May 2023

Bulgaria is making efforts to be ready for euro adoption no later than 1 January 2025. Our country’s preparation and progress in this respect were discussed during the meetings of the Minister of Finance Rositza Velkova with  the Eurogroup President Paschal Donohoe and with the Executive Vice President of the European Commission Valdis Dombrovskis during the ECOFIN meeting held on 27 and 28 April 2023. They also discussed the issue of curbing inflation and the measures that are being taken by the government in this regard, as well as the expectations for the budget deficit. These talks were already announced by the MoF press office.

In relation to some speculations that appeared on the media about the process of the country’s accession to the euro area, the Ministry of Finance states firmly that the topic of postponing the introduction of the euro in Bulgaria beyond 1 January 2025 was not raised during those meetings.

Euro area membership is Bulgaria’s priority. The state continues working actively both in technical and legislative terms on the preparation for adopting the single European currency.

The Ministry of Finance regards the dissemination of fake news and contradictory messages in the media, especially those with good reputation in the public space, as unacceptable. Any information about the official meetings of the minister of finance is provided in a timely manner by the Ministry’s press office via the official channels.

Source: Republic of Bulgaria - Ministry of Finance 

China's foreign trade grew at a faster pace in the first four months of the year amid uncertain external demand, trade risks and other challenges.

China's total imports and exports expanded 5.8 percent year on year to 13.32 trillion yuan (about 1.92 trillion U.S. dollars) in the period, the General Administration of Customs (GAC) said Tuesday. The growth rate accelerated by 1 percentage point from the pace recorded in the first quarter.

Exports grew 10.6 percent year on year while imports rose 0.02 percent in the first four months, it added.

From January to April, the growth rate of China's trade with the Association of Southeast Asian Nations and the European Union stood at 13.9 percent and 4.2 percent, respectively, the data showed.

China's trade with Belt and Road countries jumped by 16 percent year on year to 4.61 trillion yuan in the period.

In particular, the country's trade with five Central Asian countries -- Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan -- surged 37.4 percent, partly making up for the weak demand in traditional markets.

Private enterprises saw a fast growth rate as imports and exports increased by 15.8 percent to 7.05 trillion yuan in the first four months, accounting for more than half of the country's total.

In terms of types of goods, exports of mechanical and electrical products expanded by 10.5 percent to account for 57.9 percent of the total exports.

Driven by robust exports of new energy vehicles, automobile exports soared 120.3 percent year on year during the period.

A monthly customs survey showed that the proportion of enterprises with growing export orders had increased for four consecutive months.

In April alone, foreign trade increased 8.9 percent year on year, according to the GAC.

Source: Scio.gov

 

Premier Li Qiang chaired a State Council executive meeting on May 5, 2023, which deliberated and adopted a guideline on accelerating the development of the advanced manufacturing clusters.

The meeting noted that work should be done to promote the transformation and upgrading of traditional industries, as well as the cultivation and strengthening of emerging industries. Work should also be done to facilitate technological innovation and application, advance the country's high-end, smart and green transformation, expand the number of high-quality enterprises, and speed up the modernization of industrial system. The meeting pledged to combine an effective market with an active government in an improved manner, and create a sound ecological environment for industrial development.

The meeting also deliberated and adopted a guideline on speeding up the construction of charging infrastructure to better promote new energy vehicles in rural areas and rural vitalization, stressing the need to optimize the policies supporting the purchase and use of new energy vehicles further, encourage enterprises to enrich supply, and strengthen safety supervision to promote the healthy development of the new energy vehicle market in rural areas.

President Xi Jinping, also director of the Central Commission for Financial and Economic Affairs ("CCFEA"), presided over the first meeting of the CCFEA under the 20th CPC Central Committee on May 5, 2023, discussing speeding up the construction of the country's modern industrial system.

The meeting stressed speeding up the construction of the country's modern industrial system backed by the real economy, calling for seizing opportunities presented by the new scientific and technological revolution, such as artificial intelligence, maintaining and strengthening the country's advantages of a complete industrial system and strong supporting capacity, promoting the efficient aggregation of global innovation factors, and boosting the building of a modern industrial system that is holistic, advanced, and secure. The meeting also pointed out that China should fine-tune its industrial policies for the new development stage and take industrial security as a top priority, enhance the top-level design in areas of strategic importance and policy coordination, strengthen breakthroughs of key and core technologies, and secure the supply of resources of strategic importance. It also stressed ensuring the principal position of enterprises in sci-tech innovation with institutional arrangements.

China's automobile manufacturing sector reported stable output and revenue growth in the first quarter (Q1) of this year, data from the China Association of Automobile Manufacturers showed.

The industrial added value of the sector rose 4.4 percent year on year in the period, up 5.4 percentage points from the first two months and 1.5 percentage points higher than the whole manufacturing industry in the same period, according to the association.

In March alone, the sector's industrial added value jumped 13.5 percent year on year, the data revealed.

During the first three months of 2023, the combined operating revenue of companies in the sector topped 2.14 trillion yuan (about 308 billion U.S. dollars), up 1.3 percent year on year. The pace was 2.6 percentage points faster than that of the overall manufacturing industry.

Chinese authorities Sunday released a set of guidelines for facilitating the building of the basic elderly care system.

The document, released jointly by the General Office of the Communist Party of China Central Committee and the State Council General Office, emphasized that facilitating the building of this system bears great importance in China's efforts to pursue a proactive national strategy in response to population aging and ensure equitable access to public services.

According to the guidelines, basic elderly care services consist of material assistance, nursing, and caregiving services, among others. They are provided directly by the government or by parties supported by the government.

The guidelines noted that the system should follow the principles of meeting essential needs and be universally accessible. In the meantime, the system should also allow families with financial difficulties to be supported in elderly care and ensure all institutional resources regarding elderly care are optimized and integrated.

The guidelines listed five key aspects where more work should be done. They include forming and implementing a list of elderly care services, establishing an active response mechanism for providing accurate services, enhancing the mechanism that ensures sound elderly care services, improving service capacity, and making such services more accessible.

Ministry of Finance and the State Taxation Administration recently released the Circular of the Ministry of Finance ("MOF") and the State Taxation Administration ("STA") on Allowing Integrated Circuit Enterprises for Additional Deduction of Payable Value-added Tax (the MOF and STA No.17 (2023) document).

