April 2021

The government has proposed a bill introducing amendments to the Value Added Tax (VAT) Act. If the proposal is approved, the threshold for mandatory VAT registration will be increased to BGN 166,000 (approximately EUR 85,000) as from 1 January 2022. The current threshold has been set at BGN 50,000 (approximately EUR 26,000).

The full text of the proposal, issued on 28 April 2021, is available here (in Bulgarian only).

As a next step, the parliament will vote on the proposal. Further developments will be reported when they occur.

• introduction of details of the application of new EU VAT rules for e-commerce coming into force in 2021; and
• implementation of Council Directive (EU) 2020/1756 of 20 November 2020 amending Directive 2006/112/EC on the common system of value added tax as regards the identification of taxable persons in Northern Ireland.

On 2 April 2021, Bulgaria published changes to the regulations for the application of excise duties and the Tax Warehouses Act in the State Gazette. The main amendments concern the following topics:

• clarifications on the issuing of electronic registered excise tax documents; and
• documentation requirements for licensed warehouse keepers storing goods released for consumption in other EU Member States.

The full text of the amendments is available here (in the Bulgarian language only).

The State Taxation Administration released on April 1, 2021 its Announcement about the List of Administrative Matters Eligible for "No Penalty for First Violation", with immediate effect.

The announcement stated that all three conditions must be satisfied for an administrative matter to be eligible for "no penalty for first violation". The first is that the matter should be on the list of eligible matters; the second is that the consequence caused by the violation is mild; the third is that the taxpayer has corrected the wrongdoing before it's found or ordered by tax authorities.

The list has listed a total of ten administrative matters eligible for "no penalty for first violation", including those related to document presentation, tax declaration and invoice management.

The Ministry of Finance and the State Administration of Taxation jointly released on April 7, 2021 the Announcement on Further Improving the Policy for Pre-tax Additional Deductions of R&D Expenses, with retroactive effect from January 1, 2021.

According to the Announcement, for any actual R&D expenses incurred by manufacturing firms, if they have not formed intangible assets and have not been included in the current profits and losses, such expenses can be additionally deducted before tax according to 100% of the actual amount on the basis of actual deductions starting from January 1, 2021; in the case they have formed intangible assets, they shall be amortized before tax at 200% of the cost of intangible assets. When an enterprise declares the enterprise income tax for the third quarter (paid quarterly) or for the month of September (paid monthly) of the current year in advance, it can choose to enjoy the preferential policy for additional deductions of the R&D expenses incurred in the first half of the current year.

Five authorities including the People's Bank of China and China Banking and Insurance Regulatory Commission released on April 1, 2021 the Circular on Further Extending the Implementation Period of the Policy of Delaying Repayment of Principal and Interest on Loans of Inclusive Small and Micro Firms and the Policy of Supporting Them with Credit Loans, with immediate effect.

According to the Circular, the two policies will be extended until December 31, 2021. For loans of inclusive small and micro firms due from April 1 to December 31, 2021, the firms and banks are allowed negotiate independently to continue the policy of repayment of principal and interest in phases, and the People's Bank of China will continue to give preferential financial support to eligible local legal person banking financial institutions and increase its support to individual industrial and commercial households through monetary policy tools.

The State Taxation Administration issued the 9^th announcement for 2021 on April 17 to clarify issues related to tax & fee declarations.

According to the announcement, from June 1, 2021 when taxpayers declare and pay urban land use tax, property tax, vehicle and vessel tax, stamp tax, farmland occupation tax, resource tax, land value-added tax, deed tax, environmental protection tax and tobacco tax, they should use the Tax Return for Property and Deed Tax. From May 1, 2021 Hainan, Shaanxi, Dalian and Xiamen will adopt a pilot plan to combine tax returns for value-added tax, consumption tax, urban maintenance and construction tax, education surcharge and local education surcharge, and they will use a series of tax returns, including the Tax Return for Value-added Tax and Additional Taxes and Fees.

As Chinese consumers become more willing to upgrade their handsets, 5G smartphones are expected to account for more than 80 percent of overall smartphone shipments in China in the second half of this year, a senior official from the nation's top industry regulator said on Monday.

