August 2021

  • United States
    • Senate Passage of the Bipartisan Infrastructure Investment and Jobs Act

      The U.S. Senate passed the Infrastructure Investment and Jobs Act on a broad bipartisan vote of 69-30. This historic bill includes many of President Joe Biden’s economic priorities, including record investments in minority-owned businesses, broadband infrastructure, expanded funding to track and address climate change, while also including the largest-ever federal investments in roads and bridges, clean drinking water and more.

      After the Senate passed the Infrastructure Investment and Jobs Act, U.S. Secretary of Commerce Gina M. Raimondo released the following statement:

      “I am deeply thankful for the unwavering commitment of the Republican and Democratic Senators who led the process to get this done. Throughout the entire process, President Biden showed incredible leadership keeping these talks together and encouraging all of us to remain committed to this bipartisan approach. Passing a bipartisan infrastructure bill sends a message to nations around the world about the strength of our democracy and what we can accomplish together for the benefit of all Americans. The investments in this bill will better position the United States to compete globally, strengthen our supply chains, and create millions of good-paying jobs – all while making our economy more resilient and just.

      “The Infrastructure Investment and Jobs Act represents a historic investment in our country that will strengthen our economy to benefit all Americans for decades to come. This is a generational achievement that both parties can be proud of, and there is still more to do as we carry out President Biden’s Build Back Better agenda. Broad support exists to make needed investments in the Care Economy to provide access to affordable, quality care services as well as reinvigorating workforce training to ensure our workers are prepared for the jobs of the 21st century. I look forward to continued engagement with Congress to make progress on these critical challenges.”

      Among the historic investments included in the bill is more than $48 billion in funding for the National Telecommunications and Information Administration (NTIA) to fund state and local investments to help reach 100% access to affordable, high-speed broadband service. This is among the most significant government investment in broadband access and infrastructure in American history, and is a critical component of President Biden’s Build Back Better agenda.

      The bill will also make permanent the Minority Business Development Agency (MBDA), enhancing its ability to promote and administer its flagship programs to promote the growth, development, and resiliency of minority-owned businesses. As the only federal agency dedicated solely to economic development for minority businesses, the move to permanently authorize MBDA is essential to ensuring the economic recovery reaches all of America’s communities.

      Finally, the legislation makes major investments to tackle climate change, increase infrastructure resiliency, and restore and improve coastal habitats by providing the National Oceanic and Atmospheric Administration (NOAA) with approximately $3 billion in funding for climate science and services.

      Source: US Department of Commerce

    • COBRA Fees To Be Adjusted for Inflation in Fiscal Year 2022

      U.S. Customs and Border Protection (CBP) is adjusting certain customs user fees and corresponding limitations established by the Consolidated Omnibus Budget Reconciliation Act (COBRA) for Fiscal Year 2022 in accordance with the Fixing America's Surface Transportation Act (FAST Act) as implemented by the CBP regulations.

      The adjusted amounts of customs COBRA user fees and their corresponding limitations set forth in this notice for Fiscal Year 2022 are required as of October 1, 2021.

      I. Background

      A. Adjustments of COBRA User Fees and Corresponding Limitations for Inflation

      On December 4, 2015, the Fixing America's Surface Transportation Act (FAST Act, Pub. L. 114-94) was signed into law. Section 32201 of the FAST Act amended section 13031 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (19 U.S.C. 58c) by requiring the Secretary of the Treasury (Secretary) to adjust certain customs COBRA user fees and corresponding limitations to reflect certain increases in inflation.

      Sections 24.22 and 24.23 of title 19 of the Code of Federal Regulations (19 CFR 24.22 and 24.23) describe the procedures that implement the requirements of the FAST Act. Specifically, paragraph (k) in § 24.22 (19 CFR 24.22(k)) sets forth the methodology to determine the change in inflation as well as the factor by which the fees and limitations will be adjusted, if necessary. The fees and limitations subject to adjustment, which are set forth in appendix A and appendix B of part 24, include the commercial vessel arrival fees, commercial truck arrival fees, railroad car arrival fees, private vessel arrival fees, private aircraft arrival fees, commercial aircraft and vessel passenger arrival fees, dutiable mail fees, customs broker permit user fees, barges and other bulk carriers arrival fees, and merchandise processing fees, as well as the corresponding limitations.

