the Ministry of Housing and is divided into eight neighborhoods, including villas, and mixed housing in the third district, Capital Residence.
      Housing project
      The project include construction of 23,412 housing units, 952 villas and 2,050 mixed housing units in the third district, Capital Residence while the fifth district, the New Garden City with an area of ​​about 1,000 acres will have 23,000 housing units consisting of residential apartments and villas, in addition to an area of ​​residential towers with mixed use in the lower floors with about 2,000 housing units and two hotels. Moreover, the Ministry of housing plans to complete the first phase of a water treatment plant, five international schools, a restaurant complex and a mosque, as well as the government district and the investment zone for the New Administrative Capital.
      Largest park in the world
      Essam al-Gazzar also added that the  Ministry has scheduled to complete the implementation of the central gardens project at the “Capital Park” which is more than than 10 kilometers long and has an area of more than 1,000 acres, making it one of the largest parks around the world. “The central park of the New Administrative Capital will provide greater opportunity for community interaction between the capital’s residents and other residents in its wider scope, and is park is expected to host more than two million visitors annually,” said Gazzar. The park will also serve as a catalyst for encouraging a healthy life, in accordance with global rates including environmental value, green spaces, and areas for physical activities and recreation.
    • Eni reports major oil discovery offshore Angola

      MILAN -- Eni announces a major oil discovery in Block 15/06, in the Agogo exploration prospect, in Angola’s deep water. The new discovery is estimated to contain between 450 and 650 MMbbl of light oil in place with further upside. The Agogo-1 NFW well, which has led to the discovery, is located approximately 180 km off the coast and about 20 km west from the N’Goma FPSO (West Hub). The well was drilled by the Poseidon drillship in a water depth of 1,636 m and reached a total depth of 4,450 m. Agogo-1 NFW proved a single oil column of about 203 m with 120 m of net pay of high quality oil (31° API) contained in a sub salt diapirs setting in Lower Miocene sandstones with excellent petrophysical properties. The data acquired in Agogo-1 NFW indicate a production capacity of more than 20,000 barrels of oil per day. Agogo is the third discovery of commercial nature since the Block 15/06 Consortium decided to launch a new exploration campaign in 2018, leading to the discoveries of Kalimba and Afoxé. The discovery opens new opportunities for oil exploration below salt diapirs in the north-west part of the prolific Block 15/06, thus creating new chances for unlocking additional potential value. The mapping and the drilling of Agogo prospect has been possible through the use of Eni’s advanced and sophisticated proprietary seismic imaging technologies. The Block 15/06 Joint Venture, composed by Eni (operator, with a 36.8421% stake), Sonangol P&P (36.8421%) and SSI Fifteen Limited (26.3158%), will work to appraise the discovery and start the studies to fast track its development. Angola is a key Country in Eni’s organic growth strategy. The Company has been present in the Country since 1980 and currently accounts an equity production of about 155,000 boed. In Block 15/06 Eni operates two FPSOs (N’Goma in West Hub and Olombendo in East Hub) which are currently producing about 160.000 bopd (100%). Eni is also operator of the Cabinda Norte Block, located onshore Angola.
    • France Pledges $2.8 Billion African Business Investment by 2022

      French President Emmanuel Macron has pledged to invest 2.5 billion euros ($2.8 billion) in Africa by financing and supporting startups and small- to medium-sized enterprises by 2022. Dubbed Choose Africa, the government would support about 10,000 enterprises across the continent by providing credit, technical support and equity financing, the French Development Agency said in an emailed statement. The funds will be mobilized via the AFD and its private-sector financing arm, Proparco. Macron, who is on a three-day trip to Africa to boost trade with Ethiopia, Djibouti and Kenya, said 1 billion euros was earmarked for equity investment in startups and SMEs.
    • World Bank, AfDB commit $47 bln to African climate finance

      NAIROBI (Reuters) - The World Bank and the African Development Bank will together commit more than $47 billion by 2025 to help African countries tackle the effects of climate change, the banks said on Thursday. Many countries on the continent, especially those on the coast, are among the most vulnerable to the effects of climate change such as rising sea levels and coral reef deterioration. Others are prone to more frequent droughts, desertification and floods. The World Bank said in a statement it had pledged $22.5 billion for 2021-2025, while AfDB said it had committed $25 billion to climate finance between 2020 and 2025. AfDB said the funds would be used to increase investment in renewable energy projects like solar power plants. “The share of our portfolio that was in renewable energy generation between 2013 and 2015 was 59 percent but from 2015 to 2018 we moved from that to 95 percent,” AfDB president Akinwumi Adesina told Reuters on the sidelines of a U.N. environment meeting. The World Bank said some of the beneficiaries of its funding would include projects in Ethiopia, Rwanda and Kenya.
    • DP World invests $12m to improve ops at Somaliland port

