October 2019

  • Bulgaria
    • Amendment to Personal Income Tax Act gazetted

      On 8 October 2019, an amendment to the Personal Income Tax Act was published in the State Gazette. Currently, an exemption from personal income tax is applied to one-off aid of up to BGN 2,400 (approximately EUR 1,230) provided by an employer (for the account of his social expenses) to an employee in the case of child birth, civil marriage or death of a family member. The amendment extends the scope of this exemption, which will also be applied in the case of adoption of a child.
    • Intrastat thresholds for 2020 announced

      Report from our correspondent Dr Svetlin Krastanov, Tax Manager, PwC Bulgaria

      On 3 October 2019, the director of the National Statistical Institute issued an order regarding the Intrastat thresholds and their statistical values for 2020. Thresholds for Intrastat reporting are:
      • BGN 290,000 (currently BGN 280,000) for dispatches; and
      • BGN 470,000 (currently BGN 460,000) for arrivals.
      Thresholds for declaring statistical value are:
      • BGN 15,800,000 (currently 14,400,000) for dispatches; and
      • BGN 7,600,000 (currently BGN 7,400,000) for arrivals.
      The threshold for simplified reporting of single low-value transactions will remain the same, i.e. BGN 390.
    • Proposed amendments to Accountancy Act – presented to National Assembly

      Report from our correspondent Atanas Sabev, Manager, PwC Bulgaria

      On 9 October 2019, a bill amending the Accountancy Act was introduced to the National Assembly. The bill proposes simplification of the disclosure rules for dormant enterprises (i.e. enterprises not engaging in any activities during a reporting period). Under the proposed amendments:
      • dormant sole traders will be exempt from the obligation to submit a declaration of the lack of any activities to the Commercial Register; and
      • all other dormant enterprises must file such a declaration only for the first dormant period.
      Currently, all dormant enterprises must submit a declaration of lack of any activities on an annual basis.
  • China
    • Two Authorities Clarify Value-added Tax Deduction Policies for the Life Service Industry

      The Ministry of Finance and the State Administration of Taxation recently issued the Announcement about Value-added Tax Deduction Policies for the Life Service Industry. According to the announcement, from October 1, 2019 to December 31, 2021, taxpayers of life services can get an additional 15% deduction on input value-added tax to offset their taxable income. Taxpayers of life services are taxpayers whose sales revenue from life services accounts for more than 50% of their total sales revenue. The scope of life services is defined according to the Notes to Sales Services, Intangible Assets and Immovable Properties.
    • SAT Announces New Management Rules on VAT Invoice

      The State Administration of Taxation recently issued the Announcement about Matters Concerning the Management of Value-added Tax Invoices. According to the announcement, eligible taxpayers of living services should submit an electronic statement to local tax bureau about their eligibility for an additional 15% deduction in value-added tax.   If a general VAT taxpayer receives a letter of tax payment from customs authorities after July 1, 2017, it shall confirm or apply for examination of the letter within 360 days. If a small VAT taxpayer has to issue VAT invoices on taxable business activities, it can opt to use the VAT invoice management system to issue invoices. The first article of the announcement will be effective from October 1, 2019, while the second to the fifth articles will be effective from February 1, 2020.
    • SAT Highlights Six Changes in the Measures for the Administration of Non-Resident – Taxpayers’ Enjoyment of the Treatment under Tax Agreements

