October 2021

  • Bulgaria
    • Bulgarian Prime Minister: We Will Close the Coal Power Plants in 2038 at the Earliest

      The Government's Recovery and Sustainability Plan, adopted today, sets out a scenario for the closure of coal-fired power plants with two dates - 2038 and 2040. The next National Assembly will set a closing date based on technical analysis, said Prime Minister Stefan Yanev.

      The caretaker Prime Minister commented:

      "The mechanism for fixing this date is yet to come, based on technical analysis. What we have given are not three dates, but two - the 38th and 40th year, and we prefer it to be 2040. If it could be after 40 based on this technical analysis, let it be so, we don't mind defending it, but let's not play with dates and scare people, because, including yesterday, people were here, When people need clarity, a perspective in their professional development, it is not good to create a condition for them to remain with the impression that we are hiding something from them and to create almost three, or five, eight dates, an unpredictability On the contrary! We are looking for predictability! We are looking for realization ".

      The establishment of a state-owned enterprise to manage the transition in the coal regions is envisaged. It will employ laid-off workers from the Maritza Iztok complex, who will deal with land reclamation.

      Deputy Prime Minister Atanas Pekanov reminded that the plan should implement 46 reforms and finance 59 projects. Our country expects to receive BGN 12.9 billion:

      "However, which will activate an additional BGN 8.1 billion in investments, which will have an effect on our economy of BGN 21 billion in the next 6 years."

      The adoption of the Recovery Plan is a timely act, said caretaker Prime Minister Stefan Yanev.

      The document has been worked on intensively in the last 5 months, the Prime Minister stressed before the meeting of the Council of Ministers. The plan was discussed with the 46th National Assembly and with the interested branch organizations.

      "The work done is positive. They assess it as positive and we hope that with today's adoption and tomorrow's presentation to the European Commission we will open the way for detailed talks, for its final adoption and for fresh money to go to Bulgarian business, to projects that they will really have an element of recovery of the Bulgarian economy, of its future development in the direction of digitalization, in the direction of improvement and an economy with a higher added product".

      Source: Novinite

    • Bulgaria’s Government Announces Measures to Compensate Businesses for High Electricity Prices

      The Bulgarian government is announcing measures to compensate businesses for high electricity prices. This became possible after companies and workers protested in Sofia, demanding to be compensated for the price of electricity for non-household consumers on the stock exchange, which reached over BGN 480 per megawatt-hour. Among the discussed solutions is the business to receive 75% compensation from the amount representing the difference between the stock exchange price and the estimated price from EWRC.   Source: Novinite
    • Bulgaria Adopted Today its Recovery and Sustainability Plan

      The Bulgarian Recovery and Sustainability Plan is a program for long-term investment projects and reforms that will make the Bulgarian economy stronger and more competitive, boost it and increase the well-being of its citizens by responding to the challenges of the 21st century. This was stated by the Deputy Prime Minister for Management of European Funds Atanas Pekanov after today's meeting of the Council of Ministers.

      The plan, which includes 59 investment projects and 46 reforms, has been approved and is due to be formally sent to the European Commission this Friday. According to Deputy Prime Minister Pekanov, the mechanism is a unique new financial instrument within the European response to the pandemic and economic crisis, from which BGN 12.9 billion will flow into the Bulgarian economy in the coming years.

      The Deputy Prime Minister thanked the institutions for the exceptional effort to coordinate all state structures and the tireless work on such a plan, which outlines and clearly sets priorities for the development of the country in the next 6 years.

      "I thank the people from the team who stood in the offices upstairs for long hours until we confirm and confirm that the proposed projects and reforms meet European requirements. To thank the ministries and agencies that are or will be beneficiaries of hard work projects, sometimes in a very short time. "

      He did not spare criticism of the institutions, which have committed themselves to absolutely blocking any reform efforts, citing the Supreme Judicial Council as an example. "Some institutions like the established order and the status quo. But reforms are the key moment to ensure that our economy and country develop in step with the times. And even if there is resistance to them, even if some reforms are painful, we must do them, confident that we are moving forward,"Pekanov explained.

      The plan meets both the priorities of the European institutions to strengthen the environmental and digital transition, and the Cabinet's desire to drive key reforms, including those that previous rulers refused to do, in a desire to avoid any difficult topic, the deputy prime minister added and outlined the key changes from recent months:

      • Significant strengthening of the focus on decarbonization;

      • Increased support for business, with the introduction of financial instruments and partial replacement of the previously provided grant.

      • Increased investment focus in the social sphere (education, healthcare, social support);

      • 13 new investment projects;

      • Reforms in the field of healthcare, electric mobility, social sphere, rule of law and justice, business environment, energy.

      The Deputy Minister also responded to the many criticisms of the delay in the Plan, emphasizing that this was due to both the topics avoided so far and the effort to ensure that the funds would be used in the best way: "We managed to do a number of improvements. This delay has led to results and we hear from various partners - to greater efficiency of the planned projects and reforms, to higher efficiency of these funds."

      For example, Pekanov pointed to the intensification of reforms regarding the rule of law, for which he thanked the team of the Ministry of Justice and added: of the future strategy for decarbonisation of the country. In cooperation with the trade unions, in the field of energy we have set a new reform for the State Enterprise for Conversion of Coal Regions. "

      Deputy Prime Minister Atanas Pekanov also reminded that the work on the Plan is far from over, as formal negotiations with the Commission are forthcoming, especially on the difficult topic of energy. - to improve results: "This goes through the recognition that in many respects we are not doing well enough - we have one of the most energy-intensive economies in Europe, we are a timid economic innovator, health and education systems need reform, we are criticized with regard to justice. But if we say responsibly today - that's right, but it could be something else, we will be able to move forward. With the hope that the important goals set for our country within the framework of the Plan will be fulfilled and overfulfilled by the next regular and caretaker governments, I look forward and will send the Plan to Brussels tomorrow. All these priorities, reforms and investments - do not accept them as the desires or views of a technocrat. Such is the political reality that we need them to ensure the prosperity and development of our citizens and our country."

  • China
    • Answers to questions on anti-tax avoidance during Covid-19 period

      1. The epidemic has had a great impact on the production and operation of enterprises and related transactions within the group. In this case, how to carry out transfer pricing investigation by tax authorities?

      STA: The impact of the epidemic on enterprises in different industries varies greatly, bringing great impact to some enterprises in different industries and new development opportunities to others. When conducting transfer pricing investigations, tax authorities will follow the principle of independent transactions and, on this basis, consider the impact of the epidemic on related transactions of enterprises, on a case-by-case basis.

      1. How should tax authorities consider losses caused by the epidemic in their transfer pricing investigations?

      STA: Tax authorities will take into account the impact of the epidemic on enterprises in the transfer pricing investigation, taking into account such factors as enterprise functional risk, related party transaction characteristics, industry characteristics and comparable enterprise conditions. For enterprises' additional expenditures due to epidemic prevention and control or increased operating expenses due to the impact of the epidemic, tax authorities will adjust the differences as appropriate in the comparability analysis based on full consideration of the distribution of related costs and expenses among independent third parties. It is suggested that enterprises clearly divide and quantify relevant costs and expenses, and keep relevant evidence for future reference.

      1. What should an enterprise pay attention to when preparing local documents for the same period if the profit level in 2020 changes significantly due to the epidemic?

      STA: According to the state administration of taxation on perfecting the same period and related personal data management related matters of announcement no. 42 (2016) the first item (4) of article 14 of the relevant provisions of enterprise in local document preparation, shall specify outbreak the specific impact of related party transactions, the value chain, the comparable analysis, comparable object data for the same year, region, industry, product and functional risks can be focused to reflect the impact of the epidemic on industry profit levels.

      1. Does the government's assistance policy affecting the price adjustment of related party transactions?

      STA: During the epidemic, the Chinese government has introduced a series of assistance policies in areas such as rent, taxes and financing. The influence of government aid policies on transfer pricing arrangements may be mainly reflected in comparability analysis. If enterprises believe that government assistance has an impact on transfer pricing arrangements, they should provide relevant information in their transfer pricing documentation to support transfer pricing analysis. Tax authorities will follow the principle of independent transactions to identify comparable factors and ensure the fairness and consistency of comparable analysis results.

      1. How to implement signed reservation pricing arrangements if they are affected by COVID-19?

      STA: If it is true that the epidemic has affected the implementation of the reservation pricing arrangement, the enterprise may report to the competent tax authority in written form, explaining in detail the impact of the epidemic on the implementation of the reservation pricing arrangement, and attach relevant materials.

      Competent tax authorities should analyze and assess the extent to which material changes brought about by the epidemic will affect reservation pricing arrangements. For unilateral reservation pricing arrangement, negotiate with the enterprise to revise or terminate the reservation pricing arrangement; The arrangement of double-sided (multi-sided) reservation pricing shall be reported to the State Administration of Taxation for coordination at different levels and shall be settled by the State Administration of Taxation and the competent tax authorities of the other contracting party through negotiation.

    • Seven types of Documents to be retained for future reference to enjoy the additional deduction of R&D fee

      To enjoy the advantage of additional deduction for R&D expenses, seven types of data need to be retained for future reference. According to the Notice on Further Implementing the Policy of Additional Deduction for R&D Expenses, enterprises need to prepare an auxiliary account of R&D expenses, fill in the Preferential Schedule for Additional Deduction for R&D Expenses (A107012), and keep it together with other materials for future reference. Other information includes:

      (a) proposal for the independent, entrusted or cooperative research and development project, and the resolution passed by the power organ of the enterprise pertaining to setting up the independent, entrusted or cooperative research and development project;

      (b) composition of the organization or project team for the independent, entrusted or cooperative research and development project, as well as name list of the research and development personnel;

      (c) contract for the entrusted or cooperative research and development project, which is registered with the science and technology administrative authorities;

      (d) explanation on distribution of expense of staff undertaking research and development activities and instruments, as well as equipment and intangible assets used for research and development activities (including records on work and usage);

      (e) balance sheet for research and development expenses of research and development projects, breakdown of distribution of expenses of research and development projects, the actual benefit-sharing ratio etc.;

      (f) subsidiary ledger for research and development expenditure;

      (g) where the enterprise has obtained an expert opinion issued by the science and technology administrative authorities of prefectural level and above (inclusive), the expert opinion shall be retained for future inspection; and

      (h) any other materials stipulated by the provincial tax authorities.

    • Coal-fired Power Companies and Heat Supply Enterprises Can Defer Tax Payment for the Fourth Quarter

      In order to ensure steady energy and power supply during the winter and next spring, the State Taxation Administration released on October 21, 2021 the Circular about Tax Relief Measures to Support Coal-fired Power Companies.   The circular stated that coal-fired power companies and heat supply enterprises can postpone payment of their tax bills in the fourth quarters. Tax administrations will speed up processing of tax rebate applications, and accelerate implementation of targeted and universal preferential tax & fee policies. Local tax administrations should conduct thorough inspections about business and tax conditions at local power companies and heat supply enterprises, and provide instructions to them about preferential tax & fee policies.
    • Fintech companies step up financial support to SMEs

      Chinese fintech companies are ramping up efforts to provide financial support for innovative small and medium-sized enterprises in a move to fuel the country's push in achieving innovation-driven economic growth.

      360 DigiTech, the fintech arm of 360 Security Group, signed a cooperative agreement with the financial unit of business software specialist Kingdee on Thursday. The two fintech companies have vowed to strengthen cooperation on technology, capital, channel and customer base to help SMEs ease their financing difficulties.