      B. Determination of Whether an Adjustment Is Necessary for Fiscal Year 2022

      In accordance with 19 CFR 24.22, CBP must determine annually whether the fees and limitations must be adjusted to reflect inflation. For Fiscal Year 2022, CBP is making this determination by comparing the average of the Consumer Price Index—All Urban Consumers, U.S. All items, 1982-1984 (CPI-U) for the current year (June 2020-May 2021) with the average of the CPI-U for the comparison year (June 2019-May 2020) to determine the change in inflation, if any. If there is an increase in the CPI-U of greater than one (1) percent, CBP must adjust the customs COBRA user fees and corresponding limitations using the methodology set forth in 19 CFR 24.22(k). Following the steps provided in paragraph (k)(2) of § 24.22, CBP has determined that the increase in the CPI-U between the most recent June to May twelve-month period (June 2020-May 2021) and the comparison year (June 2019-May 2020) is 1.94 percent. As the increase in the CPI-U is greater than one (1) percent, the customs COBRA user fees and corresponding limitations must be adjusted for Fiscal Year 2022.

      C. Determination of the Adjusted Fees and Limitations

      Using the methodology set forth in § 24.22(k)(2) of the CBP regulations (19 CFR 24.22(k)), CBP has determined that the factor by which the base fees and limitations will be adjusted is 11.009 percent (base fees and limitations can be found in appendices A and B to part 24 of title 19). In reaching this determination, CBP calculated the values for each variable found in paragraph (k) of 19 CFR 24.22 as follows:

      • The arithmetic average of the CPI-U for June 2020-May 2021, referred to as (A) in the CBP regulations, is 261.992;
      • The arithmetic average of the CPI-U for Fiscal Year 2014, referred to as (B), is 236.009;
      • The arithmetic average of the CPI-U for the comparison year (June 2019-May 2020), referred to as (C), is 257.092;
      • The difference between the arithmetic averages of the CPI-U of the comparison year (June 2019-May 2020) and the current year (June 2020-May 2021), referred to as (D), is 4.900;
      • This difference rounded to the nearest whole number, referred to as (E), is 5;
      • The percentage change in the arithmetic averages of the CPI-U of the comparison year (June 2019-May 2020) and the current year (June 2020-May 2021), referred to as (F), is 1.94 percent;
      • The difference in the arithmetic average of the CPI-U between the current year (June 2020-May 2021) and the base year (Fiscal Year 2014), referred to as (G), is 25.984; and
      • Lastly, the percentage change in the CPI-U from the base year (Fiscal Year 2014) to the current year (June 2020-May 2021), referred to as (H), is 11.009 percent.

      D. Announcement of New Fees and Limitations

      The adjusted amounts of customs COBRA user fees and their corresponding limitations for Fiscal Year 2022 as adjusted by 11.009 percent set forth below are required as of October 1, 2021. Table 1 provides the fees and limitations found in 19 CFR 24.22 as adjusted for Fiscal Year 2022, and Table 2 provides the fees and limitations found in 19 CFR 24.23 as adjusted for Fiscal Year 2022.

      Table 1—Customs COBRA User Fees and Limitations Found in 19 CFR 24.22 as Adjusted for Fiscal Year 2022

      19 U.S.C. 58c 19 CFR 24.22 Customs COBRA user fee/limitation New fee/limitation adjusted in accordance with the FAST Act
      (a)(1) (b)(1)(i) Fee: Commercial Vessel Arrival Fee $485.11
      (b)(5)(A) (b)(1)(ii) Limitation: Calendar Year Maximum for Commercial Vessel Arrival Fees 6,610.63
      (a)(8) (b)(2)(i) Fee: Barges and Other Bulk Carriers Arrival Fee 122.11
      (b)(6) (b)(2)(ii) Limitation: Calendar Year Maximum for Barges and Other Bulk Carriers Arrival Fees 1,665.15
      (a)(2) (c)(1) Fee: Commercial Truck Arrival Fee 2 3 6.10
      (b)(2) (c)(2) and (3) Limitation: Commercial Truck Calendar Year Prepayment Fee 111.01
      (a)(3) (d)(1) Fee: Railroad Car Arrival Fee 9.16
      (b)(3) (d)(2) and (3) Limitation: Railroad Car Calendar Year Prepayment Fee 111.01
      (a)(4) (e)(1) and (2) Fee and Limitation: Private Vessel or Private Aircraft First Arrival/Calendar Year Prepayment Fee 30.53
      (a)(6) (f) Fee: Dutiable Mail Fee 6.11
      (a)(5)(A) (g)(1)(i) Fee: Commercial Vessel or Commercial Aircraft Passenger Arrival Fee 6.11
      (a)(5)(B) (g)(1)(ii) Fee: Commercial Vessel Passenger Arrival Fee (from one of the territories and possessions of the United States) 2.14
      (a)(7) (h) Fee: Customs Broker Permit User Fee 153.19

