November 2023

The international rating agency Standard & Poor's has upgraded the credit rating outlook for Bulgaria from stable to positive, as announced by the Ministry of Finance. The agency confirms Bulgaria's long and short-term credit rating in foreign and local currency as 'BBB/A-2.'

S&P Global Ratings assesses Bulgaria's fiscal performance as one of the best among Central and Eastern European countries, anticipating that the current fiscal plans will lead to a deficit of less than 3% of GDP by 2026, maintaining the net public debt below 20% of GDP.

At the end of September, the activities managed by both local and foreign investment funds operating in Bulgaria reached 9 billion euros, showing a year-on-year increase of 10.1% (827.6 million euros) and a quarterly increase of 1.3% (119.6 million euros). These data are provided by the Bulgarian National Bank (BNB). In relation to the gross domestic product (GDP), the total assets of the funds at the end of September represented 4.8%, down from the 4.9% of the previous year and unchanged from the 4.8% at the end of the second quarter of this year.

The observations indicate an overall decrease of 62 investment funds over the course of a year, bringing the total to 1459 at the end of September. Specifically, foreign funds decreased by 47, reaching a total of 1307, while domestic funds decreased by five, totaling 152.

The European Commission (EC) has improved its forecasts for the development of the Bulgarian economy for this year compared to its last report in the spring. However, the institution has lowered its expectations for the next year, predicting a slowdown in the country's gross domestic product (GDP) growth.

For this year, the Commission forecasts that the Bulgarian economy will grow by 2.0%. This is 0.5 percentage points higher than the spring forecasts. For the next year, Brussels predicts a GDP slowdown to 1.8% amid strong private consumption and a contraction in imports, whereas the previous forecast was 0.6 percentage points higher.

Exports are expected to recover by the end of 2023, growing by 4.0% in 2024 and 2.6% in 2025, reflecting the recovery of export markets. The base effect of strong exports in 2022, especially in electricity, negatively affects growth rates in 2023 and is expected to disappear later.

Regarding inflation, forecasts are improving compared to spring ones as well. The EC predicts that the growth of consumer prices in Bulgaria will average 8.8% for the entire 2023 and will slow down to 4.0% next year. For comparison, the levels set in the spring forecasts were 9.4% for this year and 4.2% for 2024.

The State Taxation Administration ("STA"), the Ministry of Finance ("MOF") and the People's Bank of China ("PBC") recently released the Circular of the State Taxation Administration, the Ministry of Finance and the People's Bank of China on Further Strengthening the Management of Service Fees for Withholding, Collecting and Levying Tax on Behalf of Tax Authorities, which stipulates that, starting from October 1, 2023, the ratio of service fees paid for withholding and remitting tax on behalf of tax authorities in accordance with the rules was lowered to 0.5% at highest, or capped at 700,000 yuan. Where a law or administrative regulation provides for the ratio of service fees, the prescribed ratio shall prevail. The service fees refunded for withholding or collecting taxes were lowered to no more than 1% of the taxes withheld. The service fees refunded on vehicle and vessel tax as withheld by maritime management bodies under transport departments will not be higher than 5% of the tax withheld. In case of asking a withholding agent to collect vehicle purchase tax on behalf of tax authorities, the service fee would be 15 yuan per vehicle. In case of asking a withholding agent to collect tax on farmers market or professional market, the service fee should not be higher than 5% of the tax withheld.

The Ministry of Finance ("MOF") released on September 26, 2023 the Announcement on Extending the Favorable VAT Policies for the Development of Cultural Enterprises and the Announcement on Extending the Favorable VAT Policies for Publicity of Culture, clarifying that the relevant policies will be extended to December 31, 2023.

According to the documents, the country will continue to exempt the VAT on the incomes of those film group companies, film studios and other film enterprises that have been approved by the film authorities to engage in film production, distribution and projection as generated from sale of film copies, transfer of film copyrights, distribution of films and projection of films in rural areas.

For specific publications in the process of publishing, the policy of refunding 50 percent or 100 percent of the VAT after the tax collection would be continued; for specific printing or production business, the policy of refunding 100 percent of the VAT would be implemented; and the VAT would be exempted on wholesale and retail of books, as well as on ticketing incomes of science popularization units, said the documents.

