November 2022

  • Bulgaria
    • Bulgaria Proposes to Allow VAT Bad Debt Relief

      The Council of Ministers has submitted a proposal for amendments to the Value Added Tax Act (VAT Act) to the parliament. Among other things, it introduces a VAT bad debt relief.

      The current VAT Act does not include an option for recovery of VAT by suppliers in situations of total or partial non-payment by their customers. The proposal, however, would introduce the "bad debt relief", which makes it possible, subject to certain conditions, for suppliers to recover the VAT paid into the budget on supplies for which they did not receive, either fully or partially, the payments from their customers.

      As next steps, the proposal should be voted on at two readings by the parliament.

      The full text of the proposal, issued on 31 October 2022, is available here (in Bulgarian only).

    • Government Proposes Windfall Tax on Fossil Fuel Sector

      The Council of Ministers has submitted to the parliament a proposal for the introduction of a windfall tax on companies in the crude petroleum, natural gas, coal and refinery sectors.

      The windfall tax will be in the form of a temporary solidarity contribution of 33% and apply to the excess profits generated by EU companies and permanent establishments with activities in the crude petroleum, natural gas, coal and refinery sectors. The contribution will be calculated based on the taxable profits for 2022 and 2023 that are above a 20% increase in the average of the taxable profits, as determined under the Corporate Income Tax Act, for the tax periods 2018, 2019, 2020 and 2021.

      The deadline for payment of the temporary solidarity contributions will be the same as the deadline for payment of the annual corporate income tax, i.e. not later than 30 June of the year following the tax year.

      The proposal is in in line with the EU proposal for a Council regulation on an emergency intervention to address high energy prices, which was presented at the end of September 2022.

      As next steps, the proposal should be voted on in two readings by the parliament. Further developments will be reported when they occur.

      The full text of the proposal, issued on 1 November 2022, is available here (in Bulgarian only).

    • Bulgaria Proposes to Amend Tax Rules on Reusing Energy as per Energy Taxation Directive

      The Council of Ministers has submitted a proposal for amendments to the Excise Duties and Tax Warehouses Act (EDTWA) before the parliament. Among other things, it proposes the implementation of Art. 21(6)(b) of the Energy Taxation Directive (2003/96), which provides that Member States need not treat as "production of energy products" operations by which the user of an energy product makes its reuse possible in their own undertaking provided that the taxation already paid on such product is not less than the taxation which would be due if the reused energy product were again to be liable to taxation.

      Additionally, the amendments also introduce:

      • an exemption from registration and reporting obligations for people who consume their own electricity produced from renewable energy sources for their own needs in a plant with a total installed capacity of up to 1 MW;
      • a clarification that persons who import or introduce compressed natural gas transported with specialized vessels are obliged to register under the EDTWA; and
      • an obligation for persons that import or receive various energy products from other EU member states to declare (before the customs authorities) whether these products are intended to be used as motor fuel or heating fuel.

      As next steps, the proposal should be voted on at two readings by the parliament.

      The full text of the proposal, issued on 31 October 2022, is available here (in Bulgarian only).

  • China
    • China to Levy Consumption Tax on E-cigarettes

      The Ministry of Finance ("MOF"), together with the General Administration of Customs ("GAC") and the State Taxation Administration ("STA"), recently released the Announcement on Levying Consumption Tax on Electronic Cigarettes, to be effective on November 1, 2022.

      The country will impose consumption tax on electronic cigarettes ("E-cigarettes"), and create a sub-item of e-cigarettes under the tobacco tax items, according to the Announcement, which defines E-cigarettes as the electronic transmission system that are used to produce aerosol for people to smoke, including cartridges, smoking utensils and e-cigarette products sold in combination with cartridges and smoking utensils. It is stated that organizations and individuals that produce (import) or sell e-cigarettes in bulk in China are taxpayers of consumption tax, which will be levied at an ad valorem rate, and the applicable tax rate in the process of production (import) is 36 percent, while the tax rate for wholesale is 11 percent. The Announcement also made provisions on taxable price, import and export policies and others.

    • MOF and STA Clarify Preferential Deferred Tax Policies on Private Pensions

      According to a source released on the website of the Ministry of Finance ("MOF") on November 4, 2022, the MOF and the State Taxation Administration ("STA") have released the Announcement of the Personal Income Tax Policies on Private Pensions, clarifying that preferential deferred tax policies would be implemented on private pensions.

      Private pension is a system supported by government policies, voluntary participation by individuals, marketization operation and supplementary function of pension insurance. Private pension system of personal accounts, capture expends fully borne by the participants personal, choose to buy conform to the provisions of the savings and wealth management products, commercial endowment insurance, public funds and other financial products (hereinafter generally referred to as the personal pension products), practice accumulation, completely in accordance with the relevant state regulations, enjoy preferential tax policies.

      Participants in private pension shall be workers who participate in the basic pension for urban workers or the basic pension for urban and rural residents within the territory of China. People who participate in private pensions should open a private pension account on the information platform.

      It is clarified that the country has begun to implement preferential deferred tax policies on private pensions since January 1, 2022. Specifically, an individual's contribution to the private pension fund account can be deducted from the comprehensive income or operating income for the actual amount based on the upper limit of 12,000 yuan/year, investment income included in private pension fund accounts is temporarily exempted from the personal income tax, and private pensions received by an individual would not be included in the comprehensive income but calculated separately for payment of the personal income tax at the tax rate of 3 percent, and the tax paid would be included in the "income from wages and salaries" item.