      "To create new development opportunities for the real economy, China needs to rely on 'little giant companies'. The country's support for such companies is increasing. Helping those companies grow through financial technology is a national strategy. It is also the major battlefield for us," Wu Haisheng, chief executive officer of 360 DigiTech, said.

      The Ministry of Industry and Information Technology unveiled in July a list of 2,930 "little giant companies" – leading SMEs that specialize in niche sectors, command a high market share, boast strong innovative capacity and core technologies, adding the total number to 4,762 as of now. The country aims to cultivate 10,000 such companies by 2025.

      Wang Hong, president of Kingdee financial unit, said industrial connectivity is important for the development of SMEs, but given the complexity of industrial value chain, digitalized financial services targeting businesses have been lagging behind compared to those targeting individuals in terms of the level of intelligence and convenience.

      "It is the 'blue ocean market' for fintech companies," he said.

      Source: China Daily

    • China’s GDP expands 9.8 pct in first three quarters

      China's economy continued stable recovery in the first three quarters of this year with major indicators staying within a reasonable range, official data showed Monday.

      The country's gross domestic product (GDP) expanded 9.8 percent year on year in the first three quarters, putting the average growth for the period in the past two years at 5.2 percent, data from the National Bureau of Statistics (NBS) showed.

      In the third quarter (Q3), the country's GDP grew 4.9 percent year on year, slower than the growth of 18.3 percent in Q1 and 7.9 percent in Q2.

      "The Chinese economy has maintained the recovery momentum in the first three quarters with progress in structural adjustment and high quality development," said NBS spokesperson Fu Linghui.

      Consumption contributed the lion's share to the economic growth in Jan.-Sept., while net exports contributed 19.5 percent to the GDP increase.

      Major economic indicators showed continued improvements across the board, with retail sales of consumer goods jumping 16.4 percent year on year in the first three quarters this year.

      China's value-added industrial output went up 11.8 percent year on year in the first three quarters, while fixed-asset investment went up 7.3 percent year on year during the period.

      The country's surveyed urban unemployment rate stood at 4.9 percent in September, 0.5 percentage points lower than the same period last year, NBS data showed.

      During the Jan.-Sept. period, China added 10.45 million new urban jobs in the first three quarters, achieving 95 percent of the target for the whole year.

      Recognizing the progress, Fu cautioned against rising uncertainties in the international environment and uneven recovery in the domestic economy, adding that the country will take various measures to keep the economy running within a reasonable range.

    • Beijing Unveils 20 Measures to Promote High Quality Development of Digital Trade

      Five departments in Beijing, including the Bureau of Commerce and the Bureau of Finance, recently released the Measures for Promoting High Quality Development of Digital Trade in Beijing. The document proposes to adopt such measures as building digital trade service platforms, promoting cross-border data flow, and consolidating the industrial foundation of data trade. In terms of promoting cross-border data flow, the document proposes to draft data classification standards and important data catalogue in the key fields of intelligent connected vehicles and information technology, seek national support and municipal participation in the security evaluation of cross-border data transmission, and establish and optimize the regulatory mechanism on security evaluation of cross-border data transmission. Source: Beijing Municipal Commerce Bureau
    • Power crunch impact on Chinese economy controllable: spokesperson

      China's power shortage is only temporary and its impact on the economy is under control, an official said Monday.

      Rising international energy prices, as well as tight domestic supplies in coal and electricity, partly led to power outages in some regions that affected normal production orders, said Fu Linghui, a spokesperson with the National Bureau of Statistics (NBS).

      The country has rolled out a series of measures to ensure power supply and keep electricity prices stable. As these measures gradually take effect, the power crunch would be eased and its impact on economic operation will be alleviated, Fu said.

      NBS data showed that the country's power generation accelerated in September, climbing 4.9 percent year on year last month compared with a year earlier, 4.7 percentage points faster than the growth rate in August.

      Monday's data also showed that the Chinese economy maintained stable growth in the first three quarters, with gross domestic product expanding 9.8 percent year on year during the period.

      Source: Xinhuanet

  • Focus Africa
    • Africa in Review by the Numbers (October 2021)

      51%
      Female business owners on the Jumia platform in Kenya, according to the firm's Africa E-commerce Index 2021. Women represent the same proportion of sellers in Nigeria, another of Africa's leading e-commerce markets. Jumia's CEO cited online retail as being 'inherently female-entrepreneur friendly'. (CapitalFm)
        $300 million
      Investment planned by Orange, the French multinational telecommunications company, in Egypt in 2022. This was announced during a meeting between several Egyptian emissaries including Prime Minister Mostafa Madbouly and representatives of a group of the largest French companies held on Monday in Paris. (Egypt Today)
        4,000 tonnes
      Annual capacity of Sierra Leone's first cocoa processing plant. The facility, launched by Capitol Foods, one of the country's leading agribusinesses will produce cocoa paste for export, sourcing beans from a network of over 2,800 farmers. (Food Business Africa)
        58%
      Nigeria's share of the total volume of private equity (PE) deals in West Africa between 2015 and 2020. Africa’s most populous nation also accounted for 54% of the total value of PE funding in the region, according to data from AVCA. Ghana followed at 17% and 26% respectively, and Kenya lead the way in East Africa, having received 61% of the total volume and 58% of the total value of PE deals in the region. (Nairametrics)
        6.5 million bags
      Uganda's coffee exports in the year through September, a 30-year peak. Increased uptake was due to growing demand from European buyers, especially Italy’s espresso lovers, amid shipping disruptions in Brazil and Vietnam. (The Citizen)
        $27 billion
      Financing sought by South Africa to develop electricity infrastructure to facilitate the shift away from coal. More than 80% of the country's electricity is powered by coal, with Eksom aiming to decommission between 8,000 and 12,000 MW of coal over the next decade. (Reuters)
        85 MW
      The total target wattage of the Regional Rusumo Hydroelectric Power Project in Rwanda after implementation of a redesign which could add at least 5 MW to the original 80-MW capacity. The $340 million project will benefit Tanzania, Burundi, and Rwanda, with first power targeted at the end of the year. (New Times)
        $8.9 billion
      Amount of financing provided by the European Bank of Reconstruction and Developments (EBRD) to Egypt, according to Rania Al-Mashat, Minister of International Cooperation. In total, the EBRD has financed 143 projects, 75% of which have been from the private sector. Egypt topped the list as the EBRD's largest country of operations in the southern and eastern Mediterranean region in 2020. (Egypt Today)
        200
      The number of drone licences that the Kenya Civil Aviation Authority (KCAA) has issued since January. Uptake has been encouraged by changes in legislation enabling drone use from late last year but has been dampened by the high cost of training. A more conducive regulatory framework for use of unmanned drones is expected to support Africa to leapfrog infrastructure challenges. (Business Daily)
        $1.2 billion
      The amount expected to be raised by MTN Uganda in the highly anticipated 20% share sale of the telco on the Uganda Securities Exchange. The listing will make MTN Uganda the second publicly traded telecom in the EAC after Safaricom’s IPO on the Nairobi Securities Exchange in 2008. (Daily Monitor)
        33%
      The reduction in Kenya Power's electricity tariffs due to take effect in December 2021 in a move designed to attract foreign direct investment and spur industrial growth. This development should also prop up power demand and save the struggling utility firm, Kenya Power, from imminent collapse. (The East African)
        40
      Wind turbines to be supplied by GE Renewable Energy to Morocco's 200-MW Aftissat onshore wind farm. The new facility is the second windfarm built with GE equipment in the country and will bring the kingdom closer to its target of having 52% of its power from renewable sources by 2030. (Morocco World News)
        37th
      Global rank of Ethiopian Airlines, which also holds the title of best carrier in Africa for the fourth year in a row, according to the SKYTRAX World Airline Awards 2021. South African Airways and Kenya Airways came in second and third of the continent's airlines. (The East African)
        254k jobs
      Kenyan jobs that were shed in the three months to March, despite the economy showing signs of recovery from Covid-19 hardships. While this paints a grim picture of the economy, the World Bank expects Kenya’s economy to grow by 4.5% this year and to climb to above 5% in the subsequent two years (Business Daily)
        100% duty-free
      Ghana plans to introduce a full waiver on tariffs for electric vehicle imports. According to Ghana's Minister of Energy, this waiver will reduce greenhouse gas emissions, stimulate demand for the country's excess power capacity and, most importantly, avoid the country becoming a dumping ground for used fossil-fuel cars as the world moves to eco-friendly vehicles. (GhanaWeb)
    • African Tax Administration Forum Comments on Global Tax Agreement

      The African Tax Administration Forum (ATAF) has issued a statement commenting on the significant progress made towards the global tax agreement (the agreement) that envisages implementing a two-pillar solution towards addressing the tax challenges arising from the digitalization of the economy.

      The statement noted that ATAF and African members of the Inclusive Framework (IF) have been heavily involved in the negotiations and the ATAF has been providing technical support to its members to ensure that the new Pillar One and Pillar Two rules address the needs of African countries in ensuring that they are simple, equitable and bridge the gap in the existing tax rules that have been skewed in favour of developed countries.

      Pillar One rules

      The Pillar One rules incorporate many of ATAF Pillar One proposal recommendations, as follows:

      • the ATAF noted that the Pillar One scope was broadened to include all sectors rather than the narrower scope proposed in the OECD blueprint report released for public consultation in October 2020;
      • the ATAF underlined that the extractives sector has been excluded from the scope of Pillar One;
      • the ATAF welcomed the nexus threshold reduction from EUR 5 million to EUR 1 million and the lower threshold of EUR 250,000 for jurisdictions with GDP lower than EUR 40 billion. The ATAF expressed that this change to the nexus rule shall ensure that no member of the IF will be excluded from receiving its reallocation of profit under the so-called Amount A; and
      • the ATAF had opposed, together with the African Union Commission, the IF's initial recommendation to impose a mandatory dispute resolution mechanism for issues relating to Amount A as it would impose a costly process on many African countries with limited capacity and where there is little risk of double taxation. The ATAF has succeeded in obtaining an agreement that there will be no mandatory dispute resolution mechanism imposed on many African and other developing countries. Instead an elective binding dispute resolution mechanism will be available for issues related to Amount A for developing economies that are eligible for deferral of their BEPS Action 14 peer review (paragraph 7 of the Assessment Methodology chapter of BEPS Action 14 effective dispute resolution mechanisms) and have no or low levels of mutual agreement procedure (MAP) disputes.

      The ATAF noted that the agreement does not reallocate part of the routine profit of in-scope MNEs to market jurisdictions. The ATAF stressed that it called for at least 35% of the so-called residual profit to be allocated to market jurisdictions. The agreement only reallocates 25% of the residual profit to market jurisdictions under Amount A. The ATAF acknowledged that the additional allocation of the global profits of the most profitable MNEs to market jurisdictions is a step in the right direction in the reallocation of taxing rights. However, it will not result in the substantial shift in the allocation of taxing rights between residence and source countries that ATAF and African countries have been advocating for to redress the current imbalance in the allocation of taxing rights which favours residence jurisdictions to the detriment of developing countries which are primarily source jurisdictions.

      The ATAF expressed that fundamental reallocation of such taxing rights could have been achieved through the ATAF Pillar One proposals. The ATAF added that it will be calling for further work to be done in the global standard setting process to persuade the developed world to agree to a more equitable allocation of taxing rights to provide African and other developing countries with the tax revenue they need to rebuild their economies.

