The European Central Bank (ECB) adopted an opinion expressing a positive assessment of the draft new law on the Bulgarian National Bank (BNB), which will enter into force on the date specified in the European Council decision on the adoption of the euro in Bulgaria. The objective of the draft law is to achieve the necessary level of legal convergence of the BNB within the Eurosystem. The ECB also makes several proposals for technical amendments to the draft law in order to achieve greater clarity, such as the way in which the BNB forms provisions and the inclusion of further references to applicable European acts. The draft of the new law on the BNB, which makes the technical changes proposed by the ECB, will be sent to the Ministry of Finance for public discussion and submission to the National Assembly.
The net flow of foreign direct investment in Bulgaria from January to July was over EUR 2bn, 32.5% (EUR 505m) higher than in the same period a year earlier, according to data published by the Bulgarian National Bank (BNB).
In July alone, the flow was up by EUR 137m, slightly down from the positive flow of EUR 145.5m a year earlier. Share capital was positive and amounted to EUR 356.5m, as was the reinvestment of profits, which amounted to EUR 1.6bn.
The largest net positive direct investment flows into the country for the seven months of 2023 came from the Netherlands (EUR 556.9m), Belgium (EUR 248.6m) and Germany (EUR 216.1m), while the largest net negative flows were to Switzerland (EUR 43m) and Italy (EUR 35.8m).
According to preliminary figures, the net flow of foreign direct investment for the January-July period reached EUR 358.9m, compared to EUR 353.1m for the same period last year.
Source: Confindustria Bulgaria
The Ministry of Finance expects stable economic growth in Bulgaria in the second quarter of 2023, despite the fact that current data show a decrease in industrial production and a slowdown in economic growth to 1.8%.
The economic growth rate is expected to remain steady in the third quarter, with a decline in demand for services and retail sales in the next three months. The inflation forecast says that there will be a slight acceleration of the annual inflation rate according to the Harmonised Index of Consumer Prices (HICP) in the third quarter of 2023, due entirely to services in the summer tourist season.
Regarding the generalised increase in interest rates perpetrated by both the US Federal Reserve Board (FRB) and the European Central Bank (ECB) to cope with rising inflation, interest rates in Bulgaria are expected to remain more or less unchanged.
Bulgaria Proposes to Implement EU Rules Regarding Disclosure of Income Tax Information By Certain Undertakings
The Ministry of Finance has published for public consultation a proposal to amend the Accountancy Act, aimed at implementing into national legislation the provisions of Amending Directive to the Accounting Directive (2013/34) as regards the Disclosure of Income Tax Information by Certain Undertakings and Branches (2021/2101) (the Public Country-by-Country Reporting (CbCR) Directive).
The Ministry also proposed the following amendments to the Local Taxes and Fees Act (LTFA):
- clarification of the provisions related to the use of tax relief for buildings that have received certificates of energy consumption class; and
- Subjecting income of individuals gathering seeds, mushrooms, medicinal and aromatic plants to patent tax under the LTFA, instead of to personal income tax under the PIT Act.
The public consultation, issued on 26 September 2023, runs until 26 October 2023.
As part of the annual package with amendments to the tax legislation, the Ministry of Finance has published the following proposals for public consultation.
- Corporate income tax:
- implementing EU rules ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups.
- Individual income tax:
- introducing statutory expenses in the case of a sale or exchange of financial assets; and
- introducing financial incentives for disclosures to tax authorities.
- Indirect tax:
- introducing deferred payment of import VAT in the case of centralized clearance;
- clarifying reporting obligations of payment service providers; and
- extending the scope of goods subject to excise duties by including products to be heated, vaporized or inhaled.
- Other taxes:
- clarifying the tax relief for buildings with certificates of energy consumption class; and
- implementing EU rules regarding the disclosure of income tax information by certain undertakings.
- Corporate income tax:
The Ministry of Finance has published a proposal to amend the Corporate Income Tax Act (CIT Act) for public consultation. The main changes suggested are the following:
- implementing the provisions of the Minimum Taxation Directive (2022/2523) ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups within the Union. In addition, a domestic top-up tax is introduced;
- introducing a new scheme for State aid to farmers in the form of deferred corporate income tax; and
- aligning the tax regime applicable to financial institutions with that for non-financial enterprises. This alignment ensures that income and expenses from subsequent valuations, including revaluations and impairments, of financial assets and liabilities will be treated consistently for tax purposes.
