November 2018

On 1 November 2018, a Bill to amend the Corporate Income Tax Act (CITA) was adopted by the parliament. With respect to the tax treatment of leasing, the following additional amendments were adopted. A new article 11a of the CITA provides that:

• income and expenses related to operational lease contracts recorded in the accounts of the lessee will not be recognized for tax purposes;
• rights to use assets under operating lease agreements may not be included in the tax depreciable value of a tax depreciable asset of the lessee; and
• income and expenses relating to operating leases will be recognized for tax purposes if they concern the lease of a right to use assets. In such a case, the income and expenses must be determined in accordance with National Accounting Standard 17 on leases.

A new article 50(2) of the CITA defines from which fixed tangible assets a lessee derives taxable income. The article covers those assets classified as depreciable fixed tangible assets with a right of use in connection with finance lease according to the international accounting standards. Article 82 of the CITA on the corrections of the financial results due to changes of the accounting policy will not apply where the change in the accounting policy concerns the application of the International Financial Reporting Standard 16 on operational leases.

On 2 November 2018, an amendment to the Corporate Income Tax Act was published in the State Gazette. The amendment envisages that donations of up to 10% of the accounting profit of a company are tax deductible if they are made to social enterprises listed in the register of social enterprises to enable them to carry on their social activities and/or achieve their social goals. The amendment will take effect on 2 May 2019.

On 5 November 2018, the Ministry of Finance published for public consultation a proposal for amendments to the VAT Act. It is proposed that the activity of an individual under any legal relationship which creates relationships similar to those of an employment relationship will not be regarded as an economic activity. This is the case if the conditions of a contract are similar to that of employment. In such case, the remuneration is paid by the employer who bears the liability for the activities carried out. In addition, it is proposed that the public register of the National Revenue Agency for VAT registration should also include information regarding VAT registration and deregistration of the taxable persons. The public consultation will be open until 5 December 2018. Further developments will be reported when they occur.

On 5 November 2018, a proposal to amend the Personal Income Tax Act (PITA) was published for public consultation by the Ministry of Finance. It is proposed to regard the following relations as employment relations for PITA purposes:

• between a sports club and professional athletes under the Physical Education and Sports Act; and
• between a sports club and coaches under the Physical Education and Sports Act.

The public consultation will be open until 5 December 2018. Further developments will be reported when they occur.

The Ministry of Finance initiated a public consultation on a bill to amend the Tax and Social Security Procedures Code. The bill proposes the implementation of obligatory transfer pricing documentation for certain entities and certain transactions depending on balance sheet data of companies and materiality of transactions. Entities with a balance sheet value of assets exceeding BGN 8 million (EUR 4 million) and net sales revenue exceeding BGN 16 million (EUR 8 million) will be required to prepare transfer pricing documentation on transactions with goods (exceeding BGN 400,000), services (exceeding BGN 200,000), intangible assets (exceeding BGN 200,000) and financial assets (exceeding BGN 200,000). Transfer pricing documentation will also need to cover loan transactions exceeding BGN 2 million or interest payments exceeding BGN 100,000. The public consultation will end on 5 December 2018, after which the bill, as amended, is scheduled to be delivered to the parliament for voting.

On 7 November 2018, the parliament approved on second (final) reading the amendments to the tax legislation proposed by the Ministry of Finance in August 2018 as well as several subsequent amendment proposals.

On 7 November 2018, the parliament voted on the tax package containing amendments to the tax laws, which was then scheduled to be published in the State Gazette. However, before allowing official publication of the amendments, the President decided to put a veto on the package, due to disagreement on the envisaged increase in real estate local tax and vehicle tax rates.

Following the veto imposed by the President on the amendments to tax legislation, on 22 November 2018, the parliament discussed and approved at final reading the amendments. The parliament did not agree with the reasons for the President's veto and did not change the texts that had been approved earlier this month. As a next step, the President must issue a decree for promulgation of the amendments in the State Gazette. Further developments will be reported when they occur.

On 27 November 2018, a proposal for amendments to the Value Added Tax (VAT) Act was gazetted. The most important details are summarized below.

Introduction of threshold for digital services

A threshold of BGN 19,558 (EUR 10,000) is introduced regarding the place of supply of digital services by EU suppliers to non-taxable persons established in other EU Member States. Under the new rule, if the supplies of telecommunication, broadcasting and electronically supplied services in the current and/or previous calendar years are below this threshold, their place of supply will be where the supplier is established, provided that it is established in only one EU Member State. This amendment implements the provisions of Directive (EU) 2017/2455.

New VAT rules for vouchers

In line with the provisions of Directive (EU) 2016/1065, detailed rules are introduced regarding the VAT treatment of single-purpose and multi-purpose vouchers. However, it is specifically stated that the new VAT rules for vouchers will not be applicable to:

• instruments that entitle the owner to receive a discount when receiving goods/services;
• tickets for travelling, cinema, museums and other, as well as postal stamps, etc.; and
• food vouchers issued by a person with a permit issued by the Minister of Finance.

Postponed accounting of import VAT

Currently, VAT on importation must be effectively paid to the customs authorities upon importation of goods; self-assessment by the taxable person is allowed only in very limited cases (e.g. for large investment projects). As from 1 July 2019, the possibility of VAT self-assessment in the VAT return will be extended to importers of goods such as aluminium, nickel, sulfur, tin, lead, zinc and organic chemical products. In addition, certain criteria are introduced, for example, each of the imported goods declared in the customs document must have a customs value of at least BGN 50,000, and the importer must have no unsettled tax and social security liabilities.

Longer period for application of domestic reverse charge rules for grain and technical crops

The period for the application of the domestic reverse charge rules for grain and industrial crops is extended to 30 June 2022.

Register of e-shops to be created by tax authorities

E-shops will be required to register in a special register to be set up and maintained by the National Revenue Agency.

Abolishment of the minimum collateral for trading liquid fuels

Currently, in certain cases, suppliers and recipients of liquid fuels are required to provide, to the tax authorities, collateral at an amount of 20% of the taxable base of the supply but not less than BGN 50,000. Under the amendments, the minimum required amount of BGN 50,000 will be abolished.

Extension of the list of VAT zero-rated supplies

The following supplies will be subject to 0% VAT:

• supplies for immediate needs of qualifying vessels and aircraft; and
• intermediary services related to international adoption under the Family Code.

Amendments to VAT deregistration rules

The requirement for mandatory VAT deregistration upon initiation of a company's liquidation proceedings is abolished. Instead, companies will have an opportunity to remain VAT registered until the end of the liquidation proceedings.

Administrative simplifications

The following administrative simplifications are introduced:

• an opportunity for VAT deregistration within 12 months after the beginning of the year following the voluntary VAT registration (currently, this period is 24 months); and
• e-shops will be allowed to issue and send electronically fiscal receipts in cases where there is no physical contact between the seller and the buyer. It is envisaged that the rules for issuing of electronic fiscal receipts will be provided in Ordinance N-18 of 2006 issued by the Ministry of Finance.

The above amendments will enter into force on 1 January 2019, with the exception of the new rules for postponed accounting of import VAT, which will be applicable as from 1 July 2019.

On 27 November 2018, amendments to the Personal Income Tax Act were published in the State Gazette. Below is a summary of the main changes.