      Pillar Two rules

      Minimum tax

      The Pillar Two rules aim to ensure that all the global profits of MNEs are taxed at least at a minimum effective rate of 15%. However, the ATAF highlighted for such a rule to be effective, the minimum effective rate needed to be at least 20% rather than 15% if it is to stem artificial profit shifting out of Africa as most African countries have a statutory corporate income tax rate of between 25% and 35%.

      Rule design

      • The ATAF noted that the agreement gives priority to the Income Inclusion Rule (IIR) and that the Undertaxed Payments Rule (UTPR) will only apply in very limited circumstances. The ATAF has stated that a source-based rule such as the UTPR or the Subject to Tax Rule (STTR, which is a treaty provision rule) should be the primary rule under Pillar Two to assist in redressing the current imbalance in the allocation of taxing rights between residence and source jurisdictions.
      • The ATAF welcomed that the STTR will be a minimum standard that developing countries can require to be included in bilateral tax treaties with IF members applying nominal corporate income tax rates below the STTR minimum rate of 9%. The ATAF has called for the STTR to be broad in scope to cover payments of interest, royalties, all service payments, and capital gains. The IF agreed that the STTR will cover interest, royalties, and a defined set of other payments; the ATAF confirmed that it will continue to monitor what will be included within defined payments as this work progresses in the IF.

      Implementation

      The ATAF announced it will work closely with the African Union and African countries on the implementation of the new rules within the timetable of the end of 2023 set out in the IF plan. The ATAF noted that the implementation must be done responsibly and in consideration of the fact that not all countries have a similar capacity to implement the rules.

      Regarding the few IF members that have not joined the agreement and the other African countries that are not members of the IF, the ATAF has expressed concern about how the new rules will impact upon those countries and that political pressure should not be brought on such countries to apply these rules or to join the IF.

      The work that the ATAF's membership and the African Union have done in the negotiations on the two-pillar solution has been ground breaking and pioneering work for Africa, and it has meant that for the first time, Africa has been able to have its tax policy objectives better reflected in the global tax rules.

      The ATAF statement was released on 8 October 2021.

    • Rwanda Joins Regional Initiatives for Tax Transparency

      According to a press release of 25 October 2021 published by the OECD, Rwanda has joined the Yaoundé Declaration, affirming the African initiatives for tax transparency and exchange of information for tax purposes and for tackling illicit financial flows (IFFs) through international tax cooperation.

      The Yaoundé Declaration was originally signed on 15 November 2017 in Yaoundé (Cameroon), by four countries, namely Benin, Cameroon, Liberia and Uganda (see text in English here), during the tenth Plenary meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum).

      Rwanda is now the 31st African country, with the African Union Commission, to adhere to the Declaration. The other countries are Benin, Burkina Faso, Cameroon, Cape Verde, Chad, Comoros, Congo, Djibouti, Egypt, eSwatini, Gabon, Ghana, Guinea-Bissau, Ivory Coast, Kenya, Lesotho, Liberia, Madagascar, Mali, Mauritius, Mauritania, Morocco, Niger, Nigeria, South Africa, Senegal, Seychelles, Togo, Tunisia and Uganda.

      More info can be found on the OECD website.

  • Hong Kong
    • Hong Kong Government Responds to Inclusion in EU’s Watchlist on Tax Co-Operation

      The Hong Kong government announced on 5 October 2021 that it will amend the Inland Revenue Ordinance by the end of 2022 and implement relevant measures in 2023 to help combat cross-border evasion. The announcement was made in a response to the inclusion of Hong Kong in the European Union (EU) watchlist on tax co-operation due to concerns about double non-taxation of certain foreign sourced passive income (such as interest and royalties) under Hong Kong's territorial tax system.

      According to the announcement, the proposed legislative amendments will target corporations, particularly those with no substantial economic activity in Hong Kong, but individual taxpayers will not be affected. The proposed amendments will also not affect financial institutions whose offshore interest income is already subject to tax in Hong Kong.

      The government reiterated its participation in and support of international tax cooperation efforts. At the same time, it stated that Hong Kong will continue to adopt the territorial source principle of taxation and uphold a simple, certain and low-tax regime with a view to maintaining the competitiveness of Hong Kong's business environment.

      The government will request the EU to remove Hong Kong from the watchlist after the relevant tax arrangements have been amended.

      Hong Kong was previously listed on the watchlist in December 2017 and subsequently removed in March 2019 after making tax reforms in areas such as transparency and fair taxation.

    • Hong Kong Logistics: Dual Circulation Supply Chains Assessed

      Hong Kong is Asia’s leading logistics hub, through which many companies deliver goods to and from mainland China and other countries and territories around the world. In the Outline of the 14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Long-Range Objectives Through the Year 2035 (the 14th Five-Year Plan, Chinese only) issued in March 2021, the “dual circulation” development paradigm was put forward in which “domestic and overseas markets reinforce each other, with the domestic market as the mainstay.” China is set to promote the development of high-tech industries, increase domestic demand, and continue to enhance its global trade network. Hong Kong, as an important logistics hub in the region, is well placed to capitalise on supply chain opportunities emerging from the dual circulation policy, which in turn will strengthen the city’s position as an international shipping, trading and aviation centre. This article analyses Hong Kong’s trade statistics during the period 2010-2020, highlighting the categories and transportation modes of Hong Kong’s merchandise imports and exports, as well as Hong Kong’s functions, roles and advantages in regional supply chains. It is hoped the analysis will help chart the city’s trade and logistics development directions more effectively going forward.
      1. Changes in Hong Kong’s merchandise imports and exports The tables below list changes in the value of Hong Kong’s merchandise imports and exports in 2010-2020:

      Top 20 Hong Kong Import Commodity Categories 2010-2020

      (by two-digit commodity code under Hong Kong Harmonized System) (HK$ million)

      Commodity category (two-digit commodity code)

      2010

      2015

      2019

      2020

      2010-2020 CAGR

      Total Import Value

      3,364,840

      4,046,420

      4,415,440

      4,269,752

      2.4%

      85 Electrical machinery and equipment and parts

      1,469,365

      2,061,305

      2,409,998

      2,495,273

      5.4%

      84 Machinery and mechanical appliances

      448,893

      479,624

      519,691

      521,648

      1.5%

      71 Jewellery and precious metals

      195,677

      284,832

      309,103

      248,972

      2.4%

      90 Instruments and apparatus

      107,176

      115,509

      138,434

      138,562

      2.6%

      27 Mineral fuels and oils

      119,270

      93,817

      112,566

      68,641

      -5.4%

      33 Perfumery and cosmetics

      16,808

      30,983

      50,057

      66,364

      14.7%

      39 Plastics

      116,427

      92,050

      64,598

      55,342

      -7.2%

      91 Clocks and watches

      57,711

      73,661

      62,778

      47,880

      -1.9%

      02 Meat

      32,956

      40,965

      42,362

      40,876

      2.2%

      08 Fruit and nuts

      19,387

      29,059

      35,759

      31,259

      4.9%

      42 Articles of leather

      39,341

      41,066

      38,490

      28,658

      -3.1%

      61 Knitted apparel

      68,385

      56,644

      41,226

      28,306

      -8.4%

      62 Apparel, not knitted

      53,663

      51,717

      40,717

      27,839

      -6.4%

      95 Toys and games

      75,900

      44,568

      32,696

      27,784

      -9.6%

      97 Artwork and antiques

      6,080

      18,741

      38,283

      22,414

      13.9%

      87 Vehicles

      29,109

      37,733

      28,990

      22,333

      -2.6%

      30 Pharmaceutical products

      15,608

      18,395

      21,831

      22,242

      3.6%

      03 Seafood

      21,331

      24,342

      23,451

      20,064

      -0.6%

      22 Beverages, spirits and vinegar

      15,547

      22,393

      22,329

      19,340

      2.2%

      70 Glass and glassware

      12,144

      15,490

      16,494

      19,291

      4.7%

      Source: Census and Statistics Department Note 1: The commodity descriptions have been simplified. For detailed descriptions and classifications under the Hong Kong Harmonized System, please visit the Census and Statistics Department website. Note 2: Statistics for 2019 are included to provide a clear picture of Hong Kong’s imports prior to Covid-19.

      Top 20 Hong Kong Export Commodity Categories 2010-2020

      (by two-digit commodity code under Hong Kong Harmonized System) (HK$ million)

      Commodity category (two-digit commodity code)

