November 2020

  • United States
    • US President-Elect Joe Biden to Propose Significant Tax Reform

      Former US Vice-President Joe Biden has won the 2020 US presidential election. The battle was fierce, took several days to call and drove voters to the polls in record numbers. Because so many people voted early and by mail, it took election officials in many key states days to count all the votes – some are still counting. By Saturday the news outlets felt confident enough in the outcome to declare Joe Biden the President-elect. Fittingly, the votes from Biden's home state of Pennsylvania provided the necessary margin for him to win the Electoral College (see Note below). Although Pennsylvania put Biden over the top, other states – Nevada and possibly Arizona and Georgia – have provided additional margin, beyond the 270 Electoral College votes required for election.

      Meanwhile, while Biden and Vice-president-elect Senator Kamala Harris, have called for healing and unity, Republican incumbent President Donald J. Trump has yet to concede the race, but instead has filed a number of lawsuits (many of them already dismissed) challenging the results.

      During the campaign, Biden proposed to raise taxes on corporations and single filers earning more than USD 400,000 annually, which is expected to bring in USD 3.5 trillion over 10 years. Biden's tax plans would also require corporations and wealthy American taxpayers to pay more, through the following measures:

      • raising the corporate tax rate from 21% to 28% (which is still lower than the pre-Trump rate of 35%);
      • imposing a true minimum tax of 21% on foreign earnings of US companies;
      • requiring all corporations to pay a 15% minimum tax on book income (i.e. income before tax);
      • raising the top individual income tax rate from 37% back up to 39.6% (the top rate in effect under the Obama administration); and
      • eliminating the lower 20% capital gains tax rate on investment income of more than USD 1 million annually, requiring taxpayers to pay the same rate as on wages.

      Now that Biden has won the presidency, all eyes turn to two US Senate runoff elections in Georgia. Scheduled for 5 January 2021, the outcome of those two races will determine which party controls the US Senate next year. Should Republicans hold their majority, Biden will face an uphill battle to enact his tax plans.

      Note: The United States elects its president and vice-president under the rules set out in the US Constitution. Voters do not vote directly for the candidates of their choice, but instead vote for a slate of "electors," pledged to particular candidates for president and vice-president. Each state is entitled to the number of electors equalling the number of members of the US House of Representative from that state, plus the number of senators (i.e. 2) from that state. In December, the electors pledged to the winners of the popular vote in each state meet to cast their ballots in the "Electoral College." There are a total of 538 electors for the United States, and it requires a majority of electoral votes, 270, to win.

    • Featuring Interview on the Impact of a Biden Victory in the US Elections on Global Tax Reform Negotiations, with Itai Grinberg, Professor of Law, Georgetown University Law Center

      This week in IBFD Tax Takes: News & Views we ask Itai Grinberg, former Attorney-Advisor to the US Treasury Department and US representative at the Committee on Fiscal Affairs of the OECD, to talk about the outcome of the US elections and the challenges an incoming Biden administration will face as it enters negotiations over global tax reform on Pillar 1 and Pillar 2 (BEPS Action 1: Tax Challenges Arising from Digitalisation). In the lead-up to our interview, you can catch up on the week's most significant tax news from around the world, drawn from IBFD's online Tax News Service. This week's picks include, Russia and the Bahamas stepping up their efforts to eliminate the competitive advantage of foreign digital service providers like Facebook, Poland and Tunisia raising the stakes in global tax competition with their corporate income tax reform efforts and the European Commission initiating new infringement proceedings against a broad array of EU Member States.   Watch video now:
    • New York Advises That Digital Ads Trigger State and Local Sales Taxes

      Giving customers access to prewritten software may trigger New York state and local sales tax if the taxpayer's customers that use the software are located in New York under advisory opinion 20-22. The state generally imposes retail sales tax on sales of tangible personal property, which includes the sale of prewritten software. Certain services are non-taxable, however, when several distinct taxable and non-taxable items are sold together for one non-itemized price, sales tax is due on the total sales price charged.

      In this case, the taxpayer's digital platform allowed customers access to certain software tools to create, deliver and manage their own digital advertisements, in addition to offering non-taxable services. The taxpayer approved the advertising campaign (once completed by the customer) and placed the digital advertisements using its network of third-party publishers. The taxpayer's receipts were generally based on the number of views any particular digital advertisement received. There was no specifically identified charge for access to the platform (i.e. the prewritten software), which otherwise would have triggered New York's sales tax requirement. Additionally, The taxpayer billed for all services (taxable and non-taxable) in a single receipt; there was no itemization of charges.

      The advisory opinion concluded that the practice of not specifically charging customers for access to prewritten software for their own use triggered sales taxes on tangible personal property in New York to the extent that any of the taxpayers' customers' employees who use the software to create their digital advertising campaigns were located in New York. The tax was assessed on the total sales price charged due to the singular, non-itemized, invoices sent to the taxpayers' customers.

    • COVID-19 Pandemic: US Tax Court Resumes Hand-Delivered Documents

      Effective 16 November 2020, the US Tax Court resumed accepting hand-delivered documents to the main courthouse building in Washington DC.

      The US Tax Court building had been closed on 18 March 2020 as a result of the ongoing COVID-19 pandemic. Operations were temporarily shut down and mail and other deliveries were put on hold until the court re-opened (deliveries postmarked within allotted timelines were considered timely). Mail delivery resumed and hand-delivered documents were accepted on and after 10 July 2020. Shortly after that, in-person acceptance of hand-delivered documents was again suspended effective 30 October 2020, but eAccess and eFiling systems remained operational.