Enterprises engaged in design, production, packaging and testing of integrated circuits ("IC"), as well as IC equipment and materials enterprises ("IC enterprises"), are allowed for additional deduction of payable VAT as per 15 percent of their deductible input tax for the current period during the period from January 1, 2023 to December 31, 2027, and those IC enterprises that are eligible for the deduction are subject to a list-based management. The specific policy application conditions, management ways and list of enterprises would be formulated by the Ministry of Industry and Information Technology in conjunction with the National Development and Reform Commission, the MOF, and the STA. If an IC enterprise is eligible for the application of several VAT additional deduction policies at the same time, it may choose the prefer one for application, and is not allowed to apply one more at the same time, said the Circular.

The Customs Tariff Commission of the State Council released on May 15, 2023 the Announcement of the Customs Tariff Commission of the State Council on Implementing the Agreed Tax Rates under the Regional Comprehensive Economic Partnership Agreement ("RCEP") for Certain Imports from the Philippines on the website of the Ministry of Finance.

The Philippines has deposited its Instrument of Ratification of the RCEP Agreement to the Secretary-General of ASEAN and with the deposit, the RCEP will enter into force in the Philippines on June 2, 2023, said the ASEAN Secretariat, the custodian of the RCEP. According to the Announcement, China will implement agreed tax rates applicable to RCEP ASEAN member states for certain imports from Philippines on June 2, 2023, and the annual rates for subsequent years will be implemented on January 1 of each year. With the RCEP coming into force in the Philippines, all 15 members will complete the ratification procedures and implement tariff reductions for each other, and the agreement will enter a new stage of full implementation.

Recently, the Ministry of Human Resources and Social Security, the Ministry of Finance and the State Administration of Taxation jointly issued the Notice on the Phased Reduction of Unemployment insurance and work-related injury insurance rates, clarifying relevant issues.

According to the circular, the policy of gradually reducing unemployment insurance premiums to 1% will continue to be implemented starting from May 1, 2023, and the implementation period will be extended to the end of 2024. Within a provincial (autonomous region or municipality) administrative area, the unit rate and the individual rate shall be uniform, and the individual rate shall not exceed the unit rate. Starting from May 1, 2023, China will continue to implement the policy of gradually reducing the premium rate of work-related injury insurance in accordance with the relevant conditions of implementation issued by the State Office No. 13 [2019], and the implementation period will be extended to the end of 2024.

$28 billion Funding to be mobilised in Uganda by 2030 to finance sustainable development projects. The private sector will commit up to $4 billion to the climate resilience fund initiated by the East African country's government. (Afrik21)

1200 Entrepreneurs in Kenya to benefit from Mars Wrigley's entrepreneurship model under the Maua programme. The initiative seeks to support micro and small enterprises to create jobs and support sustainable livelihoods in Kenya. (Food Business Africa)

39%  Proportion of the European Investment Bank's financing delivered outside of Europe that went to Africa in 2022. Some 19% of the $4.5 billion the Bank investment in Africa went to climate action and environmental sustainability. (Africa Global Funds)

$21 billion Projected market for Nigeria's crude oil on the back of the Dangote Refinery launch this coming week. The facility intends to meet the West African country's fuel needs, create jobs and contribute to the economic development. (This Day)

100 dams Offered to private investors in Kenya in $12 billion initiative to address the country's water shortage. This public private partnerships intend to ensure citizens get reliable water services and will function as joint ventures during the construction and payback periods to ensure investors get their return on investment. (Business Daily)

45% Proportion of total global investment directed to Africa by Proparco in 2022. With over $1 million committed to the continent, the region was the biggest beneficiary of the French development bank. (Proparco)

52,000 tonnes Pork imported annually by Tanzania as reported by pig farmer association,Tapifa, The East African country produces 27,000 pork a year,   leading farmers to call for more strategies to meet the demand. (The Citizen)

66% Extension of storage free period for containerised cargo handled at Kenya's port of Mombasa and inland container depots for transit users.The increase from 9 to 15 days to clear goods before storage costs are applied will benefit traders from neighbouring countries which use Kenyan ports for exports. (Monitor)

50 kilometres Largest bridge in Africa to be constructed in Tanzania connecting Dar es Salaam to Zanzibar to boost trade. Tanzania is currently talking to prospective investors in China about financing plans for the project. (CIPS Supply Management)

$3 billion Loan from Afreximbank disbursed in Kenya to offer temporary relief for the East African country as it faces financial headwinds. The funds will go into different sectors and boost importation of essential commodities to help reduce cost of living. (The East African)

69% Growth in blueberry production recorded in Zimbabwe, in a bumper horticulture season which recorded 18% growth overall to reach 2.8 million tonnes in the 2022/23 season. The particularly strong increase in berries was attributed to 50% rise in both land and yields for the crop. (The Herald)

50 kilometres Largest bridge in Africa to be constructed in Tanzania connecting Dar es Salaam to Zanzibar to boost trade. Tanzania is currently talking to prospective investors in China about financing plans for the project. (CIPS Supply Management)

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Rwanda has tabled before the parliament an income tax amendment bill proposing several tax changes relating to direct taxation. Among the key changes to be introduced, is a reduction in the standard corporate income tax rate (CIT) from 30% to 28%.

In addition, there will be a reduction of the tax rate from 20% to 10% on employment income between RWF 60,000 to RWF 100,000 per month.

The bill amending these changes was tabled before the parliament on 20 April 2023.

The Government welcomed the passage of the Stamp Duty (Amendment) Bill 2023 (the Bill) by the Legislative Council on May 17. The Bill gives effect to a proposal on stamp duty made in the 2023-24 Budget, which adjusts the value bands of ad valorem stamp duty (AVD) payable for sale and purchase or transfer of residential and non-residential properties (Scale 2 rates).

The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "The proposal mainly aims at easing the burden on ordinary families of purchasing their first residential properties, particularly small and medium residential units. After the adjustment to the value bands of AVD at Scale 2 rates, the stamp duty applicable to the property transactions with amount or value of consideration between $2 million and just below $10,080,000 will be reduced, with the amount of reduction up to $67,500. The adjustment will benefit around 37 000 property buyers, and reduce the tax revenue of the Government by about $1.9 billion a year."

The adjustment has come into effect at 11am on February 22 this year in accordance with the Public Revenue Protection (Stamp Duty) Order 2023 published in the Gazette on the same day. Any instrument executed before 11am of this day remains chargeable to AVD at the original Scale 2 rates.

Source: Inland Revenue Department

On 22 May 2023, the Inland Revenue Department (IRD) published an advance tax ruling (Advance Ruling Case No. 69) that illustrates the application of section 15K of the Inland Revenue Ordinance (IRO), which provides an exception to the tax treatment of specified foreign-sourced passive income under the foreign-sourced income exemption (FSIE) regime where the economic substance requirement is met.