      Table 2—Customs COBRA User Fees and Limitations Found in 19 CFR 24.23 as Adjusted for Fiscal Year 2022

      19 U.S.C. 58c 19 CFR 24.23 Customs COBRA user fee/limitation New fee/limitation adjusted in accordance with the FAST Act
      (b)(9)(A)(ii) (b)(1)(i)(A) Fee: Express Consignment Carrier/Centralized Hub Facility Fee, Per Individual Waybill/Bill of Lading Fee $1.11
      (b)(9)(B)(i) (b)(4)(ii) Limitation: Minimum Express Consignment Carrier/Centralized Hub Facility Fee. 0.39
      (b)(9)(B)(i) (b)(4)(ii) Limitation: Maximum Express Consignment Carrier/Centralized Hub Facility Fee 1.11
      (a)(9)(B)(i); (b)(8)(A)(i) (b)(1)(i)(B) Limitation: Minimum Merchandise Processing Fee 27.75
      (a)(9)(B)(i); (b)(8)(A)(i) (b)(1)(i)(B) Limitation: Maximum Merchandise Processing Fee 538.40
      (b)(8)(A)(ii) (b)(1)(ii) Fee: Surcharge for Manual Entry or Release 3.33
      (a)(10)(C)(i) (b)(2)(i) Fee: Informal Entry or Release; Automated and Not Prepared by CBP Personnel 2.22
      (a)(10)(C)(ii) (b)(2)(ii) Fee: Informal Entry or Release; Manual and Not Prepared by CBP Personnel 6.66
      (a)(10)(C)(iii) (b)(2)(iii) Fee: Informal Entry or Release; Automated or Manual; Prepared by CBP Personnel 9.99
      (b)(9)(A)(ii) (b)(4) Fee: Express Consignment Carrier/Centralized Hub Facility Fee, Per Individual Waybill/Bill of Lading Fee 1.11

      Tables 1 and 2, setting forth the adjusted fees and limitations for Fiscal Year 2022, will also be maintained for the public's convenience on the CBP website at

      Troy A. Miller, the Acting Commissioner, having reviewed and approved this document, is delegating the authority to electronically sign this notice document to Robert F. Altneu, who is the Director of the Regulations and Disclosure Law Division for CBP, for purposes of publication in the Federal Register.

      Source: US Federal Register

    • Congressional Research Service Outlines Reporting of Cryptocurrency Transfers

      The Congressional Research Service (CRS) of the US Library of Congress has issued a report with an overview of current information reporting requirements, as well as policy proposals and consideration, for certain cryptocurrency transfers. The CRS report is entitled "Cryptocurrency Transfers and Data Collection" (IF11910, 25 August 2021).

      For US federal tax purposes, taxpayers should treat cryptocurrency transactions in the same manner as transactions involving other mediums of value, such as cash, checks and stocks. Accordingly, cryptocurrency transactions are subject to the capital gains and losses rules of the US Internal Revenue Code (IRC). Similarly, US federal income and employment tax rules apply when a business uses cryptocurrency to compensate an individual for a service provided. Cryptocurrency transactions are also generally subject to the same information reporting requirements as non-cryptocurrency transactions.

      The Biden Administration's fiscal year (FY) 2022 Budget proposes:

      • requiring cryptocurrency exchanges and custodians to file information returns with the US Internal Revenue Service (IRS) that report the amount flowing into and out of customer accounts with gross flows above USD 600 with a separate reporting requirement for inter-broker cryptocurrency transfers;
      • requiring businesses that accept cryptocurrency to report crypto transactions exceeding USD 10,000 in value to the IRS; and
      • expanding the information reporting requirements for brokers, including cryptocurrency exchanges and wallet providers, to include information on US and certain foreign account owners to allow for automatic information sharing with foreign tax jurisdictions in exchange for information on US taxpayers transacting in cryptocurrency outside the United States.