The public consultation, issued on 26 September 2023, runs until 26 October 2023.
The Ministry of Finance has published a proposal to amend the Individual Income Tax Act (PIT Act) for public consultation. The main changes suggested are the following:
- introducing 10% statutory expenses deductible for individuals deriving income from the sale or exchange of financial assets, including virtual currencies;
- introducing a tax relief for individuals registering cash receipts with a digital receipt system of the National Revenue Agency;
- expanding the definition of "employment relationship" to include legal relationships that, by their nature, involve labour without the need for a formal employment contract; and
- exempting income of individuals from the sale or exchange of movable property to persons having the right to collect, transport, recover or dispose of waste in accordance with the Waste Management Act from taxation.
The Ministry also proposed amendments to the Tax and Social Security Procedure Code (TSSPC) by introducing financial incentives for disclosures to tax authorities.
The proposal outlines a financial incentive for persons submitting information containing specific facts and circumstances that were not known to the tax authorities, which lead to the establishment and collection of additional taxes, mandatory insurance contributions and interest in connection with hidden and/or undeclared taxable transactions, income, profits and assets. Under this proposal, if certain conditions are met, individuals who disclose such information may receive remuneration equivalent to 10% of the additional revenue collected by the budget as a result of their disclosures.
The public consultation, issued on 26 September 2023, runs until 26 October 2023.
Bulgaria Proposes Introduction of Deferred Payment of Import VAT in Centralized Clearance, Applying Excise Duties on Certain Heated Products
The Ministry of Finance has published a proposal to amend the Value Added Tax Act and Excise Duties and Tax Warehouse Act (EDTWA) for public consultation.
The main changes to the VAT Act suggested are the following:
- introducing deferred payment of import VAT in the case of centralized clearance when importing goods;
- introducing a measure allowing taxable persons that have not registered for VAT purposes in a timely manner to issue tax documents that include the applicable VAT for the periods for which they should have been registered;
- prolonging the 0% VAT rate for supplies of bread and flour until 30 June 2024; and
- introducing a measure allowing the recipients of supplies to withhold payment if the supplier fails to provide a fiscal receipt at the time of the transaction.
The amendments to the Regulations for the application of the VAT Act introduce new reporting obligations for payment service providers. These obligations cover the formatting and submission procedures for information related to cross-border payments. The electronic form must meet the requirements provided in the Commission Implementing Regulation (EU) 2022/1504 of 6 April 2022. This Regulation lays down detailed rules for the application of Council Regulation (EU) No. 904/2010 regarding the creation of a central electronic system of payment information (CESOP) to combat VAT fraud. The information from the register must be submitted with a qualified electronic signature following the guidelines set out in the Tax and Social Security Procedure Code. The submission must be made through a standard electronic form outlined in Implementing Regulation (EU) 2022/1504. The Executive Director of the National Revenue Agency must approve the format, structure and validation scheme of the file.
The main proposals to the Excise Duties and Tax Warehouse Act (EDTWA) are the following:
- extending the scope of goods subject to excise duties by including the heated products with content other than tobacco, based on plants, herbs or fruits, regardless of whether they are treated with nicotine. From 1 January 2024, these products will be subject to an excise duty rate of BGN 331 per kilogram;
- introducing a regime for distance sales of excise goods released for consumption in Bulgaria which are sent to individuals in other EU Member States; and
- introducing various clarifications for customs formalities as outlined in the Union Customs Code. These clarifications specifically relate to goods subject to excise duties that are dispatched to or received from certain third countries.
The public consultation, issued on 26 September 2023, run until 26 October 2023.
The Ministry of Finance ("MOF") issued on August 25, 2023 the Circular on Continuing the Preferential Personal Income Tax Policies in the Guangdong-Hong Kong-Macao Greater Bay Area ("GBA"), specifying that the relevant policies will remain in force until December 31, 2027.
The Circular clarifies that Guangdong province and Shenzhen municipality will offer subsidies to overseas (including Hong Kong, Macao, and Taiwan, the same below) high-end talents and talents in high demand who work in the GBA to cover the difference in personal income tax rates between the Chinese mainland and Hong Kong, and such subsidies are exempted from personal income taxes
As for the recognition and subsidy measures for overseas high-end talents and talents in high demand who work in the GBA, the relevant provisions of Guangdong province and Shenzhen municipality shall be implemented. The Circular will apply to the nine cities in the Pearl River Delta region, including Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing.