      These changes were announced in various press releases issued by the US Tax Court to accommodate remote operations during the ongoing COVID-19 pandemic.

    • United States Announces Termination of Shipping Agreement with Hong Kong

      On 20 October 2020, the US Internal Revenue Service (IRS) issued announcement 2020-40, communicating that the United States provided a written notification dated 18 August 2020 to the government of the Hong Kong Special Administrative Region on the termination of the Honk Kong - United States Shipping Tax Agreement (1989). The termination of the agreement shall take effect on 1 January 2021 and shall have effect for taxable years beginning on or after that date.

      Under the Honk Kong - United States Shipping Tax Agreement (1989), income was exempt from tax in one contracting state for income derived from the international operation of ships by residents of the other contracting state.

      According to paragraph 8 of the first note of the exchange of notes, either government may terminate the agreement by giving written notice of termination.

  • Bulgaria
    • Bulgaria Proposes Increase in Minimum Salary

      On 29 October 2020, as part of the 2021 draft bill, Bulgaria officially proposed increases in the minimum monthly salary (from the current BGN 610 to BGN 650) and the minimum monthly social security income for self-insured persons (from BGN 610 to BGN 650) as from 1 January 2021.

      In that context, the Council of Ministers submitted to the Bulgarian parliament the following draft acts:

      • the Budget Act for 2021, available here; and
      • the Act on the budget of the State Social Security for 2021, available here.

      Furthermore, it was proposed that the maximum monthly social security income remain unchanged at BGN 3,000. Finally, no changes to the social security contribution rates are envisaged.

      As a next step, the acts must be voted on at two readings by the parliament.

      Further developments will be reported in due course.

    • Bulgaria Proposes Higher Thresholds for Audits of Small Enterprises

      On 6 November 2020, Bulgaria proposed that the thresholds for statutory audits of annual financial statements of small enterprises be increased to BGN 3 million for the book value of assets and to BGN 6 million for net sales revenue. Currently, subject to a statutory audit, among other things, are the annual financial statements of small enterprises that exceed at least two of the following criteria:

      • the book value of the assets exceeds BGN 2 million;
      • the net sales revenue exceeds BGN 4 million; and
      • the average number of personnel for the reporting period exceeds 50.

      The proposal was submitted to the Bulgarian parliament between the first and second reading of the 2021 draft bill for amendments to the Accountancy Act, which had been submitted to the parliament on 27 October 2020 by the Council of Ministers (technically included in the additional provisions of the draft bill for amendments to the Value Added Tax Act). As a next step, the proposal must be voted at second (final) reading by the parliament.

      The proposal is available here (as a PDF and in Bulgarian only).

      Further developments will be reported in due course.

    • Bulgaria Officially Extends Submission of Corporate and Personal Income Tax Return Deadlines

      On 19 November 2020, Bulgaria, as part of the tax package for 2021, officially adopted the extension of the deadline for the submission of corporate income tax (CIT) and personal income tax (PIT) returns and the publication of annual financial reports.

      Several other substantial changes contained in the Bulgarian 2021 tax package include, without being limited to, the implementation of the voluntary use of approved software for sales, an exemption from transfer tax for deregistered vehicles and a refund of excise duties imposed on ethyl alcohol used for disinfection purposes.

      The announcement of the adoption of the package can be found here (in Bulgarian only).

    • Bulgaria’s government approves new double tax treaty with the Netherlands

      Bulgaria’s Cabinet approved, at a regular meeting on November 25, a treaty with the Netherlands on the avoidance of double taxation, according to a statement by the government information service.

      The treaty, signed on September 14 2020, covers the avoidance of double taxation in income taxes and the prevention of tax evasion and circumvention.

      It will be put to Bulgaria’s National Assembly for ratification.

      The document creates tax-friendly opportunities for residents of each of the two countries to carry out business activities in the other country in various fields and industries, the Bulgarian government statement said.

      “This will contribute to the deepening of bilateral economic and investment co-operation between the two countries,” the statement said.

      The tax rules adopted in the signed agreement are in accordance with current Bulgarian tax legislation and modern principles and developments in international taxation, reflected in the current Model Agreement of the Organization for Economic Cooperation and Development (OECD).

      The new guidelines in this area are also set out in the Base Erosion and Profit Shifting (BEPS) Project, which offers countries solutions to overcome differences in existing international tax rules that allow companies to minimise their tax liabilities by using aggressive tax planning schemes, artificially transferring their corporate profits to jurisdictions with low or zero tax rates, the statement said.

      The measures under the BEPS Project open the way for greater tax predictability and legal certainty by creating conditions for more effective settlement of disputes between taxpayers and administrations in the application of international tax rules and requirements, it said.

      Source: Bulgaria’s government approves new double tax treaty with the Netherlands | The Sofia Globe

  • China
    • Two Authorities Adjust Catalogue of Prohibited Commodities in Processing Trade

      The Ministry of Commerce and the General Administration of Customs recently issued an announcement to adjust the Catalogue of Prohibited Commodities in Processing Trade, to be implemented from December 1, 2020.