Beijing and other remaining regions in China respectively released on October 27, 2023 the Announcement on Conducting the Pilot Program for Fully-digitalized Electronic Invoicing, making the decision to pilot e-invoices among some taxpayers in their respective regions starting from November 1, 2023.

According to the Announcement of the Beijing Municipal Tax Service, State Taxation Administration on Conducting the Pilot Program for Fully-digitalized Electronic Invoicing, starting from November 1, 2023, Beijing will pilot the program among certain taxpayers in the municipality that use the electronic invoice service platform, with the specific scope to be determined by the Beijing Municipal Tax Service. For this batch of pilot regions, there will still be four styles of digital e-invoices, i.e. digital e-invoices carrying the words of "Special VAT Invoices", the words of "General Invoices", the words of "Itinerary/Receipt of E-ticket for Air Transport", and the words of "E-ticket for Railway Transport".

The South African Revenue Service (SARS) has published the 2023 issue of the "Taxation in South Africa" guide, providing an overview of the most significant tax legislation administered in South Africa by the Commissioner for the South African Revenue Service (the SARS).

The updated guide deals, amongst others, with the following:

• taxation of natural persons and companies;
• special allowances and recoupments;
• deductions for pre-trade expenditure and losses;
• taxation of non-residents working temporarily in South Africa;
• transfer pricing and thin capitalization;
• taxation of foreign entertainers and sportspersons;
• withholding tax on royalties and interest;
• donations tax;
• dividends tax;
• turnover tax and employment tax incentive;
• general anti-avoidance rules;
• value added tax;
• customs and excise duties;
• administrative non-compliance and understatement penalties, and criminal offences for non-compliance with tax legislation;
• dispute resolution;
• exchange control; and
• automatic exchange of information.

The Government welcomes the passage of the Inland Revenue (Amendment) (Taxation on Foreign-sourced Disposal Gains) Bill 2023 by the Legislative Council today (November 29). The Bill refines Hong Kong's foreign-sourced income exemption (FSIE) regime by expanding the scope of assets in relation to foreign-sourced disposal gains to cover assets other than shares or equity interests. The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "With the passage of the Bill, Hong Kong's FSIE regime will be brought in line with the latest requirement of the Guidance on Foreign Source Income Exemption Regimes updated by the European Union (EU) in December 2022. Hong Kong's tax regime is further strengthened to counter cross-border tax avoidance and prevent double non-taxation. "Under the refined FSIE regime, foreign-sourced non-intellectual property (IP) disposal gains will continue to be exempt from tax if the multinational enterprise (MNE) entity has adequate economic substance in Hong Kong. For foreign-sourced IP disposal gains, the extent of the tax exemption will be determined by the nexus approach promulgated by the Organisation for Economic Co-operation and Development. While the scope of assets in relation to foreign-sourced disposal gains is expanded, exemption and relief have been put in place to minimise the compliance burden of the affected MNE entities. This will maintain the tax competitiveness of Hong Kong." To provide the necessary continuity and tax certainty for taxpayers, other parts of the existing compliance framework of Hong Kong's FSIE regime will continue to apply to the refined FSIE regime. This covers the availability of double taxation relief and treatment of disposal loss as well as business facilitating measures to reduce compliance burden, enhance tax certainty and ensure tax transparency. The refined FSIE regime will be implemented with effect from January 1, 2024. The Government will request the EU to swiftly remove Hong Kong from the EU watchlist on tax co-operation.

Soruce: www.ird.gov.hk

The Government welcomes the Legislative Council's passage of the Stamp Duty (Amendment) (Stock Transfers) Bill 2023 today (November 15) to give effect to the measure of reducing the rate of Stamp Duty on Stock Transfers (the Stamp Duty) to 0.1 per cent as announced by the Chief Executive in the 2023 Policy Address. A Government spokesman said, "The reduction of the rate of the Stamp Duty will lower investors' transaction costs, improve market sentiment, and enhance the competitiveness of Hong Kong's stock market. The Government will work with financial regulators and the Hong Kong Exchanges and Clearing Limited to follow up on the other measures recommended by the Task Force on Enhancing Stock Market Liquidity to promote the sustainable development of the market." The Amendment Ordinance comes into operation on November 17.