      2010

      2015

      2019

      2020

      2010-2020 CAGR

      Total Export Value

      3,031,019

      3,605,279

      3,988,685

      3,927,517

      2.6%

      85 Electrical machinery and equipment and parts

      1,405,385

      1,930,431

      2,355,155

      2,417,041

      5.6%

      84 Machinery and mechanical appliances

      427,815

      502,051

      551,473

      579,913

      3.1%

      71 Jewellery and precious metals

      163,192

      225,256

      219,559

      196,757

      1.9%

      90 Instruments and apparatus

      109,042

      113,235

      140,482

      142,879

      2.7%

      39 Plastics

      109,405

      95,327

      70,769

      62,002

      -5.5%

      91 Clocks and watches

      57,608

      76,721

      64,223

      46,386

      -2.1%

      33 Perfumery and cosmetics

      8,020

      14,858

      31,369

      38,149

      16.9%

      95 Toys and games

      87,449

      57,142

      42,846

      35,628

      -8.6%

      61 Knitted apparel

      96,931

      70,963

      48,250

      32,934

      -10.2%

      62 Apparel, not knitted

      80,855

      64,153

      43,075

      27,851

      -10.1%

      42 Articles of leather

      46,739

      41,352

      34,493

      27,304

      -5.2%

      70 Glass and glassware

      7,553

      18,519

      24,440

      25,500

      12.9%

      08 Fruit and nuts

      8,544

      14,676

      24,080

      21,255

      9.5%

      38 Miscellaneous chemical products

      10,505

      10,549

      11,164

      19,684

      6.5%

      64 Footwear

      43,328

      30,315

      23,220

      16,479

      -9.2%

      97 Artwork and antiques

      2,263

      5,569

      20,212

      11,186

      17.3%

      30 Pharmaceutical products

      12,129

      11,321

      11,276

      10,991

      -1.0%

      74 Copper and articles thereof

      20,986

      10,810

      13,529

      10,756

      -6.5%

      49 Printed books and newspapers

      14,743

      14,718

      13,058

      10,719

      -3.1%

      60 Knitted fabrics

      19,596

      18,532

      13,508

      10,338

      -6.2%

      Source: Census and Statistics Department Note 1: The commodity descriptions have been simplified. For detailed commodity descriptions and classifications under the Hong Kong Harmonized System, please visit the Census and Statistics Department website. Note 2: Statistics for 2019 are included to provide a clear picture of Hong Kong’s exports prior to Covid-19.
      According to the 2010-2020 import-export statistics above, commodity categories with import/export value compound annual growth rate (CAGR) higher than the total trade value CAGR (imports 2.4%, exports 2.6%) are: “85 Electrical machinery and equipment and parts” (import CAGR 5.4%, export CAGR 5.6%); “90 Instruments and apparatus” (import CAGR 2.6%, export CAGR 2.7%); “33 Perfumery and cosmetics” (import CAGR 14.7%, export CAGR 16.9%); and “97 Artwork and antiques” (import CAGR 13.9%, export CAGR 17.3%). During the same period, commodity categories with CAGR lower than the total trade value are: “39 Plastics” (import CAGR -7.2%, export CAGR -5.5%); “95 Toys and games” (import CAGR -9.6%, export CAGR -8.6%); “61 Knitted apparel” (import CAGR -8.4%, export CAGR -10.2%); and “62 Apparel, not knitted” (import CAGR -6.4%, export CAGR -10.1%). Based on these figures, it can be deduced that most of the commodities currently imported into or exported from Hong Kong tend to be high value-added products. These commodities mainly fall under two categories. First, products that have high requirements in terms of security and transport packaging and environment (such as humidity and temperature). Examples include jewellery and artwork. Second, products with a higher value and requiring such services as temporary storage, repackaging and transhipment. Examples include electronic parts, and precision instrument parts and components. Under "One Country, Two Systems", Hong Kong does not levy import tariffs on most commodities. As such, enterprises can freely arrange for parts to be assembled in Hong Kong before delivering them in bulk to factories in the mainland or other regions, thereby lowering cost as well as enhancing supply chain efficiency. Trade statistics in the last 10 years show that enterprises have full confidence in Hong Kong’s reliable and highly efficient logistics services, as well as the advantages offered by "One Country, Two Systems" . Yet, for commodities which only require simple processing (such as toys and apparel), since all the production procedures are completed in the same region, finished products can be shipped directly to the target consumer market and the transport mode and route used are more direct. This, coupled with the fact that in recent years the logistics facilities in many Asian countries and territories (in particular mainland China) have greatly improved and many ports in Asia have set up regular shipping schedules and routes with various countries around the world, has lured an increasing number of enterprises to opt to export commodities directly from the place of production in order to lower transhipment costs through Hong Kong. As a result, the value of trade of these products registered in Hong Kong has been declining in the past years.
      2. Mode of transport Under the mainland’s dual circulation paradigm, Hong Kong is the meeting point of domestic circulation and international circulation. Hong Kong’s international airport and port connect to over 2001 and about 4702 worldwide destinations respectively. Meanwhile, Hong Kong’s trade with the mainland accounts for 52% of the city’s total trade value3. Evidently, Hong Kong serves as a regional logistics hub where large quantities of goods are shipped to and from mainland China as well as other countries and territories. Listed in the table below are the shares of different modes of transport for all commodity categories in Hong Kong’s total import and total export value in 2020:

      2020 Import Value (HK$ million)

      2020 Export Value (HK$ million)

      Import Transport Mode (share of cargo value)

      Export Transport Mode ​​​​​​​(share of cargo value)

      Air Sea Land River Other Air Sea Land River Other
      Total import/export value

      4,269,752

      3,927,517

      48%

      12%

      38%

      1%

      1%

      37%

      13%

      48%

      2%

      0%

      Yet, what are the modes of transport used by various commodity categories? What are the differences in various commodities’ supply chains? While a total of 25 product types in the top 20 import and export commodity categories are listed in the tables above, the tables below show the shares of different transport modes in the total value of these import and export goods, briefly analysing the importance of each mode of transport. However, it should be noted that trade value and trade volume are not necessarily related.
      Electromechanical Products and Instruments

      2020 Import Value (HK$ million)

      2020 Export Value (HK$ million)

      Import Transport Mode (share of cargo value)

      Export Transport Mode (share of cargo value)

      Air Sea Land River Other Air Sea Land River Other
      85 Electrical machinery and equipment and parts

      2,495,273

      2,417,041

      55%

      3%

      41%

      1%

      0%

      35%

      8%

      56%

      1%

      0%

      84 Machinery and mechanical appliances

      521,648

      579,913

      37%

      11%

      51%

      1%

      0%

      40%

      14%

      45%

      2%

      0%

      90 Instruments and apparatus

      138,562

      142,879

      38%

      12%

      50%

      1%

      0%

      46%

      12%

      40%

      1%

      0%

      87 Vehicles

      22,333

      8,356

      7%

      71%

      20%

      1%

      0%

      8%

      60%

      7%

      25%

      0%

      Source: Census and Statistics Department
      In imported and exported electromechanical products and instruments transport, air transport and land transport cargo value accounts for a larger share of total cargo value, while sea freight accounts for a smaller share (with the exception of “87 Vehicles”). The fact that land transport accounts for a relatively large share in the value of imported and exported electromechanical products and instruments indicates that quite a lot of such products are shipped to and from the southern provinces of China via Hong Kong over land. Quite often, these products are imported into Hong Kong by air and then exported to mainland China by land. Such products also enter Hong Kong from the mainland by land and are then exported to various countries and territories around the world by air via Hong Kong. While the import and export of certain electromechanical products and instruments would also use sea transport, it is believed that their unit value tends to be rather low or their size rather large. As mentioned above, “85 Electrical machinery and equipment and parts” is one of the categories with import-export value CAGR higher than that of total trade in a span of 10 years. In 2019, the total industrial output value of computer, communication and other electronic equipment manufacturers above designated size in Guangdong province was 2.2 times (in nominal terms) that of 2010. Its share in Guangdong’s total industrial output value also rose from 22% in 2010 to 28% in 20194. To a certain extent, this shows the reason why these products account for the highest value in Hong Kong’s total and that their trade value has continued to grow. “87 Vehicles” mainly use marine transport because vehicles and parts are mostly bulky and are not seasonal goods, hence timeliness is not the most important factor. As such, sea freight is the most cost-effective transport mode.
      Luxury Consumer Goods

      2020 Import Value (HK$ million)

      2020 Export Value (HK$ million)

      Import Transport Mode (share of cargo value)

      Export Transport Mode (share of cargo value)

      Air Sea Land River Other Air Sea Land River Other
      71 Jewellery and precious metals

      248,972

      196,757

      81%

      2%

      15%

      1%

      2%

      73%

      12%

      13%

      1%

      1%

      33 Perfumery and cosmetics

      66,364

      38,149

      61%

      31%

      7%

      1%

      0%

      11%

      17%

      49%

      23%

      0%

      91 Clocks and watches

      47,880

      46,386

      69%

      2%

      25%

      3%

      1%

      71%

      10%

      13%

      5%

      2%

      22 Beverages, spirits and vinegar

      19,340

      5,066

      16%

      52%

      4%

      5%

      23%

      4%

      38%

      37%

      21%

      0%

      97 Artwork and antiques

      22,414

      11,186

      96%

      2%

      1%

      0%

      0%

      95%

      3%

      2%

      1%

      0%

      Source: Census and Statistics Department
      Luxury consumer goods import and export mainly uses air freight for two reasons. First, security considerations: using air transport not only reduces delivery time, but also indirectly lower transportation risks. Second, timeliness: since most of these luxury consumer products (e.g. perfume, cosmetics, festive jewellery etc) are seasonal, suppliers have to deliver the goods to the consumer in time. In the export value of “33 Perfumery and cosmetics”, land transport accounts for up to 49%, indicating that Hong Kong is one of the mainland’s leading distribution centres for international perfumery and cosmetics brands. It is worth noting that river transport accounts for 23% of the export value of “33 Perfumery and cosmetics” and 21% of the export value of “22 Beverages, spirits and vinegar”. This is due to the fact that in Hong Kong’s statistical classification, goods transported to Macao by water are counted as river transport. In 2020, Hong Kong’s exports of “33 Perfumery and cosmetics” and “22 Beverages, spirits and vinegar” to Macao accounted for 23% and 24% respectively5 of the total export value of these products. This shows that Hong Kong is an important logistics partner with Macao in its pursuit to develop into a tourist centre.
      General Consumer Goods

      2020 Import Value (HK$ million)

      2020 Export Value (HK$ million)

      Import Transport Mode (share of cargo value)

      Export Transport Mode (share of cargo value)

      Air Sea Land River Other Air Sea Land River Other
      42 Articles of leather

      28,658

      27,304

      66%

      7%

      23%

      3%

      0%

      52%

      32%

      8%

      8%

      0%

      61 Knitted apparel

      28,306

      32,934

      32%

      15%

      48%

      6%

      0%

      38%

      52%

      6%

      4%

      0%

      62 Apparel, not knitted

      27,839

      27,851

      32%

      13%

      39%

      16%

      0%

      38%

      53%

      5%

      4%

      0%

      95 Toys and games

      27,784

      35,628

      10%

      10%

      66%

      14%

      0%

      16%

      72%

      10%

      2%

      0%

      30 Pharmaceutical products

      22,242

      10,991

      63%

      32%

      4%

      1%

      0%

      24%

      33%

      22%

      20%

      1%

      70 Glass and glassware

      19,291

      25,500

      10%

      31%

      60%

      0%

      0%

      6%

      6%

      87%

      1%

      0%

      64 Footwear

      17,090

      16,479

      34%

      20%

      38%

      8%

      0%

      34%

      42%

      17%

      7%

      0%

      60 Knitted fabrics

      9,966

      10,338

      3%

      11%

      81%

      5%

      0%

      7%

      77%

      14%

      3%

      0%

      49 Printed books and newspapers

      7,917

      10,719

      12%

      7%

      59%

      23%

      0%

      9%

      71%

      17%

      2%

      1%

      Source: Census and Statistics Department
      Among general consumer products, apart from “42 Articles of leather” which mainly use air freight for import and export and “30 Pharmaceutical products” which rely on air transport for import, the import value of most of the other general consumer goods transported by land is higher, while the export value of these products transported by sea is higher. This shows that mainland manufacturing enterprises ship finished products to Hong Kong by land for export to consumer markets the world over via sea. Marine transport is normally lower cost and is therefore used for shipping commodities with a lower unit price, such as apparel, toys and shoes. As for trade in “70 Glass and glassware”, the import and export values by land transport account for 60% and 87% of the total value respectively. This indicates that Hong Kong is a main distribution centre for mainland glass and glassware. In other words, glass and glassware from the mainland and other countries and territories converge in Hong Kong and are then transported to the mainland by land.
      Food Products

      2020 Import Value (HK$ million)

      2020 Export Value (HK$ million)

      Import Transport Mode (share of cargo value)

      Export Transport Mode (share of cargo value)

      Air Sea Land River Other Air Sea Land River Other
      02 Meat

      40,876

      3,091

      6%

      86%

      8%

      0%

      0%

      0%

      76%

      0%

      24%

      0%

      08 Fruit and nuts

      31,259

      21,255

      8%

      88%

      4%

      0%

      0%

      0%

      6%

      92%

      2%

      0%

      03 Seafood

      20,064

      2,481

      39%

      36%

      26%

      0%

      0%

      15%

      61%

      9%

      15%

      0%

      Source: Census and Statistics Department
      Among food products, it is worth noting that the difference between the import value and export value of “02 Meat” as well as “03 Seafood” is quite significant. This means that the majority of imported meat and seafood should be for local consumption. Since some local consumers prefer the freshest possible seafood (e.g. sashimi-grade Japanese food), such products have to be delivered from the place of origin to Hong Kong within the shortest possible time and that explains why a considerable proportion of seafood is imported by air. As for fruit and nuts export, most are transported by land (92%), indicating that currently Hong Kong is a leading logistics transit hub for the mainland’s imported fruit and nuts consumer market.
      Industrial Supplies

      2020 Import Value (HK$ million)

      2020 Export Value (HK$ million)

      Import Transport Mode (share of cargo value)

      Export Transport Mode (share of cargo value)

      Air

      Sea

      Land

      River

      Other

      Air

      Sea

      Land

      River

      Other

      27 Mineral fuels and oils

      68,641

      3,681

      0%

      69%

      0%

      1%

      29%

      0%

      88%

      3%

      10%

      0%

      39 Plastics

      55,342

      62,002

      9%

      57%

      30%

      4%

      0%

      12%

      25%

      56%

      7%

      0%

      38 Miscellaneous chemical products

      16,809

      19,684

      40%

      26%

      33%

      1%

      0%

      40%

      16%

      42%

      2%

      0%

      74 Copper and articles thereof

      8,799

      10,756

      19%

      56%

      24%

      1%

      0%

      3%

      28%

      51%

      17%

      0%

      Source: Census and Statistics Department
      Of the above industrial supplies, “39 Plastics” and “74 Copper and articles thereof” are mainly imported by sea and exported by land. This shows that these two categories are primarily imported and transported to factories in mainland China for use as industrial raw materials. The reason these products are imported by sea is that their size is rather big and marine transport is more cost-effective. For the import and export of “38 Miscellaneous chemical products”, the fact that both air transport and land transport account for a larger share in their total cargo value indicates that Hong Kong is a hub for the transhipment of chemical products between overseas countries and territories and mainland China. As for “27 Mineral fuels and oils”, the considerable gap between import and export values means that such products imported into Hong Kong are mainly for consumption in the local market.
      3. Analysis of selected commodities Although it was mentioned earlier that Hong Kong is gradually developing into a high value-added logistics centre in Asia, analyses based merely on commodities classified according to the Hong Kong Harmonized System (HKHS) two-digit codes would not suffice. Hence, among the 25 two-digit coded commodities listed in the tables above, commodities which have registered significant growth (over 200%) during 2010-2020, coded in eight digits, are listed in the table below.