New tax rules for awards

The monetary and non-momentary awards which are not provided by the employer will be subject to a one-off tax due by the payer. Currently, such income should be reported by the recipient in his/her annual personal income tax return. In addition, awards with an amount of up to BGN 100 (currently BGN 30) will be exempt from Personal Income Tax.

One-off tax for subsidies and State aid

Subject to a one-off tax will be the gross amounts received from individuals (not registered as farmers) in the form of State aid, subsidies or other support from the European Agricultural Guarantee Fund, the European Agricultural Fund for Rural Development or amounts from the national budget.

Extended mandatory electronic submission of documents to tax authorities

It will be mandatory to submit electronically the following documents to the National Revenue Agency:

• all declarations and reports of self-insured persons;
• the annual report for income paid to individuals under article 73, paragraph 1 of the Personal Income Tax Act; and
• information on the income paid by employers to residents of other EU Member States.

New administrative simplifications

The following administrative simplifications will be introduced:

• abolishment of the requirement for providing a declaration by the spouse that he/she will not apply for tax relief for young families, children (including children with disabilities);
• regarding tax relief for children (including those with disabilities), it will be allowed that the relief can be used by both parents (currently only one parent may use it);
• it is provided that traders that did not perform economic activities (as per the Accountancy Act) during a tax year will be exempt from the requirement to submit annual activity reports.

The above amendments will be effective from 1 January 2019. In addition, as of 1 January 2020 the abolishment of the requirement for employers to provide paper notes on income paid, taxes and social/health securities withheld from their employees unless they request such documents, is envisaged. The information which is included in these notices will be submitted by employers to the National Revenue Agency.

On 27 November 2018, amendments to the Local Taxes and Duties Act were published in the State Gazette. A summary of the main changes is given below.

Increased real estate tax for certain immovable property in resorts

Immovable property in Bulgaria is subject to annual real estate tax of between 0.1‰–4.5‰ of the tax value of the property. However, as from 1 January 2019, increased rates will apply to immovable property that meets the following criteria:

• located in a resort;
• not the main home of a taxable person;
• not leased; and
• not registered as accommodation under the Tourism Act.

The increased rates for immovable property meeting the above criteria will be as follows:

• 5‰-7‰ of the tax value for property in balneological, climatic mountain and climatic seaside resorts of national importance; and
• 4.5‰-6‰ for immovable property in other resorts.

Changes to determining the real estate tax

The correction coefficient increasing the real estate tax for immovable property that has features such as aluminium joinery, air conditioning installation, etc., will be abolished.

Amendments to tax relief for main home

If more than one main home is declared, the full amount of the real estate tax will be due for all homes owned by the taxable person. Also, no reduction of the waste collection duty will be applied in such cases.

New concept for motor vehicles tax

The motor vehicle tax for cars and light commercial vehicles with a weight of up to 3.5 tonnes will be determined based on a formula including a property and an ecological component. The property component will take into account the engine power and the manufacturing year of the car. The ecological component will reflect the ecological category of the car based on the European Emission Standards (Euro 1, 2, 3, 4, 5 or 6). In addition to the above, various other amendments to motor vehicle tax relief are introduced, e.g. abolishment of the tax relief for cars with catalytic converters, the possibility for applying tax relief for cars with engine power above 74 kW, etc.

New administrative simplifications

In the case of transactions involving motor vehicles, notaries public will be required to check in the relevant registers whether there is any unpaid tax on vehicles. In addition, the notaries public will be obliged to inform the local municipalities of the transfers of immovable property and motor vehicles performed, as well as the taxable base and local tax paid, within 7 days.

Postponed introduction of the new concept for calculation of waste collection duty

The new concept for the calculation of waste collection duty based on generated waste had initially been scheduled to be introduced as from 2020. However, this year it was decided to postpone introduction of the new concept until 2022. The above changes will be applicable as from 1 January 2019. In addition, an exemption from real estate tax is introduced for new buildings until they are put into use, but not later than 2 years after completion of the structural works. This rule will be applied as from 1 January 2020.

On 27, 28 and 29 November 2018, the parliament approved at second (final) reading, the amendments to the following Budget Acts:

• the State Budget Act for 2019;
• the Act on the Budget of the State Social Security for 2019; and
• the Act on the Budget of the National Health Insurance Fund for 2019.

On 27 November 2018, amendments to the Corporate Income Tax Act were published in the State Gazette. The main amendments are summarized below.

Limitation of interest deduction rule

A new rule is introduced for limitation of interest deduction, which implements the provisions of the European Union Anti-Tax Avoidance Directive (EU) 2016/1164 (2016). Under the rule, the exceeding borrowing costs for a tax year will be deductible for up to 30% of the tax-adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of the taxable person. Any restricted interest can be carried forward indefinitely. The limitation of interest deduction will no longer be applicable when the exceeding borrowing costs are up to EUR 3 million. Also, the new rule will not be applied to credit institutions.

Amendments to thin capitalization rule

Although in August 2018, the Ministry of Finance proposed to abolish the thin capitalization rule, subsequently it was decided to keep it, but an amendment was introduced so that restricted interest expenses can be carried forward indefinitely (currently it is possible for a period of up to 5 years).

Controlled foreign company (CFC) rule

According to the new rule, a Bulgarian taxable person with a CFC, under certain conditions, will be required to include a share of the CFC's taxable profit into its taxable profit and thus be subject to Bulgarian corporate income tax. Between the first and the second reading of the draft bill at the parliament, amendments were introduced to the initial texts and the CFC rules will not be applicable in terms of CFCs which are not subject to corporate income tax in the jurisdictions where they are tax residents. Bulgarian taxable persons with CFCs will be obliged to keep a register with specific details on the CFCs. This register should be provided to tax authorities upon their request.

New tax rules for certain operating lease agreements

The new rules concern the tax treatment of expenses/income of a lessee under operating lease agreements to which the rules of IFRS 16 Leases (effective as of 1 January 2019) will be applied. It is provided that such income/expenses will not be recognized for corporate income tax purposes and instead, the income/expenses determined as per the National Accounting Standard 17 Leases applied to these agreements will be recognized for corporate income tax purposes. In addition, right-of-use assets in relation to operating lease agreements under IFRS 16 Leases will not be recognized as tax depreciable assets of the lessee.

Other amendments

An option is introduced for the submission of corporate income tax returns in cases when a taxable person did not perform an activity in the tax year in order to report tax on expenses, incurred losses, or reporting hidden profit distribution. Certain amendments are introduced regarding the filing and payment of corporate income tax, withholding tax, tax on expenses and alternative tax in cases of liquidation or termination for insolvency of a company and when a permanent establishment of a foreign company is ceasing its activity. In this respect the last tax period of such companies/permanent establishments will be from 1 January of the year of the deregistration until the date of the deregistration and the last corporate income tax, withholding tax, tax on expenses and alternative tax to be due within 30 days after the date of the deregistration. The above amendments will be applicable as of 1 January 2019.

Shanghai municipal government released on November 22, 2018 the Opinions about Accelerating the Development of High-tech Enterprises in Shanghai. The document proposed a raft of measures to support high-tech firms, including cutting taxes and reducing burdens. According to the document, the city will implement existing preferential tax policies granted to high-tech companies to reduce their business cost. High-tech firms and tech-based small and medium-sized firms are allowed to carry forward losses for ten years. Scientific researchers are encouraged to commercialize their research achievements, and stock options awarded to them can be eligible for installed or deferred payments of individual income tax.