Source: www.info.gov.hk

The Central Board of Direct Taxes (CBDT) has issued a notification that a tax registration number or permanent account number (PAN) is not required for non-resident taxpayers and foreign companies opening accounts in the International Financial Services Centres (IFSC) banking units, provided they file Form 60 and do not have any other taxable income in India.

More specifically, the notification provides as follows:

• a non-resident (not being a company) or a foreign company, having no taxable income in India, is not required to quote a PAN or Aadhar number while making deposits, withdrawals or opening bank accounts with IFSC banking units; and
• a foreign company, having no PAN and no taxable income in India, can execute specific transactions with an IFSC banking unit by filing Form 60 (as amended in the same notification).

The Supplementary Retirement Scheme is part of the Singapore government’s multi-pronged strategy to address the financial needs of a greying population by helping Singaporeans to save more for their old age. It began in 2001 and is operated by the private sector. The SRS complements the Central Provident Fund (CPF). CPF savings are meant to provide for housing and medical needs and for basic living needs after retirement. Unlike the CPF scheme, participation in SRS is voluntary. SRS members can contribute a varying amount to SRS (subject to a cap) at their own discretion. The contributions may be used to purchase various investment instruments.

Benefits

The SRS offers attractive tax benefits. Contributions to SRS are eligible for tax relief. SRS contributions made on or after 1 Jan 2017 are subject to a cap on personal income tax relief of $80,000 per Year of Assessment from Year of Assessment 2018.

Investment returns are accumulated tax-free and only 50% of the withdrawals from SRS are taxable at retirement (referred to as a “50% tax concession”).

Personal Income Tax Relief Cap from 1 Jan 2017 The personal income tax relief cap of $80,000 applies from Year of Assessment 2018 (when income earned in 2017 is assessed to tax) to SRS contributions made on or after 1 Jan 2017. As SRS contributions made cannot be refunded, SRS members who make SRS contributions on or after 1 Jan 2017 should take note of the overall personal income tax relief cap. They should evaluate whether they would benefit from tax relief on their SRS contributions, and make an informed decision accordingly.

Latest Enhancements to the SRS

1. Allowing SRS withdrawals to be made in the form of investments from 1 July 2015
2. Providing a tax exemption of up to $400,000 for SRS funds deemed withdrawn upon demise, or withdrawn in full on the grounds of terminal illness
3. Increasing the SRS contribution cap.

Increase in SRS Contribution Cap

• $15,300 for Singapore Citizens and Permanent Residents; and (ii)$35,700 for foreigners.

The Inland Authority of Singapore (IRAS) has updated its guidance on determining whether a company is a tax resident in Singapore in instances where technology allowing virtual participation is used in Board of Directors meetings.

Generally, a company is considered a Singapore tax resident for a year of assessment if the control and management of its business was exercised in Singapore in the preceding calendar year. The location of the company's Board of Directors meetings where strategic decisions are made usually determines where control and management are exercised. In certain cases, holding Board of Directors meetings in Singapore may not be sufficient and IRAS will consider all the facts provided by the company to decide.

IRAS has clarified that a Board of Directors meeting which involves the use of virtual meeting technology will generally be regarded as having strategic decisions made in Singapore if:

• at least 50% of the directors with the authority to make strategic decisions are physically present in Singapore during the meetings; or
• the Chairman of the Board of Directors, if the company has such an appointment, is physically present in Singapore during the meeting.

The Federal Tax Administration has established additional conditions for a legal entity to be registered as a tax agent. The decision stipulates that a legal entity wishing to be registered as a tax representative and appear in the register must meet the following conditions:

• one of the partners or directors of the legal entity must be entered in the Register of Tax Agents; and
• the legal entity must have at least one natural person registered as a tax representative for every ten employees working in the tax area.

The decision was issued for the purposes of paragraph (d) of item 2 of article 12 of Cabinet Decision No. 74 of 2023 on the Implementation of the Tax Procedures Law.

Decision No. 14 of 16 August 2023 on the establishment of additional conditions for the registration of a legal entity as a tax representative will enter into force on 1 December 2023.

The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (generally referred to as the “Corporate Tax Law”) issued by the United Arab Emirates on 09 December 2022 marks a milestone in the UAE legislation: it provides the legislative basis for the introduction and implementation of a Federal Corporate Tax in the country.