      According to the announcement, 199 commodity codes in the 2014 catalogue, which are consistent with China's industrial development policies, are not products with heavy pollution and high energy consumption, and involve advanced technologies, will be removed from the catalogue; some products will be prohibited by different means. Other products on the catalogue will continue to be prohibited according to the previous announcement released in 2014.

    • Hainan Free Trade Port Releases First “Zero Tariff” Positive List

      The Ministry of Finance, the General Administration of Customs and the State Taxation Administration released on November 12, 2020 the Circular about "Zero Tariff" Policies for Importing Raw Materials to Hainan Free Trade Port, to be implemented from December 1, 2020.

      According to the circular, if a company has been registered and secured independent legal entity at the free trade port before the island is closed off, and it imports raw materials for production, processing or service trade purposes and will export finished products to foreign destinations, it will be exempted from import tariff, import value-added tax and consumption tax. The "zero tariff" materials will be managed through a positive list, which includes 169 items in eight tax categories in the first stage.

    • Three Authorities Unveil Preferential VAT Policies for Insurance and Export Companies at GBA

      The Ministry of Finance, the General Administration of Customs and the State Taxation Administration recently issued the Circular about Implementing Value-added Tax Policies at the Guangdong-Hong Kong-Macau Greater Bay Area.

      From October 1, 2020 to December 31, 2023 insurance companies registered in Guangzhou will be exempted from value-added tax for revenues received from providing international shipping insurance to enterprises registered in Nansha free trade zone; from October 1, 2020 eligible export companies can get tax rebate for container goods shipped to foreign markets from Nansha bonded port zone and Qianhai bonded port zone.

    • Returned Goods from Export Destinations Will Not Be Levied with Import VAT Tax and Consumption Tax

      The Ministry of Finance, the General Administration of Customs and the State Taxation Administration released on November 3, 2020 the Announcement about Tax Policies for Returned Export Goods Due to the COVID-19, effective from November 2, 2020.

      According to the announcement, if a company declares export between January 1, 2020 and December 31, 2021, and the exported goods are returned within one year due to the COVID-19 pandemic, the goods will not be levied with import tariff, import value-added tax or consumption tax; export tariff will be returned if the tariff has already been levied. If taxpayers have already received tax rebates for their exported goods, and the goods are later returned, they shall repay the rebated value-added tax and consumption tax according to existing tax rules.

    • Minister Zhong Shan signed the Regional Comprehensive Economic Partnership Agreement on behalf of the Chinese government

      On November 15, during the 4th Regional Comprehensive Economic Partnership (RCEP) Summit, witnessed by Premier Li Keqiang and other leaders attending the meeting, Minister of Commerce Zhong Shan signed the RCEP on behalf of the Chinese government, together with the trade ministers of 10 ASEAN countries, Japan, the ROK, Australia and New Zealand.

      The RCEP consists of 20 chapters, covering comprehensive market access commitments on goods, services, investment and other areas. It is a comprehensive, modern, high-quality and mutually beneficial free trade agreement. The overall liberalization level for trade in goods exceeds 90%; the service trade commitment is significantly higher than that of the original China-ASEAN FTA; the negative list approach is applied for market access commitments on investment; the rules cover trade facilitation, intellectual property rights, e-commerce, competition policy, government procurement and other areas at a higher level. The RCEP Agreement also fully takes differences in economic scale and development level among members into consideration, and includes dedicated chapters on small and medium-sized enterprises and economic and technological cooperation to help developing members, especially the least developed ones, to fully enjoy the benefits of RCEP.

      The signing of the RCEP Agreement marks the successful launch of the world's largest free trade area and is a new milestone for East Asian economic integration. The total population, economic volume and trade of the 15 existing RCEP members all account for about 30% of the global total, which means that about one third of the global economy forms an integrated market. This will strongly support the free trade and multilateral trading system, promote international cooperation against COVID-19, keep the regional industrial chain and supply chain stable, and boost regional and global economic recovery and development.

      In the next step, the parties are committed to completing their domestic approval procedures so that the agreement will enter into force as early as possible.

    • China’s FDI inflow rises for 7th month

      Foreign direct investment (FDI) into the Chinese mainland, in actual use, expanded 18.3 percent year on year to 81.87 billion yuan (about 12.4 billion U.S. dollars) in October, the Ministry of Commerce (MOC) said Monday.

      This marked the 7th consecutive month for the country to see positive growth in FDI. In the first ten months, FDI growth was 6.4 percent year on year, quickening from the 5.2-percent gain seen in the first three quarters, the MOC data showed.

      Foreign investment in the service industry came in at 625.8 billion yuan during the January-October period, up 16.2 percent year on year, while that in the high-tech service sector increased 27.8 percent.

      Building on the effective containment of the COVID-19 epidemic, China has rigorously rolled out a string of measures to stabilize foreign trade and investment.


    • The 3rd China International Import Expo Concludes with Great Highlights

      The 3rd China International Import Expo themed "New Era, Shared Future" was successfully held in accordance with the general requirements of “making continued success” despite negative impacts. Coordinated efforts have been made to deliver fruitful results while containing the coronavirus. The total area of the CIIE was nearly 360,000 square meters, about 30,000 square meters larger than that of the last one. Exhibitors from many countries and regions launched a large number of new products, new technologies and new services at the CIIE. 101 supporting activities were held. The CIIE attracted nearly 400,000 professional visitors and more than 3,000 domestic and foreign journalists, living up to the expectations of making a safe, splendid and successful expo.