Liu Liehong, vice-minister of Industry and Information Technology, said in March that 5G smartphones already accounted for more than 76 percent of overall smartphone shipments in China.

According to Liu, China has preliminarily built the world's largest 5G network, with 260 million 5G mobile connections.

China's phone market boomed in the first quarter of this year compared with the big setback caused by the COVID-19 pandemic at the same period last year, with phone shipments reaching 97.97 million units, up 100.1 percent from the same period last year, according to the China Academy of Information and Communications Technology, a Beijing-based think tank.

In March, a total of 36.09 million phones were shipped, increasing 65.9 percent year-on-year, with 41 newly-released models, up 32.3 percent from a year earlier.

The ministry also is working hard to reduce the digital divide between urban and rural areas by encouraging telecom companies to build base stations and optical networks for relatively poor areas.

Source: China Daily

Industrial production in China has returned to pre-COVID-19 levels amid efforts to revive economic activity and the renewed confidence of enterprises, the Ministry of Industry and Information Technology said on April 20.

Huang Libin, a spokesman for the ministry, said that during the first three months of this year, the utilization rate of industrial capacity in the nation reached 77.2 percent, the highest for the same period since 2013.

According to Huang, industrial output increased 24.5 percent on a yearly basis in the first quarter, while profits of industrial enterprises jumped 1.79 times on a yearly basis in January and February, with the vitality of enterprises getting a further boost.

In the first quarter, 40 of the 41 major industrial sectors achieved year-on-year growth, the spokesman said.

Huang said rising commodity prices had an impact on the manufacturing industry, but the effect has been controllable. Joint efforts with relevant departments will be made to stabilize the prices of raw materials and prevent panic purchases or stockpiling.

The strong data came after China took a series of measures to revive industrial production and encourage consumption.

Liu Wenqiang, deputy head of the China Center for Information Industry Development, a Beijing-based think tank, said though there have been increases in international commodity prices, its impact on China's sprawling industries will be limited, given the nation's strong industrial capacity and relatively sound industrial system.

The ministry said it is drafting the manufacturing development plan for the 14th Five-Year Plan period (2021-25), which will include goals for the overall development of the manufacturing industry, efforts to boost industrial fundamental technological innovation and initiatives for cultivating strategic industries such as raw materials of major technical equipment.

The ministry said it will carry out a special plan to fight unfair competition in the internet industry, with a focus on rectifying malicious blocking, traffic hijacking and other behaviors that disrupt market competition.

Source: gov.cn

Themed "A World in Change: Join Hands to Strengthen Global Governance and Advance Belt and Road Cooperation," this year's Boao Forum for Asia annual conference is ongoing in Boao, a coastal town in China's southern Hainan province, attracting more than 2,600 delegates from over 60 countries and regions.

The forum on Sunday released two flagship reports: Sustainable Development: Asia and the World Annual Report 2021, and Asian Economic Outlook and Integration Progress Annual Report 2021. Let's take a look at some highlights from these reports.

Going forward in 2021, the pandemic remains the major variable that will have a direct bearing on the performance of Asian economies. Overall, Asian economies are likely to witness recovery in 2021. Its economic growth rate is expected to reach more than 6.5 percent. Asian economies, an "anchor" for multilateralism, play a key role in bolstering global pandemic control, keeping industries and supply chains efficient and stable, and promoting trade and investment.

In 2020, Asia's economic growth was significantly better than other regions, and Asia's share in the global economy, as measured by purchasing power parity (PPP), has therefore further increased by 0.9 percentage point to 47.3 percent from 2019.

As Asia's largest economy, China has made indelible contributions to Asia's economic growth. In 2020, China was the only major economy in the world to achieve positive economic growth, with an economic growth rate of 2.3 percent.

Asia and the Pacific region's share of global GDP has leaped from 26.3 percent in 2000 to 34.9 percent in 2019. According to an estimate from the World Economic Forum, by 2030, Asia and the Pacific region is expected to contribute about 60 percent to the global economic growth and 90 percent of the 2.4 billion new middle-income class around the globe.

The alignment between various regional or even global inter-connectivity programs—the Belt and Road Initiative, Master Plan on ASEAN Connectivity 2025, and Eurasian Economic Union—provide significant impetus for regional trade and economic cooperation and post-pandemic economic recovery and development.