Announcement on Continued Implementation of Individual Income Tax Policies for Subsidies and Allowances for Foreign Individuals
For the purposes of further reducing taxpayers' burden, announcement is hereby made on individual income tax policies for subsidies and allowances for foreign individuals as follows:
Foreign individuals who satisfy the criteria for resident individuals may opt to claim special additional deduction for individual income tax, or opt to enjoy tax exemption policies for subsidies and allowances such as housing allowance, language class fees, children education fee etc. stipulated in the Notice of the Ministry of Finance and the State Taxation Administration on Several Issues Relating to Individual Income Tax Policies, the Notice of the State Taxation Administration on Issues Relating to the Implementation of Exemption of Individual Income Tax on Allowances of Foreign Individuals and the Notice of the Ministry of Finance and the State Taxation Administration on Levying and Exemption of Individual Income Tax on Housing and Other Subsidies Received by Foreign Individuals in Hong Kong and Macau, but shall not claim special additional deduction and tax exemption incentives concurrently.
The option made by a foreign individual shall not be changed within a tax year.
This Announcement shall remain effective until 31 December 2027.
The Ministry of Finance ("MOF") issued on August 28, 2023 the Announcement on Continuing the Implementation of the Individual Income Tax Policy for Annual Lump-sum Bonuses, saying that the current policy will remain in force until December 31, 2027 (Announcement n.30 of 2023).
According to the Announcement, if the annual lump-sum bonus obtained by a resident meets the provisions of Guo Shui Fa No.9 (2005) Document, it will not be included in the resident's current-year comprehensive income. Payable taxes will be separately calculated by multiplying the amount obtained by dividing the annual lump-sum bonus by 12 months with the applicable monthly tax rate after excluding the quick deduction amount as specified in the comprehensive income tax rates table attached to the Announcement. The specific calculation formula is as follows:
Taxable amount = Annual lump-sum bonus income × applicable tax rate - quick deduction
Residents who receive annual lump-sum bonuses may also choose to merge the bonuses into their annual comprehensive incomes to calculate their payable taxes for the year concerned.
China Clarifies Latest Changes to the Annual Final Settlement and Payment of Individual Income Tax on Comprehensive Income
Two Chinese government departments released on August 28, 2023 the Announcement on Continuing the Implementation of Policies Related to the Final Settlement and Payment of Individual Income Tax on Comprehensive Income, clarifying relevant matters.
The Announcement clearly states that for their annual comprehensive incomes obtained from January 1, 2024 to December 31, 2027 that are under 120,000 yuan but are subject to the final settlement and payment and tax supplementation, or have supplementary taxes of less than 400 yuan in the annual final settlement and payment, residents may be exempted from the final settlement and payment of individual income tax, except where their withholding agents have failed to comply with the legal requirement and withhold the prepaid taxes for them when they obtained their comprehensive incomes.