      The State Administration of Taxation released on October 21, 2019 the Measures for the Administration of Non-Resident Taxpayers' Enjoyment of the Treatment under Tax Agreements.   The document has four chapters, 25 articles and an attachment. The new regulation will be implemented from January 1, 2020, while the previous edition of the regulation, published in 2015 and revised in 2018, will be abolished. According to the third article, non-resident taxpayers shall determine by themselves whether they are eligible for tax privileges, and file an application for such privileges. They should keep relevant information to prepare for future examinations. The new regulation has reduced paperwork for non-resident taxpayers, who only have to fill one statement, provide such information as name and contact information and make a written statement. The new regulation has clarified the legal obligations of non-resident taxpayers and withholding agent. Non-resident taxpayers determine whether they are eligible for tax privileges, and provide tax statements to the withholding agent; they assume corresponding legal responsibilities.   According to the 16th article, if a non-resident taxpayer is not eligible for tax privileges but it pays less or no tax as a result, tax agency shall collect the unpaid tax and hold the taxpayer accountable for delaying tax payment, unless the withholding agent is responsible for the delay because it did not act according to the 6th article. The new regulation added "a clause of testing primary purpose" to prevent tax avoidance, and revised the definition of "non-resident taxpayer".
    • State Council Announces Twelve Fresh Measures to Facilitate Export Tax Rebate and Cross-border Investment

      Premier Li Keqiang chaired a State Council executive meeting on October 23, 2019 to introduce more measures to keep foreign trade stable and improve the quality of exports and imports, facilitate cross-border trade and investment, and enhance foreign exchange management.   The meeting decided to further improve policies of export tax rebates, trade financing and credit insurance, and ensure the cross-border e-commerce retail import policies to be fully applied in comprehensive bonded zones step by step. Meanwhile, efforts have to be made to facilitate the building of a high-standard free trade zone network and lift the level of trade facilitation. The meeting also confirmed 12 measures to optimize foreign exchange management and promote cross-border trade and investment facilitation.
  • South Africa
    • Ethiopian carries 12.5m passengers

      Addis Ababa, October 2, 2019 (FBC) – The Ethiopian Airlines (Ethiopian) has said it carried more than 12.5 million passengers last Ethiopian fiscal year which ended July 7. Despite facing its biggest challenges in years, the airlines remains profitable, said Tewolde Gebremariam, Group CEO of Ethiopian. All 157 people were killed when an Ethiopian Airlines flight crashed shortly after takeoff last March from Ethiopia’s capital, Addis Ababa. The number of passengers who uses Ethiopian continues to increase, said the CEO in an exclusive interview with FBC. Reuters reported that Ethiopian’s operating revenue jumped nearly 30% in the year to July 31. Operating revenue jumped by 28.6% year on year to 114.6 billion birr ($3.9 billion), it said. However, a sharp increase in jet fuel price at the global market slightly affected the profitability of the airlines, Tewolde told FBC. The CEO said more works will be undertaken in this Ethiopian fiscal year to increase the global comparativeness of the airlines. He said five new airports will be built in different parts of the country, namely Debre Markos, Metu, Borena, Yabello and Mizan Aman. He said the airlines will invest more than 5 billion birr this fiscal year alone, including for expansion projects. According to the CEO, the company will also buy more than 20 modern aircrafts in the future. Ethiopian commands the lion’s share of the Pan-African passenger and cargo network operating the youngest and most modern fleet to more than 120 international passenger and cargo destinations across five continents.
    • African mast operator Helios Towers launches up to $1.8 billion London IPO – source

      African mobile networks operator Helios Towers Ltd priced its initial public offering at 115-145 pence per share on Wednesday, a source familiar with the matter told Reuters, implying a total valuation of $1.42 billion to $1.79 billion. The company, which operates phone masts in the Democratic Republic of Congo, Republic of Congo, Ghana, South Africa and Tanzania, last year shelved plans for its IPO amid concerns about political risks in DRC and Tanzania. Helios is planning a free float of at least 25% of the company, with a listing on the London Stock Exchange, and will use the proceeds for expanding its services, including possibly into new countries, it has said. “It’s a really good business in a strong sector, telecoms in Africa is the sort of growth story that appeals in this low-growth environment (globally),” said a source familiar with the transaction. The decision to press ahead with the deal comes despite turbulent market conditions in Britain amid the long-running chaos surrounding the negotiations to exit the European Union, and the poor recent performance of other African IPOs in London. Airtel Africa (AAF.L) saw its shares drop 15% to 67 pence per share on its market debut after completing a 595 million pound ($730 million) IPO in late June. Since then shares have fallen further, and were as low as 50 pence on Tuesday. Vivo Energy (VVO.L) shares are down 1% since its May 2018 debut.
    • Nigeria, Norway collaborate on power sector expansion