Briefly, the FSIE regime that became effective from 1 January 2023 subjects specified foreign-sourced income to profits tax if the income is received in Hong Kong by a multinational entity (MNE) carrying on a trade, profession or business in Hong Kong unless economic substance, nexus and/or participation requirements are met. The ruling focuses on the economic substance requirement and applies for the years of assessment 2023/24 to 2027/28.

Facts

The Applicant is a private limited company incorporated in Hong Kong and an MNE entity as defined under the IRO. It holds 20% equity interests in Company F (a company incorporated in Jurisdiction F) from which it derives offshore dividend income but is not a pure equity-holding company. The principal business activities of the Applicant are sales of hospitality packages for sporting events and investment holding.

Arrangements

• The Applicant carries out or arranges to carry out its specified economic activities in Hong Kong, i.e. making necessary strategic decisions in respect of assets it acquires, holds or disposes of and managing and bearing principal risks in respect of the relevant assets.
• The Applicant has several directors and employees in Hong Kong to manage and support its business operations. It also outsources its legal and business support activities to a non-associated service provider in Hong Kong.
• Apart from its principal business activities, the Applicant has advanced two interest-free loans to its related parties in Hong Kong and bears principal risks of the loans. The loan transactions have already occurred and have been made within the same multinational enterprise group, hence minimal activities are required by the Applicant to manage the loans. The relevant activities in relation to overseeing the loans are carried out by the Applicant's director in Hong Kong.
• The Applicant has planned to:
  • have a predetermined number range of employees with the necessary qualifications to carry out the specified economic activities in Hong Kong each year;
  • incur a predetermined amount range of annual operating expenditures in Hong Kong for the specified economic activities; and
  • undertake adequate monitoring of the specified economic activities carried out in Hong Kong by the service provider.

Ruling

The IRD has ruled that the Applicant will satisfy the economic substance requirement under section 15K of the IRO. Advance Ruling Case No. 68 was also published on 22 May 2023, with similar facts and arrangements and also ruled as satisfying the exception requirement.

The Regional Comprehensive Economic Partnership (RCEP) is a giant trade area extending from the fringes of the Arctic (Hokkaido, Japan, main picture) to the Antarctic (New Zealand) and encompassing the giant economy of Mainland China as well as Korea and the Association of Southeast Asian Nations (ASEAN) and Australia.

Hong Kong sits plum in the middle of this geographic area and is perfectly placed to serve as a hub city so it is no surprise to learn that about 90% of Japan-affiliated companies based in Hong Kong manage or handle business in at least one RCEP market other than Japan, according to a recent survey conducted by the Hong Kong Trade Development Council (HKTDC).

More than 60% of respondents plan to expand their RCEP operations through their Hong Kong office in the next three years, with the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) (40.4%) and ASEAN (39.4%) the most popular destinations.

The respondents make use of Hong Kong’s well-developed logistics and commercial networks, as well as its world-class business services to manage and expand global business, particularly in the Asia-Pacific region.

Supply chain integration

RCEP came into effect last year, creating the world’s largest free trade bloc made up of 15 member economies. RCEP accounts for about 30% of global gross domestic product, trade and population, injecting impetus into regional economic development.

Last year, RCEP economies accounted for 71% of Hong Kong’s merchandise trade.

“Hong Kong has applied for accession to RCEP and once approved, the city will become the first new member of the bloc, enjoying a wide range of benefits, such as tariff concessions. It will also help Hong Kong further integrate into regional supply chains and strengthen trade and investment with other members in the bloc, especially Japan and Korea, which have yet to sign free trade agreements with the city,” HKTDC Director of Research Ms Irina Fan said.

Premier platform for RCEP

About 1,400 Japanese companies have set up regional headquarters or offices in Hong Kong. With the support of the Hong Kong Japanese Chamber of Commerce & Industry (HKJCCI), the HKTDC surveyed more than 100 Japanese companies via a questionnaire to better understand their business development in the first year of RCEP, advantages of the Hong Kong platform and services, and the city’s role in helping them expand into the RCEP market.

Most survey respondents operate in the import and export trade sector, followed by wholesale and retail, finance and logistics. More than 20% said their Hong Kong office served as the company’s overseas headquarters or main regional office that manage operations outside of Japan. Other functions include marketing and sales (73.5%), logistics and supply chain management (36.3%) and sourcing and procurement (25.5%).

HKTDC Economist Mr Corey To said Hong Kong plays an important role in facilitating RCEP related business (nearly 90% of respondents manage or handle RCEP business via Hong Kong) and over 60% of the respondents saw Hong Kong as “important” or “very important” in helping capture arising business opportunities in the RCEP region.

Respondents also revealed that strong regional connectivity made Hong Kong the premier platform for RCEP. Core strengths include business networks with the mainland (88.8%), freedom of capital flows and currency exchange (79.7%), efficiency as a trans-shipment and distribution hub (72%) and more.

RCEP accession benefits

The survey also found that more than half the Hong Kong-based Japanese trading companies had already enjoyed RCEP benefits, such as unified rules of origin, lower tariffs and streamlined customs procedures. Close to 80% anticipated more benefits should Hong Kong join the bloc. This reflects Hong Kong’s role as a major logistics hub in the region as well as its deep trade ties with many RCEP economies.

Mr To said among the non-trade sector, 60% expected to benefit from Hong Kong’s RCEP accession, largely because of the anticipated increase in economic activity and investment flows across the mainland, Hong Kong and Japan, and due to improved access for service sectors and enhanced intellectual property rights protection, which will create opportunities for such sectors as e-commerce.

Overall, more than half the respondents suggested Hong Kong’s accession to RCEP would improve their company’s ability to capture RCEP business opportunities. Providing marketing information about RCEP economies and encouraging co-ordination among public bodies and regulators were also seen as helpful.

Regional business base

The survey results echo the statements made in HKTDC Research’s in-depth interviews conducted with Japan-affiliated companies in Hong Kong. These case studies show Hong Kong’s competitive edges in a number of areas, which are beneficial to Japanese companies that aim to leverage Hong Kong as a base for business expansion in the region: solid financial infrastructure, well-established hub for international trade and logistics, quality professional services and a pool of diversified talents, prime location adjacent to GBA and among key economies in the Asia-Pacific.

  Source: HKTDC.com

On 10 May 2023, the Central Board of Indirect Taxes and Customs (CBIC) issued a notification mandating businesses with a turnover of INR 50 million or more to issue e-invoices for business-to-business (B2B) transactions beginning 1 August 2023. Currently, the requirement is applicable to businesses with a turnover of INR 100 million.