Corporate Tax in the UAE is effective for financial years starting on or after 1 June 2023.

The new law covers all business activities in the UAE except for government entities and certain businesses engaged in extractive and non-extractive natural resources; in general, Corporate Tax applies to:

• Juridical persons incorporated or registered at the UAE mainland and free zones in the UAE.
• Natural persons conducting business activities in the UAE.
• Non-resident juridical persons, depending on certain conditions.

The corporate tax is set at a rate of 9% of annual taxable income, making it one of the lowest in the world. This deliberate choice reflects the government's commitment to maintaining a competitive business environment while simultaneously generating revenue for public investment.

Moreover, the tax shall be levied at the rate of 9% only on annual taxable income exceeding AED 375,000 ($100,000) while the annual taxable income below this threshold shall be subject to a 0% corporate tax rate to support small businesses and startups.

A different tax rate (not yet specified) is applied to large multinationals that meet specific criteria set with reference to 'Pillar two' of the OECD Base Erosion and Profit Shifting Project.

Below are a few key points of the Corporate Tax Law which may be of interest to our readers:

Free Zone

The UAE Corporate Tax regime will continue to honor the tax incentives currently being offered to free zone persons; but only under certain conditions that would allow the free zone person to be considered as a “Qualifying Free Zone Person” and thus be eligible for the preferential 0% corporate tax rate on its “Qualifying Income” (as defined under Corporate Tax Law).

The conditions to be considered as a Qualifying Free Zone Person are: maintaining adequate substance in the UAE, preparing audited financial statements, not having elected to be subject to Corporate Tax at the standard rates, complying with the transfer pricing requirements (under the Corporate Tax Law), satisfying the “de minimis” requirement (as specified in Cabinet Decision 100 of 2023) and the business must derive “Qualifying Income” (as defined and enumerated in Cabinet Decision 100 of 2023).

Once verified that the entity can be considered a Qualifying Free Zone Person, the preferential Corporate Tax rate of 0% can be applied to the “Qualifying Income” falling in the list published in Cabinet Decision No. 100 of 2023.

If the free zone person fails to meet the conditions of a Qualifying Free Zone Person in a given tax period, it shall no longer be considered as a Qualifying Free Zone Person from the beginning of that tax period and the subsequent four (4) tax periods.

Natural Persons

The corporate tax shall be applicable to natural persons - including sole establishments and individual partners in unincorporated partnerships - who are engaged in business activities (including professional/service activities) in the UAE and whose revenue from business activities exceeds AED 1,000,000 in a Gregorian Calendar Year.

However, corporate tax does not apply to the income of a natural person arising from employment, personal investments, and real estate investments.

It should be noted that in the case of natural persons, residence does not refer to the place where the natural person resides or is domiciled but instead refers to the business connection in the UAE. A natural person is considered a resident under corporate tax regardless of their nationality, whether or not they have a residency visa, or how much time they may physically spend in the UAE.

Therefore, the question of residency or non-residency for natural persons under the corporate tax law deviates from those in other tax jurisdictions; wherein tax residency is typically determined by the jurisdiction where the natural person resides or if the natural person physically stays in the said jurisdiction for 180 days or more within a given tax period.

Non-Resident Juridical Persons

A non-resident juridical person shall be subject to corporate tax if they are either: having a permanent establishment in the UAE, derive UAE sourced income or earn income from immovable property located in the UAE.

In cases wherein the non-resident juridical persons earn UAE sourced income only and the income is not attributable to a permanent establishment in the UAE, the income shall be subject to 0% withholding tax.

Small Business Relief

Recognizing the importance of supporting small and medium-sized enterprises (SMEs), the backbone of the economy, the government has implemented administrative and tax relief measures aimed at alleviating the impact of corporate tax on small businesses, which is referred in the regulations as “Small Business Relief”.

The taxable Person may elect for Small Business Relief and as a result it will be treated as not having derived any Taxable Income for a Tax Period. The business will also benefit from simplified corporate tax return filing and record keeping requirements.

The conditions to apply for Small Business Relief are the following: the business must be resident in the UAE (either juridical or natural person), annual revenues should be below or equal to AED 3,000,000 for each Tax Period (including all previous and subsequent tax periods) and the Taxable Person should not be part of a Multinational Enterprise Group (as defined in the UAE’s Country-by Country Reporting legislation) or be a Qualifying Free Zone Person.