Source: Announcement n.32 of 2023
$12 billion Value of food produced in Africa under projects supported by the African Development Bank, putting the target of reaching $25 billion production on track. During discussions at the UN General Assembly meetings, the President of the bank expressed optimism that food insecurity could be effectively addressed within a five-year timeframe. He emphasised the significant impact of the AfDB's financing, which is leveraged 3-4 times, thereby amplifying the resources available to combat food insecurity and address various climate-related issues in Africa. (Reuters)
1 million People to benefit from access to power via the deployment of solar mini-grids financed through CrossBoundary group's electrification financing mechanism. Sustainable Energy Fund for Africa (SEFA) has provided $10 million towards demonstrating CrossBoundary Access's project finance model to attract more commercial financiers to renewable electricity on the African continent. (Afrik21)4 Days of free storage offered to importers at Kenya's Mombasa port, after authorities doubled the free cargo storage window for domestic importers to four days. The move provides relief to traders whose cargo face delays at the port facilities within Kenya. (Business Daily)
$6 billion Financing to be offered by South Korea to domestic companies working in Africa between 2024 and 2025, representing the country’s largest-ever export financing committed to the continent. Loans to Korean firms will be offered in three areas: energy development and conversion, agricultural innovation and intellectual knowledge and competency development. (The Korea Economic Daily)
280,000 tonnes Copper expected to be produced in Zambia following an expansion project by Kansanshi Mining PLC. The $900 million S3 expansion project will increase production from the current 150,000 tonnes a year, representing a significant opportunity to boost the country's economy. (Lusaka Times)25% Reduction on fossil fuel dependence targeted by Nigerian conglomorate, Dangote, at its facilities by 2025. The company has initiated several innovative strategies to cut green house gas emissions as part of its commitment to Sustainable Development Goals 12. (Punch)
$996 million Funding committed by African Development Bank in partnership with Global Centre on Adaptation to support youth startups in Africa as part of the fight against climate change. According to AfDB, the capital infusion will empower young entrepreneurs across the region. (The East African)
2500 mini-grids To be implemented over the next five years through the Africa Sunspot Initiative. Launched by Husk Power Systems at Africa Climate Week, the project will mobilise $500 million in equity and debt to finance 1 million new power connections in off-grid and weak-grid communities in Africa. (Africa Market Trends)
6% Stake in Atlantic Lithium bought by Ghana's Minerals Income Investment Fund for $27.9 million as it prepares to develop the country's first lithium producing mine. The investment by the sovereign wealth fund is another example of the global surge in interest in companies producing the key battery metal amid the clean energy transition. (Reuters)
$400 million Loan facility signed between Afreximbank and China Development Bank (CDB) to improve access to trade finance for SMEs in Africa. The facility will boost smaller companies involved in trade, both externally and within Africa, as well as those engaged in productive sectors. (Global Trade Review)650,000 tonnes Salt production at the newly commissioned salt mine in Sege, Ghana, operated by McDan Group. The mine is expected to increase its annual production to 1 million tonnes in 2024 and 2 million by 2027, making it the largest salt mine in Africa. (Ghana Web) 61% Increase in lending reported by Kenyan multinational banks to affiliate companies abroad in the six months to June, compared to the same period last year. Fillings by banks indicate that lenders with external parents had lent affiliates in foreign markets $1.22 billion by end of June, up from $760 million last year. This has raised concerns about Kenyan forex deposits funding external assets. (The East African)
On 14 September 2023, Rwanda gazetted a law reducing the standard corporate income tax rate from 30% to 28%.
The new law (Law No.º 051/2023), further introduced a provision related to tax declarations, allowing taxpayers required to submit certified financial statements to seek tax administration authorization for the provisional filing of non-certified financial statements.
Taxpayers that receive authorization remain liable to pay the tax by the due date and are further required to submit to the tax administration their annual tax declaration and certified financial statements within 3 months from the date of the provisional tax declaration.
The new law amends law No. 027/2022 of 20/10/2022 establishing taxes on income.
The Government announced on 6 September the extension of the application period of the Greater Bay Area (GBA) Youth Employment Scheme to December 31 to enable more enterprises and young people to join the scheme.
The Labour Department (LD) launched the regularised GBA Youth Employment Scheme in March this year to encourage enterprises with businesses in both Hong Kong and the GBA to employ university graduates of Hong Kong to work in the GBA's Mainland cities, so as to foster their career development and the exchange of talent in the GBA. As of August 31, a total of 220 enterprises had provided 2 069 job vacancies under the scheme and 333 young people had been employed.
The LD's spokesman said, "Enterprises with businesses in both Hong Kong and the GBA's Mainland cities are eligible to join the scheme. Participating enterprises shall employ eligible young people in accordance with Hong Kong laws, offer them a monthly salary of not less than HK$18,000 and station them in the GBA's Mainland cities to work and receive on-the-job training. The Government will grant a monthly allowance of HK$10,000 for up to 18 months to enterprises for each employed young person.
The spokesman added, "Young people participating in the scheme should be Hong Kong residents lawfully employable in Hong Kong who are awarded bachelor's degrees or above from 2021 to 2023. Job vacancies under the scheme, upon the LD's vetting, have been uploaded to the scheme's website for Hong Kong young people to apply for. The deadline for graduates to apply for job vacancies under the scheme will fall on December 31.Source: HK Government
The Government Gazette published on September 1 contains a Legal Notice to the effect that the Secretary for Financial Services and the Treasury has authorised a change in the rate of interest payable on Tax Reserve Certificates. From September 4, 2023 the new annual rate of interest will be 0.9250 per cent against the current rate of 0.8833 per cent, i.e. the new rate will be $0.0771 per month per $100.