For this purpose, if the turnover of the business for any of the 5 preceding years (viz. financial years 2017-18, 2018-19, 2019-20, 2020-21 and 2021-22) exceeds the limit of INR 50 million, the requirement to generate e-invoices applies from 1 August 2023.

On 19 April 2023, the Indian Supreme Court, in the case of Director of Income Tax vs. Travelport Inc. (Civil Appeal No. 6511-6518 of 2010), ruled that determination of the quantum of income/profits attributable to Indian operations is essentially a "question of fact". Accordingly, the Supreme Court refrained from interfering with the order pronounced by the Tribunal that no income is taxable in India.

The taxpayer provided electronic global distribution services to airlines through a Computerized Reservation System (CRS). CRS services were marketed in India through Indian distribution agents. The taxpayer earned USD/EUR 3.00 per booking made in India and paid USD/EUR 1.00–1.80 as commission to Indian agents.

The Income Tax Appellate Tribunal (the Tribunal) held that the taxpayer constituted a permanent establishment (PE) in India as fixed place PE and dependent agent PE (DAPE). Further, since only a miniscule portion of the taxpayer's activity was performed in India, the Tribunal held that only 15% of total revenue (0.45 cents) was attributable to India. However, as payment to agents far exceeded such income, no income should be taxed in India.

Revenue appealed before the Supreme Court for taxation of the entire income of the taxpayer in India. However, the Supreme Court ruled in favour of the taxpayer and held as follows:

• the Tribunal arrived at the quantum of revenue accruing to the taxpayer in respect of bookings in India which can be attributed to activities carried out in India, on the basis of FAR analysis (functions performed, assets used and risks undertaken). The commission paid to the distribution agents was more than twice the amount of income attribution and this was already taxed. Therefore, the Tribunal rightly concluded that the same extinguished the assessment;
• the question as to what portion of the income can be reasonably attributed to the operations carried out in India is a question of fact, on which the Tribunal has taken into account relevant factors; and
• Section 9(1) of the Income tax Act, 1961 confines the taxable income to that proportion which is attributable to the operations carried out in India and accordingly, rejected Revenue's reliance placed on article 7 of the India-United States Income Tax Treaty (1989).

The full text of the decision pronounced by the Indian Supreme Court is available here.

India, today, is a major player in the global electronics manufacturing industry. The country is rapidly becoming an electronics manufacturing hub, with the sector expected to rise to $ 300 billion by 2025-26. This growth can be attributed to the government's push to promote domestic electronics manufacturing, which has led to increased investment and the creation of new jobs.

The global electronics manufacturing services (EMS) market is projected to reach $ 1145 billion by 2026, registering a CAGR of 5.4% during the forecast period 2021-2026. From $ 9.8 billion in 2021, India’s domestic demand for consumer electronics is seeing significant growth and is expected to touch $ 21.18 billion by 2025. India is also home to the world's second-largest smartphone market, with over 1.3 billion mobile phone users in the country. This presents a huge opportunity for companies and investors looking to tap into the manufacturing of smartphones and other electronic devices.

One of the key initiatives driving India's push towards electronics manufacturing is the Production-Linked Incentive (PLI) scheme. The PLI scheme is aimed at promoting domestic manufacturing and export of electronic products, and offers companies incentives on incremental sales from products manufactured in India, over the base year. The country’s large-scale electronic manufacturing (LSEM) sector received the maximum allocation of INR 40,951 crore (approximately $5 billion) under this scheme. This has led to a surge in investments in the sector, with several global electronics companies, including Samsung and Apple, setting up manufacturing facilities in India. The global giant Apple became the first smartphone player in India to have exported $1 billion worth iPhones in a single month of December 2022.

The success of India's electronics manufacturing industry can be seen in the country's growing exports. Electronics is India's fastest-growing export sector, with smartphones being the top export item. In fact, India surpassed a remarkable $10 billion worth smartphone exports in FY 2022-2023. This is a testament to the country's ability to compete with other major electronics manufacturing hubs such as China and South Korea. 97% of the smartphones sold in the country are produced domestically, while exports have increased by over 139% over the last three years. The recent announcement for the setting up of the Electronics Manufacturing Cluster (EMC) at Dharwad, Karnataka worth INR 180 crore (approximately $21.98 million) is a step towards Atmanirbhar Bharat, and is expected to create over 18,000 jobs.

Key government initiatives aimed at boosting domestic production of electronics and IT hardware include the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which offers financial incentives for the production of electronic components and semiconductors. The Modified Electronics Manufacturing Clusters (EMC 2.0) initiative seeks to establish world-class infrastructure for electronics manufacturing. The government has also liberalized foreign direct investment, allowing up to 100% FDI for electronics manufacturing.

Another important factor contributing to India's emergence as an electronics manufacturing hub is the country's highly skilled workforce. India is home to a large pool of technical and engineering talent, with many of the country's top universities offering courses in electronics and engineering. This has made India an attractive destination for multinational companies looking to set up research and development (R&D) centers and manufacturing plants in the country.

With the Indian government's unwavering support and key initiatives, the country has been successful in promoting domestic manufacturing and boosting exports. The Production-Linked Incentive (PLI) scheme, in particular, has been a game-changer for the electronics sector in India. With several global electronics giants investing heavily in the country, India is on its way to becoming a major electronics manufacturing hub.

Source: Investindia.gov.in

The new Part-Time re-employment grant (PTRG) is part of the Government Assistance programs outlined in Singapore's FY2023 Budget Statement. These initiatives encompass grants, loans and tax incentives. For a deeper understanding of Singapore's budget statement, please refer to Overview of Tax Changes – Singapore Budget 2023.

Specifically, among the various grant types established by the Singaporean government, the first program is the Part-Time Re-employment Grant (PTRG). The PTRG aims to assist companies in implementing part-time re-employment flexible work arrangements (FWA), and structured career planning (SCP) for senior workers.

Companies that have been approved for the New Part-Time Re-employment Grant (PTRG) are required to provide their employees with the opportunity to reduce their work intensity and transition into part-time work arrangements during the re-employment phase. In cases where a suitable part-time position cannot be identified, eligible employees will be entitled to receive an Employment Assistance Payment as a form of support.

Companies of all types registered or incorporated in Singapore, including societies, non-profit organizations such as charities and voluntary welfare organizations, are eligible to register for the New PTRG.

In order to qualify for the grant, companies must meet certain criteria:

1. Have at least one senior worker aged 60 years and above at the time of application and claim.
2. Provide part-time re-employment opportunities to eligible senior workers upon their request.
3. Adopt the Tripartite Standard on Age-Friendly Workplace Practices.
4. Adopt the Tripartite Standard on Flexible Work Arrangements.
5. Offer Flexible Work Arrangements (FWAs) and implement Structured Career Planning (SCP) as part of their formal HR policy.
6. Commit to providing SCP to mature employees aged 45 and above in their HR policy.
7. Send one senior management representative and one HR practitioner to attend a fully funded SCP workshop for senior management and HR practitioners, respectively, conducted by Singapore National Employers Federation (SNEF).