      Selected HKHS Eight-Digit Coded Commodities Registering over 200% Growth in Export Value During 2010-2020 (Unit: HK$ million)

      HKHS Code

      Commodity Description

      2010

      2019

      2020

      2010-2020 Growth

      85171200 Telephones for cellular networks or for other wireless networks

      51,850

      240,116

      212,971

      310.7%

      84718090 Other units of automatic data processing machines, NESOI

      11,597

      34,702

      52,501

      352.7%

      84111200 Turbojets of a thrust exceeding 25 kN

      7,708

      47,272

      50,230

      551.7%

      84713010 Portable automatic data processing machines, notebook

      7,692

      36,737

      44,320

      476.2%

      33049990 Beauty or make-up preparations and preparations for care of the skin (excluding medicaments) NESOI

      2,310

      20,036

      27,815

      1104.3%

      85299014 Camera modules, not for special purpose

      4,872

      20,158

      25,269

      418.6%

      84715000 Processing units other than those of subheading 8471 41 and 8471 49, whether or not containing in the same housing one or two of the following types of units: storage units, input units, output units

      5,542

      24,781

      23,491

      323.9%

      70031900 Cast glass and rolled glass, in non-wired sheets, NESOI, unworked

      19

      16,010

      17,946

      93872.0%

      97011000 Paintings, drawings and pastels, executed entirely by hands, other than drawings for architectural, engineering or similar purposes, being originals drawn by hand, other than hand-painted or hand-decorated manufactured articles

      1,050

      15,518

      7,591

      622.7%

      38220090 Other diagnostic or laboratory reagents and certified reference materials

      1,731

      2,211

      7,474

      331.7%

      91012100 Wristwatches, with case of precious metal or of metal clad with precious metal, with automatic winding

      1,570

      7,335

      5,691

      262.4%

      71102100 Palladium, unwrought or in powder form

      878

      817

      4,620

      426.5%

      08106000 Durians, fresh

      678

      3,569

      4,542

      570.1%

      90132000 Lasers, other than laser diodes

      587

      3,114

      4,148

      606.6%

      Source: Census and Statistics Department Note: Statistics for 2019 are included to provide a clear picture of Hong Kong’s exports prior to Covid-19.
      According to the commodity categories listed above there are a number of points worth noting. First, some of the commodities are not only high in value but are also in the category of dangerous goods. For instance, as cellular phones (HS 85171200) and portable computers and data processing units (HS 84713010) contain built-in lithium batteries. They have to be handled as dangerous goods in the course of transportation in order to prevent fire hazard caused by short circuit. Hong Kong has in place a sound air cargo inspection mechanism, and has also rolled out 100% security screening for export air cargo starting July 2021. Using X-ray machines to screen cargo can help reduce the chance of dangerous goods being loaded onto cargo aircraft without prior proper handling. Hong Kong’s extensive global air freight network, as well as its sound security screening system, are factors attracting a great number of businesses to use Hong Kong to export their goods. Second, many of the commodities recording significant growth in export value are raw materials and semi-manufactures. Camera modules (HS 85299014), palladium (HS 71102100), and lasers (HS 90132000) are raw materials and parts required in the precision electronics industry. In recent years, the share of raw materials and semi-manufactures in Hong Kong’s re-export trade has been rising year by year, from 35.0% in 2010 to 44.1% in 20206. This confirms Hong Kong’s position as a key transit hub for industrial raw materials and parts in the Asian region. Third, many commodities need special handling. Examples include fresh durians (HS 08106000) which require cold chain logistics to preserve their freshness; cast glass and rolled glass in non-wired sheets (HS 70031900) which require shatterproof treatment; and luxury wristwatches (HS 91012100) which need heightened security. Industry players choose to transport these products via Hong Kong not only because there is strong market demand and favourable import and export system, but also probably because they believe Hong Kong’s world-class logistics facilities and competent logistics companies can provide excellent services, guaranteeing that cargo is delivered to its destinations safe and sound. The reason for the impressive growth in the export of turbojets (HS 84111200) is that Hong Kong’s aircraft engine maintenance service has been developing steadily in recent years. In 2015, Hong Kong imported 206 turbojets and exported 234 turbojets. By 2020, the import and export of turbojets rose to 602 and 553 respectively (while the figures for 2019 are 509 and 542 respectively). Of the 602 turbojets imported into Hong Kong in 2020, 236 came from mainland China7. According to the International Trade Centre Trade Map, in 2020 Hong Kong was the world’s fourth largest turbojet exporter (in terms of trade value), accounting for 14.6% of the global export value of this commodity. It is evident that Hong Kong’s development into Asia’s aviation hub not only bolsters the growth of its air transport logistics, but also its aircraft maintenance service.
      Conclusion It can be seen from the above analysis that Hong Kong’s strengths in global logistics lie in its high-end logistics services. From the angle of the dual circulation development paradigm, it can be seen that Hong Kong is an ideal place for Chinese enterprises (including Hong Kong enterprises) to export high value-added products to the rest of the world. Reasons include: Hong Kong maintains close ties with the world; it offers good storage, repackaging and transhipment services; and has a great number of international-level logistics companies and facilities which can guarantee the safe transportation of goods. Also, Hong Kong, with its excellent logistics supporting services, can help the mainland develop high-tech industries, pursue consumption upgrade and grow the huge domestic market. While many regions in the mainland have been proactively developing the logistics industry and related facilities in recent years, Hong Kong can still leverage its advantages in systems, facilities and human resources to maintain its position as an important link in China’s supply chain connecting to the rest of the world. In a bid to enhance its position as an international shipping, trading and aviation hub, Hong Kong can start with optimising its high-end logistics services. In the last few years, as the development of global logistics has entered a stage of transformation, the trade is not only applying technologies more extensively, but is also moving towards specialisation. Cold chain logisticsdangerous goods logisticsluxury goods logistics and pharmaceuticals logistics are now playing a more important role in the industry. Given Hong Kong’s advantages in its geographical location and “One Country, Two Systems”, as long as it devotes more efforts to strengthening personnel training, expanding logistics facilities construction, and encouraging technology applications (e.g. automated logistics and artificial intelligence) the city is bound to complement the logistics facilities in the mainland. While proactively participating in the country’s dual circulation paradigm, actions should also be taken by Hong Kong to enhance its position as an international shipping, trading and aviation hub.
      Appendix: Analysis of statistics of trade between Hong Kong and mainland provinces, municipalities and autonomous regions In the analysis in this article, mainland China is taken as a single entity. In reality, there are 31 provinces, municipalities and autonomous regions in mainland China. Since there is no breakdown of the import/export data published by Hong Kong’s Census and Statistics Department on which provinces, municipalities or autonomous regions the goods come from, even if the goods are imported into Hong Kong by land transport, it can only be assumed that they are more likely to come from neighbouring Guangdong province. In order to gain a better understanding of Hong Kong’s trade relations with the mainland, the following table sets out the figures of trade between Hong Kong and the various mainland provinces, municipalities and autonomous regions in 2010 and 2019. These statistics are taken from the statistical yearbooks published in 2011 and 2020 as well as from the websites of their respective Customs administrations. Unlike the statistical methods adopted in Hong Kong, the mainland figures do not count most of the goods re-exported from Hong Kong to the mainland as imports from Hong Kong. As such, an analysis can only be made on the value of goods exported to Hong Kong from the mainland, showing the changes in merchandise exports from the various provinces, municipalities and autonomous regions to Hong Kong in 2010 and 2019. Moreover, due to various reasons, the figures for trade between some provinces, municipalities and autonomous regions and Hong Kong are not available. Hence, the trade statistics and analyses below are for reference only.

      Value of Trade between Various Provinces, Municipalities and Autonomous Regions and Hong Kong in 2010 and 2019