The Small Business Relief is available for eligible taxable persons up to tax periods that end on or before 31^st December 2026. In practical terms, it means that the tax authorities have provided a three (3) year period starting from the enforcement of the corporate tax law on 1^st June 2023 till 31^st December 2026 wherein the Small Business relief is available as a tax relief.

Transfer pricing

Transfer pricing rules have also been introduced by the corporate tax law, applicable to both cross-border and domestic transactions carried out by natural and juridical persons.

Businesses must apply the arms’ length principle when entering into transactions or arrangements between Related Parties and Connected Persons (such as owners or officers of a company).

In support of the arms’ length principle, companies must maintain documentation that justifies the transfer price of transactions between related parties and connected persons. This documentation should demonstrate that the prices charged in transactions and arrangements with related parties and connected persons are consistent with those that would be charged between unrelated independent parties under similar circumstances.

The authorities can require a taxable person to provide information regarding their transactions and documentation supporting the arrangements with their related parties and connected persons together with the corporate tax return of the taxable person.

In addition to the above general disclosure requirements, taxable persons who are part of a Multinational Enterprise (MNE) Group with total consolidated group revenue equal to or more than AED 3.15 billion in the relevant tax period or taxable persons whose revenue in the tax period is AED 200 million or more, shall be required to maintain a master file and local file in support of its’ transfer pricing policy.

Administration

All taxable persons within the scope of Corporate Tax should apply for a tax registration number for Corporate Tax. The tax registration number for corporate tax purposes is a separate application from the tax registration number for VAT purposes.

Non-resident persons that do not have a permanent establishment in the UAE and only earn UAE sourced income can choose to not register for Corporate Tax.

Financial statements will need to be maintained by taxable persons as it shall be the starting point in calculating taxable income. Financial statements must be prepared in accordance with IFRS, however, taxable persons that earn revenue not exceeding AED 50 million may apply IFRS for SMEs.

Audited financial statements are required to be maintained for taxable persons deriving revenue in excess of AED 50 million in a tax period and from taxable persons who are Qualifying Free Zone Persons.

Taxable persons should file their corporate tax return and pay corporate tax within nine (9) months from the end of each relevant tax period. Since majority of taxable persons in the UAE follow the Gregorian calendar year (ending every 31^st December) as their financial period, then the first corporate tax period for these taxable persons shall be starting 1^st January 2024 and ending 31^st December 2024, with the corporate tax return filed and any corporate tax due to be paid on or before 30^th September 2025.

Transitional Rules

The opening balance sheet for corporate tax purposes (and thus the closing balance sheet of the financial year prior to being subject to corporate tax) should be prepared taking into consideration the arms’ length principle.

Certain adjustments in the financial statements can also be made by a taxable person to its’ intangible assets, immovable property and financial assets & financial liabilities which were owned by the taxable person before it becomes subject to corporate tax.

If no books of accounts were prepared for the previous financial year (prior to being subject to corporate tax) a closing balance sheet will have to be prepared under an appropriate accounting standard.

Implications

Businesses should evaluate the impact of Corporate Tax, determine whether they need to register for corporate tax and understand if steps should be taken to align their accounting operations with the corporate tax requirements to be compliant and take advantage of tax benefits whereas available.

Corporate tax does not only mean corporate tax registration, filing and payment of the due tax; but it also implies understanding if any tax reliefs can be applied and requested, keeping accounting records and documents within the requirements of the corporate tax law, putting in place transfer pricing policies if required to do so and applying transitional rules which may be applicable to the business.

Being aware and prepared will be essential for businesses navigating the new corporate tax landscape in the UAE.

Diacron provides support in assessing the impact of Corporate Tax, offering dedicated consultancy to ensure full compliance and meet related regulatory requirements. For any inquiry or to discuss your specific needs, please do not hesitate to contact us at tax.uae@diacrongroup.com

The Autumn Finance Bill 2023 was published on Wednesday 29 November 2023 to enshrine a raft of landmark tax changes into law.

Measures in the Bill back British business by cutting and simplifying tax to help them invest for less, making full expensing permanent – an effective £11 billion a year corporate tax cut.