Should you require further information, do not hesitate to contact us at info@diacrongroup.com 

Singapore's allure derives not only from its promising business prospects but also from the wealth of talent it possesses. Ranked 2nd globally and 1st in the regional group in the esteemed Global Talent Competitiveness Index (GTCI)(*), the country boasts a highly educated and skilled workforce, in fact over 30 percent of Singapore's workforce possesses a university degree, while an additional 15 percent have earned a diploma or professional qualification(**).

In line with Singapore's commitment to attract the best and most competitive talent, the Ministry of Manpower (MOM) will update its foreign work policies and implement changes to the Employment Pass Eligibility framework (EP) to strengthen the quality of EP holders and their ability to complement the local workforce effectively.

MOM's forthcoming adjustments encompass two key aspects:

• raising the qualifying salary for Employment Pass (EP) renewals
• introducing a points-based Complementarity Assessment Framework (COMPASS) for EP applications.

These changes apply progressively as per below table:

EP applications undergo evaluation based on four fundamental criteria, categorized into individual attributes and firm-related attributes. In terms of individual attributes, points are assigned based on salary relative to local PMET (Professionals, Managers, Executives and Technicians) norms for the sector and qualifications. Likewise, points are allocated for the firm's attributes, encompassing diversity (contributing to national diversity within the organization) and support for local employment (compared to industry peers in terms of local PMET representation).

These criteria are scored as follows:

• 20 points for exceeding expectations,
• 10 points for meeting expectations,
• 0 points for not meeting expectations.

To pass the COMPASS assessment, an application must achieve a total of 40 points while meeting the required expectations.

Should an application fall short, there are opportunities to earn additional points. This can be accomplished by exceeding expectations in other foundational criteria or by attaining bonus points through the Skills Bonus (applicable to candidates in roles with skills shortages) or the Strategic Economic Priorities Bonus (pertaining to partnerships with the government for ambitious innovation or internationalization initiatives).

Some exemption from COMPASS will apply to your candidate if any of the following conditions are met:

• Earning a fixed monthly salary of at least $22,500, which aligns with the prevailing Fair Consideration Framework job advertising exemption starting from 1 September 2023.
• Applying as an overseas intra-corporate transferee under the World Trade Organisation’s General Agreement on Trade in Services or an applicable Free Trade Agreement that Singapore is party to.
• Occupying a short-term role lasting one month or less.

 

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(*)the Global Talent Competitiveness Index (GTCI) 2022 is a report that provides a comprehensive annual benchmarking which measures how countries and cities grow, attract and retain talent, Singapore ranks second overall and first in the regional group (i.e. Eastern, Southeastern Asia and Oceania). (**)Economic Development Board: Business, Innovation & Talent | Singapore EDB

During its meeting on 17 May 2023, the Federal Council adopted the dispatch on the protocol of amendment to the double taxation agreement (DTA) with the United Arab Emirates. The protocol implements the BEPS minimum standards for double taxation agreements.

The protocol of amendment contains an abuse clause which refers to the main purpose of an arrangement or transaction and thus ensures that the DTA is not abused. It also supplements the provision on the mutual agreement procedure to bring it into line with the minimum standard.

The cantons and interested business sectors have welcomed the conclusion of the protocol of amendment. It still has to be approved by the legislator in both countries before it can come into force.

Source: Admin.ch

Switzerland's GDP adjusted for sporting events rose by 0.5% in the first quarter of 2023, following 0.0% growth in the fourth quarter of 2022. Domestic demand proved robust. Along with rising goods exports, manufacturing also registered a slight increase.

Growth in domestic final demand (+0.9%) was stronger in the first quarter than the historical average. Government consumption (+0.0%) stagnated, but private consumption (+0.6%) recorded substantial growth. In particular, there was a significant increase in consumer spending on services, such as mobility and tourism. Buoyed by the continued recovery in travel, value added in the transport and communication sector (+0.7%) and in the accommodation and food services sector (+1.0%) increased at an above-average rate.

Consumer spending on goods developed at a more moderate pace. Value added in retail trade (−0.4%) slightly declined accordingly, albeit from a high level. Bolstered by wholesale trade and car sales, trade as a whole (+2.1%) nonetheless posted a positive overall result for the quarter. Most other service sectors also registered positive growth in the first quarter, including the important sector of business-related services (+0.2%), the health sector (+0.7%) and the entertainment sector (+1.2%). Investment activity also contributed to the solid development of domestic demand in the first quarter. Investments in equipment (+2.6%) saw a significant rise. This was mainly attributa-ble to research and development and to vehicles, but the other categories also saw slight growth overall. Construction investment (–0.1%) was essentially stable. After a number of weak quarters, value added in the construction sector (+0.8%) rose again, driven mainly by higher sales revenues in civil engineering and specialised construction activities. Following three negative quarters in succession, value added in the manufacturing sector (+0.3%) again posted a slight uptick. The chemical and pharmaceutical industry declined at a high level (–0.6%). Value added increased in the other industrial sectors, however, with higher exports and sales in machinery and vehicles, for example. Exports of goods*** saw broad-based growth overall across the various categories and markets (+4.0%). On the other hand, exports of services (–0.9%) posted a decline. With exports of financial services contracting, value added in the financial sector (–4.1%) also fell noticeably, as in previous quarters. Meanwhile, there was an increase in imports of goods and services (+3.6%). Overall, the contribution of foreign trade to GDP growth was slightly negative.   Source: Admin.ch

The Federal Tax Authority (FTA) has clarified through Decision No. 5 of 2023 the rules for changing the tax period for corporate income tax purposes. The Decision provides that a taxpayer may apply to the FTA to change the start and end dates of the tax period or to use another tax period if the following conditions are met:

• the change is made for one of the following reasons:
  • liquidation of the taxpayer;
  • the alignment of the resident taxpayer's financial year with the financial year of another resident taxpayer for the purpose of forming a tax group or joining an existing tax group, or the alignment of the taxpayer's financial year with the financial year of its domestic or foreign head office, subsidiary, parent or ultimate parent company for the purpose of financial reporting or for the purpose of taking advantage of a tax relief available under corporate tax law or under the legislation of a foreign jurisdiction; or
  • there is a valid commercial, economic or legal reason to change the tax period;
• the taxpayer has not yet filed the tax return for the tax period for which the change is requested; and
• the request to change the tax period relates to any of the following:
  • the extension of the current tax period to a maximum of 18 months; or
  • to shorten the next tax period to between 6 and 12 months. The application must be made within 6 months of the end of the original tax period. Taxpayers applying to shorten their tax periods may not apply to shorten previous or current periods.