      The Infrastructure Investment and Jobs Act (H.R. 3684), as passed by the US Senate on 10 August 2021 would, if enacted:

      • require a party facilitating the transfer of cryptocurrency to file an information return as a broker with the IRS; and
      • require a business that receives cryptocurrency worth more than USD 10,000 in a single transaction to report the transaction to the IRS.

      The CRS report notes that US policymakers face a trade-off between providing the necessary tools to ensure anti-money laundering (AML) compliance and driving activities out of the US market because cryptocurrency can be used across jurisdictions with relative ease.

      Note: The CRS is an agency within the US Library of Congress and serves the US Congress throughout the legislative process by providing legislative research and analysis for an informed national legislature.

    • White House Summarizes Tax Reform Plan for Small Businesses

      The White House has released a Fact Sheet outlining US President Joe Biden's tax reform plan to provide greater tax fairness for small businesses. The Fact Sheet, dated 19 August 2021, is entitled "The Build Back Better Agenda Will Provide Greater Tax Fairness or Small Businesses."

      To level the playing field and address the concerns of small business owners, President Biden's plan, if adopted by the US congress, will:

      • raise the corporate income tax rate from 21% to 28%;
      • strengthen the global minimum tax for large multinational corporations;
      • reduce incentives for foreign jurisdictions to maintain ultra-low corporate tax rates by encouraging global adoption of robust minimum taxes for large corporations;
      • enact a 15% minimum tax on book income of large, highly profitable corporations;
      • eliminate incentives for large corporations to offshore profits and jobs;
      • ramp up enforcement to address tax avoidance among large corporations;
      • extend the expansion of the Child Tax Credit (CTC) in the American Rescue Plan Act (ARP) (from USD 2,000 per child to USD 3,000 per child for children over the age of six and USD 3,600 for children under the age of six); and
      • permanently extend the tax credits that lowered health insurance premiums for those buying coverage through the Affordable Care Act (ACA) (

      The Fact Sheet states that, according to the US Treasury Department's analysis, President Biden's plan will protect 97% of small business owners from income tax rate increases while delivering tax cuts to more than 3.9 million entrepreneurs.

    • Congressional Research Service Explains Federal Tax Gap

      The Congressional Research Service (CRS) of the US Library of Congress has analysed the US federal tax gap in its recent report. The CRS report is entitled "Federal Tax Gap: Size, Contributing Factors, and the Debate Over Reducing It" (IF11887-Version 2, 2 August 2021).

      The federal tax gap is a measure of taxpayer non-compliance. The US Internal Revenue Service (IRS) provides two estimates of the tax gap:

      • the gross federal tax gap, i.e. the difference between:
        • the total amount of federal individual and corporate income, employment, and estate and gift taxes owed in a year; and
        • the total amount of those taxes paid voluntarily in full and on time; and
      • the net tax gap, i.e. the difference between:
        • all taxes owed; and
        • taxes paid after late taxpayer payments and taxes collected through IRS enforcement actions.

      The federal tax gap has three components:

      • the understatement of tax liability through underreporting of income or overstating deductions, credits and other income adjustments;
      • the failure to pay the full amount of taxes owed when filing a tax return on time (tax underpayment); and
      • the failure to file a required return on time (non-filing).

      The CRS report includes the following table showing the net federal tax gap from 2001 to 2013:

      Years Current USD Constant 2020 USD Net Taxpayer Non-compliance Rate*
      2001 290 billion 423 billion 13.7%
      2006 385 billion 493 billion 14.5%
      2008-2010 406 billion 491 billion 16.3%
      2011-2013 381 billion 431 billion 14.2%
      * The percentage of total taxes owed in a year that were not paid in full and on time after IRS enforcement actions.

      An updated estimate from the IRS is unlikely to be released before 2022. In testimony given at a congressional hearing in April 2021, IRS Commissioner Charles Rettig stated that the current gross federal tax gap could total as much as USD 1 trillion, although not everyone agrees with that assessment.

      The CRS report states that options for decreasing the federal tax gap include:

      • increasing the IRS's resources, especially for enforcement;
      • regulating paid tax preparers;
      • requiring new information reporting for certain taxpayer transactions with banks;
      • major new investments in the IRS's information technology and employee training;
      • a greater emphasis on the IRS's taxpayer services;
      • a redesign of the IRS's information systems;
      • simplifying the federal tax code to make it possible for more taxpayers to meet their tax obligations on their own with fewer errors; and
      • clarifying ambiguous areas of the tax code to make it harder for corporations and high-income individuals to prevail in disputes with the IRS over the legality of their tax minimization strategies.