It also simplifies R&D and extends the Enterprise Investment Scheme and Venture Capital Trust schemes by an extra ten years each to 2035, ensuring younger companies can attract the finance they need today to become the unicorns of tomorrow.

The majority of tax changes in the Bill will take effect from April 2024.

Financial Secretary to the Treasury, Nigel Huddleston, said:

“This Bill marks our next step in making the UK into the best place in the world to do business - and that’s the way we grow our economy and drive up living standards for all.

“We have the lowest rate of corporation tax in the G7, and full expensing effectively cuts it further by £11 billion a year - the biggest British business tax cut in modern British history to help firms invest for less.”

Permanent full expensing effectively cuts corporation tax by £11 billion per year and ensures that the UK will continue to have both the lowest headline corporation tax rate in the G7 and the most generous capital allowances in the OECD group of major advanced economies, including the United States, Japan, South Korea and Germany. The Autumn Statement is expected to result in an extra £20 billion of investment per year by the end of the decade.

Permanent full expensing helps companies to continuously invest for less by allowing them to deduct 100% of the cost of a wide range of plant and machinery – such as lorries, drills and office chairs - from their profits before tax. For every pound a company invests in plant or machinery, their taxes are cut by up to 25p.

Since the introduction of the super deduction – the predecessor to full expensing introduced in 2021 – investment in the UK has grown the fastest in the G7.

As well as reforms to capital allowances, the Chancellor Jeremy Hunt announced other measures that are also featured in today’s Bill to cut and simplify tax to boost investment and get the economy growing. These include:

• Changes worth £280 million a year to simplify and improve R&D tax reliefs. The government will merge the current R&D Expenditure Credit and SME schemes.
• Legislating for more generous support for loss-making R&D intensive SMEs as announced in spring.
• Extending the sunset clause for the Enterprise Investment Scheme and the Venture Capital Trust scheme to 6 April 2035. -For the creative sector, reforming the film, TV and video games tax reliefs to refundable expenditure credits.
• Expanding the ‘cash basis’ – a simplified way for over four million smaller, growing traders to use a simpler method of calculating their profits and pay their income tax.

The Internal Revenue Service announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2024.

For individuals, the rate for overpayments and underpayments will be 8% per year, compounded daily. Here is a complete list of the new rates:

• 8% for overpayments (payments made in excess of the amount owed), 7% for corporations.
• 5.5% for the portion of a corporate overpayment exceeding $10,000.
• 8% for underpayments (taxes owed but not fully paid).
• 10% for large corporate underpayments.

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

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points and the overpayment rate is the federal short-term rate plus two percentage points. The rate for large corporate underpayments is the federal short-term rate plus five percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half of a percentage point.

The interest rates announced on 17th November 2023 are computed from the federal short-term rate determined during Oct. 2023.

Further details are contained in the Revenue Ruling 2023-22

Source: www.irs.gov

Starting in calendar year 2023, the Inflation Reduction Act reinstates the Hazardous Substance Superfund financing rate for crude oil received at U.S. refineries, and petroleum products that entered into the United States for consumption, use, or warehousing. The tax rate is the sum of the Hazardous Substance Superfund rate and the Oil Spill Liability Trust Fund financing rate. For calendar years beginning in 2024, the Hazardous Substance Superfund financing rate is adjusted for inflation. For calendar year 2024 crude oil or petroleum products entered after Dec. 31, 2016, will have a tax rate of $0.26 cents a barrel.

Highlights of changes in Revenue Procedure 2023-34:

The tax year 2024 adjustments described below generally apply to income tax returns filed in 2025. The tax items for tax year 2024 of greatest interest to most taxpayers include the following dollar amounts:

• The standard deduction for married couples filing jointly for tax year 2024 rises to $29,200, an increase of $1,500 from tax year 2023. For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.
• Marginal rates: For tax year 2024, the top tax rate remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly).The other rates are: 35% for incomes over $243,725 ($487,450 for married couples filing jointly) 32% for incomes over $191,950 ($383,900 for married couples filing jointly) 24% for incomes over $100,525 ($201,050 for married couples filing jointly) 22% for incomes over $47,150 ($94,300 for married couples filing jointly) 12% for incomes over $11,600 ($23,200 for married couples filing jointly) The lowest rate is 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).
• The Alternative Minimum Tax exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly for whom the exemption begins to phase out at $1,218,700). For comparison, the 2023 exemption amount was $81,300 and began to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption began to phase out at $1,156,300).
• The tax year 2024 maximum Earned Income Tax Credit amount is $7,830 for qualifying taxpayers who have three or more qualifying children, an increase of from $7,430 for tax year 2023. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
• For tax year 2024, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $315, an increase of $15 from the limit for 2023.
• For the taxable years beginning in 2024, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,200. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640, an increase of $30 from taxable years beginning in 2023.
• For tax year 2024, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,800, an increase of $150 from tax year 2023, but not more than $4,150, an increase of $200 from tax year 2023. For self-only coverage, the maximum out-of-pocket expense amount is $5,550, an increase of $250 from 2023. For tax year 2024, for family coverage, the annual deductible is not less than $5,550, an increase of $200 from tax year 2023; however, the deductible cannot be more than $8,350, an increase of $450 versus the limit for tax year 2023. For family coverage, the out-of-pocket expense limit is $10,200 for tax year 2024, an increase of $550 from tax year 2023.
• For tax year 2024, the foreign earned income exclusion is $126,500, increased from $120,000 for tax year 2023.
• Estates of decedents who die during 2024 have a basic exclusion amount of $13,610,000, increased from $12,920,000 for estates of decedents who died in 2023.
• The annual exclusion for gifts increases to $18,000 for calendar year 2024, increased from $17,000 for calendar year 2023.
• The maximum credit allowed for adoptions for tax year 2024 is the amount of qualified adoption expenses up to $16,810, increased from $15,950 for 2023.

Items unaffected by indexing

By statute, certain items that were indexed for inflation in the past are currently not adjusted.

• The personal exemption for tax year 2024 remains at 0, as it was for 2023. This elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
• For 2024, as in 2023, 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
• The modified adjusted gross income amount used by taxpayers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after Dec. 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

The Treasury Department has released a final rule regarding when and how entities should use FinCEN (Financial Crimes Enforcement Network) identifiers for reporting beneficial ownership information (BOI) of certain related entities (see Note). An identifier is a unique identifying number that FinCEN will issue to individuals who have provided FinCEN with their BOI and to "reporting companies" that have filed initial BOI reports. The final rule is effective as of 1 January 2024.

Beneficial ownership reporting requirements initially were enacted as part of the Corporate Transparency Act (CTA) of 2021 and final rules were delegated for development to FinCEN.

The newly adopted rule requires certain corporations, limited liability companies, and other similar entities (i.e. "reporting companies") to report certain identifying information about the beneficial owners who own or control such entities and the company applicants who form or register them.

Specifically, the final rule clarifies that a reporting company may report another entity's FinCEN identifier and full legal name in lieu of the full list of information required under 31 CFR 1010.380(b)(1) with respect to the beneficial owners of the reporting company, but only if the following three conditions are met:

• the entity has obtained a FinCEN identifier and provided that FinCEN identifier to the reporting company;
• an individual is or may be a beneficial owner of the reporting company by virtue of an interest in the reporting company that the individual holds through the entity; and
• the beneficial owners of the entity and of the reporting company are the same individuals.

These requirements are intended to facilitate access to BOI for certain authorized recipients for the purposes of countering money laundering and the financing of terrorism, and for other specific purposes. The new rule was revised before being finalized to take into account concerns that commentators raised. The changes are to:(1) consistently refer to the entity whose FinCEN identifier the reporting company may use as "another entity" or "the other entity" rather than simply "the entity," in order to avoid confusion with the reporting company itself; and (2) make clear that it is an individual's ownership interest in another entity that allows the reporting company to report the other entity's FinCEN identifier in lieu of the individual's information.

Note: The Treasury established the FinCEN in 1990 to provide a government-wide multisource financial intelligence and analysis network. While it does not directly collect taxes like the IRS, FinCEN plays a crucial role in safeguarding the financial system from illicit use, combating money laundering, and promoting national security by receiving and maintaining financial transactions data, analysing and disseminating that data for law enforcement purposes, and building global cooperation with counterpart organizations in other countries and with international bodies.