      First, the high-standard exhibition wins warm response at home and abroad.

      Second, the high-quality exhibition sees active participation by businesses around the world.

      The total number of new products, new technologies, and new services making their debut at this year's CIIE is 411. Nearly 80% of the Global Fortune 500 enterprises and industry leaders have participated in the CIIE for three years in a row. The level of exhibition setup improves with 94% of special booths. Multiple ministries have launched support measures on tax incentives, customs clearance and market access, among others, which brings real benefits for exhibitors and buyers. The six exhibition zones in the 3rd CIIE are featured in different highlights.

      Third, rich agenda and fruitful results.

      Despite the ravaging COVID-19, participants at the 3rd CIIE were full of enthusiasm for cooperation. The cumulative intended deal on an annual basis reached USD72.62 billion, up by 2.1%.

      Fourth, thoughtful services and better experience.

      The 3rd CIIE, integrating virtual and physical exhibitions, is the largest international event with the most participating countries held in China as we maintain containment routines in the meantime. It is a testament to the remarkable achievements of China in epidemic control and economic and social development. It has served as platforms for sourcing, investment promotion, cultural exchanges, and openness and cooperation. Through the spillover effect of these platforms, exhibits have made their way to the markets, while exhibitors have found investment opportunities. The CIIE has also sent messages of wider opening-up and shared markets to the world, and underpinned the strategy to expand domestic demand and build a new paradigm of domestic and international circulations.

  • Focus Africa
    • South Africa to Relax Exchange Control Rules

      South Africa has announced reforms aimed at phasing out the current exchange control regulations to make it easier to invest in South Africa, these measures are:

      • In respect of inward listing instruments: all debt, derivatives and exchange traded instruments referencing foreign assets, that are inward listed, traded and settled in Rand on South African exchanges, will be classified as domestic. The classification of all inward listed shares denominated in Rand remains domestic.
      • In respect of loop structures for foreign direct investment purposes: the full 'loop structure' restriction has been lifted to encourage inward investments into South Africa, subject to reporting to the South African Reserve Bank (SARB) as and when the transaction is finalized. A 'loop structure' entails the formation by a South African resident of an offshore structure which, by reinvestment into the country, acquires shares, loan accounts or some other interest in a South African resident company or a South African asset. This reform will be effective from 1 January 2021 for companies, including private equity funds, provided that the entity is a tax resident in South Africa.
      • In respect of corporate foreign borrowings: all bond and note issuances by South African corporates offshore (excluding State owned companies) with recourse to South Africa, will be subject to framework and reporting conditions determined by the SARB, which will replace the current prior-approval process.

      In addition to the above-mentioned reforms, several measures aimed at widening the tax base and increasing tax revenue for the financial years 2021/22, 2022/23 and 2023/24 have been announced. These include:

      • finalizing the tax gap study in December 2020 to quantify the difference between how much tax should be collected and how much is collected;
      • remaining focused on international taxes, particularly aggressive tax planning using transfer pricing;
      • increasing enforcement to eliminate syndicated fraud and tax crimes;
      • continuing to use third-party data to find non-compliant taxpayers; and
      • collecting pay-as-you-earn and value added tax debt and ensuring that outstanding taxpayer returns are filed, and liabilities paid.

      These measures were presented to the parliament by the Minister of Finance on 28 October 2020, through his 2020 Medium Term Budget Statement.

    • Put small-scale traders at the heart of efforts to accelerate trade and investment in Africa post COVID-19

      The AfCFTA will not in one dramatic swoop alter existing commercial and economic realities on a vast scale, but its implementation could lead the recovery efforts from the COVID-19 crisis – Solomon Quaynor, VP African Development Bank

      Industry experts meeting this week for a virtual discussion focused on resetting, retooling and restarting regional integration in Africa in the wake of the COVID-19 pandemic, underscored the importance of putting small scale traders at the heart of any initiatives.

      The joint webinar, organized on Tuesday by  the African Development Bank and Korea Customs Service(KCS), looked at service sectors, e-commerce, digital platforms and value chain development as critical factors for accelerating trade and investment in Africa against the backdrop of the global pandemic. The webinar was delivered in three sessions, moderated by Stephen Karangizi, Director, African Legal Support Facility; Dr. Stephen Karingi, Director at Regional Integration and Trade Division of UNECA and Acha Leke, Senior Partner at McKinsey

      History has demonstrated the success of countries and businesses that seize new opportunities during times of crisis, said Sukhwan Roh, Commissioner of the Korea Customs Service. “The COVID-19 pandemic has completely changed health and livelihoods of individuals across  the world in less than a year,” he said. “Korea wishes to share all the achievements in system enhancement utilizing new technologies with African countries.”

      The workshop’s audience heard how regional integration is increasingly central to the continent’s future economic prospects and to attracting foreign direct investment. The African Continental Free Trade Agreement, (AfCFTA),  already ratified by 30 countries, is expected to come into effect on 1 January, 2021. Uniting all 55 member states of the African Union, the pact will create a market of more than 1.2 billion people, including a growing middle class, and a combined gross domestic product (GDP) of over $3.4 trillion

      COVID-19 has deepened pre-existing trade frictions within the continent yet offers  important growth  opportunities and great stories of innovation and highlights the importance of protecting Africa’s place in local value chains, said Anabel Gonzalez, Senior Fellow, Peterson Institute for International Economics, with the need to “put small scale traders at the heart of the effort.”  She urged governments to strengthen national agencies to provide support to small traders.