The Shanghai Head Office of the People's Bank of China (PBOC) recently issued the Guideline about Further Strengthening Financial Services to Private Enterprises and Technology Innovation Enterprises. The document proposed 20 measures to support private and tech firms. Among them, at least 10 billion yuan of re-lending quota will be granted to private and small firms committed to technology innovations and advanced manufacturing, and rediscount subsidies will be prioritized to technology-based small businesses with loan amount of 5 million yuan or less. Startups borrowing less than 500,000 yuan will not have to provide collateral for the loans; the maximum amount of loan for a corporate borrower is doubled to 2 million yuan.

It was learned from the State Council executive meeting that, starting from January 1, 2019, the current policies on cross-border e-commerce retail imports will continue. No requirements in licensing, registration or record-filing for first-time imports will apply to retail imports through cross-border e-commerce platforms. Instead, these goods will receive more relaxed regulation as imports for personal use. Moreover, implementation of this policy will be extended from the 15 cities such as Hangzhou to another 22 cities which have just established comprehensive cross-border e-commerce pilot zones. Goods included in the cross-border e-commerce retail imports list have so far enjoyed zero tariffs within a set quota and had their import VAT and consumer tax collected at 70 percent of the statutory taxable amount. Such preferential policies will be extended to another 63 tax categories of high-demand goods. The quota of goods eligible for the preferential policies will be raised from 2,000 yuan to 5,000 yuan per transaction, and from 20,000 yuan to 26,000 yuan per head per year.

The State Administration of Taxation recently issued the Announcement about Deductions of Liability Insurance Premiums on Corporate Income Tax. According to the announcement, enterprises buying employer liability insurance and public liability insurance can file for premium deductions before they pay corporate income tax. The tax arrangement is applicable to corporate income tax payment in the 2018 tax year and following years.

On 31 October 2018, the Inland Revenue (Amendment) (No. 4) Bill 2018 was passed by the Legislative Council. The new Ordinance gives effect to a concessionary tax measure proposed in the 2018-19 Budget (see Hong Kong-1, News 1 March 2018). Under the new arrangement, with effect from 1 April 2019, a taxpayer can claim tax deductions under salaries tax and personal assessment for the Voluntary Health Insurance Scheme (VHIS) premiums procured for the benefit of the taxpayer and all specified relatives (including the taxpayer's spouse and the children, parents, grandparents and siblings of the taxpayer's spouse). The annual tax ceiling of premiums for tax deduction is HKD 8,000 per insured person.

The Inland Revenue (Amendment) (No.7) Bill 2018 was gazetted by the government on 2 November 2018. By amending the Inland Revenue Ordinance, the Bill seeks to:

• align the tax treatment of financial instruments with their accounting treatment;
• allow the deduction of interest expenses payable to overseas export credit agencies;
• refine the provisions that implement the arrangement for automatic exchange of financial account information in tax matters (AEOI);
• avoid potential double non-taxation of income of visiting teachers and researchers arising from the introduction of tax exemption for teachers and researchers in tax agreements signed by Hong Kong; and
• revise the definition of the sibling relationship to cover some cases related to adopted persons in determining the eligibility for the dependent brother or dependent sister allowance.

The Amendment Bill will be introduced into the Legislative Council on 14 November 2018.

According to an update of 13 November 2018, published by the Hong Kong Inland Revenue Department, the first round of negotiations for a tax agreement between Estonia and Hong Kong is scheduled to take place from 19 to 23 November 2018. Further developments will be reported as they occur.

On 2 November 2018, the Inland Revenue (Amendment) (No.7) Ordinance 2018 (the Ordinance) was gazetted by the government to provide enhanced tax deductions for certain expenditures incurred by enterprises on research and development (R&D) activities carried on in Hong Kong. Under the Ordinance, R&D expenditures are now classified into either "Type A expenditures" which qualify for 100% deduction or "Type B expenditures" which qualify for an enhanced tax deduction. The enhanced tax deduction for "Type B expenditures" is a two-tier deduction regime. The deduction is 300% for the first HKD 2 million of the aggregate amount of payments made to "designated local research institutions" for "qualifying R&D activities", and expenditures incurred by the enterprises for in-house qualifying R&D, and 200% for the remaining amount. There is no cap on the amount of enhanced tax deduction. The arrangement is applicable to R&D expenditures incurred by enterprises on 1 April 2018 and thereafter.

The Inland Revenue (Amendment) (No.5) Bill 2018 was passed by the Legislative Council on 14 November 2018. It gives effect to three concessionary tax measures proposed in the 2018-19 Budget. These measures include, effective from the year of assessment 2018/19:

• allowing husband and wife the option of electing for personal assessment separately;
• allowing enterprises to claim a 100% tax deduction for capital expenditure incurred in procuring environmental protection installations in 1 year instead of over 5 years; and
• extending the scope of tax exemption for debt instruments under the Qualifying Debt Instrument Scheme.

The trade volume between Nigeria and Norway stands at $30 billion, the Norwegian Ambassador to Nigeria, Jens-Petter Kjemprud, has said. At a forum by the Nigerian Norwegian Chambers of Commerce (NCNN) in Lagos, during the week, he said there is a lot both countries can do together. The envoy said, for instance, that Norway investors are planning to increase investments in Nigeria’s oil and gas industry with focus on the power sector. According to him, Nigeria’s manufacturing sector can only compete globally if the sector gets cheap and stable power supply. “The power sector needs to be regulated and organised to attract investments. There are huge investment opportunities in the power sector and there is also need to secure these investments, Kjemprud said. The Chairman, NCNN, Chijioke Igwe, said the objective of the chamber was to grow business-to-business interaction between Nigeria and Norway. He maintained that the forum was to seek ways on how best to tap into the resilience and discipline of the Norwegian economy. “The chamber cuts across all industries and we want  to create an enabling environment for Nigeria and Norway businesses to interact and develop projects to the benefits of both sides of the divide,” Igwe said. He said the chamber has put together a group of professionals to engage the government on the impacts of its policies on the economy. Igwe said this was because, most  times, the government does not have a clear understanding of the impact of its policies on business environments. The Consul General of Norway, Taofik Adegbite, said Nigeria must harness the technology of Norway to fast-track rapid growth and development.

Merkel says Berlin to support German, African companies for their investments on continent

Chancellor Angela Merkel has announced on Tuesday the launch of a €1billion ($1.14 billion) fund to support private investments in African countries.

Speaking at the G20 Compact with Africa conference, Merkel pledged to ease financing burdens and support African countries’ development objectives.

“Now we have a €1billion fund, through which we would be able to support small and medium-sized enterprises from Germany or Africa,” she said.

But Merkel also raised her expectations from partner countries for reform and transparency to attract more direct investments to their countries.

Leaders from Benin, Ivory Coast, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, South Africa, Togo and Tunisia attended the conference hosted by German Chancellor in Berlin.