Decision No. 5 of 2023 on the conditions for changing the tax period for corporate income tax was published on the official website on 7 April 2023 and will enter into force as of 1 June 2023.

The Ministry of Finance (MoF) of the UAE has issued a decision specifying the categories of business or business activities carried out by a resident or non-resident individual that are subject to corporate tax.

• the Decision provides that natural person, whether resident or non-resident, engaged in business or business activities are subject to corporate tax and registration requirements only if their total turnover exceeds AED 1 million in a calendar year; and
• the decision also stipulates that activities that generate income for individuals from employment, investments and real estate are not considered business or business activities and are not subject to corporate tax.

MOF Decision No. (49) of 2023 was issued on 8 May 2023 and will be effective from 1 June 2023.

It is available on UAE Minister of Finance website: Cabinet Decision No. (49) of 2023

The Ministry of Finance (MOF) of the UAE has provided the following two clarifications for the determination of the conditions under which a taxable person (person) may continue to be considered an exempt person:

• the liquidation or termination of the business or commercial activity; and
• non-compliance with the conditions for exemption from income tax is temporary.

Liquidation or termination of business or business activity

The eligibility rules provide that a person may continue to be deemed as an exempt person from the beginning date of the liquidation or termination procedure of the business or the business activity until the date it is completed, provided that a notification has been submitted to the Federal Tax Authority (FTA) within 20 business days from the date of the beginning of the procedure. The person shall cease to be deemed as an exempt person on the day following the date of the completion of the liquidation or termination procedure.

Non-compliance with conditions for exemption from income tax is temporary

The person may continue to be deemed as an exempt person from corporate tax where all the following conditions are met:

• failure to meet the conditions to be deemed as an exempt person is due to a situation or an event beyond the person's control, which could not be reasonably predicted or prevented;
• the person has made an application to the FTA to continue to be treated as an exempt person within 20 business days from the date it fails to meet the conditions to be exempt;
• the person is reasonably expected to rectify the failure to meet the conditions within 20 business days from the submission of the application to the FTA; and
• upon request by the FTA, the person provides evidence to support putting in place appropriate procedures to monitor compliance with the relevant conditions of the corporate tax law, within 20 days from the date of the request by the FTA or any other period as may be determined by the tax authority.

The period of 20 business days may be extended by an additional 20 business days if the failure to rectify the situation or the events is beyond the person's reasonable control.

The Ministry of Finance's Decision No. 105 of 2023 determining the conditions under which a person may continue to be considered an exempt person was issued on 4 May 2023.

It is available on UAE Ministry of Finance website: Ministerial Decision No. 116 of 2023

The UAE Minister of Finance has clarified the requirements for maintaining transfer pricing documentation for corporate tax purposes. The clarification provides that taxpayers who meet one of the following conditions must maintain both a master file and a local file for the relevant tax period:

• at any time during the relevant tax period, the taxpayer is a member of a multinational group of companies with a total consolidated group turnover in the relevant tax period of AED 3.15 billion or more; and
• the taxpayer's turnover in the relevant tax period is at least AED 200 million.

The local file includes transactions or arrangements with the following persons:

• a non-resident person;
• an exempt person;
• a resident person who has made an election for small business relief; and
• a resident whose income is subject to a rate of corporate income tax different from the rate applicable to the income of the taxpayer.

In addition, the clarification provides that the taxpayer shall not include in the local file transactions or arrangements with the following related parties and connected persons:

• resident persons other than a non-resident person, an exempt person, a resident person who has made an election for small business relief, and a resident person whose income is subject to a corporate tax rate different from that applicable to the income of the taxpayer;
• an individual, provided that the parties to the transaction or arrangement act as if they were independent;
• a legal person that is a related party or connected person solely by virtue of being a partner in an unincorporated partnership, provided that the parties to the transaction or arrangement act as if they were independent; and
• a permanent establishment of a non-resident person in the UAE, the income of which is subject to the same rate of corporate tax as that applicable to the income of the taxpayer.

The decision states that the parties to the transaction or arrangement will be deemed to be acting as if they were independent of each other if both of the following conditions are met:

• the transaction or arrangement is carried out in the ordinary course of business; and
• the parties are not dealing exclusively or almost exclusively with each other.

The Ministry of Finance's Clarification No. 97 of 2023 on transfer pricing documentation requirements for corporate income tax purposes was issued on 27 April 2023.

The ministerial decision is available on UAE Ministry of Finance website: Ministerial Decision No. 97 of 2023

Dubai retained its No. 1 spot globally for attracting Greenfield FDI projects in 2022, further reinforcing its position as the world’s top foreign direct investment hub, according to the latest data from the 2022 Financial Times ‘fDi Markets’ report.

Retaining its top spot for a second successive year, Dubai achieved 89.5% YoY growth in total announced FDI projects in 2022, while total FDI capital surged 80.3% over the same period, further consolidating the emirate’s status as one of the top three global cities, a key goal of the Dubai Economic Agenda D33 launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai.

His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of The Executive Council of Dubai said: “Dubai’s ability to secure the No. 1 global ranking for Greenfield FDI projects for the second year in a row demonstrates its ability to sustain its compelling investment value proposition even at a time when the worldwide economy is facing headwinds.  Driven by the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, the emirate offers the deep stability, sustainability, infrastructure and opportunity-rich environment needed to ensure the long-term trust of international investors, businesses and entrepreneurs. Over the years, Dubai has forged dynamic partnerships with global investors to accelerate innovation and create enduring economic value. Dubai leads the world in attracting FDI in a wide range of industries, especially future-oriented sectors, a fact that is a testament to the strategic vision articulated in the Dubai Economic Agenda D33, which aims to consolidate Dubai’s position as one of the world’s top urban economies.”

Financial Times Ltd. ‘fDi Markets’ data for 2022 showed that Dubai continued to maintain and improve its leadership position across key FDI attraction metrics. The emirate ranked first in attracting FDI projects into tourism, business services, financial services, transport and warehousing, consumer products, and software & IT services sectors. Dubai also emerged as the 2022 world leader in attracting FDI projects in the creative industries cluster, in research and development projects, and in attracting FDI project headquarters by hosting international companies’ global and regional headquarters.