The pandemic has made all countries more fully aware of the value of the digital economy and thus has promoted its faster development. In the post-pandemic era, the digital economy will become a key force after the agricultural economy, industrial economy and information economy, influencing the world economy and international relations.

Asia has become one of the growing regions in developing the digital economy. In 2019, Asia's digital economy grew by 7.7 percent year-on-year, 3.4 percentage points higher than GDP growth during the same period. At present, the overall level of China's digital economy ranks second in the world.

To stride toward sustainable recovery, the report highlights addressing "four development deficits": healthcare, infrastructure, green and digital deficits. To address these deficits, the world should stand on the side of multilateralism and narrow the global governance deficit.

To reduce the health deficit, the world should prioritize vaccination and the establishment of mutual health data recognition arrangements. To narrow the deficits in infrastructure, green development and digital economy, global governance platforms and international organizations will have a vital role to play in urging countries to commit to and implement international agreements and initiatives.

Source: China Daily

Mauritius commenced trade under the African Continental Free Trade Area (AfCFTA) following the official launch of trade by the AfCFTA Secretariat on 1 January 2021.

The government introduced the following changes to the domestic legislation in order to implement the AfCFTA:

• the First Schedule of the Customs Tariff Act to include the rate of customs duty applicable to goods imported under AfCFTA; and
• the Customs (Export to the AfCFTA) Regulations 2021

The Mauritius Revenue Authority (MRA) has created customs procedure codes to facilitate the proper implementation of trading under AfCFTA. A person must be authorized by the MRA to be an approved exporter in order to export originating goods by completing an origin declaration on an invoice or any other commercial document. Approved exporters can apply for a certificate of origin electronically on the Tradenet portal. A list of States which have already implemented the provisions of AfCFTA has also been published.

The changes to the domestic legislation were promulgated under Government Gazette No. 13 of 6 February 2021 and apply with effect from 1 January 2021.

The Federal Inland Revenue Service (FIRS) requires all approved enterprises operating in free trade zones, export processing zones and oil and gas free zones to file tax returns.

According to the Finance Act 2020, all enterprises registered and operating in these zones are to file income tax returns in accordance with the provisions of the Companies Income Tax Act (CITA). However, operators in these zones still enjoy the tax-exempt status and other benefits conferred by the Nigerian Export Processing Zones Authority Act (NEPZA) and Oil and Gas Free Zone Authority Act (OGFZA), including repatriation of foreign capital at any time with capital appreciation, remittance of profits and dividends earned by foreign investors, 100% foreign ownership, etc.

The filing obligation will be for the 2021 and subsequent years of assessment while enterprises are expected to compute and pay any tax due in the manner prescribed under the CITA.

For ease of compliance, enterprises operating within various zones are expected to file their returns with the FIRS' offices situated in the geo-political regions of Nigeria where they are located. Thus, enterprises located in the South: in Port-Harcourt; enterprises operating in the South East: Enugu; in the South West: Ibadan; in the North East and North West: Kano; and in the North Central part: Abuja.

Penalties for failure to comply with the filing requirements as regards the due dates will be imposed in accordance with the provisions of the CITA and the FIRS (Establishment) Act 2007.

The FIRS communicated the above through a Public Notice issued on its website on 1 April 2021, following the Finance Act 2020 which amended relevant sections of the Nigerian Export Processing Zones Authority Act (NEPZA) and the Oil and Gas Free Zone Authority Act (OGFZA).

Following the President's assent on 30 March 2021, the Business Laws (Amendment) (No. 2) Act, 2021 was published. The Act amends various statutes for the smooth running of businesses, with key highlights being as follows:

• it eliminates the requirement for a company seal in the execution of documents of companies registered under the Companies Act;
• it provides for the holding of virtual and hybrid meetings;
• it provides for the payment of training levy to be remitted at the end of a business' financial year but not later than the 9th day of the month following the end of the financial year;
• it exempts payment of fixed stamp duty of KES 100 on contracts;
• it provides for both National Hospital Insurance Fund and National Social Security Fund contributions to be collected on the 9th day of the month;
• it clarifies that an administrator can distribute routine payments to unsecured creditors without necessitating the court's permissions; and
• it introduces a pre-insolvency moratorium period to prevent creditors from taking an enforcement action while a company considers its options for rescue.