President Nana Addo Dankwa Akufo-Addo, says German conglomerate company, Siemens AG, which is the largest industrial manufacturing company in Europe, will soon announce its decision to establish a presence in Ghana. Siemen’s decision, together with that taken by German car manufacturing giant, Volkswagen, to establish an assembly plant in Ghana soon, President Akufo-Addo stressed are testament to the efforts Government has put into creating the necessary environment for the private sector to flourish. “We are not resting on our oars. We will continue to work hard to attract investments, domestic and foreign, into Ghana, so that we can unleash the sense of enterprise, creativity and innovation of the Ghanaian people, and help build a progressive, prosperous Ghana, whose citizens live in harmony and security,” he said. President Akufo-Addo made this known on Tuesday, October 30, when he delivered his remarks at the ongoing G-20 Compact with Africa Conference, being held in Berlin, in the Federal Republic of Germany. Additionally, at the Conference, HL Hamburger Leistungsfutter GmbH, a leading manufacturer and supplier of specialist feeds and compound feeds in Germany, signed an 8 million Euro agreement to invest in Ghanaian company, Agricare Ltd. The investment from HL Hamburger into Agricare comprises of full technology transfer in animal feed formulation and sales, and also help enable Agricareutilise more locally produced raw materials in the formulation of feeds. Whilst commending the German Chancellor, Frau Angela Merkel, for convening the conference, the President noted that Ghana is delighted with Germany’s decision to re-orient its policy and relationship with Ghana, and, indeed, with Africa, from one based on aid, to relations focused primarily on trade and investment co-operation. “My Government’s vision of moving our country to a situation beyond aid, i.e. a ‘Ghana Beyond Aid’, is aligned to Germany’s Compact with Africa programme. Under my leadership, we are determined to discard the mindset of dependence on aid, charity and handouts, and aim towards becoming self-reliant, within the context of strong global co-operation,” he said. President Akufo-Addo continued, “We are well aware that, in order for Ghana to harness the full benefits of the Compact Programme, whose objective is to ensure more private sector investments, we have to get our act together. We have to create an enabling environment for investments in Ghana not just to survive, but to thrive.” It is for this reason that his administration has spent the last 21 months to improve the fundamentals of the Ghanaian economy, because “we believe that an improved macro-economy is a basic requirement for stimulating the investments we need for the significant expansion and growth of the national economy, and the generation of wealth and jobs.” Additionally, the President indicated that his Government has initiated and implemented policies that are encouraging and empowering the private sector to grow the Ghanaian economy, within the framework of macroeconomic stability. “We believe that when the private sector flourishes, and when our enterprises become competitive, not just on the continent, but also in the global marketplace, then can we create the thousands and thousands of jobs our teeming masses of unemployed youth crave,” he added. The President was confident that, if respected, the premise, on which the Compact with Africa conference is being held, will enable Germany and the Compact with Africa Countries to re-shape their countries, and chart a new path of growth and development in freedom. In concluding, President Akufo-Addo used the occasion, on account of the news of the impending departure from the German political scene, to congratulate Angela Merkel on the exceptional quality of her leadership of Germany and Europe this last decade and more. “The Ghanaian people and I will regret her departure very much, for she has been one of the most outstanding leaders of modern times. We shall miss her very much,” the President added.  

The government of Nigeria through the Family Homes Fund (FHF) intends to invest US $1bn over the next five years in bridging its 17 million housing deficit. Senior Special Assistant to the President on Infrastructure, Imeh Okon confirmed the report and said that the government would issue US $275m yearly for a five year period. The projects, despite being powered by the FHF will also involve private sector participation.

Nigeria housing deficit

According to the United Nations, Nigeria stands at a 180 million population with an annual growth rate of 3% as of 2015 and an urban population growth rate of 5%. Data from the World Bank and the National Bureau of Statistics states that there is a 17 million housing deficit in Nigeria.Globally, 1.6 billion people live in sub standard housing according to UN statistics. In Nigeria, over 100 million of its 180 million citizens live in substandard housing. Mr. Yemi Adelakun, the managing director for Nigeria Integrated Social Housing(NISH) commented that the available houses built do not meet to the needs and affordability of the people hence making bridging the housing deficit hard.

Affordable housing

Currently, about 3,000 to 6,000 affordable housing are under construction in Nigeria with 1,400 houses in Nassarawa. Mr. Adeyemi Dipeolu, the Special Adviser to the President on Economic said that with hope of Nigerians accessing the housing units under the affordability index, the the Ministry of Power, Works and Housing has managed to complete more than 2,000 houses in 72 units across Nigeria. In regards to high mortgage, Mr. Dipeolu said that it would be a challenge for Nigerians to access homes with the high mortgage rates. “ The government is working to ensure that there are cheap mortgage  available for Nigerians.” Ms. Okon added that under FHF, Nigerians earning even US $83 can afford a home which covers the government’s main aim of providing social and affordable homes.

Anglo American Plc is going where larger rivals fear to tread, returning to its African roots to tap mineral assets with compelling returns. The storied mining company, founded by Ernest Oppenheimer in Johannesburg a century ago, is devoting a third of its exploration budget to the continent, including searching for copper and cobalt in Angola and Zambia. In South Africa, it’s investing in platinum, diamond and iron-ore mines that are spitting out cash. The London-based company is betting that Africa can deliver a portfolio of new ore bodies, even as BHP Billiton and Rio Tinto Group largely shun the continent and focus on returning cash to shareholders. It’s a reversal of Anglo’s almost two-decade retreat from a continent that long weighed on its shares, but the miner retains a higher tolerance for risk in what used to be its backyard. “They are working toward projects that can form the pipeline 30 years from now,” said Hunter Hillcoat, a London-based analyst at Investec Securities Ltd. “Anglo is the only one working there and they have better comfort within the region, geographically.” After a collapse in commodity prices in 2015, the mining blue-chip talked about selling assets in South Africa, the home of its biggest diamond, iron ore and platinum mines. Early last year, Anglo confirmed that plan was dead. While exiting some higher-cost operations, its remaining mines in the country are the company’s biggest cash contributors.

Glittering Prize

Now Anglo is doubling down on those assets: it plans to spend $2 billion developing underground deposits at Venetia, the biggest investment in a South African diamond mine in decades. Another $4 billion will be invested in iron ore, manganese and coal over the next five years. “South Africa punches above its weight,” Anglo Chief Executive Officer Mark Cutifani said earlier this year. Anglo’s shares have gained 13 percent this year, making them the best performers on the 11-member FTSE 350 Mining Index. The stock was up 3.2 percent as of 10:02 a.m. in London. Further north, changes to Angola’s mining code have persuaded Anglo to add copper exploration to its diamond prospecting activities. The Angolan government has identified an extension of the Copperbelt, the world’s largest resource of the metal that stretches from Zambia through the southern part of the Democratic Republic of Congo. “We are applying for exploration concessions to explore for base metals,” said James Wyatt-Tilby, a spokesman for Anglo. While Anglo exited its Zambian copper mines more than 16 years ago, a four-fold increase in prices has spurred the company to reconsider the prospects. The mining company is also more at ease than its rivals with the tough tax regimes found in places such as Zambia, said Ben Davis, an analyst at Liberum Capital. “Anglo would like to have more exposure in the region but first they have to find the assets,” Davis said.