      The Federal Government is partnering the Government of Norway to work out measures that will help in the expansion of Nigeria’s power sector. With Norway’s 99 per cent total electricity supply coming from hydropower generation plants, both governments, during a meeting in Abuja on Monday, focused more on how Norwegian investors would help develop Nigeria’s hydropower sources.
      It was also learnt that Norway, which currently has about 77 companies in Nigeria, plans to increase its investments by bringing in more investors to Nigeria, particularly in the power sector. These were made public at the headquarters of the Federal Ministry of Power when the Norwegian Ambassador to Nigeria, Jens-Petter Kjemprud, and his team paid a courtesy call on the Minister of State for Power, Goddy Agba. Agba told journalists that the team from Norway shared invaluable experiences with the ministry, adding that this would help progress Nigeria’s power sector. He said, “They are here to share experiences from what they have gained and what knowledge they’ve got, since we are growing our power system and this will help us to progress further. Norway is a great country with so much potential power-wise that can be beneficial to Nigeria.” On whether investors from Norway would invest in Nigeria’s power sector, the minister replied, “We looked at that and he mentioned a few of them and how efficient some of their companies are in Nigeria. “We will look at them and see which are to be useful to us and certainly if we find them very useful, we shall encourage them to participate in our development process in power.” Also speaking on whether Norway would bring investors to Nigeria, Kjemprud said, “Very much. Currently, we have 70 Norwegian companies active in Nigeria but not that heavily engaged in the power sector. “But as the minister rightly said, we have a long history of generating electricity. In fact, we do 99 per cent from hydropower. And we believe that we have some comparative advantage and a number of companies who would like to work with Nigeria in developing and strengthening the power sector.”
      The ambassador said his country had great expertise in hydropower generation, adding that industries in Nigeria would benefit from this when both countries work to develop Nigeria’s power sector. He said, “Norway is a highly industrial nation and we built our industries on the fact that we first developed our hydropower sector to supply the Norwegian industry with cheap, efficient and stable power. “We have discussed. Nigeria has a huge market and huge possibilities of expanding its industries but it needs to be competitive and that’s where hydropower comes in as one alternative.”
      The meeting had the Managing Director of the Transmission Company of Nigeria, Usman Mohammed, the Permanent Secretary, FMP, Louis Edozien, and other senior government officials from both countries in attendance.
    • Net foreign transactions on EGX hit $1.3 billion (Egypt)

      Net transactions of non-Egyptians in securities reached almost LE 21 billion up from not more than LE 3 billion on the stock exchange, which confirms the success of Egypt’s reform plan, according to Chairman of the Egyptian Stock Exchange (EGX) Mohamed Farid. Farid added Wednesday that the economic reform witnessed in Egypt is one of the boldest reform plans that dealt with the causes of the budget deficit, issuing the new investment law and improving the economic environment as well as the management of state assets. This came during the session “Investing in financial instruments”, held within the activities of the second day of “Egypt Can” conference. Farid said that the State has carried out rapid remedies to ease the burden on some social classes, enabling them to face the repercussions of the reform process, stressing that it was necessary to search for sources of funding for the success of these programs. He pointed out that the stock market has witnessed diversification in various fields, which also confirms the confidence of the foreign investor in the Egyptian investment climate and market. Farid noted that the process of encoding the investor also contributed to the revival of the stock market, pointing out that the stock exchange is one of the State's most important tools to revitalize investments in Egypt and allow different classes to trade and make profits. Farid explained that most small projects are not registered in the stock market because of its legal status and the owners'desire to stay without development, noting that the volatility in the stock market is not negative, but represents investment opportunities and gains for participants
    • Construction of largest market in East Africa to begin in December