Tax Reserve Certificates bear simple interest, and interest is calculated monthly (including part of a month) from the date of purchase to the date of payment of tax.
Interest is only credited when certificates are used to pay tax and no interest is due where the principal value of a certificate is repaid to its holder.
The rate of interest payable on Tax Reserve Certificates is periodically revised in line with the market trend. Currently, it is reviewed every month based on the average prevailing interest rate for the 12-month time deposit for $100,000 to $499,999 offered by the three note-issuing banks.
The new rate will apply to all certificates purchased on or after September 4, 2023. Certificates purchased before September 4, 2023, will continue to earn interest at the rates prevailing on their respective purchase dates. Below is a summary of the interest rates for the past periods:
For certificates purchased on or after December 5, 2022, and before January 3, 2023: 0.4000% per annum For certificates purchased on or after January 3, 2023, and before March 6, 2023: 0.5833% per annum For certificates purchased on or after March 6, 2023, and before April 3, 2023: 0.7500% per annum For certificates purchased on or after April 3, 2023, and before June 5, 2023: 0.7667% per annum For certificates purchased on or after June 5, 2023, and before August 7, 2023: 0.8083% per annum For certificates purchased on or after August 7, 2023, and before September 4, 2023: 0.8833% per annum For certificates purchased on or after September 4, 2023, until further notice: 0.9250% per annum
India Amends Valuation Rules for Investment in Closely Held Indian Companies, Introduces Safe Harbour
The Central Board Of Direct Taxes (CBDT) has issued a notification amending the valuation rules (rule 11UA of the Income Tax Rules, 1962) for investment in equity shares of a closely held company for the purpose of section 56(2)(viib) of the Income Tax Act, 1961 (the Act). This section provides that if the consideration for the issue of shares in a closely held company exceeds the fair market value (FMV) of the shares, the excess will be taxable (also known as "angel tax").
Specifically, the notification provides that where an investment is made by an Indian tax resident, unquoted equity shares may be valued as per the different methods provided below, at the option of the taxpayer:
- net asset value (NAV) method;
- discounted cash flow (DCF) method;
- FMV of the equity shares to the extent it does not exceed the aggregate investment received, in the case of investments made by a venture capital fund (VCF) or a venture capital company (VCC) or a specified fund in unquoted equity shares of the venture capital undertaking (VCU), provided the consideration is received within 90 days before or after the date of issue of shares; and
- FMV of the equity shares to the extent it does not exceed the aggregate investment received, in the case of investments made by an entity notified by the CBDT, provided the consideration is received within 90 days before or after the date of issue of shares.
Further, the notification provides that where an investment is made by a non-resident taxpayer, unquoted equity shares may be valued as per the different methods provided below, at the option of the taxpayer:
- all methods applicable to a resident taxpayer; and
- FMV determined by a merchant banker under any of the following methods: (i) comparable company multiple method; (ii) probability weighted expected return method; (iii) option pricing method; (iv) milestone analysis method; (v) replacement cost methods.
Compulsorily convertible preference shares (CCPS) issued by a company may be valued as per any of the aforesaid methods other than NAV method.
For the purpose of valuation, the taxpayer may consider the valuation date as per the valuation report of the merchant banker provided it is dated not more than 90 days prior to the date of issue of shares.
Finally, the notification provides for safe harbour rules whereby the issue price of shares will be considered as FMV if the consideration received does not exceed 10% of the value of shares arrived as per:
- NAV, DCF methods for a resident taxpayer; and
- NAV, DCF, merchant banker valuation methods for a non-resident taxpayer.
As announced in Minister of Finance’s Budget 2022, the GST rate will increase from 8% to 9% on 1 January 2024. The rate change affects any GST-registered business that sells or purchases goods or services that are subject to the standard rate of GST. To ensure a smooth transition, businesses must follow some transactional rules to be prepared for the rate adjustment.
Update Price DisplayAll price displays with effect from 1 Jan 2024 must be inclusive of GST at 9%. This necessitates updating prices across all sales channels. Businesses have the option to present two prices:
- One applicable before 1 Jan 2024 showing prices inclusive of GST at 8%; and
- One applicable from 1 Jan 2024 showing prices inclusive of GST at 9%.