WHAT ANGLO IS UP TO IN SOUTHERN AFRICA

Kumba Iron Ore	Africa’s top iron ore miner is extending lifespan of giant Sishen mine in South Africa beyond current 13 years.
Venetia Diamonds	De Beers unit is spending $2 billion to develop underground operation to tap an estimated 94 million carats of diamonds.
Anglo American Platinum	World’s biggest platinum producer is investing about $1 billion to boost output at Mogalakwena mine and could develop Der Brochen deposit.
Unki Mine Zimbabwe	Anglo assembled Zimbabwe’s only PGM smelter at mine on world’s second-largest platinum reserves.
Namibia Diamonds	Namdeb venture adding sixth marine mining vessel as Anglo seeks to tap an estimated 80 million carats of gems.
Botswana Diamonds	De Beers venture is deepening Jwaneng to extend the mine’s life and extract a further 50 million carats.
Zambia	Anglo exploring for base metals in Zambezi west area.
Angola	Anglo seeking permits to explore for base metals.
South Africa	Anglo has been granted 23 licenses for diamond exploration.

New Al Yah 3 satellite gives broadband service YahClick to eight new markets, including Ghana, Cameroon, Ivory Coast, Democratic Republic of the Congo and Zimbabwe. Having to conduct your business from your local burger joint because of unreliable internet connectivity should be a necessity that - even for the humblest of freelancers or start-up entrepreneurs - belong to a distant past or a rare emergency situation. Yet for many small businesses across Africa’s remote, rural regions, this is a daily reality. “This valley is [known] for bad reception. I know some of my neighbours never had reception. They go into town to the Wimpy to be able to get reception in order to get reception to do business,” says Carien De Villiers, a farm owner in the remote village of Thorndale in South Africa. The correlation between investment in broadband connectivity and the growth of economic activity has been well established. For every 10 per cent increase in broadband connectivity in developing nations, GDP rises by 1.38 per cent, according to the World Bank. Tapping into this trend, Abu Dhabi’s Al Yah Satellite Communication Company, known as Yahsat, has been expanding its YahClick broadband internet service to more markets in developing economies across Africa. Its investment of over $200 million in the Al Yah 3 satellite, which became commercially operational earlier this year, has allowed the company to launch broadband service YahClick in eight new markets, including Ghana, Cameroon, Ivory Coast, Democratic Republic of the Congo and Zimbabwe, extending the potential for connectivity even in rural areas. “Since I’ve had YahClick, I always have a connection, which I can’t say about any of my neighbours,” says Ms De Villiers, who sells livestock to surrounding businesses. This connectivity to rural areas has been available to Ms De Villiers and others in South Africa, Nigeria and Kenya for a number of years now, unlocking potential for schools, businesses and governmental services. In 2016, Africa’s average internet penetration was forecast to hit 50 per cent by 2025, while the number of smartphones was expected to reach 360 million, a significant rise from 16 per cent and 67 million in 2013, respectively. Greater access to satellite broadband services could help improve the quality of life, and specifically in regions were internet interruptions are so common they cost businesses millions of dollars a day. Satellite services provide fibre-like speeds without the need for expensive capital investments to develop the infrastructure on the ground. "Yahsat, and in alignment to the UN SDG efforts [sustainable development goals] have teamed up with leading e-learning solutions and e-health solutions providers," says Farhad Khan, chief commercial officer of Yahsat. “These implementations have a direct impact on the social aspect of people; connecting the schools to the internet and transforming the learning environment increases the willingness of pupils to attend their schools and enhances their abilities to create the skills that will benefit them in their lives." Ghana was the first African nation to have a mobile service provider in 1992, and two years later was one of the continent’s first to connect to the internet and offer ADSL broadband services to the public. Today, the nation of 28 million has ambitions to be one of Africa’s leading lights in digitisation and connectivity, something that the "Ghana 2020" plan has made one of its main pillars. The initiative’s aim is to make Ghana the first African state to become a developed country, between 2020 and 2029, and a newly industrialised country between 2030 and 2039. "Ghana has always been a pioneering country within the internet, technology and telecommunications space, boasting a myriad of firsts on the continent across mobile, fibre and digital genres," says Mr Khan. Last month, at the International Telecommunications Union (ITU) world conference in Durban, South Africa, Ghana’s communications minister Ursula Owusu-Ekuful stressed the importance of improving connectivity for the benefit of the country’s socio-economic development. “It’s imperative that all citizens benefit from the opportunities presented by digitisation and it is crucial that we close the digital divide which threatens to further marginalise the most vulnerable in our communities,” she said. The opportunities in Africa also include sport. Cameroon in the coming months will increasingly come under the spotlight as it prepares to host the 2019 African Cup of Nations between June 15 and July 13 of next year. In January, a team from the Confederation of African Football (CAF) that inspected the six venues set to host the matches were reportedly impressed with preparations and general facilities, as well as hotels, transport and security in the country. The one area they deemed inadequate was internet connectivity. Cameroon’s Information and Communications Technology (ICT) sector accounts for just 3.5 per cent of the country’s GDP according to Research and Markets, while only 25 per cent of the population experiences consistent Internet access. According to the World Bank, this figure ranks Cameroon 18th among sub-Saharan Africa’s 48 nations for internet penetration. Cameroon, as hosts and reigning champions of the African Cup of Nations, will no doubt be hoping that the competition, newly expanded to 24 teams, will not suffer from tech and connectivity issues when the world’s press descends on the country. In an untapped market such as Cameroon, satellite broadband’s consistent delivery of uninterrupted connectivity is set to be a game-changer. The Ivory Coast, despite being the leading Francophone economy in Africa ­– and a gateway for French speaking enterprises – has internet penetration of just 27 per cent. Only 2 per cent of households in rural areas have internet connectivity, compared to 16 percent in urban communities. The Ivory Coast is one of the world's largest producers of coffee, palm oil and cocoa beans, and the potential for new businesses, especially SMEs, is huge. However, many prospective investors have been put off by poor connectivity and low internet penetration. The increased availability of satellite broadband services should create a more confident investment environment. The legal and commercial implications of increased connectivity are significant, according to Atiq Anjarwalla, managing partner at Anjarwalla, Collins and Haidarmota, and will in the long term help boost investment in local businesses. “There are of course a number of factors which will encourage new businesses, and especially foreign businesses,” he said. “They include rule of law, tackling corruption and the general ease of doing business by, say, reducing the number of licences and the cost of licences. Clearly, connectivity and cheaper connectivity will also play an important role for an investor who is making a business decision on markets. This would apply in particular for those businesses that either rely on or are looking to develop and deepen business generation [through] e-solutions.” Above all, increased connectivity should help the spirit of entrepreneurship to flourish in local African communities. “Africa’s young population is tech savvy and is entirely comfortable with and understands how to communicate and build businesses through mobile and other e-platforms,” Mr Anjarwalla added. “In addition, African governments are increasingly looking to find e-solutions for government services which means that the ease of doing business will also be assisted by increased connectivity. There are many examples of this including in the medical, agriculture, financial services and other sectors.”