      Construction of a regional market, which according to Mr. Karim Karamagi, the chief executive officer at Rural United Business Association Network (RUSBA) Ltd, will be the “largest market in the East Africa”, is set to commence in December at Kyotera district in the central region of Uganda. The market, whose establishment is subsidized by South African based Degitech Energy Company Ltd at an undisclosed amount, will be erected on a 200 acres piece of land along the Kyotera- Mutukula Road.
      Features of the proposed facility
      Upon completion, the facility will have, but not limited to the following spaces: stores, wholesale shops, Restaurants, Cottage industries, Granaries, Fruit stalls/lockers, Open space for small retailers, Halls for seminars, Cold rooms, Exhibition grounds, Day Care Centre, Craft stalls/lockers, Shops, Information Centre, Butchery stalls, Animal market space, Furniture and timber, Agro Chemicals Garage, spare shops, Hotels, Halls for training and meetings, Recreational space, Forex Bureaus, Vehicle parking yard, Hardware shops, Health Units, Office space, Vet shops, Pharmacies, Car bonds, and  Playgrounds.
      Aim of the project
      Mr. Karamagi said that the market is aimed at bringing together manufacturers, distributors, wholesalers, retailers and consumers from all over the East African region, including Uganda, Kenya, Tanzania, Rwanda, Burundi, Southern Sudan and Western Part of the Democratic Republic of Congo. “The market will also create employment opportunities and encourage entrepreneurial growth in the republic of Uganda, and in so doing we will spur value addition and also promote export of value-added products to regional markets like the East African Community (EAC) and Common Market for Eastern and Southern Africa (Comesa),” he said. On the other hand, Mr. Fred Kalyesubula, the Kyotera District Chief Administrative Officer said that the market is one of the government initiatives to encourage the private sector to engage in gainful trade and investments.
    • Ethiopia to issue two telecoms licences by April, behind initial schedule

      ADDIS ABABA (Reuters) - Ethiopia plans to award two telecoms licences to multinational mobile companies by April 2020, the new communications regulator said on Tuesday, an apparent delay in the timeline officials had previously set. Balcha Reba, director general of the Ethiopian Communications Authority, gave the date at a press conference. In June, Reuters reported that Ethiopia would issue the licences by the end of the year, quoting Ethiopian officials and telecoms executives with direct knowledge of the process. The issuing of licences will end a state monopoly and open up one of the world’s last major closed telecoms markets in the country of around 100 million.   Prime Minister Abiy Ahmed launched a push to liberalise the country’s economy last year. The communications regulator, formed after parliament passed a law covering the liberalisation of the sector, will hold a meeting on Nov. 12 in the Ethiopian capital to answer questions of interested companies, Balcha said. Vodafone, South African operator MTN, France’s Orange and Etisalat of the United Arab Emirates are likely to be among the leading contenders vying for entry into the Ethiopian market.
    • Ivory Coast tourism attracts $5bn from Arab investors

      ABIDJAN: Ivory Coast announced Tuesday that Arab investors had pledged $5 billion to support its program to attract foreign tourists to the West African nation. The tourism ministry said “a round table of investors in Dubai” on Sunday and Monday expressed interest In Ivory Coast and in total, the minister for tourism and leisure, Siandou Fofana, “enlisted from them pledges worth just over $5 billion” (4.49 billion euros). Ivory Coast’s charm offensive in the United Arab Emirates included a delegation with recently retired star footballer Didier Drogba and A’Salfo, lead singer with the pop group Magic System, who gave two concerts. The initiative, dubbed “Sublime Cote d’Ivoire” (Magnificent Ivory Coast), was launched in May. “Our goal is to become the fifth biggest destination for tourism in Africa by 2025,” Fofana said in the ministry’s statement. If objectives are reached, tourism would account for 12 percent of GDP compared with 5.5 percent today, and jobs in the tourism sector would grow from 270,000, as of 2016, to 365,000. The economy today is hugely dependent on rural earnings, especially cacao and coffee. The plan is to attract tourists to the remote west of the country, a region of unspoiled mountains and beaches.
    • UK’s Gemcorp, Russia’s Sberbank, VEB team up for Africa trade finance