His Excellency Helal Saeed Almarri, Director General of Dubai’s Department of Economy and Tourism, said: “Dubai’s leading global FDI ranking underpins a comprehensive framework of initiatives that were launched to further strengthen the city’s business and investment environment, based on the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai.

“Our strategy to further consolidate the city’s position as one of the top three global cities, in line with the Dubai Economic Agenda, D33, is again strengthened by the achievement of attracting and stimulating FDI and reflects the confidence investors, multinational companies, start-ups, and global talent have in Dubai. The growth of the city’s share in global Greenfield FDI projects clearly indicates our strategy’s effectiveness and also highlights the city’s position as the capital of the global digital economy and a hub for innovation and technology, further ensuring that increasing FDI inflow remains a top priority and key goal of the D33 Agenda,” HE Helal Almarri added.

Overall in 2022, Dubai ranked seventh globally in attracting Greenfield FDI Capital and fifth globally in FDI Jobs. From a MENA perspective, Dubai ranked second in FDI Capital and first in FDI Jobs. Compared to 2021, Greenfield FDI (wholly owned) and new forms of investments increased by 6% in 2022. The new forms of investments demonstrate the level of Dubai’s domestic market maturity and the diverse non-equity-based partnership opportunities across joint ventures, strategic alliances, sub-contracting, licensing, production-sharing franchising, and turnkey projects.

The emirate’s share in attracting global Greenfield FDI projects reached 4%, an increase of 1.9% compared to 2021, with a record 837 projects enabling the city to achieve the highest growth in global shares across the past seven years, according to data from Financial Times’ fDi Markets, the most comprehensive online database on cross-border Greenfield investments. Dubai attracted a total of 1,173 FDI projects in 2022.

Dubai FDI Monitor’s data also revealed that the total estimated FDI capital flowing into Dubai in 2022 was AED47 billion ($12.8 billion) compared to AED26.07 billion in 2021. An estimated 38,447 jobs were created in Dubai in 2022 compared to 24,932 jobs in 2021.

The top five source countries for FDI projects accounted for 54% of the total in 2022, split among the United States (20%), the United Kingdom (13%), India (12%), France (5%), and Switzerland (4%). Additionally, the top five source countries for FDI capital accounted for 72% of the total estimated flows into the emirate in 2022, split among Canada (41%), the United Kingdom (12%), the United States (11%), India (4%), and Switzerland (4%).

The top five sectors - transportation & warehousing, hotels & tourism, renewable energy, software & IT services, and consumer products - accounted for 76% of the total estimated flows into Dubai and 68% of announced FDI projects — the transportation & warehousing sector led the pack with a dominant 45% share of FDI capital. Dubai FDI Monitor data also revealed that the top five business functions accounted for 78% of total estimated flows into Dubai, while 93% accounted for the total announced FDI projects in 2022. Business services also remained a prominent business function based on FDI projects and FDI capital in 2022.

Compared to 2021, Dubai leads the world in a number of important metrics as a result of attracting different types of FDI projects and capital, including Greenfield FDI and new forms of investments: mergers, acquisitions, reinvestments, VC-backed FDI and greenfield joint ventures.

Complementing the 2022 increase in FDI capital, the hotels & tourism sector and the software & IT services sector catalysed growth in total estimated jobs created through FDI. High and medium-tech FDI projects accounted for 63% of the projects recorded in this sector in 2022, highlighting Dubai’s position as a preferred destination for high-tech FDI projects and a global centre for specialised talent in the digital economy.

Source: Media Office - Government of Dubai 

The Minister of Finance (MoF) has clarified the rules for limiting the general interest deduction for corporation tax (CIT) purposes. The ruling includes provisions on:

• the definition of interest, which includes, but is not limited to, the interest component of any of the following:
  • performing and non-performing debt securities;
  • shares in collective investment schemes that invest primarily in cash and cash equivalents;
  • asset-backed securities and similar instruments;
  • agreements to sell and repurchase the same security at a future date and at an agreed price;
  • securities lending and similar agreements to transfer a security subject to an obligation or right to repurchase the same or a designated similar security;
  • securitization and similar transactions involving the transfer of assets in exchange for the issue of securities giving entitlement to the income generated by those assets;
  • lease or hire purchase arrangements where substantially all the risks and rewards of ownership of the underlying asset have been transferred to the lessee; and
  • factoring and similar receivables purchase transactions.

In addition, the rules require the interest component to include the following costs:

• guarantee fees;
• arrangement fees;
• commitment fees; and
• any other commissions similar in nature to guarantee, arrangement and commitment fees.

The amount of interest that may be deducted from taxable income is the greater of AED 12,000,000 or 30% of Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA).

The amount of EBITDA will be the higher of AED 0 and the amount calculated as taxable income based on the sum of the following items:

• net interest expense for the relevant tax period;
• depreciation expense considered in determining taxable income for the relevant tax period; and
• any interest income or expense relating to historic financial assets or liabilities held before 9 December 2022.

The ministerial decision is available here: Ministerial Decision no.126 of 2023

UK Business and Trade Secretary, Kemi Badenoch, launched negotiations for a modern, updated free trade agreement with Switzerland to boost trade between the two services superpowers.

Switzerland is one of the wealthiest countries in the world and the UK’s 10th largest trading partner. The two countries are among the world’s leading service economies, exporting almost £15 billion worth of services including financial, professional, legal, and architecture every year.

The current UK-Switzerland FTA is based on an EU-Swiss deal from more than 50 years ago – before the advent of the home computer or the internet – and does not cover services, investment, digital or data. With most of the UK’s services exports to Switzerland delivered electronically – almost 69% in 2020 – both sides are keen to rectify this in upcoming talks.

Business and Trade Secretary Kemi Badenoch said:

As two of the world’s leading service economies, there’s a huge prize on offer to both the UK and Switzerland by updating our trading relationship to reflect the strength of our companies working in areas ranging from finance and legal, to accountancy and architecture.

The UK and Switzerland are natural trading partners and today’s launch will play to our strengths as services superpowers, while also boosting investment in emerging technologies, data innovation, and digital trade.

ONS figures published earlier this year showed UK services exports reaching record highs in 2022, totalling £397 billion - an increase of 20% compared to 2021 in current prices.

The Business and Trade Secretary will launch talks on the new, modernised deal with her counterpart Federal Councillor Guy Parmelin in Bern, the country’s capital city.

During her visit, Badenoch will also go to SIX, the operator of the Swiss Exchange, Europe’s 3rd biggest stock exchange and one of the industry’s most respected post-trade service providers.

Whilst at SIX she will visit the innovation accelerator Tenity where she will meet startups already operational in the UK including Enterprise Bot, Xworks, SmartPurse and Jrny.