      2010 Total Trade Value (US$10,000)

      2019 Total Trade Value (US$10,000)

      2010 Export Value (US$10,000)

      2019 Export Value (US$10,000)

      2010 Import Value (US$10,000)

      2019 Import Value (US$10,000)

      Guangdong

      15,875,900

      15,940,200

      15,278,600

      15,640,800

      597,400

      299,400

      Shanghai

      2,275,100

      2,821,400

      2,104,600

      2,628,000

      170,500

      193,400

      Jiangsu

      1,854,944

      2,688,575

      1,794,679

      2,660,497

      60,265

      28,077

      Beijing

      632,334

      1,074,278

      401,337

      1,015,690

      230,997

      58,588

      Hunan

      105,503

      918,775

      104,524

      881,352

      979

      37,423

      Guangxi

      102,611

      822,880

      99,012

      716,413

      3,599

      106,468

      Fujian

      471,928

      738,013

      455,702

      727,439

      16,226

      10,574

      Shaanxi

      61,215

      500,735

      57,596

      500,218

      3,619

      517

      Zhejiang

      669,764

      470,873

      644,393

      394,226

      25,371

      76,646

      Jiangxi

      111,391

      396,691

      106,306

      390,795

      5,085

      5,896

      Shandong

      Not available

      384,132

      Not available

      365,553

      Not available

      18,579

      Hubei

      132,979

      362,591

      125,849

      360,494

      7,130

      2,097

      Henan

      65,030

      305,297

      64,280

      304,861

      750

      436

      Chongqing

      23,530

      287,993

      23,198

      284,092

      332

      3,902

      Tianjin

      266,867

      262,975

      202,393

      251,567

      64,474

      11,407

      Yunnan

      22,316

      254,835

      21,742

      254,269

      574

      566

      Heilongjiang

      33,453

      205,877

      31,395

      205,330

      2,058

      547

      Guizhou

      16,315

      162,858

      16,313

      161,539

      2

      1,319

      Anhui

      35,917

      144,931

      31,015

      132,136

      4,902

      12,795

      Liaoning

      292,175

      133,752

      281,236

      128,155

      10,939

      5,596

      Hebei

      38,808

      123,042

      36,712

      102,486

      2,096

      20,556

      Ningxia

      Not available

      60,768

      Not available

      31,284

      Not available

      29,485

      Hainan

      Not available

      54,942

      58,406

      41,409

      Not available

      13,533

      Gansu

      8,200

      32,633

      7,863

      32,149

      337

      484

      Shanxi

      23,777

      24,381

      23,350

      24,367

      426

      14

      Jilin

      9,159

      5,973

      7,974

      5,901

      1,185

      72

      Xinjiang

      Not available

      5,126

      Not available

      4,978

      Not available

      148

      Qinghai

      3,325

      Not available

      3,322

      833

      3

      Not available

      Inner Mongolia

      Not available

      Sichuan

      Not available

      Tibet

      Not available

      Source: Statistical Yearbooks of the various provinces, municipalities and autonomous regions in 2011 and 2020, as well as the websites of their respective Customs administration Note: The trade figures of some provinces, municipalities and autonomous regions were calculated in RMB. The exchange rates between RMB and US$ refer to the average exchange rate published in the Statistical Communiqué of the People's Republic of China on the 2010 National Economic and Social Development and the Statistical Communiqué of the People's Republic of China on the 2019 National Economic and Social Development. In 2010 the exchange rate was US$1 to RMB6.6227, and in 2019 the exchange rate was US$1 to RMB6.8985.
      The above data reflects a number of characteristics in trade relations between Hong Kong and the mainland: First, for many years, the value of trade between Guangdong province and Hong Kong has been far outpacing other provinces, municipalities and autonomous regions. This shows that serving the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is Hong Kong’s most important function in dual circulation supply chains. Second, trade ties between Hong Kong and Beijing and the Yangtze River Delta region (Zhejiang, Shanghai, Jiangsu and Anhui) are close. This indicates that Hong Kong plays a significant role in the supply chains in the co-ordinated development of the Beijing-Tianjin-Hebei region and integrated development of the Yangtze River Delta region. Third, during the nine years from 2010 to 2019, the value of trade between Hong Kong and the provinces, municipalities and autonomous regions in the western part of China (e.g. Guangxi, Shaanxi, Chongqing, Yunnan and Guizhou) grew substantially. This strong growth is probably due to the fact that in recent years the local industries have been developing in leaps and bounds, while many enterprises there are willing to use Hong Kong’s facilities and logistics services to export goods to other countries and regions. Hence, in order to bolster trade in goods with various provinces, municipalities and autonomous regions across the country, Hong Kong should first of all optimise its high-end logistics services in an effort to better meet the demands for industrial and consumption upgrading in the GBA, integrated development of the Yangtze River Delta region, co-ordinated development of the Beijing-Tianjin-Hebei region, and Hainan Free Trade Port. Furthermore, Hong Kong should deepen co-operation in logistics with provinces, municipalities and autonomous regions in the southern and western parts of the mainland. In August 2019, the National Development and Reform Commission issued an overall plan (Chinese only) for the country's new western land-sea corridor, aiming to strengthen the sea-land transport network of a number of provinces, municipalities and autonomous regions in western China. The plan helps to facilitate logistics for internal and international trade in China’s western region as well as boost the national economy and the development of the Belt and Road Initiative. It was put forward in the plan that efforts would be made to “advance cross-border transport facilitation, and strengthen connectivity with neighbouring countries [and regions] in such areas as international aviation routes”. In this connection, Hong Kong should promote its advantages in air freight logistics to enterprises in these provinces, municipalities and autonomous regions, making the city their prime choice for conducting air cargo imports and exports. By so doing, Hong Kong can not only expand its logistics clientele, but can also play a more active role in the development of the country’s western region and Belt and Road Initiative.

      1 Source: Hong Kong International Airport

      2 Source: Hong Kong Maritime and Port Board

      3 Source: Census and Statistics Department 2020 figures

      4 Source: Guangdong Statistical Yearbook 2011 and Guangdong Statistical Yearbook 2020. According to the National Bureau of Statistics of China, from 2007 to 2010 “industrial enterprises above a designated size” referred to those with annual revenue from principal business of RMB5 million or more. Starting from 2011 the figure was raised to RMB20 million or more.

      6 Source: Census and Statistics Department

      7 Source: Census and Statistics Department

      8 Source: Census and Statistics Department

  • India
    • Piyush Goyal: Pushing G20 for tax on MNCs in country of operation

      India is pushing G20 nations to ensure that large multi-national corporations (MNCs) pay a minimum corporate tax in the countries in which they operate. A number of countries have raised the issue of large MNCs shifting profits and taxes to low tax jurisdictions, regardless of where revenues are generated. India loses about $10.3 billion per year as a result of such moves by MNCs, including Big Tech majors Facebook, Google and Amazon that move profits to low-tax jurisdictions such as Ireland, the British Virgin Islands and Panama. “On tax reforms, India has pushed the G20 nations to address the mismatch between source of generation of profits and the jurisdiction where profits are taxed. This will ensure large MNCs pay a minimum effective corporate tax in the country of operation,” Commerce Minister Piyush Goyal said in a press briefing prior to the start of the two-day G20 summit on Saturday. India had earlier this year amended taxation rules to impose an equalisation levy of 2 per cent on trade and services by non-resident e-commerce operators with a turnover of over Rs 2 crore. The US had in June announced a retaliatory tariff on Indian imports after concluding the taxes targeted US firms but immediately suspended the tariffs for a six month period noting that the US was “committed to reaching a consensus on international tax issues through the OECD and G20 processes.”

    • CBDT expands Form 26AS info list; includes foreign remittances, MF buys

      The income tax department has expanded the list of high-value financial transactions which would be available to taxpayers in their form 26AS by including details of mutual fund (MF) purchases, foreign remittances, as well as information in ITRs of other taxpayers. Form 26AS is an annual consolidated tax statement that can be accessed from the income-tax website by taxpayers using their Permanent Account Number (PAN).

      The Central Board of Direct Taxes (CBDT) on October 26 issued an order under Section 285BB of the I-T Act expanding the scope of information reported in new Form 26AS. Additional information prescribed includes foreign remittance made by any person through an authorised dealer, breakup of the salary with deductions claimed by the employee, information in ITR of other taxpayers, interest on Income Tax Refund, information published in Statement of Financial Transactions.
    • Income tax dept exempts certain non-residents, foreign investors from filing I-T returns

      The income tax department has exempted certain non-residents and foreign investors from filing Income Tax Return (ITR) from 2020-21 onwards, a move aimed at easing compliance burden. Through a notification, the Central Board of Direct Taxes (CBDT) said non-residents (corporates/ otherwise) who do not earn any income other than income from investment in 'specified fund', being Alternate Investment Fund Category III located in International Financial Services Centres (IFSC) or GIFT city shall not be required to file ITR. Further, eligible foreign investors (non-residents who operate in accordance with SEBI instructions), who during the financial year, have only transacted in capital asset like Global Depository Receipts, Rupee Denominated Bonds, derivatives or other notified securities, listed on recognised stock exchange in IFSC, have also been exempted from ITR filing.
  • Switzerland
    • Switzerland Notes Info Exchange Extended to 96 Countries, 3.3 Million Accounts

      Switzerland has exchanged information on more than 3.3 million financial accounts with 96 countries within the framework of the global standard on the automatic exchange of information, the Swiss Federal Tax Administration said in an October 11 release.

      Bern, 11.10.2021 — The Federal Tax Administration (FTA) has exchanged information on financial accounts with 96 countries. The exchange took place within the framework of the global standard on the automatic exchange of information (AEOI).

      This year, the AEOI involved a total of 96 countries. Antigua and Barbuda, Azerbaijan, Dominica, Ghana, Lebanon, Macau, Pakistan, Qatar, Samoa and Vauatu were added to the existing list of 86 countries. With 70 countries, the exchange of information was reciprocal. In the case of 26 countries, Switzerland received information but did not provide any, either because those countries do not yet meet the international requirements on confidentiality and data security (14) or because they chose not to receive data (12). Currently, around 8,500 reporting financial institutions (banks, trusts, insurers, etc.) are registered with the FTA. These institutions collected the data and transferred it to the FTA. The FTA sent information on around 3.3 million financial accounts to the partner states and received information on around 2.1 financial accounts from them. The FTA cannot provide any information on the amount of financial assets. Switzerland has committed itself to adopting the global standard for the international automatic exchange of information in tax matters. The legal basis for the implementation of the AEOI in Switzerland came into force on 1 January 2017. Identification, account and financial information is exchanged, including name, address, country of residence and tax identification number, as well information concerning the reporting financial institution, account balance and capital income. The exchanged information allows the cantonal tax authorities to verify whether taxpayers have correctly declared their financial accounts abroad in their tax returns. The OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) reviews the implementation of the AEOI.

    • Switzerland – Switzerland Issues Report on Money Laundering and Terrorist Financing Risks

      Today, the Federal Department of Finance (FDF) published the second "Report on the national evaluation of the risks of money laundering and terrorist financing in Switzerland" by the interdepartmental coordinating group on combating money laundering and the financing of terrorism (CGMF). The report describes the evolution in these risks since the first such report was published in 2015. It also provides an overview of the legislative provisions that have been implemented in this period with a view to improving the Swiss toolkit for combating money laundering and terrorist financing. In addition, since 2017, the FDF has published a number of sectoral reports by the CGMF in this regard.

      The report concludes that the considerable risk of money laundering to which Switzerland is exposed has not changed fundamentally since 2015. Because its financial centre is so interconnected internationally, the main risk to Switzerland lies in it being misused to launder assets derived from predicate offences committed abroad. In this regard, the major international money laundering cases of recent years have partly changed Switzerland's measurement of risk. If anything, they have confirmed the conclusions of the 2015 report by illustrating the magnitude of the threat from foreign corruption, but also the complexity of the suspected money laundering incidents, the large sums involved and the vulnerability of financial intermediaries engaging in international financial transactions.

      Despite the continuity that emerges from the comparison of the risks identified in more recent years and the assessment of the situation in 2015, there are three particular areas in which risk has changed since 2015: online casinos, which have been authorised in Switzerland only since 2019; terrorist financing; and crypto assets, whose rapid growth and rising popularity have brought new risks.

      The regulatory and legislative toolkit for combating money laundering and terrorist financing has been improved since 2015, with the aim of eliminating the shortcomings and vulnerabilities identified. The Swiss authorities will continue to prioritise effective systems for money laundering and combating terrorist financing, and continuously review these systems in order to identify potential areas for improvement.

      Second national report on risks of money laundering and terrorist financing (in German)

    • Social Security Coordination Agreement Between Switzerland and United Kingdom Applies Provisionally

      According to a press release of 1 November 2021, published by the Swiss Federal Social Insurance Office, the Switzerland - United Kingdom Social Security Coordination Agreement (2021) applies provisionally from 1 November 2021. The agreement will enter into force after all necessary domestic ratification procedures for the entry into force have been met in both contracting states. For more information on the provisional application, see article 73 of the Switzerland - United Kingdom Social Security Coordination Agreement (2021). The new agreement coordinates the social security systems of the two states as the European Union - Switzerland Free Movement of Persons Agreement (1999) is no longer applicable in relations between Switzerland and the United Kingdom following Brexit.
  • United Arab Emirates
    • UAE Ranked World’s 4th Best Place To Live And Work

      The UAE climbed 10 places to rank 4th best country in the world to live and work according to HSBC’s 14th annual Expat Explorer study - a global survey of over 20,000 people who live and work abroad.

      The vast majority of expats surveyed in the UAE (82%) feel optimistic that life will be more stable and normal again in the next 12 months despite the global pandemic, far above the 75% global average, with (53%) of UAE respondents also expecting an increase in their income and a better work life balance (57%).

      These findings are published the same year that HSBC celebrates 75 years of doing business in the UAE and that the nation celebrates its own Golden Jubilee.