      MOSCOW (Reuters) - Russia’s largest lender Sberbank (SBER.MM) has teamed up with London-based investment firm Gemcorp Capital and two state entities to create a mechanism to support trade finance between Russia and African countries, Sberbank said. Their agreement, signed on the sidelines of Africa-Russia forum in the Black Sea city of Sochi on Wednesday, is worth $5 billion, state-controlled Sberbank said in a statement. It “signifies Russian and African parties’ need for joint financial solutions,” the bank added. Speaking to dozens of African heads of state at a two-day summit earlier on Wednesday, Russia’s President Vladimir Putin called for trade with African countries to double over the next 4-5 years and said Moscow had written off African debts to the tune of over $20 billion. It was not immediately clear what projects could become part of the agreement - which includes state development bank VEB and the Russian export center, a state institute supporting non-commodities exports. Gemcorp did not respond to request for comment from Reuters. Gemcorp was formed in 2014 by Atanas Bostandjiev, a former executive at VTB Capital, the investment arm of Russia’s second largest lender VTB (VTBR.MM). In 2018, Gemcorp said it had extended a $250 million loan to Zimbabwe to help the country import essential goods like fuel and medicine. In 2019, Gemcorp’s commodities trading arm agreed to supply 500,000 tonnes of wheat to Ethiopia. The agreement will help boost Russian exports in general by providing financial assistance for the supply of Russian goods to African countries including Angola, Ethiopia, Mozambique and Zimbabwe, Sberbank said. The plan is to offer financial support and counsel to projects of Russian exporters in sectors like agricultural products, fertilisers and medical products, it added.
  • United Arab Emirates
    • Multilateral Convention (MLI) – English synthesized text of United Arab Emirates-United Kingdom treaty published by United Kingdom

      On 21 October 2019, HM Revenue & Customs published the English synthesized text of the United Arab Emirates - United Kingdom Income Tax Treaty (2016), displaying the modifications made to the treaty by the MLI. The text was prepared jointly by the competent authorities of the United Arab Emirates and the United Kingdom. The United Kingdom and the United Arab Emirates deposited their instruments of ratification of the MLI on, respectively, 29 June 2018 and 29 May 2019. The MLI therefore entered into force on 1 October 2018 for the United Kingdom and on 1 September 2019 for the United Arab Emirates. Unless stated otherwise in the synthesized text, the provisions of the MLI will generally have effect with respect to the United Arab Emirates - United Kingdom Income Tax Treaty (2016): In the United Kingdom:
      • for taxes withheld at source: from 1 January 2020; and
      • from 1 April 2020 for corporation tax and from 6 April 2020 for income tax and capital gains tax.
      In the United Arab Emirates:
      • for taxes withheld at source: from 1 January 2020; and
      • for other taxes for taxable periods beginning on or after 1 March 2020.
  • United Kingdom
  • Switzerland
    • Interest rate for tax arrears and tax refunds, and maximum deduction fur supplementary pension contributions for 2020 – determined

      On 18 October 2018, the tax administration published press release No. 2-174-D-2-19-d determining the interest rate for tax arrears and tax refunds, and the maximum deduction fur supplementary pension contributions for 2020.

      Interest rate on arrears and refunds

      The 2020 interest rate for tax arrears and refunds will be 3%. The interest compensation rate for advance payments will be 0%.

      Deduction for supplementary pension contributions

      The maximum deductions for supplementary pension contributions relating to old age, surviving spouse and disability for 2020 will amount to:
      • CHF 6,826 for employees; and
      • CHF 34,128 for self-employed people.
  • United States
    • Guidance issued on hard forks of cryptocurrency