      Dubai port operator commissions the first mobile harbour cranes to double productivity. DP World Berbera has announced it has invested $12 million to improve operations at the Port of Berbera in Somaliland. The Dubai-based port operator said it has commissioned the first mobile harbour cranes (MHCs) so the port will be able to offer shoreside crane support, substantially improving vessel operations. The investment on the three new cranes will double productivity at the port, significantly reducing vessel turn-around time and stabilising operations during monsoon season, DP World said in a statement. Suhail Al Banna, CEO and managing director of DP World Middle East and Africa, said: “The three mobile harbour cranes currently being commissioned are strategically important for the development of the Port of Berbera. "They will enable more ships to be served at and ultimately increase the flow of trade to both the country and the region. As construction work for the expansion of the port progresses, we are witnessing a transformation in the capacity of this major infrastructure asset, benefiting people both here and across the Horn of Africa.” The investment in the new cranes is the latest in a series of improvements to the Port of Berbera. Since 2017 DP World Berbera has introduced container handling equipment, vehicles and systems as part of its push to modernise the historic port.
    • New Kenya railway, France in €2bn infrastructure diplomacy push

      French companies will build a new railway in Kenya and operate a motorway there following a visit by President Emmanuel Macron aimed at boosting France’s exports to East Africa. Construction giant Vinci will be involved in the motorway concession. Macron and Kenya’s President Uhuru Kenyatta witnessed the signing of contracts worth more than €2bn during the visit, the first by a French president since Kenya’s independence from Britain in 1963. In a move that will be seen as a challenge to China’s dominance in the provision of infrastructure in the region, Macron said France wants commercial relationships that are “much more fair and profitable for the Kenyan people”, reports French news agency RFI. Macron added French investment would respect Kenya’s sovereignty and would be “sustainable”. Contracts between unnamed French companies and Kenya include building a railway from Nairobi to Jomo Kenyatta International Airport, a trip of about 20 km that can take up to two hours by car, said RFI. It should be operational by 2021, and would “will help completely transform the lives of millions of urban workers”, said President Kenyatta during the visit on Wednesday, 13 March. A consortium led by Vinci also secured a 30-year concession worth €1.6bn to improve and operate a highway between Nairobi and Mau, now a clogged and dangerous stretch of road relied upon by freighters. Another consortium led by Airbus won a €200m contract for coastal and maritime surveillance, and renewables firm Voltalia sealed a €70m euro contract for two solar power plants.
    • Toyota, Suzuki and CFAO announce joint venture to produce vehicles in Ghana

      Officials from Suzuki Motor Corporation, Toyota Tsusho Corporation, and CFAO have announced a joint venture to manufacture and distribute vehicles in Ghana.

      At a courtesy call on President Akufo-Addo, on Tuesday, March 19, 2019, at the Jubilee House in Accra, Mr. Koyote Suzuki, General Manager for the Middle East and Africa of Suzuki Motor Corporation, told President Akufo-Addo that with the company producing some 1.8 million vehicles in India alone, “my mission is to find our next India in the continent of Africa.”
      He stated that “our next phase of growth will come from Africa, but we need to find the right partner in Africa for manufacturing and distribution after sale of our vehicles.” Suzuki, he said, has partnered with Toyota in Africa, and are currently working in some 26 countries. “We came to know from Toyota that the Ghanaian government is planning to roll out a new automotive policy. We heard this from Toyota executives who paid a visit here last month. We are highly interested in participating in this initiative by the Ghanaian government. We wish to start production here, grow it and expand it,” the Suzuki General Manager added. Mr. Masafumi Yamashita, from Toyota Tsusho Corporation, in his remarks, noted that Toyota Corporation and CFAO have the largest automotive distribution network in Africa, and have the ambition to contribute to and support further development in African countries. “Our vision is with Africa and for Africa. This time, we commit to work together with Suzuki Motor Corporation for the future development of the automotive industry here in Africa, as a strategic partner,” he added. On his part, President Akufo-Addo told the gathering that “these three companies that have come together to push an idea, here in Ghana, is an idea that we have to welcome.” His government, he explained, is interested in developing a vibrant and dynamic automobile industry in Ghana, and has made several initiatives towards that end. “Finally, I believe we are now ready to outdoor our automotive policy which will enable people like you know what is available to you in terms of government support, and also the obligations that will be upon you, if you enter the Ghanaian space,” the President added. With the economy projected to grow by 7.9 per cent this year, and the country recognized as one of the most stable countries on the continent, where the rule of law works, President Akufo-Addo stressed that “this is architecture designed expressly to try and attract investments into our country.” President Akufo-Addo told the delegation that “you are very welcome, and it will be very good news for the people of Ghana if they were to hear that Suzuki has teamed up with Toyota Tsusho and CFAO to establish a facility here in Ghana.” With Suzuki manufacturing 1.6 litre engine vehicles in India, the President stated that “these are exactly the kind of cars that should have very successful entry into the Ghanaian market.”
  • Switzerland
    • New tax rule for systemically important banks enters into force

      On 8 March 2019, the Swiss Federal Council decided that The Federal Act on the Calculation of the Participation Deduction for Systemically Important Banks will enter into force retroactively with effect from 1 January 2019. The law corrects the calculation of the participation deduction so that the profit tax burden of the group parent company of a systemically important bank remains unchanged if it issues too-big-to-fail instruments (e.g. bail-in bonds).
  • United Kingdom
    • Treaty between Lesotho and United Kingdom enters into force