      “The UAE being billed among the top five best places to live and work globally is inspiring and a clear indication of the huge potential that drives this country’s economy. We saw that potential as the first and only bank here when we opened our doors for business on 12th October 1946, and we’ve been investing ever since, supporting the country and our customers to open up a world of opportunity,” said Abdulfattah Sharaf, HSBC UAE CEO and Head of International.

      “The connectivity of the economy combined with the scale of its vision has transformed it from a small fishing and pearling port in the 1940s into a global trade, logistics, shipping, aviation, business and finance hub today. The country’s focus on innovation, infrastructure, quality of life, diversity and inclusion have made it the destination of choice for businesses and professionals looking to grow and prosper,” Abdulfattah added.

      Economics and quality of life

      The progress of the UAE has been attractive for many who make the UAE their home. The top three reasons cited by expats for choosing to move to the UAE are: to improve their earnings (56%), to progress their career (49%), and to improve their quality of life (43%).

      The quality of life offered in the UAE is what makes expats stay longer than intended. Most expats in the UAE (86%) say their overall quality of life is better than their home country and six out of every 10 intend to stay longer for that reason. Only 11% say the pandemic changed their plans of staying in the UAE.

      “The overwhelming sense of optimism from expats in the UAE about the 12 months ahead is reflective of the quick response from authorities to tackle the social and economic impact of the pandemic,” Abdulfattah said.

      “The UAE’s clear appeal to entrepreneurs and High Net Worth Individuals, has driven decisions in our own business that will support the recovery. We have committed US$5 billion of lending to support strong companies in the UAE to grow globally with our UAE Growth Initiative, and we have invested in our wealth management business, expanding our private bank in the Abu Dhabi Global Market as part of our plan to double our assets under management over the next three years,” added Abdulfattah.

      Culture and safety

      In addition to a better quality of life, 80% of respondents said their children are more aware and open to different cultures and experiences in the UAE. The UAE is currently hosting Expo 2020, the festival of internationalism staged in a new city every five years to showcase ideas and innovations that will shape our world, with as many as 25 million visits expected during its six-month run.

      “The UAE’s openness to diverse cultures and views is a key attraction for expats looking to make the country their home. Expo 2020, the Arab world’s largest global event with more than 190 countries taking part, is putting this commitment to diversity and openness on the global stage,” Abdulfattah said.

      Source: Media Office - Government of Dubai

    • DMCC Awarded ‘Global Free Zone of the year’ by Financial Times’ FDI Magazine for seventh year running

      • DMCC awarded global accolade following review of over 70 free zones around the world • DMCC claims record total of 11 accolades, including Middle East Free Zone of the Year and a range of Global Excellence Awards • Award builds on DMCC’s continued record breaking performance as business hub and district The Dubai Multi Commodities Centre (DMCC) – the world’s flagship Free Zone and Government of Dubai Authority on commodities trade and enterprise – has received the Global Free Zone of the Year 2021 award by the Financial Times’ fDi Magazine for the seventh consecutive year. The award, which is the most prestigious credit a free zone can earn, serves as a testament to DMCC’s exceptional performance throughout 2020 and the efforts it made to support and enable the success of its business community. DMCC also claimed Global Free Zone of the Year and Middle East Free Zone of the Year- Large Tenants, Middle East Free Zone of the Year and received Global and Middle East Excellence Awards and honourable mentions for COVID-19 Response, Infrastructure Investment, SMEs, Sustainable Reporting and Leadership. "Securing the fDi Global Free Zone of the Year award for a seventh, consecutive time is not only testament to the value and opportunity available with DMCC, but its agility to move with global demand. In doing so, we've not only supported our existing members during 2020, but gained record-breaking company registrations thanks to our business support packages that  provided numerous waivers and sectorial benefits, while expanding our pre-existing online services. This, combined with the opening of our international representative offices in Tel Aviv and Shenzhen, and our new DMCC Crypto Centre and DMCC Cacao Centre, have meant a growing opportunity for businesses of all types to become a part of our highly diversified community and benefit from our unrivalled, global connectivity," said Ahmed Bin Sulayem, Executive Chairman and Chief Executive Officer, DMCC. The Excellence Awards for Leadership was anchored in DMCC’s ability to swiftly adapt to the pandemic landscape and provide relief, and its flagship research on The Future of Trade.  The award-winning report examines the impact of geopolitics, technology, COVID-19 and global economic trends with a focus on trade growth, supply chains, trade finance, infrastructure and sustainability. In addition to offering analysis, the report provides clear and tangible trade policy recommendations to government and business. The report, published bi-annually since 2016, has been downloaded over 500,000 times. DMCC received ‘Honorable Mentions’ for its sustainability reporting based on adopting an enhanced 5C Sustainability Framework and enhancing its smart and sustainable district infrastructure, digitalisation and transparency. The award recognises DMCC’s progress against the UN Sustainable Development Goals and commitment to UN Global Compact, all of which is detailed in DMCC’s annual sustainability report available here. Over 70 free zones from across the world were assessed against a set of multidisciplinary criteria. The awards were judged by both the Financial Times’ specialist editorial team and a panel of independent judges for each region. The team scored each nomination in categories including strategy, COVID-19 response, infrastructure development and promotion of sustainability and ESG projects.

      Record breaking performance in 2020 and beyond

      Despite a business environment shaped by the pandemic, DMCC registered a record breaking 2,025 new companies in 2020, the highest number of registrations in five years. This was largely driven by the Business Support Package rolled out in March 2020, the largest incentive DMCC had ever released, offering a wide range of incentives and value-added services to both existing and new companies. More than 8,000 companies availed over 13,000 relief offers and incentives throughout the year, with interest from more than 149 countries. Given the positive market response, the package was expanded and extended until the end of 2020. DMCC also partnered with financial institutions, namely Emirates NBD and Mashreq Bank, to provide new and existing companies flexible banking solutions tailored to their needs as they navigated the impact of the pandemic. DMCC’s record breaking performance has continued into 2021. The first three quarters of this year represented DMCC’s best ever nine-month period for the number of new companies registered. This has included best June, August and September on record.

      Supporting the community

      In line with DMCC’s ongoing commitment to providing a first-class working environment, a new Employee Protection Insurance programme for all DMCC and member company employees was rolled out. The scheme offers increased protection for employees in case their employer defaults on their salaries, end of service benefit or repatriation cost. DMCC also brought an array of educational webinars to the member companies. Delivered in collaboration with industry experts, the sessions covered a variety of topics to help businesses with day-to-day operations as well as overall business strategy. A series of initiatives were also launched to specifically support the F&B sector across the district. DMCC partnered with Careem Now and Talabat to offer discounts on orders from 188 different restaurants within the Jumeirah Lakes Towers (JLT) community. The result was a 118% increase in the number of customer acquisitions for the restaurants.

      Ensuring safety first

      As the world grappled with the impact of COVID-19, DMCC was ahead of the curve in addressing the various challenges posed by the pandemic and protecting the safety and wellbeing of its employees and the community at large. DMCC immediately launched a remote working policy for employees while operations continued with no interruption. At Almas Tower, DMCC’s headquarters, thermal screening equipment was promptly made available across all entry points of the building. Teams were and continue to be deployed twice a day to deep clean and sanitise offices and common areas. With restrictions easing and commercial activities resuming, all DMCC customer facing employees are now being provided with masks and gloves and sanitisers are made available across office floors and service centres. To curb the spread of the virus, a public communication campaign was launched across the business district providing guidance and advice to residents and businesses. Daily circulars were sent out to member companies with updates on the latest UAE Government announcements and directives. All tower owners/building management operators in the district received guidance on communications and hygiene protocols to be followed as per the health authorities’ directives.

      Facilitating the ease of doing business

      The record-breaking performance was also the result of significant enhancements to DMCC’s customer service, its simplified and digitalised set up processes and swifter onboarding, all of which furthered the ease of doing business in the district. By providing customers with a seamless, digital company formation in Dubai experience, DMCC is well-positioned to respond to changing consumer and business behaviours, which now prioritise online transactions. Today, 85% of companies that register with DMCC do so digitally – compared with 40% in 2015.

      Promoting trade flows to Dubai

      To continue to enable tradeflows to and through Dubai, DMCC took its flagship Made for Trade Live roadshow online in 2020, hosting 19 virtual sessions in key markets. DMCC also inaugurated representative offices in Tel Aviv, Israel, and Shenzhen, China, to better support companies looking to set up a business in Dubai. In addition, DMCC shifted all of its networking events and learning seminars online. Companies in DMCC were provided access to 83 webinars and online networking events, averaging two sessions per week. Overall, DMCC gathered 11,000 attendees virtually in 2020.

      Enabling commodities trade

      Following the visit of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of UAE, and Ruler of Dubai, to the DMCC Tea Centre and DMCC Coffee Centre in June 2020, DMCC announced its plans to expand both facilities and its intention to triple output, increase services and boost capacity. This stemmed from increasing demand from commodity traders to use the facilities to connect with regional and international markets. In fact, the DMCC Coffee Centre facilitated 7 million kilogrammes of coffee shipments while 40 million kilogrammes of tea were transacted through the DMCC Tea Centre. DMCC also announced plans to launch a state-of-the-art DMCC Cacao Centre. The centre would initially incubate a select range of cacao services and transform the emirate into an international trade hub for the in-demand superfood. For its part, the Dubai Diamond Exchange hosted the largest rough diamond tender ever in the UAE - selling a total of 379,912 carats of rough diamonds valued at USD 87.47 million (AED 321.29 million) in December 2020. In 2020, DMCC signed a Memorandum of Understanding with CVVC and CV Labs to launch a Crypto Centre in Dubai, a unique ecosystem that provides access to capital, resources and opportunities to innovators, entrepreneurs and pioneers. With the support of UAE’s Securities and Commodities Authority (SCA), the now launched DMCC Crypto Centre is a fast growing hub for the development and application of crypto and blockchain technologies, backed by a regulatory framework for businesses offering, issuing, listing, and trading crypto assets in DMCC.

      Source: Media Office - Government of Dubai

    • United Arab Emirates Amends Supply Rules Within Designated Zone

      The United Arab Emirates cabinet has amended the VAT Executive Regulations (the VAT regulations) modifying cases where supplies of goods and services made within a designated zone are treated as supplies made outside the United Arab Emirates.

      Supplies of goods

      New paragraph 5 of article 51 of the VAT regulations provides that, in addition to the case where goods supplied within a designated zone are not consumed and are either incorporated, attached, become part of or are used in the production of another good in the same designated zones, the following supplies of goods are also treated as supplies made outside the United Arab Emirates if:

      • the goods were delivered to a place outside the United Arab Emirates, and the supplier provides supporting commercial or official evidence (i.e. customs evidence) proving that the goods were removed from the designated zone; or
      • the goods were moved from the designated zone to a place inside the United Arab Emirates, and the supplier retains official evidence establishing that VAT had been applied to that import.

      Supplies of services

      New paragraph 7 of article 51 of the VAT regulations provides that the place of supply of services within a designated zone is treated as a supply made outside the United Arab Emirates where shipping or delivery services are supplied directly in connection with goods that have a place of supply outside the United Arab Emirates and all of the following conditions are met:

      • shipping or delivery services are supplied by the same supplier of the goods;
      • the supplier of the goods is a non-resident and not registered for VAT purposes;
      • these goods are sold via an electronic sales platform; an electronic sales platform means any type of online sales platform, including websites and electronic applications, which brings together third-party sellers and buyers, and through which goods may be sold and purchased with or without shipping or delivery services; and
      • the person owning the electronic sales platform is not the supplier of the goods.