      On 9 October 2019, the US Internal Revenue Service (IRS) issued Revenue Ruling 2019-24 to provide guidance on the tax treatment of hard forks of cryptocurrency. The IRS also issued a related News Release (IR-2019-167) dated 9 October 2019. Cryptocurrency is a type of virtual currency that utilizes cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. A hard fork is unique to distributed ledger technology and occurs when a cryptocurrency on a distributed ledger undergoes a protocol change resulting in a permanent diversion from the legacy (i.e. existing) distributed ledger. A hard fork may result in the creation of a new cryptocurrency on a new distributed ledger in addition to the legacy cryptocurrency on the legacy distributed ledger. An airdrop is a means of distributing units of a cryptocurrency to the distributed ledger addresses of multiple taxpayers. A hard fork followed by an airdrop results in the distribution of units of the new cryptocurrency to addresses containing the legacy cryptocurrency. A hard fork, however, is not always followed by an airdrop. Revenue Ruling 2019-24 states that a taxpayer does not have gross income under section 61 of the US Internal Revenue Code (IRC) as a result of a hard fork of a cryptocurrency that the taxpayer owns if the hard fork is not followed by an airdrop, and thus the taxpayer does not receive units of a new cryptocurrency. Revenue Ruling 2019-24 further states that a taxpayer has gross income, ordinary in character, as a result of a hard fork under IRC section 61 if an airdrop follows the hard fork, and thus the taxpayer receives units of new cryptocurrency. Revenue Ruling 2019-24 will be published in the IRS Internal Revenue Bulletin (IRB) as part of IRB 2019-44 dated 28 October 2019.
    • Relief announced for US persons who own stock in certain foreign corporations

      On 1 October 2019, the US Treasury Department and the US Internal Revenue Service (IRS) issued Revenue Procedure 2019-40 to provide relief to certain US persons that own stock in certain foreign corporations in connection with the repeal of section 958(b)(4) of the US Internal Revenue Code (IRC). The IRS issued a related News Release (IR-2019-162) dated 1 October 2019. IRC section 318(a)(3) generally attributes stock owned by a person to a partnership, estate, trust, or corporation in which the person has an interest (so-called "downward attribution"). Before the repeal by the Tax Cuts and Jobs Act (TCJA), former IRC section 958(b)(4) provided that downward attribution should not apply so as to consider a US person as owning stock owned by a person who is not a US person (a "foreign person"). As a result of the repeal of IRC section 958(b)(4), stock of a foreign corporation owned by a foreign person can be attributed to a US person under IRC section 318(a)(3) for purposes of determining whether a US person is a US shareholder of the foreign corporation and, therefore, whether the foreign corporation is a controlled foreign corporation (CFC). Accordingly, US persons that were not previously treated as US shareholders may be treated as US shareholders, and foreign corporations that were not previously treated as CFCs may be treated as CFCs. Revenue Procedure 2019-40 provides guidance on determining whether certain foreign corporations are CFCs. Revenue Procedure 2019-40 also allows certain unrelated minority US shareholders to rely on specified financial statement information to calculate their subpart F and global intangible low-taxed income (GILTI) inclusions and satisfy reporting requirements with respect to certain CFCs if more detailed tax information is not available. Revenue Procedure 2019-40 also provides penalty relief to taxpayers in the specified circumstances. In addition, Revenue Procedure 2019-40 announces that the IRS intends to amend the instructions for IRS Form 5471 (Information Return of US Persons With Respect To Certain Foreign Corporations) to reduce the amount of information that certain unrelated minority US shareholders of the CFC are required to provide, and to limit the filing requirements of US shareholders who only constructively own stock of the CFC solely due to downward attribution from another person. Revenue Procedure 2019-40 generally applies from the last taxable year of a foreign corporation beginning before 1 January 2018 and to the taxable years of US shareholders in which or with which such taxable years of such foreign corporation end. Revenue Procedure 2019-40 will be in the IRS Internal Revenue Bulletin (IRB) as part of IRB 2019-43 dated 21 October 2019.
  • Tax Treaties
    • Tax Treaties

      A tax treaty is a bilateral agreement made by two countries to resolve issues involving double taxation of passive and active income. Treaties Update – October 2019
      Date Country A Country B Object Status
      09.10.19 China New Zealand Income Tax Treaty Ratified and gazetted by New Zealand
      04.10.19 United Arab Emirates Zimbabwe Income Tax Treaty Approved by United Arab Emirates' Cabinet
      18.10.19 Gibraltar United Kingdom Income Tax Treaty Signed