To comply with the substantial changes associated with the GST rate adjustment, businesses should prepare the invoicing systems to accurately calculate taxes, issue invoices, and file GST returns in accordance with the new requirements.
Reverse Charge Business
GST-registered businesses subject to reverse charge (“RC business”), must account for GST at 9% on the services you procure from overseas suppliers (“imported services”) on or after 1 Jan 2024.
Diacron Assistance for a smooth Transition
Failure to account for GST on your supplies at the correct rate may attract penalties. Being prepared for GST rate change will help you avoid such increases to your business and compliance costs.
Diacron expertise can help you understand the implications and guide you through an efficient and effortless update to the new GST requirements, ensuring compliance.
For further information and assistance please contact us at email@example.com
Switzerland, Federal Council initiates consultation on strengthening the anti-money laundering framework
At its meeting on 30 August 2023, the Federal Council launched the consultation procedure on a bill to strengthen the anti-money laundering framework. The aim is to reinforce the integrity and competitiveness of Switzerland as a financial and business location with a federal register of beneficial owners, due diligence for particularly risky activities in legal professions, as well as other provisions. The measures are in line with international standards.
An effective system for combating financial crime is essential for the good reputation and lasting success of an internationally important, safe and future-oriented financial centre and business location. Money laundering and terrorist financing pose a serious threat to financial system integrity. Around the world, legal entities are misused by criminals, including organised crime, to conceal assets for the purposes of money laundering, tax evasion and the circumvention of sanctions. As a major financial centre, Switzerland is also exposed to these risks. The Federal Council therefore proposes to strengthen the existing anti-money laundering framework. In particular, increased transparency should allow the prosecution authorities to identify who is really behind a legal structure with greater speed and certainty.
The key elements of the bill are:
- A federal register will be introduced, in which companies and other legal entities in Switzerland will have to be entered, together with information on their beneficial owners. Simplified registration is provided for certain legal forms, such as limited liability companies, sole proprietorships, associations and foundations. This non-public register will be managed by the Federal Department of Justice and Police (FDJP), in order to make use of the existing infrastructure and the know-how of the authorities running the commercial register. To ensure the quality of the register, an audit unit within the Federal Department of Finance (FDF) will carry out checks and, where necessary, issue penalties.
- Anti-money laundering due diligence rules should henceforth also apply to certain consultancy activities (especially legal advice) which carry an elevated risk of money laundering. This move is in response to the proposal already discussed by Parliament in 2019. The structuring of companies or transactions with real estate are considered to be particularly risky. The position of the legal profession and lawyers' and notaries' duty of professional secrecy are respected.
- There is also a series of additional measures to strengthen the anti-money laundering framework. These include measures to prevent sanctions under embargo legislation from being breached or circumvented. Moreover, the threshold for cash payments in precious metals trading will be lowered from CHF 100,000 to CHF 15,000. It will still be possible to make cash payments above this limit, but they will be subject to certain due diligence rules. All cash payments in real estate business are now subject to anti-money laundering due diligence rules, irrespective of the monetary amount involved.
The consultation on the bill will last until 29 November 2023. The Federal Council will submit the dispatch to Parliament in 2024. The reform should contribute significantly to protecting the financial centre from funds of criminal origin, and to strengthening Switzerland as a business location. The measures are in line with the international standards of the Financial Action Task Force (FATF) on combating money laundering and terrorist financing.
What does the legislative amendment mean for SMEs? In principle, all companies and legal entities in Switzerland are required to enter their beneficial owners in the federal transparency register. However, a simplified reporting procedure is provided for most companies, especially sole proprietorships, limited liability companies, foundations and associations. The simplified procedure also applies to all companies whose beneficial owners are already entered in the commercial register. According to an externally produced regulatory impact assessment, the new regulations will result in a slight additional burden, but this will have little impact at the level of individual companies. On average, for all companies this involves around 20 minutes' work (equivalent to about CHF 25) in the first year. In subsequent years, the effort falls to a quarter of that.
United Arab Emirates
His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, saidthat the UAE's strong fiscal performance and diversified government revenues reflect efficient fiscal policy, with overall fiscal balance surplus recorded in 2022, a 31.8% year-on-year growth in revenues, and a 6.1% increase in expenditures, which amounted to approximately AED427.12 billion.