      “AfCFTA creates a new trade and integration reality…integrating unequal partners across the continent,” said Trudi Hartzenberg Executive Director of the Trade Law Center (TRALAC). Trade facilitation  enjoys specific focus within the AfCFTA, with digital, e-payments, and e-commerce particularly important, she added, citing a 2020 WTO report that emphasized education and healthcare as fundamental to industrialization.

      From the outset, the African Development Bank has lent strong support to the AfCFTA, financing the set-up of its secretariat as well as supporting  member countries with technical assistance to  comply with  a range of AfCFTA regulations, said Bank Vice President, Infrastructure, Private Sector & Industrialization, Solomon Quaynor in his introductory remarks read by Abdu Mukhtar, Bank Director, Industrial and Trade Development Department.

      Still, Quaynor warned, post-crisis recovery efforts are likely to be slow.  “The AfCFTA will not in one dramatic swoop alter existing commercial and economic realities on a vast scale. However, through strategic measures and the right investments, policy frameworks and political backing, intra-African trade will be enhanced.“

      African countries innovate to enhance local value chains

      Presentations provided examples from Ghana and Zambia of strategies the private sector can adopt to leverage the AfCFTA within the context of the pandemic.

      Ghana previously imported most of its Personal Protective Equipment or PPE, but, since the pandemic, the government galvanized 14 local garment firms to manufacture PPE. These firms now produce 1,000 items daily,  according to Ghana’s deputy trade minister, Robert Ahomka Lindsay. The development has created 10,000 jobs.

      “ Traditional value chains have been challenged… it made us realise that we cannot rely on those value chains,” Lindsay said.

      Some of the worst-affected sectors in Africa such as tourism, aviation and education, had shown resilience, for example, in the food industry, which harnessed e-commerce for marketing during the pandemic, noted Kenneth Baghamunda, Dir. General, Customs and Trade, East African Community Secretariat. Zambia’s success with cashless payment solutions at its border and other innovations since COVID-19 was another example of favourable results.

      “We need to see which value chains need to be developed and we need to interconnect our policies with the right institutional framework,” he said.

  • Hong Kong
    • Three Authorities Unveil Preferential VAT Policies for Insurance and Export Companies at GBA

      The Ministry of Finance, the General Administration of Customs and the State Taxation Administration recently issued the Circular about Implementing Value-added Tax Policies at the Guangdong-Hong Kong-Macau Greater Bay Area.

      From October 1, 2020 to December 31, 2023 insurance companies registered in Guangzhou will be exempted from value-added tax for revenues received from providing international shipping insurance to enterprises registered in Nansha free trade zone; from October 1, 2020 eligible export companies can get tax rebate for container goods shipped to foreign markets from Nansha bonded port zone and Qianhai bonded port zone.

    • United States Announces Termination of Shipping Agreement with Hong Kong

      On 20 October 2020, the US Internal Revenue Service (IRS) issued announcement 2020-40, communicating that the United States provided a written notification dated 18 August 2020 to the government of the Hong Kong Special Administrative Region on the termination of the Honk Kong - United States Shipping Tax Agreement (1989). The termination of the agreement shall take effect on 1 January 2021 and shall have effect for taxable years beginning on or after that date.

      Under the Honk Kong - United States Shipping Tax Agreement (1989), income was exempt from tax in one contracting state for income derived from the international operation of ships by residents of the other contracting state.

      According to paragraph 8 of the first note of the exchange of notes, either government may terminate the agreement by giving written notice of termination.

  • India
    • Gujarat – nurturing and fuelling New India’s entrepreneurial spirit

      Gujarat is located on the western coast of India and has the longest coastline of 1,600 km among all the states in the country. The state shares its borders with Rajasthan, Madhya Pradesh, Maharashtra, and the Union Territories of Daman and Diu and Dadra and Nagar Haveli. The Arabian Sea borders the state on the west and the southwest.

      Gujarat is one of the leading industrialised states in India. At current prices, Gujarat's Gross State Domestic Product (GSDP) was about Rs. 18.85 trillion (US$ 269.70 billion) during 2020-21. The state’s GSDP grew at a CAGR of 12.87%, during 2015-16 to 2020-21.

      As of March 2020, Gujarat had an installed power generation capacity of 35,211 megawatt (MW), comprising 8,572.17 MW under state utilities, 21,900.16 MW under private utilities, and 4,738.25 MW under central utilities.

      Gujarat is considered the petroleum capital of India due to presence of large refining capacity set up by private and public sector companies.

      The state is the world’s largest producer of processed diamonds, accounting for 72% of the world’s processed diamond share and 80% of India’s diamond exports. With a contribution of 65 to 70% to India’s denim production, Gujarat is the largest manufacturer of denim in the country and the third largest in the world. There are 42 ports, 18 domestic airports and one international airport. There are 106 product clusters and 60 notified special economic zones (SEZs). Large scale investment is expected in Gujarat as part of the US$ 90 billion Delhi-Mumbai Industrial Corridor (DMIC).

      As of February 2020, Gujarat had 20 operational SEZs. In addition to operational SEZs, Gujarat had four SEZs with valid in-principle approvals, 28 SEZs with formal approvals and 24 SEZs with notified approvals.