South Africa and Ghana signed the biggest single deal of the day at the Africa Investment Forum. The deal — worth $2.6-billion — is expected to improve Accra’s public transport system through an elevated light railway system which would provide low cost transport to it citizens. This is according to Hubert Danso, the chief executive of Africa Investor, an investment holding platform. The group is part of the South African consortium that has partnered with the Ghana Infrastructure Investment Fund (GIIF) to develop the Ai Skytrain. The Ai Skytrain is an elevated light rail, public mass transit system that uses air propulsion technology to drive lightweight, high passenger volume vehicles. The investment forum is the first of its kind in Africa and is taking place at the Sandton Convention Centre this week. The forum has been attended by over 1 400 people — among them several heads of state, senior government officials from across Africa plus investors and promoters — with the intention of brokering intra-Africa deals and investment opportunities. On Thursday, Ghanaian President Nana Akufo-Addo signed a memorandum of agreement with GIIF, greenlighting Ai Skytrain’s development. Akufo-Adoo said it was paramount for his government to revive rail infrastructure in Accra as rail infrastructure has been neglected since Ghana’s independence in 1957. “This benefits all our people. Accra in independence was sitting with a population of 50 000 people. That is 60 years ago, it is now six-million people. You can imagine what that means for the movement of people in the city,” Akufo-Adoo remarked. According to the African Development Bank’s 2018 Africa Economic Outlook journal, continental development requires financing of about $600-billion to $700-billion, of which $130-billion to $170-billion will go towards clearing the continents infrastructure backlog. “Accra like most capital cities is suffering from congestion so this will provide a light railway system that will ease that congestion. We are using Brazilian technology, South African engineering and technical expertise for a solution with Ghanaian participation,” said Solomon Asamoah, chief executive of GIIF. Asamoah said the signed agreement meant they could now begin with the full feasibility study, which will take six to nine months, after which financing of the project will be finalised. “We are hoping that with 12 to 18 months, we start with construction and then the system will start, and you will be seeing construction after that,” Asamoah said. Construction is projected to start in 2020. Speaking to the Mail and Guardian on the sidelines of the event, Gauteng Premier David Makhura said the deal was good for both countries, saying that as much as they wanted to attract investment into South Africa, government also wanted to encourage South African businesses to invest in economies on the continent. Makhura added that the same group that wants to build the $2.6-billion rail system in Ghana has indicated its interest to speak to him for a similar development in Gauteng. “African cities need huge investment in infrastructure and public transport is one of those. Our cities are gridlocked, it’s very expensive and very costly and takes long to to move from one area to another. “We want to ease this movement. The design of our cities in South Africa, people live far from where they work and we certainly need this investment in public transport,” Makhura added.

Highlights

• Five reports on different aspects of capital market development launched today
• Identify key areas to support development of Africa’s capital markets infrastructure
• Aim to increase global investment flows and create deep and sustainable capital markets in African countries
• Underlines London’s status as a leading global financial centre and strong business & economic partner to Africa

  Yesterday, the London Stock Exchange Group (LSEG) launches its series of reports on African capital markets, which were developed as part of its London Africa Advisory Group (LAAG).   The reports will be launched at the African Investment Forum in Johannesburg. The five reports put forward recommendations on how African capital markets could be further developed to increase global investment flows. The reports were commissioned by LAAG following its series of meetings over two years with its members, Africa’s business leaders, policymakers and investors. The reports have been produced in conjunction with stakeholders in London and across Africa.   The reports address five key topics:

• developing the green bond market for infrastructure products;
• attracting passive investment flows;
• developing offshore local currency bond markets;
• capital raising challenges for SMEs and;
• corporate information dissemination.

  Suneel Bakhshi, Chairman of International Advisory Groups, LSEG: “I am delighted to announce the launch of LSEG’s series of reports on the development of African capital markets today. These reports are the result of work carried out over two years to deliver empirically grounded, actionable and Africa-specific policy recommendations. “LSEG’s London Africa Advisory Group is designed to provide a platform for regular and collective dialogue through which to develop stronger relations with senior decision makers, regulators and business leaders across the continent. It is our intention that these recommendations offer practical advice and constructive solutions for supporting the development of Africa’s capital markets.”   Summary of Key Findings

• Developing the green bond market in Africa: Studies suggest Africa will be more severely affected by climate change than any other continent, which will require the continent to take advantage of green capital raising tools and sources of funding.

 

• Attracting passive investment flows to African markets: Passive investment flows are key to supporting depth of African capital markets; a key factor for this is country classification (Developed, Emerging or Frontier Markets) and flows could be enhanced through country classification upgrades.

 

• Developing offshore local currency bond markets in Africa: To sustain the continent’s strong GDP growth of the past two decades, substantial investment, particularly in infrastructure, is required; raising debt finance from larger offshore capital pools in local currencies is an attractive solution which mitigates an issuer’s currency risks associated with borrowing in hard currencies.

 

• The challenges and opportunities of SME financing in Africa: Small and medium-sized enterprises (SMEs) account for around 90% of Africa’s businesses, but experience a shortage of financing at all levels; these companies, which provide nearly 80% of the continent's employment, can benefit from increased training and capacity building, a public register of companies, and supportive government policy.

 

• Trends in corporate information dissemination in Africa: Company news plays a central role in the efficient functioning of financial markets improving depth in securities trading; centralised regulatory information services and their distribution are therefore key in disseminating company news to the relevant stakeholders in a timely manner.

The Italian Enel Green Power company and Nareva have announced they will start construction on a 180-megawatt wind farm in Midelt, central Morocco. Rabat – The Midelt wind farm is the first part of the 850 megawatt Integrated Wind Project (PEI) which includes four other wind farms, Enel Green Power (EGP) wrote in a statement on November 5. The Midelt wind farm will cost MAD 2.5 billion and is expected to be complete in 2 years. Morocco’s National Electricity Office (ONEE), the Moroccan Agency for Sustainable Energy (MASEN), and a consortium of both EGP and the Moroccan energy company Nareva all signed financing agreements on November 5 to start the wind farm’s construction. The Midelt wind farm “is set to contribute to the economic and social development of Morocco, and particularly that of the Midelt region, notably in terms of job creation and use of local services,” wrote EGP. The Midelt farm is expected to have enough capacity to power a city like Agadir, with 500,000 inhabitants, and save 400,000 tons of CO2 emissions per year. “With this first, important step that we are taking today, Enel Green Power will support Morocco’s energy demand and help the country meet its objective to increase power generation from renewables, as announced in its Domestic Energy Strategy,” said Antonio Cammisecra, head of EGP. Once the Midelt wind farm becomes operational, the companies will sell the electricity produced to ONEE for a 20-year power purchase agreement. The blades and towers of the wind farm will be manufactured in Morocco through Spanish Siemens Gamesa, the only supplier of wind turbines for the project.

Morocco’s ambitious wind project

The EGP and Nareva consortium were awarded the 850 megawatt Integrated Wind Project following an international tender. The wind project will cost MAD 12 billion. The project, according to EGP, “marks a turning point in Morocco’s national energy strategy, aimed at meeting the country’s growing demand for electricity, at competitive prices while complying with Morocco’s sustainable development goals.” Nareva CEO Said El Hadi said, “The 850 MW [Integrated Wind Project] is a project that will enable Morocco to make significant progress in meeting its energy strategy.” “We are pleased to support the Government in achieving its goal of increasing the share of renewable energy to 52% of the country’s installed capacity by 2030,” El Hadi added. On November 2, King Mohammed VI chaired a meeting to follow up the implementation of Morocco’s renewable energy strategy. During the meeting, the King gave instructions “to increase the initial ambitions for renewable energy to exceed the current goal of 52 percent of the national electric mix by 2030.” The other four wind farms included in the 850 megawatt wind projects will be built in Tangier (100 megawatts), Jbel Lahdid (200 megawatts) in western Morocco, and Tiskrad (300 megawatts) and Boujdour (100 megawatts) in southern provinces.  