The Act was published in Kenya Gazette Supplement No. 52 (Acts No. 1) of 2021. The effective date is 30 March 2021.

$10 billion

25%

5000

1st

$15 billion

61%

$1 billion

65 cents

3rd

Expectations running high

GBA Business Confidence Index (GBAI), based on quarterly surveys of over 1,000 companies operating in the Guangdong‑Hong Kong‑Macau Greater Bay Area (GBA) conducted in collaboration with the Hong Kong Trade Development Council (HKTDC), shows business confidence was off to a strong start in Q1‑2021. The GBAI’s ‘current performance’ index for business activity rose further above the 50 neutral mark to 53.0 in Q1‑2021 from 50.2 in Q4‑2020. The improvement came despite a seasonal slowdown in factory production and transitory COVID containment measures around Lunar New Year, plus worsening profit pressure due to rising costs. Even more encouraging was the jump in the forward‑looking ‘expectations’ index, to 62.7 from 54.1 prior. Worldwide vaccine rollout likely fuelled the broad‑based improvement, with all eight sub‑indices above 60. This, in our view, gives policy makers more cushion to taper stimulus, which could weigh on growth in H2‑2021.

A detailed breakdown shows continued outperformance in ‘manufacturing and trading’; more surprising was ‘retail and wholesale’ coming in second, beating IT and financial services; this hints at a broadening of China’s services sector recovery. Shenzhen and Guangzhou’s more developed services sectors likely contributed to their latest outperformance among cities, in our view, adding to their edge in manufacturing and technology. Our thematic questions showed that respondents are most upbeat towards vaccine rollouts in China and elsewhere, and are mostly concerned about higher costs and other production challenges in 2021. Over 20% of respondents already use Renminbi trade settlement, and another 16% plan to start doing so this year. We see room for policy relaxation to make cross‑border money movement easier.

Please click to read the full report.

Source: HKTCD

On 28 April 2021, the Legislative Council passed the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Bill 2021 that exempts from tax carried interest distributed by eligible private equity funds operating in Hong Kong. The Bill was passed on the third reading and will come into operation on the day it is published in the Gazette.

The Central Board of Direct Taxes has increased the threshold for international groups in India required to comply with country-by-country reporting requirements from INR 55 billion to INR 64 billion of consolidated group revenues effective 1 April 2021.

Full details are available in Notification No. 31/2021 of 5 April 2021.

On 1 February 2021, the Finance Minister presented the Finance Bill, 2021 in the lower house (Lok Sabha) of Parliament. On 23 March, the lower house of Parliament passed the Bill with amendments.

The key amendments are summarized as follows.

Equalization levy

The scope of the equalization levy is further clarified so that "consideration received or receivable from e-commerce supply or services" does not include any consideration for the sale of goods or provision of services which are owned or provided by a resident in India or by a permanent establishment (PE) in India, if the sale of such goods or the provision of such services is effectively connected with the PE.

Definition of "liable to tax" rephrased

The definition of "liable to tax" is rephrased to mean that, in relation to a person and with reference to a country, there is an income tax liability on such person under the law of that country for the time being in force and shall include a person that has subsequently been exempted from such liability under the law of that country.

Clarification of treatment of existing goodwill in a block of assets

Existing blocks of assets will be reduced by an amount equal to the actual cost of goodwill within the block of assets as reduced by:

• the amount of depreciation actually allowed to the taxpayer for such goodwill prior to assessment year (AY) 1988-89; and
• the amount of depreciation that would have been allowed to the taxpayer for such goodwill after AY 1988-89, as if the goodwill was the only asset within such a block.

This amendment will take effect from AY 2021-22 where tax depreciation was claimed on goodwill in AY 2020-21. Further, the reduction shall not exceed the written down value of the block of assets.

Fair market value (FMV) of capital assets transferred under slump sale

The FMV of the transferred undertaking shall be deemed to be the full value of consideration in a slump sale. Further, the value of goodwill that has not been purchased by the taxpayer shall be considered as nil for the purpose of computing net worth of the undertaking.