His Highness commended the Ministry of Finance’s team efforts in supporting the UAE’s fiscal excellence and sustainable development. He noted that fiscal policy enhanced economic growth and the competitive business environment, which resulted in the UAE’s ranking as the fastest growing economy in 2022.
Balanced fiscal planning Mohamed bin Hadi Al Hussaini, Minister of State for Financial Affairs, said: “Through balanced fiscal planning, the UAE government aims to diversify the local economy, enhance non-oil government revenues, and diversify sources of government revenues, in addition to adopting financial reforms to improve the business environment and attract valuable foreign investments. The government also seeks to increase spending effectiveness by keeping pace with institutional developments and adopting best practices. The government’s implementation of the vision of the wise leadership has resulted in the recovery of the national economy and returning to normal growth in post pandemic era. This motivates us to boost our efforts to achieve sustainable growth.” Expense control Expenditures went up moderately during 2022, with an increase of AED24.74 billion compared to 2021, as a result of the government’s commitment to spend cautiously and rationally, strengthen fiscal buffers, and focus on strategic investments and projects. This serves the UAE’s vision and achieves comprehensive growth in economic, social, and environmental areas, and streamlines the UAE’s journey towards employing fiscal policies to counter the effects of climate change.
The directions of government spending policy in the UAE are reflected in the doubling of the net acquisition of non-financial assets, achieving an estimated growth of 94.5% in 2022 compared to 2021. This reflects the role of these assets in achieving the national strategic goals and supporting the ambition of the wise leadership by placing the UAE on the list of the top economies in the world, in addition to promoting economic diversification and reducing the impact of oil price fluctuations on the government revenues and the local economy.
Quantum leap The UAE posted a surplus in the overall fiscal balance in 2022, and thus this indicator achieved growth. This exceptional growth is due to the quantum leap in government revenues, supported by strong local economic activity. Despite the increase in revenues, the UAE has maintained a cautious and rational spending policy, with this surplus allowing for stronger fiscal buffers to mitigate the impact of potential financial risks. The government also continues to implement its strategic plan by enhancing the business environment, providing high- quality services, and providing highest levels of social well-being for citizens and residents of the UAE.
Revenues The results of the UAE government fiscal performance analysis for the fiscal year 2022, showed an increase in tax revenues, reflecting the recovery of economic activity in the country, in addition to the results of streamlining and digitizing tax procedures, which contribute to improving the efficiency of tax collection. The intensification of tax awareness campaigns has also had a tangible impact on taxpayers’ awareness of the facilities and services provided, which contributed to enhancing compliance and increasing efficiency.
Other revenue also grew by AED19.33 billion in 2022, reflecting the stability of the local economy. Social contributions results showed an increase from AED13.55 billion in 2021 to AED14.92 billion in 2022, to achieve the founding fathers’ vision of developing Emiratis who can promote growth and create a more prosperous nation.
Source: Government of Dubai
The UK Treasury has made and published The Finance Act 2009, Sections 101 and 102 (Economic Crime (Anti-Money Laundering) Levy) (Appointed Day) Order SI 2023/997 using its powers under sections 104(3) and 103(4) of the Finance Act 2009 (FA 2009).
The order states that the interest regime in sections 101 and 102 of (including Schedules 53 and 54) the FA 2009 will come into force from 30 September 2023. The first payment of liabilities under the economic crime levy become payable on 30 September 2023.
Interest will be added to any payment of the economic crime levy paid after the due date. The current applicable rates regarding late payment interest and repayment interest are set at the UK bank base rate plus 2.5%. The base rate is 5.25% so interest will apply at 7.75% a year.
The Bank of England Monetary Policy Committee announced an increase to the Bank of England base rate from 5.00% to 5.25%
HMRC interest rates are linked to the Bank of England base rate.
Because the base rate has changed, HMRC interest rates for late payment and repayment have been increased.
How HMRC interest rates are set
HMRC interest rates are set in legislation and are linked to the Bank of England base rate.
Late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1% with a lower limit, or ‘minimum floor’, of 0.5%.
The differential between late payment interest and repayment interest is in line with the policy of other tax authorities worldwide and compares favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.
The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay.
The Financial Accounting Standards Board (FASB) unanimously voted (7-0) to implement new accounting rules requiring companies that hold or invest in cryptocurrency to use fair-value accounting standards (FASB Topic 820) for measuring assets and liabilities at their current market value.