      Cabinet Decision No. 88 of 2021 amending the VAT Executive Regulations became effective from 30 October 2021.

  • United Kingdom
    • United Kingdom To Boost Its Global Business Hub Status Through New Corporate Re-Domiciliation Plan

      As part of the 2021 Autumn Budget announcement, the United Kingdom has initiated a public consultation seeking views from interested parties on the introduction of a corporate re-domiciliation regime that aspires to promote jobs, innovation and investment in the United Kingdom through enabling companies to take advantage of the United Kingdom's top-tier status as a global leading financial centre and its strong infrastructure and skills network.

      The establishment of a re-domiciliation regime would enable a foreign-incorporated company to change its place of incorporation to the United Kingdom, while maintaining its legal status as a corporate entity.

      According to the UK government, the introduction of an attractive corporate re-domiciliation regime would increase the competitiveness and availability of the United Kingdom as a destination to locate a business and to invest, and would also modernize the United Kingdom's legal framework, bringing it in line with around 50 jurisdictions that also have re-domiciliation regimes in place. Moreover, a new corporate re-domiciliation regime would contribute to increased investment and skilled jobs, as companies would transfer their headquarters to the United Kingdom, as well as increased demand for the United Kingdom's internationally respected professional services, such as audit, accounting and legal. The United Kingdom's innovation base would also be enhanced and expanded through non-resident companies choosing to re-locate research and development (R&D) functions in the United Kingdom.

      Finally, the introduction of a corporate re-domiciliation regime could support and develop the United Kingdom's capital market, by making it easier for companies to re-domicile to the United Kingdom and access the United Kingdom's world-leading capital markets as UK companies. It could also improve corporate governance and transparency, as re-domiciled companies would be obliged to adhere to the United Kingdom's high corporate transparency and governance standards, which would guarantee better investor protections.

      The public consultation outlines proposals and seeks public input on the following:

      • the advantages of enabling companies to re-domicile to the United Kingdom;
      • the level of demand that exists among various types of companies and sectors;
      • the appropriate checks and entry criteria;
      • the merits of establishing an outward corporate re-domiciliation regime; and
      • the potential tax implications associated with the introduction of a corporate re-domiciliation regime.

      The public consultation document can be accessed here (as a PFD).

    • United Kingdom Budget Affirms Commitment to Raising Corporate Tax Rate to 25%

      On 27 October 2021, the United Kingdom (UK) Chancellor of the Exchequer, Rishi Sunak, presented the 2021 Autumn Budget to the House of Commons with a view to encouraging economic recovery from the COVID-19 pandemic through promoting investments in infrastructure, innovation and skills, levelling up public services such as the national health service (NHS), and public cultural institutions such as regional museums, libraries and orchestras, as well as strengthening working families' and the financial position of low-income earners. In this context, the UK Chancellor announced the following tax measures:

      • the corporation tax rate increase from 19% to 25% effective from April 2023, which was announced as part of the March 2021 Budget has been maintained;
      • the bank surcharge rate will be decreased from 8% to 3% with effect from April 2023;
      • the business rates system for companies in the retail, hospitality, and leisure sectors will become fairer with cancellation of the planned increase in the tax rate multiplier due to inflation and the introduction of a 50% business rates discount lasting for 1 year;
      • the GBP 1 million annual investment allowance for companies will be extended until April 2023;
      • a new investment relief, encouraging investment in green technologies such as solar panels will be introduced;
      • flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower air passenger duty rate effective from April 2023, whereas a new increase in the air passenger duty rate, covering ultra-long-haul flights of over 5,500 miles with an economy rate of GBP 91, will become effective from April 2023;
      • the alcohol duty regime will become simpler, fairer and healthier through the reduction of the current number of duty rates from 15 to six (6) and the introduction of a the-stronger-the-drink-the-stronger-the-rate system. A 5% cut in alcohol duty imposed on draught beer and cider served from draught containers over 40 litres will be introduced. Also, there will be alcohol duty cuts on drinks made from fruit, such as cider, as well as on the sparkling wine premium. Finally, the planned increase in the alcohol duty on spirits, such as wine and whiskey, will be cancelled;
      • the tonnage tax shipping regime will become simpler and more competitive through the rewarding of shipping companies adopting the UK flag;
      • the planned increase in fuel duties will be cancelled;
      • the residential property developers' tax on developers with profits over GBP 25 million will be set at a rate of 4%;
      • the heavy goods vehicle (HGV) levy will be suspended until 2023 and the vehicle excise duty for heavy goods vehicles will be frozen; and
      • the universal credit taper tax rate will be decreased by 8%, from currently 63% to 55% in order to financially support lower-income working individuals. The decrease will take effect no later than April 2022.
    • Regulations concerning operation of Free Zones in the United Kingdom

      On 19 October 2021, the United Kingdom (UK) published a tax information and impact note, setting out the broad terms as well as the anticipated impact of the 2021 Free Zone regulatory regime. The legislation was published on 18 October 2021.

      The Free Zones Regulations are divided into four parts, as follows:

      • citation and commencement;
      • provisions concerning customs;
      • provisions concerning excise goods in free zones; and
      • provisions concerning value added tax (VAT).

      Each of the latter three parts amend existing relevant legislation, in order to enable the operation of free zones within freeports in the UK. The legislation will come into effect on 8 November 2021.

      On 21 October 2021, HM Revenue and Customs (HMRC) published draft notices concerning the operation of free zones, which can be found here. The tax information and impact note can be found here and the Free Zones legislation can be found here.

    • United Kingdom Updates EU VAT E-Commerce Package Rules

      On 20 September 2021, the United Kingdom updated its policy paper on the EU value added tax (VAT) e-commerce package, which had entered into effect on 1 July 2021.

      The EU VAT e-commerce package introduces changes affecting:

      • the movement of goods from Northern Ireland to the European Union;
      • imports of low value goods in the European Union or Northern Ireland; and
      • the rules for supplies made through online marketplaces.

      As the Northern Ireland Protocol only applies to goods, the United Kingdom will not include electronically supplied services in its reporting system.

      The HM Revenue and Customs (HMRC) policy paper outlines the changes for:

      • distance sales, i.e. sale of goods between Northern Ireland and the European Union;
      • imports;
      • online marketplaces; and
      • online marketplaces and supplies within the European Union.

      The policy paper contains examples of how the EU VAT e-commerce package rules work in various situations for the United Kingdom. Reference is also made to the use of the One-Stop Shop and Import One-Stop Shop to reduce the administrative burdens.

  • United States
    • US Treasury Announces Agreement on Transition From Digital Services Tax to New International Tax Framework

      The US Treasury Department (Treasury) has announced that the United States, Austria, France, Italy, Spain and the United Kingdom reached an agreement on the transition from existing digital services taxes (DSTs) to the new multilateral solution that was agreed on 8 October 2021 by 136 countries of the OECD-G20 Inclusive Framework (IF).

      The Treasury made the announcement in its Press Release, dated 21 October 2021.

      The Press Release states that the agreement represents a pragmatic compromise that helps ensure that the named countries can focus their collective efforts on the successful implementation of the IF's historic agreement on a new multilateral tax regime and allows for the termination of trade measures adopted in response to DSTs.

      The Press Release further states that, overall, this political agreement carefully balances the perspectives of several countries and is yet further demonstration of their commitment to working together to reach consensus, and to deliver far-reaching multilateral reforms that help support national economies and public finances.

      According to the Press Release, the named countries will continue to discuss this matter through constructive dialogue.

    • US Corporate Tax Revenues Grow Significantly in 2021

      The Monthly Budget Review of September 2021, issued by the US Congressional Budget Office (CBO), showed a major increase in corporate tax revenues in the year 2021.

      Preliminarily, corporate tax revenues in 2021 increased to USD 370 billion from USD 212 billion in 2020. This 74.8% growth rate resulted in part from higher corporate profits earned in 2021.

      2021's tax collection is also approximately 24.5% higher than the USD 297 billion collected in 2017. This is significant because 2017 was the year prior to the enactment of the corporate tax rate reductions under President Trump's Tax Cut and Jobs Act (TCJA). In analysing the corporate tax revenues as a percentage of the US gross domestic product (GDP) metric in 2017, it equated to 1.5%, versus today's GDP percentage of 1.63% (based on the estimated GDP of USD 22.74 trillion, provided by the US Bureau of Economic Analysis (BEA)).

      This new data will spur more debate in the days to come as the United States grapples with whether to increase corporate tax rates to raise revenues to finance President Joe Biden's Infrastructure Investment and Jobs Act. Under the American Jobs Plan, corporate tax rates would increase to 28%.

      Note 1: The CBO is a non-partisan agency that provides objective analyses of budgetary and economic issues in supporting the Congressional budget process.

      Note 2: The BEA, which is an agency of the US Department of Commerce, produces economic statistical reports that enable the government, business decision-makers, researchers and the public to understand the performance of the US economy.

    • Biden Unveils Revamped Tax Reform Plans in Build Back Better Framework

      The US President Joe Biden has released the Build Back Better Framework, which includes his updated tax reform plans. The White House issued a statement dated 28 October 2021 to announce the Build Back Better Framework.

      The Build Back Better Framework is intended to guide the drafting of legislative language for the Build Back Better Act. According to the White House statement, President Biden is confident that the framework can pass both chambers of the US Congress, and he looks forward to signing it into law.

      Specifically, the Build Back Better Framework includes the following tax reform plans:

      • imposing a 15% minimum tax on the corporate profits that large corporations (those with over USD 1 billion in profits) report to shareholders;
      • imposing a 1% surcharge on corporate stock buyback;
      • adopting a 15% global minimum tax on a country-by-country basis;
      • ensuring other countries abide by the agreement on the global minimum tax by imposing a penalty rate on any foreign corporations based in non-compliant countries (i.e. the base erosion and anti-abuse tax or BEAT);
      • imposing a surtax on the income of multi-millionaires and billionaires at the rate of 5% on income above USD 10 million and additional 3% on income above USD 25 million;
      • closing the Medicare self-employment tax loophole by strengthening the net investment income tax (NIIT) for those making over USD 400,000;
      • continuing the limitation on excess business losses;
      • extending the expanded child tax credit (CTC) for 2022 to provide USD 300 per month per child under 6 years and USD 250 per month per child aged 6 to 17 years;
      • extending the expanded earned income tax credit (EITC) for childless workers for 2022;
      • extending the expanded Affordable Care Act (ACA) premium tax credits through 2025;
      • providing 10-year expanded tax credits for utility-scale and residential clean energy, transmission and storage, clean passenger and commercial vehicles, and clean energy manufacturing; and
      • making transformation investments in the US Internal Revenue Service (IRS) by:
        • hiring enforcement agents who are trained to pursue wealthy evaders;
        • modernizing outdated IRS technology; and
        • investing in taxpayer service.

      The framework aims to set the United States on course to meet its climate goals, create millions of good-paying jobs, enable more Americans to join and remain in the labor force, and grow the US economy from the bottom up and the middle out.

    • HTS CHANGES 2022

      On January 1st 2022, the HTS will be updated with recommendations made by the United States International Trade Commission. These recommendations have been open for comment to federal agencies and the public for the last two years in order to ensure proper classification of goods. There are 351 total amendments being made to the HTS, including new subheadings for a large range of products including electronic vaporizers, hybrid truck engines, blanched peanuts, and cultural artifacts.

      The full list of recommendations going into effect can be found here