A refresh of our trading relationship with Switzerland will add to the UK’s growing armoury of powerful service-focused deals by removing remaining market access barriers, improving regulatory cooperation and enabling UK firms to compete on an equal footing in Switzerland, now and in the future.

Switzerland’s demand for imports is expected to grow in real terms by 78% by 2050. The new deal could lower tariffs on UK exports to Switzerland, which could reduce annual duties for UK businesses by around £7.4 million.

It will also benefit the more than 14,000 UK businesses which already export goods to Switzerland, 86% of which are small and medium-sized enterprises (SMEs), by creating simpler trade rules for products of origin, customs procedures and digitisation.

Switzerland is a key investment partner to the UK with the total stock of Swiss foreign direct investment in sectors such as textiles, chemicals, manufacturing and financial services worth £74 billion in 2021, while UK investment into Switzerland was worth £52 billion. A new FTA would look to boost this even further, helping facilitate more investment by Swiss companies into communities around the UK and seeking preferential terms for UK investors in Switzerland.

During her visit to Switzerland, Badenoch will also meet with leading female business leaders at Advance, a network of close to 140 Swiss companies committed to increasing the share of women in management in Switzerland.

Background:

• The launch will take place at the Federal Palace of Switzerland. The first round of talks are scheduled for week commencing 22 May.
• Switzerland ranks as the UK’s 2nd largest trading partner in Trade in Professional and Business Services. In 2022, total PBS trade with Switzerland amounted to £9.2 billion (39% of total UK services trade with Switzerland).
• Talks will also look to provide long-term certainty on business travel, particularly for services firms, helping firms in a wide range of sectors, from life sciences to tech to share expertise, form vital partnerships and expand into new markets.
• We will also seek to cut remaining tariffs on UK exports such as red meat, chocolate and baked goods, which are currently very high. Switzerland imports over £5.5bn a year of agri-goods under product lines where tariffs still apply for the UK.
• The businesses are supported by Tenity, which provides incubation and acceleration programs to help startups in connect with entrepreneurs, experts, mentors, and investors for early-stage venture and late-stage venture investing.

Source: Gov.uk

The UK tax authority, His Majesty's Revenue and Customs (HMRC) has announced that the rates of interest charged on the late payment of tax and for repayments if tax has been overpaid will increase to 7% (late payment interest rate) and 3.5% (repayment interest rate).

The Taxes and Duties, etc (Interest Rate) Regulations SI 2011/2446 link HMRC's rates to the Bank of England base rate. The late payment interest rate is set at base rate plus 2.5%, while the repayment interest rate is set at base rate minus 1%, with a lower limit of 0.5% (known as the 'minimum floor').

On 11 May 2023, the Bank Of England announced that its base rate would increase to 4.5%. Consequently, the new late payment and repayment interest rates will be 7% and 3.5% respectively. These rates will apply from 31 May 2023 because the regulations state that the increase will take place 13 working days after the date of the Bank of England meeting.

The Internal Revenue Service has discussed the process and criteria for business entity classification elections for federal tax purposes in a recent private letter ruling (202317009).

The IRS stated that under section 301.7701-3(a) of the Internal Revenue Code (IRC), a business entity not classified as a corporation under IRC under sections 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) can elect its classification for federal tax purposes. An eligible entity with at least two members can choose to be classified as either an association or a partnership, while an entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.

For foreign eligible entities, IRC section 301.7701-3(b)(2)(i) provides that, unless the entity elects otherwise, it is considered:

• a partnership, if:
• it has two or more members; and
• at least one member does not have limited liability;
• an association, if all members have limited liability; or
• disregarded as an entity separate from its owner, if it has a single owner without limited liability.

Under IRC section 301.7701-3(b)(2)(ii), a member of a foreign eligible entity is considered to have limited liability if they bear no personal liability for the debts or claims against the entity by reason of being a member.

According to the IRS, to elect a classification other than the default provided in IRC section 301.7701-3(b), an eligible entity must file Form 8832, Entity Classification Election, with the designated service center. Per section 301.7701-3(c)(1)(iii), the effective date specified on Form 8832 cannot be more than 75 days prior to the filing date and cannot be more than 12 months after the filing date.

In the present case, the foreign eligible entity was formed under the laws of a foreign country and intended to be classified as a corporation. However, the entity failed to timely file Form 8832. Upon review, the IRS concluded that the requirements of IRC section 301.9100-3 have been satisfied and granted the entity an extension of 120 days from the ruling's date to make an election to be treated as a corporation for federal tax purposes.

On 22 May 2023, the US Internal Revenue Service (IRS) issued a news release (IR-2023-104) announcing interest rates on tax overpayments (i.e. tax refunds) and tax underpayments (i.e. tax assessments and late tax payments) for the calendar quarter beginning 1 July 2023 (Revenue Ruling 2023-11).

The interest rates, which apply to amounts bearing interest during the third calendar quarter, are as follows:

• 7% for non-corporate overpayments (payments made in excess of the amount owed);
• 6% for corporate overpayments;
• 4.5% for corporate overpayments exceeding USD 10,000;
• 7% for underpayments (taxes owed but not fully paid); and
• 9% for large corporate underpayments.

Note: Under the Internal Revenue Code, interest rates are determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

The IRS' Chief Counsel's Office released a memorandum (AM 2023-003) and advised on the application of the regularly traded exception in two different situations where a non-resident alien individual's gain on the disposition of a domestic corporation's stock could be treated as effectively connected income under section 897.

In its memorandum, the IRS asserted that the regularly traded exception should be assessed at the partnership level when a partnership owns stock of a US real property holding corporation (USRPHC). This means that if a partnership exceeds the 5% stock ownership threshold with respect to a corporation, stock of which is regularly traded on an established securities market, a foreign partner of the partnership is subject to US tax under section 897(a) on its allocable share of any gain from a sale of such stock by the partnership.

Accordingly, a foreign partner could be subject to US tax on the disposal of a publicly traded USRPHC even if the foreign partner does not indirectly own more than 5% of the stock sold by its partnership vehicle.

Section 897 pertains to the taxation of foreign persons on the disposition of US real property interests. It generally provides that when a foreign person sells or disposes of a US real property interest (USRPI), the gain from the transaction is generally subject to US taxation as effectively connected income. The term "USRPI" refers to any interest, whether direct or indirect, in real property located in the United States or in any domestic corporation that primarily holds USRPIs.

However, there is an exception known as the "regularly traded exception" provided under section 897(c). This exception applies when the USRPI interest is regularly traded on an established securities market and the foreign person holds no more than a 5% interest in the class of stock that represents the USRPI.