      According to Department for Promotion of Industry and Internal Trade (DPIIT), Foreign Direct Investments (FDI) inflow in Gujarat reached US$ 26.6 billion between April 2000 and March 2020. Gujarat accounted for about five% share in the overall FDI inflows in India.

      Total exports from the state stood at US$ 63,440 million in 2019-20 and US$ 17,418 million during April to August 2020.

    • India Issues Implementing Guidelines for Equalization Levy on E-Commerce Supply or Services

      The Central Board of Direct Taxes (CBDT) has issued guidelines implementing a 2% equalization levy (EL) chargeable on certain non-resident e-commerce supply or services under the Finance Act, 2020, with the existing rules and forms on the advertisement equalization levy being amended to extend their application to e-commerce supply or services.

      In this regard, the CBDT issued the Equalization Levy (Amendment) Rules, 2020 to amend the Equalization Levy Rules, 2016. The amended EL rules remain largely the same, except for:

      • the substitution of the phrases "specified services or e-commerce supply or services" and "assessee or e-commerce operator" in provisions that mention "specified services" and "assessee", respectively; and
      • the revised Statement of Specified Services or E-commerce Supply or Services (Form No. 1) and Appeal to the Commissioner of Income Tax (Form No. 3), namely:
        • in Form No. 1, an e-commerce operator (i.e. the payer) is only required to provide information on the EL remitted to the government for each calendar quarter, unlike the requirement for specified services where the payer is required to provide information for each service provider and transaction;
        • in the case of a corporate payer, Form No. 1 may be verified by a person authorized to verify the income tax return under section 140 of the Income Tax Act or the principal officer (previously, the managing director or director or principal officer); and
        • in Forms No. 1 and 3, a payer for specified services or e-commerce supply or services may provide the Aadhar number instead of the Permanent Account Number (PAN) (previously, only the PAN is accepted).

      Full details of the amended rules are available here.

      Note: The Finance Act, 2020 extends the application of the equalization levy to e-commerce supply or services, in addition to specified services (i.e. online advertisement or any provision of digital advertisement space), effective from 1 April 2020. The obligation to withhold and remit the EL falls in the hands of the payer.

  • Switzerland
    • Switzerland Allows Deduction of Foreign Penalties

      The Swiss Federal Council will bring the Federal Act on the Tax Treatment of Financial Sanctions into force with effect from 1 January 2022.

      Just as in the past, domestic punitive financial sanctions, i.e. fines, monetary penalties and punitive administrative sanctions, are not tax deductible. In contrast, foreign punitive financial sanctions are to be tax deductible in exceptional cases if they violate Swiss public policy or if a company credibly demonstrates that it has taken all reasonable steps to comply with the law.

      Bribes paid to private individuals are no longer tax deductible. This harmonizes tax and criminal law. Finally, expenses that make a criminal offence possible or are paid in return for one being committed are no longer tax deductible.

      Once the Act comes into force, Switzerland will be complying with a recommendation of the OECD's Financial Action Task Force on Money Laundering. The Federal Council took the relevant decision in its meeting of 11 November 2020.

    • Federal Council Brings Act and Ordinance on International Automatic Exchange of Information in Tax Matters Into Force

      The Swiss Federal Council has approved the amended Ordinance on the International Automatic Exchange of Information in Tax Matters (AEOIO) and decided to bring it into force with effect from 1 January 2021, together with the amendments to the Federal Act on the International Automatic Exchange of Information in Tax Matters (AEOIA).

      The Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) regularly assesses domestic implementation of the standard for the international automatic exchange of information in tax matters (AEOI standard). As part of the assessment procedure, the Global Forum presented Switzerland with recommendations, which the country will in principle implement by the end of 2020.

      Switzerland's parliament had already approved the amendments to the AEIOA on 19 June 2020. These involve the repeal of the exemption clause for condominium associations and an adjustment of the applicable due diligence requirements. In addition, amounts will be stated in US dollars and a document retention obligation will be introduced for reporting Swiss financial institutions.

      With its decision of 11 November 2020, the Federal Council is aligning the AEOIO with the amended AEOIA. The amendments to the AEOIA and AEOIO will enter into force on 1 January 2021.

  • United Arab Emirates
    • UAE Allows Full Foreign Ownership of Firms to Boost Economy


      UAE allows 100% ownership of businesses for foreign nationals from December 1, 2020. The new presidential decree announced on Monday 23 November amends the Federal Law No. 2 of 2015 on Commercial Companies (“Companies Law”), superseding the Decree Law No. 19 of 2018 on Foreign Direct Investment. It annuls the requirement for commercial companies to have a major Emirati shareholder (or agent), and thus providing full foreign ownership of onshore companies.

      Under the new rules:

      • Local authorities can set specific targets for Emiratis in capital allocation and boards of directors of companies. They can also approve requests to establish companies, except for joint stock companies.
      • Firms wishing to become joint stock companies can now sell as much as 70% through initial public offerings, instead of the current 30%.

      The legal changes come on the heels of reforms to personal status and family laws announced earlier this month that decriminalized cohabitation among unmarried couples and removed a requirement to obtain a license to consume alcohol as part of an effort to remain attractive to foreign expertise and investment.

      Abolishing the need for local partners in onshore companies will ultimately pressure the business model of dozens of free zones across the UAE to help satisfy foreign companies unable to work onshore.