      According to an update of 5 March 2019, published by the HRMC, the Lesotho - United Kingdom Income Tax Treaty (2016) entered into force on 18 September 2018. The treaty generally applies from: In Lesotho:
      • 1 November 2018: for withholding taxes; and
      • 1 April 2019: for other taxes.
      In the United Kingdom:
      • 1 November 2018: for withholding taxes;
      • 1 April 2019: for corporation taxes; and
      • 6 April 2019: for income and capital gains taxes.
      In Lesotho and the United Kingdom:
      • 18 September 2018: for the provisions of article 24 (Mutual Agreement Procedure), article 25 (Exchange of Information), and article 26 (Assistance in the Collection of Taxes).
      From these dates, the new treaty generally replaces the Lesotho - United Kingdom Income Tax Treaty (1997). Details of the new treaty will be reported subsequently.
    • Treaty between Austria and United Kingdom enters into force

      According to information published by the Austrian government, the Austria - United Kingdom Income Tax Treaty (2018) entered into force on 1 March 2019. The treaty generally applies from: In Austria:
      • 1 January 2020.
      In the United Kingdom:
      • 1 April 2019: for corporation taxes; and
      • 6 April 2019: for income and capital gains taxes.
      In Austria and the United Kingdom:
      • 1 March 2021: for cases falling within paragraph 5 of article 23 (Mutual Agreement Procedure).
      From these dates, the new treaty generally replaces the Austria - United Kingdom Income Tax Treaty (1969), as amended by the 1977, 1993 and 2009 protocols. In addition, notwithstanding the entry into force of the new treaty, an individual who is entitled to the benefits of article 21 (Teachers) of the 1969 treaty at the time of entry into force of the new treaty shall continue to be entitled to such benefits as if the 1969 treaty had remained in force.
    • Spring Statement 2019 announced

      Further to the report on 30 January 2019, the Chancellor of the Exchequer presented his Spring Statement 2019 to Parliament on 13 March 2019. Pursuant to the Statement, the following consultations were launched on 13 March 2019:
      • consultation on infrastructure finance which seeks to ensure high levels of private investment on UK infrastructure projects. The consultation runs to 5 June 2019;
      • consultation on the key features of the Structures and Buildings Allowance (draft secondary legislation), presented at the Budget 2018, which seeks to support business investment to develop new structural assets and enhance tax reliefs in relation to those assets. The consultation runs to 24 April 2019;
      • consultation on the new energy efficiency scheme for SMEs which runs to 8 May 2019; and
      • consultation on the decommissioning industry, seeking views from interested parties on how the UK decommissioning industry should work and how to encourage domestic industry to export its expertise abroad, making the United Kingdom a leading hub for decommissioning. The consultation runs to 8 May 2019.
      The Chancellor added that the consultation on helping businesses to improve the way they use energy had been concluded on 26 September 2018. The following relevant publications were also announced by the Chancellor:
    • Budget 2018 – preventing abuse of R&D tax relief for SMEs: consultation

      Research and Development (R&D) tax reliefs, including the small or medium-sized enterprise (SME) scheme, offer an incentive for businesses to invest. Budget 2018 announced measures to limit the amount of payable R&D tax credit that a qualifying loss-making business can receive in any one accounting period. On 28 March 2019, HMRC launched a consultation on the application of this limit. The consultation runs to 24 May 2019.
  • United States
    • 2020 Budget: President submits budget proposal to Congress

      On 11 March 2019, President Trump submitted the Budget of the US Government for Fiscal Year 2020to the US Congress. The 2020 Budget is entitled "A Budget for a Better America – Promises Kept. Taxpayers First". The White House also issued related Fact Sheets and Supplementals, Amendments, and Releases. The US Treasury Department released "Secretary Mnuchin Statement on President Trump's FY2020 Budget Proposal". The 2020 Budget proposes tax credits for individual and corporate donations to State-authorized non-profit education scholarship-granting organizations (SGOs). SGOs would use donated funds to provide families with scholarships or additional educational resources that can be used on a range of educational activities such as career and technical dual-enrollment programs, after-school tutoring programs, tuition for private schools, courses not available in their assigned schools, special education services, and additional qualifying public education expenses. The Budget also proposes to allow Medicare beneficiaries to make tax-deductible contributions to health savings accounts (HSAs) associated with high deductible health plans offered by their employers or Medicare Advantage plan.
  • Tax Treaties
    • Tax Treaties

      A tax treaty is a bilateral agreement made by two countries to resolve issues involving double taxation of passive and active income. Treaties Update – March 2019
      Date Country A Country B Object Status
      23.03.19 China Italy Income Tax Treaty Signed
      28.03.19 Saudi Arabia Switzerland Income and Capital Tax Treaty Ratified by Saudi Arabia
      29.03.19 Brazil Switzerland Income Tax Treaty Approved by Swiss Parliament
      01.03.19 Austria United Kingdom Income Tax Treaty Entered into force