Additionally, under the new rules, companies holding or investing in cryptocurrency will need to:
- present the aggregate amount of crypto assets separately from other intangible assets that are measured using other measurement bases;
- present gains and losses on crypto assets in net income and present those gains and losses separately from the income statement effects of other intangible assets, such as amortization or impairments; and
- classify crypto assets received as non-cash consideration during the ordinary course of business that are converted nearly immediately into cash as operating flows.
The new rules are effective for fiscal years beginning after 15 December 2024. However, companies can begin implementing the rules before the effective date.
The Internal Revenue Service (IRS) has announced that it will be paying more attention to high-income earners, partnerships, large corporations and promoters who are abusing US tax law.
The shift in focus is due to funding from the Inflation Reduction Act (IRA) which will allow the IRS the means to increase audit rates on the wealthy, partnerships, and other high earners who have experienced sharp drops in audit rates over the past decade due to lack of funding.
To help carry out the audits the IRS plans to leverage its improved technology along with Artificial Intelligence (AI) which is intended to detect tax cheating, identify emerging compliance threats, and improve case selection tools to avoid "no-change" audits.
The IRS stated it will not increase audit rates of taxpayers earning less that USD 400,000 and focus on taxpayers with total positive income above USD 1 million that have more than USD 250,000 in recognized tax debt. This focus builds on past success in which the IRS collected USD 38 million from more than 175 high-income earners. The IRS plans to contact about 1,600 taxpayers that owe hundreds of millions of dollars in taxes.
Amid rising concerns about a flood of improper Employee Retention Credit claims, the Internal Revenue Service announced on 14th September an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program to protect honest small business owners from scams.
IRS Commissioner Danny Werfel ordered the immediate moratorium to run through at least Dec. 31 following growing concerns inside the tax agency, from tax professionals as well as media reports that a substantial share of new claims from the aging program are ineligible and increasingly putting businesses at financial risk by being pressured and scammed by aggressive promoters and marketing.
The IRS continues to work previously filed Employee Retention Credit (ERC) claims received prior to the moratorium but renewed a reminder that increased fraud concerns means processing times will be longer. On July 26, the agency announced it was increasingly shifting its focus to review these claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS announced that hundreds of criminal cases are being worked, and thousands of ERC claims have been referred for audit.
The IRS emphasizes that payouts for these claims will continue during the moratorium period but at a slower pace due to the detailed compliance reviews. With the stricter compliance reviews in place during this period, existing ERC claims will go from a standard processing goal of 90 days to 180 days – and much longer if the claim faces further review or audit. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.
The IRS is developing new initiatives to help businesses who found themselves victims of aggressive promoters. This includes a settlement program for repayments for those who received an improper ERC payment; more details will be available this fall.
In addition, the IRS is finalizing details that will be available soon for a special withdrawal option for those who have filed an ERC claim but the claim has not been processed. This option – which can be used by taxpayers whose claim hasn't yet been paid– will allow the taxpayers, many of them small businesses who were misled by promoters, to avoid possible repayment issues and paying promoters contingency fees. Filers of these more than 600,000 claims awaiting processing will have this option available. Those who have willfully filed fraudulent claims or conspired to do so should be aware, however, that withdrawing a fraudulent claim will not exempt them from potential criminal investigation and prosecution.
As part of the wider compliance effort, the IRS is working with the Justice Department to address fraud in the ERC program as well as promoters who have been ignoring the rules and pushing businesses to apply.
The IRS has trained auditors examining ERC claims posing the greatest risk, and the IRS Criminal Investigation division is actively working to identify fraud and promoters of fraudulent claims for potential referral for prosecution to the Justice Department.
The Internal Revenue Service today announced the opening of the application period for the 2024 Compliance Assurance Process (CAP) program, which will run from Sept. 6 to Oct. 31, 2023.
The IRS will inform applicants if they're accepted into the program in February 2024.
Launched in 2005, CAP employs real-time issue resolution through transparent and cooperative interaction between taxpayers and the IRS to improve federal tax compliance by resolving issues prior to the filing of a tax return.
To be eligible to apply for CAP, new applicants must:
- have assets of $10 million or more,
- be a U.S. publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q and 8-K and
- not be under investigation by, or in litigation with, any government agency that would limit the IRS's access to current tax records.