An additional 1.3 billion people will be added to Africa’s population by 2050 and, unless infrastructure development happens at an unprecedented pace, sharp housing shortages will likely be an offshoot of the rapid population growth. The problem will be even more acute in urban areas as more people migrate to cities for access to economic opportunities and better living standards. Indeed, by 2050 all of Africa’s key sub-regions will have more than 50 per cent of their population living in urban areas. A new report by Estate Intel, a real estate market data and research firm, shows private developers and governments across the continent are spending over $100 billion on new sprawling city projects from Utopian sea-side business districts, smart tech hubs to futuristic residential cities. Of the eighteen major new city projects analysed in the report, Nigeria accounts for five which, when completed, will cover a landmass of more than 25 million square meters. Nigeria, already Africa’s most populous country, is set to become the world’s third largest by population in 2050. But the pace of new city developments do not always match population size: Mauritius, the Indian Ocean island nation of only 1.2 million people, has four major new cities planned. As land in urban city centres is already scarce, a majority of the new cities planned or in development are situated on the fringes of existing cities. It’s a necessary compromise as the new cities will require brand new, more efficient infrastructure—independent of existing amenities like sewage, roads and power—to justify the huge financial outlays. Many of the new cities are futuristic in design and also in delivery dates as typical timeline for completion ranges from 10 to 30 years comprising of planning, development and sale processes. Marketing the new cities to prospective new inhabitants happens long before they’re completed. Developers often pull out all stops from promising early bird discounts to using slick marketing videos to showcase the cities. It’s a tactic that often drives early adoption and then a surge in value of the property. For instance, land prices in Lagos’ Eko Atlantic have nearly doubled since construction began in 2008. But as new city construction ramp up, it’s unlikely they will make a big enough dent in the housing shortage as they ignore the socio-economic realities of locals. Once they are completed, much of the luxurious apartment homes will likely remain out of reach for a majority of citizens in need of housing. Indeed, Senegal’s $2 billion Diamniadio Lake City is already facing strong criticism as being “planned without inhabitants in mind” amid fears that its costs could worsen Senegal’s debt problems. Meanwhile, in Vision City, Kigali, one of the country’s string of proposed “smart cities,” a home unit costs around $160,000 even though up to 50 per cent of the city’s population live in slums. There’s also the question of the effects new city projects will have on the wider population, especially when land reclamation from the sea is involved. A prime example is Nigeria’s Eko Atlantic project, a 6-mile city built on land reclaimed from the Atlantic Ocean. While the new city will have a sea wall wrapped around it to protect it from the ocean’s storms, experts say it will leave other parts of Lagos even more susceptible to flood.

Local Brewer Bralirwa Plc is set to launch the local production of Heineken beer, which was previously imported from the Netherlands. With that, the brewer becomes the 9th subsidiary of the Heineken Group to produce the drink locally. The brand will be produced in its Gisenyi Brewery. By producing it locally, the firm is also seeking to execute a downward revision of retail price from current Rwf1000 to Rwf800. However, the drink’s bottles will now be returnable. This, analysts say, could be a move to drive up sales of canned beer under the same brand as a section of the brand’s consumer prefer the disposable of the bottles. Victor Madiela, the Managing Director of Bralirwa, said that they expect the development to improve their business prospects in Rwanda and increase their exports to the region. “We believe that this innovation will create additional business opportunities for Bralirwa Plc and for our business partners in Rwanda as well as through export to neighbouring countries. Additionally, this is another contribution by Bralirwa plc to the Made-in-Rwanda programme. By switching from importing to local production, Bralirwa Plc will contribute to the development of the local economy,” Madiela said. The firm registered a profit of Rwf2.1b in the first half of 2018 following total revenues of Rwf45.4b in the first half of 2018. The firm, however, has been facing persistent challenges, including increased input costs which have continued to hold back its performance in recent years. Madiela in August admitted to increased competition in the local market saying that they are seeking an edge. The firm faces growing competition from Skol Brewery which has a range of beers and drinks. Imports are also increasingly becoming popular in the local market coupled with refined consumer tastes in liqours further driving competition. The firm’s revenue was this year adversely impacted by a one-off excise tax correction following a tax audit which by the Rwanda Revenue Authority discrepancy which revealed a discrepancy of about Rwf400m for the years 2015 to 2017. The group’s recurrent operating costs were estimated at Rwf7 billion owing to higher input costs and brand investments. The firm has in recent months introduced a strict cost management drive.

On 7 November 2018, the Federal Council decided to remove the transitional provision concerning the term "participating state" in the Ordinance on the International Automatic Exchange of Information in Tax Matters with effect from 1 January 2019. Background. According to the definition of the standard on the automatic exchange of information (AEOI), a participating state is a state with which an AEOI agreement exists. Financial institutions have enhanced due diligence requirements vis-à-vis non-participating states. When the OECD introduced the AEOI, it was decided that states could include a transitional provision in their national law according to which participating states are also deemed to be states that have undertaken to implement the AEOI. The reason for this is that the AEOI will not be introduced by all states at the same time. Instead, the AEOI agreement network will be gradually expanded. The transitional provision was intended to reduce the financial institutions' burden during the introductory phase of the AEOI. More than 100 states and territories, including Switzerland, have since introduced the AEOI and expanded their agreement network. Against this backdrop, the OECD called on the states in autumn 2017 to remove the transitional provision. Switzerland made use of this transitional provision, which will cease to apply with effect from 1 January 2019.

On 15 November 2018, the Swiss Federal Tax Administration (FTA) announced that in the course of the corporate tax reform, it will no longer apply the federal practices concerning principal companies and Swiss finance branches to new companies from 2019. The corporate tax reform (Tax Proposal 17) introduces legislative measures to bring Swiss corporate tax law in line with international requirements. Tax Proposal 17 provides, inter alia, for the abolition of arrangements for cantonal status companies. Correspondingly, the FTA will abolish the federal practices on tax allocation for principal companies and Swiss finance branches in parallel to the abolition of the rules concerning cantonal status companies. Unlike the rules concerning cantonal status companies, the abolition of federal practices does not require any legislative amendment. As a first step, the FTA will therefore ensure that federal practices are no longer applied to new companies from 2019. With the entry into force of the Tax Proposal 17 at the beginning of 2020, the federal practices for existing principal companies and Swiss finance branches will also be abolished.

The Swiss Federal Tax Administration (FTA) announced that from 15 November 2018, mail-order businesses registering online for VAT purposes in Switzerland will have to indicate if they are active in the area of mail-order and give their express consent if they wish to be included on a corresponding list. It is however in their interest to do so in order to ensure that the import VAT is not wrongly invoiced to the client and to avoid potential complaints. On its website, the FTA provides a list of mail-order businesses that are registered for VAT purposes in Switzerland. The aim of such a list is to help the undertakings entrusted with the customs clearance formalities to know whom, between the recipient of the parcel and the mail-order businesses, they should charge the import VAT to. This list can be made available in XML format for the persons responsible for customs clearance formalities. Under the CHF 100,000 threshold, mail-order businesses may choose to waive the exemption from tax liability and register voluntarily using the declaration of subordination. Under this procedure, a business has authorization from the FTA to import goods in its own name and, if the other conditions are met, can deduct the import tax as input tax in its VAT returns. In terms of VAT, the subsequent supply of goods made to the recipient is then considered made on Swiss territory (same as with the provision for mail-order sales). The main advantage of choosing to apply the declaration of subordination is that a mail-order business can plan ahead its transition towards a mandatory VAT liability as provided in the provision for mail-order sales and its VAT registration. Background. Article 7(3)b of the Swiss VAT Act, a new provision for mail-order sales, will enter into force on 1 January 2019 (see Switzerland-1145, News 16 August 2018). Accordingly, any person making supplies of low value goods/parcels and achieving in 2018 a minimum turnover of CHF 100,000 from these supplies must register for VAT purposes if it is forecasted that the same supplies of goods will also be provided in 2019. Low value goods/parcels are goods that are exempt from import tax due to the insignificant import tax amount (less than CHF 5.00). If in 2019, a person starts making supplies of goods that are imported from abroad and if those supplies are exempt from import tax due to the insignificant import tax amount, the place of supply for those supplies will be deemed to remain outside the Swiss territory as long as the CHF 100,000 threshold is not reached. From the beginning of the month following the month during which the threshold was reached, the place of supply for all supplies of goods from abroad will change to be on Swiss territory. If this occurs, the mail-order business will have to register for VAT purposes in Switzerland.