    • Hengqin Unveils Tax Policies to Support Development of Metaverse Industry

      The Finance Bureau, Taxation Bureau and Economic Development Bureau of Guangdong-Macao In-depth Cooperation Zone in Hengqin ("Hengqin Cooperation Zone") have jointly released the Circular on Issuing the Tax Measures in Ten Aspects to Support the Development of the Metaverse Industry, in a bid to provide full-cycle support for the development of metaverse enterprises with 23 tax policies and service measures in ten aspects.

      It is stated that enterprises in industries related to the development of metaverse, such as 5G, artificial intelligence, blockchain, XR and others, may apply for the access to the preferential tax by comparing their industries with the catalogue of 150 items in nine industries eligible for preferential corporate income tax rate of 15 percent for enterprises in the Hengqin Cooperation Zone, and those enterprises falling under the catalogue may declare for exemption of the corporate income tax for the income from overseas direct investment. It is also clarified that those high-tech metaverse enterprises which the country needs to particularly support would be eligible for a reduced tax rate of 15 percent in payment of corporate income tax.

    • New COVID-19 measures released

      China plans to reduce the COVID-19 quarantine period for incoming travelers and close contacts from 10 days to eight, cancel circuit breakers for inbound flights and no longer trace secondary close contacts of confirmed cases.

      Categories of COVID-risk areas will also be adjusted to two — high and low — from the previous categories of high, medium and low, according to a notice released by the State Council's Joint Prevention and Control Mechanism that lays out 20 measures aimed at upgrading disease control measures.

      According to the notice, all passengers arriving from overseas will undergo five days of centralized quarantine plus three days of home — or hotel-based isolation, compared with the current protocol of seven days of centralized isolation plus three days of self-isolation. It also stipulates that inbound travelers should not be placed into isolation again after finishing required quarantine periods at their first points of entry.

      The circuit-breaker mechanism, which bans flight routes if inbound international flights carry COVID-19 cases, will be canceled. Inbound travelers will only need to provide one, rather than two, negative nucleic acid testing results taken 48 hours before boarding.

      Meanwhile, quarantine periods for close contacts of confirmed infections have also been reduced from 10 to eight days, while secondary close contacts will no longer be traced.

      The notice said that modifying categories of COVID-risk areas is aimed at minimizing the number of people facing restrictions on movement. The optimization of virus control policies does not signal relaxation, but aims for more scientific and precise approaches to fend off the epidemic while minimizing the impact on the economy and livelihoods

      The notice also requires ramping up stockpiles of COVID-19 drugs and medical equipment, preparing more hospital and intensive care unit beds, bolstering booster vaccination rates — especially among the elderly — and accelerating research of broad-spectrum and multivalent vaccines.

    • China aims to foster digital transformation of SMEs

      China's Ministry of Industry and Information Technology has recently released a guideline to facilitate the digital transformation of small and medium-sized enterprises (SMEs).

      The guideline calls for the creation of digital applications for instant communication, long-distance collaboration and project management in order to better meet the needs of such companies during the transformation.

      Digital service providers and internet platforms have been asked to develop more convenient solutions for the issues faced by SMEs in advancing digital transformation.

      To step up policy support for the companies, relevant departments should offer more guidance, increase financial assistance, expand pilot programs and improve services, according to the guideline.

      The ministry has also published the 2022 list of standards for assessing the digital capability of SMEs.

      Source: China SCIO

    • (CIIE) Tentative deals totaling 73.5 bln USD signed at 5th import expo

      A total of 145 countries, regions and international organizations attended the expo, Sun said, adding that more than 2,800 enterprises from 127 countries and regions participated in the business exhibition, showcasing 438 new products, technologies and services.

      There were 284 Fortune 500 companies and corporate giants among the participants, the official said.

      Registration for the sixth CIIE has begun, with over 100,000 square meters of the business exhibition area already booked.

      The CIIE is the world's first national-level import expo. It was held from Nov. 5 to 10 this year in Shanghai.

      Source: Xinhuanet

    • China’s digital economy hits 45 trln yuan

      The value of China's digital economy reached 45.5 trillion yuan (about 6.3 trillion U.S. dollars) in 2021, accounting for 39.8 percent of the country's GDP, according to a report released by the Chinese Academy of Cyberspace Studies on Wednesday.

      The digital economy has become an important cornerstone of China's stable economic development, said the China Internet Development Report 2022, which was released during the 2022 World Internet Conference (WIC) Wuzhen Summit, held in the water-town of Wuzhen, in east China's Zhejiang Province.

      In addition to the above report, the summit also released another report titled "World Internet Development Report 2022." It says the added value of the digital economy in 47 countries around the world reached 38.1 trillion U.S. dollars in 2021, with an increase of 15.6 percent year-on-year.

      The digital economy has become an important engine driving global economic recovery, said the report.

      Themed "Towards a Shared Digital Future in a Connected World -- Building a Community with a Shared Future in Cyberspace," this year's summit was attended by more than 2,100 guests from over 120 countries and regions, both in person and online. The reports have been released for six consecutive years since 2017 as an important part of the summit.


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