      Further official updates detailing the implementation phase of new law will come up soon.

      You can read more, here:

    • Ministry of Finances Confirms Economic Substance Regulations Filing Deadlines

      The United Arab Emirates Ministry of Finance (UAE MoF) has confirmed the Economic Substance Regulations (ESR) filing requirements and deadlines.

      The UAE MoF provides that the deadline for filing the ESR notification and the ESR report is 31 December 2020. Filing must be done through the UAE MoF portal, which will be made available in the first week of December 2020.

      Licensees that file their notification to a regulatory authority before the UAE MoF portal goes lives must resubmit their notification. Failure to submit the notification will be subject to a penalty of AED 20,000. Failure to submit the ESR report will be subject to a penalty of AED 50,000.

      The UAE MOF issued the ESR notice confirming the filing requirements and deadlines on 3 November 2020. The ESR have been prescribed under Cabinet Resolution No 57 of 2020 concerning Economic Substance Regulations and Ministerial Decision No. 100 of 2020.

    • UAE Pass: The digital identity solution unlocking thousands of services in the United Arab Emirates

      Since the government of the United Arab Emirates (UAE) launched the mGovernment initiative in 2013, it has been spearheading digital transformation by integrating and coordinating between different government entities and other sectors to achieve paperless government and provide faster, easier and safer channels for round-the-clock digital public services. UAE PASS, the country’s national digital identity and digital signature solution, is one such service. Inspired by Vision 2021, a plan that foresees high quality of life built on world-class public infrastructure, UAE PASS also forms part of the UAE’s Centennial 2071, another plan that aims to build a future-focused government. Launched in 2018 during GITEX Technology Week as a joint initiative between the Telecommunications Regulatory Authority (TRA), Abu Dhabi Digital Authority and Smart Dubai, UAE PASS is also supported by key strategic partners including the Federal Authority for Identity & Citizenship, the Dubai Electronic Security Center, and the digital authorities of all seven emirates of the UAE. What is UAE PASS? UAE PASS is the United Arab Emirates’ national digital identity and digital signature solution. The service is free and is available for citizens and residents of the UAE. Individuals can start using it after registering on the UAE PASS mobile app, which is available on the App Store and Google Play.

      The app enables all registered individuals to access more than 5,000 government, semi-government and private sector entities’ services through their respective websites and apps, and allows them to digitally sign and authenticate documents and transactions.

      Citizens and residents can use UAE PASS to identify themselves to government or private sector service providers across the UAE through smartphone-based authentication. The application also enables users to request a digital version of official documents issued in their name. An improved user experience Before the launch of UAE PASS, citizens and residents needed to go to each entity separately to verify their identity and had to be physically present together with a government official to complete transactions and sign documents. With UAE pass, users only need to log in once without having to register for each entity separately.

      Officially, UAE PASS digital signatures are valid and equivalent to handwritten signatures.

      The adoption of UAE PASS and digital signatures supported the UAE government’s launch of the Bashr eService, through which businesses can be registered in the UAE in just 15 minutes. Additionally, by eliminating paper transactions and cutting on fuel trips to get these administrative services done, UAE PASS contributes to reduced CO2 emissions. State-of-the-art security The entire UAE PASS infrastructure relies on a secure environment with various security measures put in place to protect users’ identities and signatures. UAE PASS relies on national public key infrastructure (PKI) that utilizes industry standard signing certificates. Secure storage of the keys is done through secure element (SE) and trusted execution environment (TEE) on the user’s mobile phone itself, as well as through a cloud-based hardware security module (HSM). As a testament to the app’s security, several entities in the UAE financial sector use UAE PASS not only as an authentication method, but also as a blockchain-based document sharing platform that serves to onboard new customers and facilitate know your customer (KYC) updates. Enabling the opening of bank accounts without having to visit service centers physically was a welcome advancement especially during the COVID-19 pandemic. Uninterrupted service delivery amid COVID-19 Early in 2020, when the first wave of COVID-19 emerged in the United Arab Emirates, the government relied on UAE PASS to continue delivering public services to socially-distancing residents during the lockdown. Before the emergence of COVID-19, the number of UAE PASS verified accounts was 79,000 and the rate of user satisfaction with UAE Pass service was 70 per cent. After the pandemic hit, 30 additional partners were integrated into UAE PASS.

      As of September 2020, the number of users increased to 243,970 verified accounts.

      UAE PASS continues to serve as a stepping stone in the United Arab Emirates’ secure digital transformation journey.


    • Tax Authority Amends Services and Fees List

      The UAE Federal Tax Authority (FTA) has amended the list of services and fees it is providing to taxpayers. Amongst the services provided the issuance of the tax residence certificate is now within its competency (previously issued by UAE Ministry of Finance).