On 7 November 2018, HMRC released the following consultation outcomes:

• Tax Abuse and insolvency - The document confirms that legislation will be enacted to allow HMRC to make directors and other persons involved in company tax avoidance, evasion or phoenixism jointly and severally liable for tax liabilities that arise from those activities where the company becomes insolvent.
• Review of the corporate intangible fixed assets regime - The document summarizes the responses received to the consultation on the reform of the corporate intangibles regime with the objective of simplifying it and making it more effective in supporting economic growth.
• Tackling the hidden economy: public sector licensing – The document summarizes the responses received to the consultation on conditionality measures taken to tackle the hidden economy.
• Online platforms' role in ensuring tax compliance by their users - The document summarizes the submissions received to the consultation on the role of online platforms in ensuring tax compliance by their users and sets out the government's next steps, including using new technology to improve the guidance available for those who make money using online platforms.

On 7 November, HMRC published a final version of the draft legislation, in the form of a statutory instrument, together with a policy paper and a guidance note, on the introduction, with effect from 1 October 2019, of a VAT domestic reverse charge for certain building and construction services.

Details of the Austria-United Kingdom Income Tax Treaty (2018), signed on 23 October 2018, have become available. The treaty was concluded in the English and German languages, each text having equal authenticity. The treaty generally follows the OECD Model (2017). The maximum rates of withholding tax are:

• 10% on dividends in general, 15% were the dividends are paid by a relevant investment vehicle (as defined in Art. 10(6)), and 0% if the beneficial owner of the dividends is a company (other than a partnership) which controls, directly or indirectly, at least 10% of the voting power in the company paying the dividends or a pension scheme;
• 0% on interest; and
• 0% on royalties.

Deviations from the OECD Model include that:

• article 4(2) provides that the term "resident of a Contracting State" includes a pension scheme established in that State and an organization that is established and is operated exclusively for religious, charitable, scientific, cultural, or educational purposes (or for more than one of those purposes) and that is a resident of that State according to its laws, notwithstanding that all or part of its income or gains may be exempt from tax under the domestic law of that State;
• article 4(4) provides that where by reason of the provisions of article 4(1) a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated. However, in cases of doubt, the competent authorities of the Contracting States shall endeavour to determine by mutual agreement the State in which the person’s place of effective management is exercised, and in doing so shall take into account all relevant factors. In the absence of such agreement, that person shall not be entitled to claim any benefits provided by the Convention except those provided by article 21 (Elimination of Double Taxation), article 22 (Non-discrimination) and article 23 (Mutual Agreement Procedure).
• article 5 on permanent establishments follows the OECD Model (2014);
• article 7 on business profits is based on the OECD Model (2008); and
• article 27 on limitation of relief provides for a principle purpose test.

Both states generally provide for the credit method to avoid double taxation. The treaty also clarifies that the United Kingdom exempts the dividends paid by a company resident in Austria to a company resident in the United Kingdom if the conditions for the exemption are met under the laws of the United Kingdom. Likewise, the profits of a permanent establishment in Austria of a company resident in the United Kingdom are exempt in the United Kingdom if the conditions for the exemption are met.

On 26 November 2018, the US Treasury Department and the US Internal Revenue Service (IRS) released proposed regulations (REG-106089-18) with regard to the limitation on the deduction for business interest expense under section 163(j) of the US Internal Revenue Code (IRC) as amended by the Tax Cuts and Jobs Act (TCJA). The IRS also issued a related News Release (IR-2018-233) dated 26 November 2018. For tax years beginning after 31 December 2017, the deduction for business interest expense is generally limited to the sum of a taxpayer's business interest income, 30% of adjusted taxable income and floor plan financing interest. Certain small businesses whose gross receipts are USD 25 million or less (adjusted for inflation) and certain trades or businesses are not subject to the limitation under IRC section 163(j). The proposed regulations provide the following guidance:

• general rules relating to the computation of a taxpayer's section 163(j) limitation;
• ordering and other rules regarding the relationship of the section 163(j) limitation and other provisions of the IRC affecting interest;
• rules applicable to C corporations (including real estate investment trusts (REITs), regulated investment companies (RICs) and consolidated group members) and tax-exempt corporations;
• rules governing the disallowed business interest expense carryforwards of C corporations;
• special rules for applying the section 163(j) limitation to partnerships and S corporations;
• rules regarding the application of IRC section 163(j) to foreign corporations and their shareholders;
• rules regarding the application of IRC section 163(j) to foreign persons with US effectively connected income;
• rules regarding elections for excepted trades or businesses, as well as a safe harbour for certain REITs;
• rules to allocate expense and income between non-excepted and excepted trades or businesses; and
• certain transition rules relating to the application of the section 163(j) limitation.

Taxpayers may rely on the rules in the proposed regulations until final regulations are published in the Federal Register.

On 28 November 2018, the US Treasury Department and the US Internal Revenue Service (IRS) released proposed regulations (REG-105600-18) on the determination of the foreign tax credit (FTC) under the various provisions of the US Internal Revenue Code (IRC). The IRS also issued a News Release (IR-2018-235) dated 28 November 2018 to announce the issuance of the proposed regulations. The proposed regulations provide guidance related to changes made by the Tax Cuts and Jobs Act (TCJA), which was enacted on 22 December 2017. Those changes include:

• the repeal of rules for computing deemed-paid FTCs on dividends on the basis of foreign subsidiaries' cumulative pools of earnings and foreign taxes;
• the addition of two separate FTC limitation categories (baskets) for foreign branch income and amounts includible under the new Global Intangible Low-Taxed Income (GILTI) provisions; and
• the modification of how taxable income is calculated for the FTC limitation by disregarding certain expenses related to income eligible for the dividends-received deduction and repealing the use of the fair market value method for allocating interest expense.

The new FTC rules apply to tax years beginning after 31 December 2017.

A tax treaty is a bilateral agreement made by two countries to resolve issues involving double taxation of passive and active income. Treaties Update – November 2018

Date	Country A	Country B	Object	Status
30.11.18	Hong Kong	India	Income Tax Treaty	Entered into force
12.11.18	Brazil	United Arab Emirates	Income Tax Treaty	Signed
19.11.18	Paraguay	United Arab Emirates	Income Tax Treaty	Ratified
18.11.18	Guernsey	United Kingdom	Income Tax Treaty	Ratified