Tax on transfer of money or property by a firm, association of persons (AOP) or body of individuals (BOI) to its partners or members

The amended bill proposed to simplify the earlier proposed version of section 45(4) of the Income Tax Act (ITA), which provided for the taxability of capital assets received by specified persons upon the dissolution of a firm, AOP or BOI representing their share in their capital account, and provide that any profits from money or capital asset received by a specified person on account of reconstitution of a specified entity shall be deemed to be the capital gains of the specified entity.

Minimum Alternate tax (MAT) relief for secondary adjustment or advance pricing agreement (APA)

As proposed earlier, a corporate taxpayer can make an application before an assessing officer to recompute the book profit of past years on account of a secondary adjustment or an APA. The provisions will apply to the AY beginning on or before 1 April 2020 only if the taxpayer does not utilize the MAT credit in any subsequent AY. No interest shall be payable on a refund arising out of this provision.

Tax on interest earned on provident fund (PF) contribution

In cases where contributions to the PF are made only by the employee, interest accruing on such contributions in excess of INR 500,000 will be taxable.

Presumptive taxation scheme

The proposed presumptive taxation scheme for professionals will not apply to a Hindu Undivided Family.

No tax on income of development financial institutions

Income of institutions established for financing infrastructure and development may be tax exempt for 10 consecutive assessment years and income of developmental financing institutions licensed by the Reserve Bank of India may be tax exempt for the first 5 consecutive assessment years.

Qualified transfer of capital assets for the abovementioned institutions may also be exempt from capital gains tax.

Capital gains tax on unit linked investment plans (ULIPs)

The proposed minimum equity component of 65% or 90%, as the case may be, must be satisfied throughout the term of a ULIP in order to be eligible for the concessional long-term capital gains tax rate of 10%.

Relocation of offshore funds to international financial services centres (IFSCs)

The proposed capital gains tax exemption on the transfer of shares of an Indian company acquired or relocated from an offshore fund will also apply to a specified fund.

Global depository receipts (GDRs) created in an IFSC

The scope of section 115ACA of the ITA, which deals with the taxation of income from GDRs in the hands of specified resident individuals, will include GDRs created in an IFSC.

Income from aircraft leasing

The proposed tax exemption on royalty received by a non-resident from an IFSC unit for the lease of an aircraft will also apply to interest income.

The scope of the proposed 100% deduction allowed to an IFSC unit in respect of income arising from the transfer of a leased aircraft will apply to any person (previously, to domestic companies only).

Further developments will be reported in due course.

Dubai International (DXB) ended the first quarter of the year on a relatively positive note, registering a gradual but steady recovery in both customer numbers and cargo volumes. By the end of Q1 2021, DXB served 63% of the destinations in 89% of the countries on 74% of the airlines compared to before the COVID-19 pandemic.

Key facts and figures

Boosted by passenger numbers breaching the 2 million-mark in March, DXB’s passenger volumes for the first quarter this year reached 5.75 million. This translates to a contraction of 67.8% compared to Q1 of 2020, which was largely unaffected by the pandemic related suspension of operations by airlines and airports worldwide towards the end of March.

Cargo 

Cargo, which has shown more resilience compared to the passenger segment throughout the pandemic, continued its strong recovery despite the reduction in belly-hold capacity. DXB handled a total of 550,811 tonnes of airfreight during the first three months of 2021, a year on year increase of 3.2%.

Flights

Total flight movements during the first quarter totalled 50,176, down 38.3% from last year reflecting the impact of the pandemic on airline operations.

Top destinations

India, which is traditionally a strong market for the UAE, retained its position as DXB’s top destination country with traffic for Q1 reaching 1,384,448 – propelled by top city destinations New Delhi and Mumbai. Pakistan was placed second with 454,294 customers, followed by Bangladesh (221,027 customers) and Russia (196,890 customers). Other destination countries of note include Egypt and Turkey. The top three cities were New Delhi (262,035 customers), Dhaka (178,593) closely followed by Addis Ababa (169,715 customers).

Source: Media Office

The UAE is working on a legislation to include 10 new sectors under its commercial companies' law, which allows for 100 per cent ownership of onshore entities in the country, a senior government official.

The legislation will enable investors and businesses in 10 new sectors of strategic importance to come under the purview of the law, undersecretary of the Ministry of Economy for Foreign Trade and Industry Abdullah Al Saleh said.