      The list of services and the corresponding fees are provided as follows:

      Description of the service   Fee (in AED)
      issuance of an attested paper tax registration certificate (new/replacement)   250 per certificate
      issuance of an attested paper warehouse keeper registration certificate (new/replacement)   250 per certificate
      registration of a designated zone, pursuant to the provisions of the Federal Decree Law No. 7 of 2017 on excise tax   2,000 per year
      registration of a tax agent in the register of tax agents   3,000 for 3 years
      renewal of the registration of a tax agent in the register of tax agents   3,000 for 3 years
      registration of an accounting software vendor with the Authority   10,000 for 1 year
      renewal of the registration of an accounting software vendor in the Authority   10,000 for 1 year
      submission of application for a tax residency certificate   50 per application
      review of tax residency certificate application and issuance of an electronic certificate to a registrant with the Authority   500 per application
      review of tax residency certificate application and issuance of an electronic certificate to a legal person not registered with the Authority   1,750 per application
      review of tax residency certificate application and issuance of an electronic certificate to a natural person not registered with the Authority   1,000 per application
      printed paper copy of the issued electronic tax residency certificate under item number 9, 10 and 11 of this table (new/replacement)   250 per certificate
      submission of application for a certificate of commercial activities   50 per application
      review of certificate of commercial activities application and issuance of an electronic certificate   500 per application
      printed paper copy of the electronic certificate of commercial activities issued under item number 14 of this table (new/replacement)   250 per certificate

      The list was updated through Cabinet Decision 65/2020 and is available on the UAE FTA's website.
    • Tax Authority Clarifies Tax Certificates Processes

      The UAE Federal Tax Authorities (FTA) clarified the registration and requests processes regarding the Tax Residence and Commercial Activities Certificates.

      The FTA has issued a Tax Certificate User Guide informing individuals or legal persons requiring these certificates that they should register within the FTA portal and submit the related certificate request. The FTA will review the requests as well as the information provided and issue certificates accordingly.

      The FTA was appointed to issue the Tax Residence as well as the Commercial Activities Certificates in accordance with the UAE Ministry of Finance decision.

      The Guide was published on the FTA's official website.

  • United Kingdom
    • United Kingdom Announces Changes to UK VAT Legislation Relating to UK Leaving the EU

      On 19 November 2020, HM Revenue & Customs (HMRC) published a policy paper announcing changes to existing value added tax (VAT) legislation required in light of the United Kingdom (UK) leaving the European Union (EU) (Brexit). The changes will be effective as from 23:00 GMT on 31 December 2020 and include the following:

      • the VAT zero-rate that currently applies at airports for the handling of qualifying aircraft and the storage of goods, currently relies in part on the direct effect of EU legislation. An amendment to the VAT Act 1994 Schedule 8 Group 8 will ensure that the zero-rating will continue to apply;
      • the zero-rate will, also, be extended to cover the handling of international trains and the storage of goods carried in them;
      • changes will be made to remove the exemption from VAT of pension fund management services supplied to pension funds established in the EU. The VAT treatment will be the same as for services provided to pension funds in the rest of the world; and
      • a provision of the Taxation (Cross-Border Trade) Act 2018 (paragraph 94(4)(c)) is to be removed as it has been superseded by changes in the Value Added Tax (Tour Operators) (Amendment) (EU Exit) Regulations 2019 concerning the VAT treatment of designated travel services.
    • United Kingdom Introduces Changes to Legal Rulings for Classification of Goods from 1 January 2021

      On 19 November 2020, HM Revenue & Customs (HMRC) updated its guidance introducing changes to legal rulings for the classification of goods from 1 January 2021. The guidance provides instructions with respect to the action businesses need to take in the following situations:

      • if they have a Binding Tariff Information decision;
      • if they are applying for a ruling before 1 January 2021; and
      • if they are applying for a ruling after 31 December 2020.

      For the period up to 31 December 2020

      Existing Binding Tariff Information decisions will be converted to an Advanced Tariff Ruling at 23:00 GMT on 31 December 2020 unless the business requests otherwise. An Advanced Tariff Ruling will not be recognised by the European Union (EU).

      Applications for Binding Tariff Information decisions before 1 January 2021 will need to be done using the current system. For imports into and exports from Great Britain Binding Tariff Information decisions given before 1 January 2021 will be converted to an Advanced Tariff Ruling. Those given after 31 December 2020 will be Advanced Tariff Rulings.

      For importing into or exporting from Northern Ireland or the EU it will be necessary to hold an exchange of reporting information (EORI) starting XI and advise HMRC that the Binding Tariff Information decision is for imports into and exports from Northern Ireland or the EU.

      For the period after 31 December 2020

      Businesses can, only, apply for an Advanced Tariff Ruling if they have an EORI starting GB and intend to import into or export from Great Britain.

      Businesses importing into or exporting from Northern Ireland or the EU will need to apply for a Binding Tariff Information decision, have an EORI that starts XI and be established in Northern Ireland.

      Finally, HMRC indicates that it will update the guidance again in the future.

      The HMRC guidance can be accessed here.

    • European Commission Closes Infringement Procedure against United Kingdom Regarding Income Tax Relief for Losses on Disposals of Shares

      On 30 October 2020, the European Commission (EC) announced that the infringement procedure against United Kingdom regarding income tax relief for losses on disposals of shares had been closed.

      According to the EC's reasoned opinion, the share loss relief should also be applicable to investments in non-UK resident entities to ensure that this relief is compatible with the free movement of capital (article 63 of the Treaty on the Functioning of the EU (TFEU)).

      The United Kingdom followed EC's request in section 38 of the Finance Act 2020 by extending the income tax and corporation tax relief to disposals of shares in companies anywhere in the world (applicable as from 24 January 2019, see here). For the Finance Bill 2020 Explanatory Notes, see "Clause 37: Losses on disposal of shares: abolition of requirements to be UK business" here.