He was speaking at the Sharjah Economic Ramadan Majlis organised by the Sharjah Investment and Development Authority (Shurooq), according to a statement on Saturday.

"Chemical, petrochemical, pharmaceutical, defence and heavy industries; the national food and healthcare security industries; and industries of the future, including space and renewable energy among others" will be added to the law, said Omar Al Suwaidi, undersecretary of the ministry of industry and advanced technology, said.

These industries will be prioritised under the UAE's 10-year plan to expand the contribution of the industrial sector to Dh300 billion by 2031 from Dh133bn presently.

The ministry of industry and advanced technology has been tasked with rolling out programmes and initiatives that will support 13,500 industrial small and medium sized enterprises in the UAE.

“A new industrial law will soon come into force and will be instrumental to promoting a conducive environment for industry in the UAE," Mr Al Suwaidi said.

A delegation from the ministry, which was established in July 2020, visited Ras Al Khaimah, Sharjah and Ajman chambers of commerce to present Operation 300bn.

The visits were in line with the ministry's mandate to "explore opportunities for boosting co-operation" with various stakeholders to achieve the goals of the national strategy for industry and advanced technology, it said on Saturday.

The ministry is also working to resolve financial issues faced by start-ups in order to "boost their performance", he said.

The country is also planning to launch a programme to support locally-made products.

"A National Added Value Programme will be launched soon to support national products, enhance their competitiveness and find new markets for them.”

Some of the legislations to the UAE's companies law will be "enacted soon" and will increase the competitiveness of the country for both local and international investors in advancing business performance.

The changes to legislation is "not the outcome of a crisis", he stressed but was part of a long-standing vision for the UAE's economic future, undertaken collaboratively by federal, local and private sector stakeholders.

In 2018, the UAE announced a 'positive list' of 122 economic activities in which foreign commercial entities could have 100 per cent ownership.

The ministry of economy will also announce a "a comprehensive strategy" to attract talent from around the region, Mr Al Suwaidi said.

Source: Jennifer Gnana for The National News

The US Treasury Department (Treasury) has updated its list of the countries that require cooperation with, or participation in, an international boycott as a condition of doing business. The Treasury published the updated list in the Federal Register on 8 April 2021.

The countries listed are Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria and the Republic of Yemen. The United Arab Emirates (UAE) is removed from the previous list that the Treasury published in the Federal Register on 13 October 2020.

The Treasury has removed the UAE from the list because the UAE repealed its law mandating a boycott of Israel and it subsequently has taken actions to implement the new policy.

The listed countries are identified pursuant to section 999 of the US Internal Revenue Code (IRC), which requires US taxpayers to file reports with the Treasury concerning operations in the boycotting countries. Such taxpayers incur adverse consequences under the IRC, including denial of US foreign tax credits (FTCs) for taxes paid to those countries and income inclusion under subpart F of the IRC in the case of US shareholders of controlled foreign corporations (CFCs) that conduct operations in those countries.

The Council of the European Union has concluded the EU-UK Trade and Cooperation Agreement. The decision to conclude the agreement, adopted on 29 April 2021 after the European Parliament granted its consent, is the last step for the European Union in the ratification of the agreement.

The agreement establishes a Free Trade Agreement, a close partnership on citizens' security and an overarching governance framework to regulate the relationship between the United Kingdom and the European Union. It aims at ensuring a level playing field in areas such as VAT, customs, social security coordination, State aid, tax transparency and anti-avoidance. The agreement has been provisionally applied as of 1 January 2021.

As next steps, the United Kingdom will be notified of the finalization of the internal EU procedures and the agreement will be published in the Official Journal of the European Union before the end of the month. The agreement will enter into force on 1 May 2021.

The Federal Council adopted the dispatch on the revision of the Federal Act on Withholding Taxes and the Federal Act on Stamp Taxes.

The revision contains the following key elements:

• abolition of the anticipatory tax on interest paid to domestic recipients (with the exception of interest paid to individual persons resident in Switzerland); and
• abolition of the turnover tax on bonds issued by Swiss based emitters.

The purpose of the revision is the strengthening of Switzerland's financial market. Further developments will be reported as they occur.

The Federal Council adopted the dispatch on 15 April 2021.