      Note: The CRS is an agency within the US Library of Congress and serves the US Congress throughout the legislative process by providing legislative research and analysis for an informed national legislature.

    • New York Expands Definition of Receipts for Sales and Use Tax Purposes

      New York has enacted legislation expanding its definition of receipts for sales and use tax purposes. The definition now includes consideration received by a vendor from third parties in certain circumstances (A01143-A / S06301). The new law is effective for sales occurring on or after 1 December 2021.

      The newly enacted legislation provides that receipts shall include consideration received by the vendor from third parties under the following conditions:

      • the vendor receives consideration from a third party and the consideration is directly related to a rebate, discount or similar price reduction on the sale (except sales of motor vehicles);
      • the vendor has an obligation to pass the consideration through to the purchaser in the form of a price reduction;
      • the amount of the consideration to be paid by the third party is fixed and determinable by the vendor at the time of the sale of the property or service to the purchaser; and
      • one of the following criteria is met:
        • the purchaser presents to the vendor a coupon, certificate or other documentation to claim a price reduction granted by a third party, who will reimburse any vendor to whom the document is presented;
        • the purchaser presents identification as a member of a group or organization entitled to a price reduction (excluding the presentation of a customer loyalty or related rewards program card); or
        • the invoice received by the purchaser or a coupon, certificate or other documentation presented by the purchaser identifies the price reduction as third-party.

      The New York Governor signed the bill into law on 20 August 2021.

  • Switzerland
    • Tax Treaty Between India and Switzerland – MFN Clause on Dividends Activated

      On 13 August 2021, the Swiss Federal Tax Administration published a clarification, announcing that the conditions for the activation of the most favoured nation (MFN) clause contained in the amending protocol, signed on 30 August 2010, to the India - Switzerland Income Tax Treaty (1994) have been met.

      The MFN clause should apply as of 1 January 2021. If India does not apply the clause on a reciprocal basis, Switzerland will apply the reduced rate from 1 January 2023.

      Currently, the treaty provides for a 10% withholding tax on dividends.

      The MFN clause of article 11 of the 2010 protocol provides that this rate will be reduced when India afterwards signs a new treaty with another OECD Member States providing for a lower rate.

  • Hong Kong
    • COVID-19 Pandemic: IRD Outlines Approach in Handling Tax Issues Arising from COVID-19 Pandemic

      On 29 July 2021, the Inland Revenue Department (IRD) of Hong Kong set up a webpage to provide general guidance on the IRD's approach in handling tax issues arising from the COVID-19 pandemic, including issues on the tax residence status of companies and individuals, permanent establishments, employment income of cross-border employees and transfer pricing. The IRD stresses that the treatment of each case will be determined based on its facts and circumstances.
      It should also be noted that the IRD's approach in relation to these tax issues is generally in line with the OECD's Updated Guidance on Tax Treaties and the Impact of the COVID-19 Pandemic and Guidance on the Transfer Pricing Implications of the COVID-19 Pandemic of January 2021 and December 2020, respectively, to which further references may be made.
    • Import and Export Trade Industry in Hong Kong


      • Hong Kong’s total merchandise trade in 2020 decreased by 2.5% to US$1,051 billion (HK$8,197 billion) after dropping by 5.4% in 2019.
      • Hong Kong handles a large amount of offshore trade, estimated by the Hong Kong government to have a value of US$604 billion (HK$4,709 billion) in 2019, an decrease of 2.5% over 2018. In comparison, re-exports amounted to US$505 billion (HK$3,941 billion) in 2019, down 4.2% over 2018.
      • As of December 2020, 438,964 people were employed in the import and export sector, which had 105,675 establishments. In 2019, the sector accounted for 16.8% of Hong Kong’s GDP.
      • Hong Kong handles a good portion of mainland China's external trade. In 2020, about 10.1% of the mainland's exports (valued at US$263 billion) and 14.3% of imports (US$295 billion) were handled via Hong Kong and 53% of Hong Kong's re-exports originated from the mainland.
      Industry Data Import and Export Trade

      December 2020

      Number of Establishments




      Source: Quarterly Report of Employment and Vacancies Statistics, Census and Statistics Department
      Exports of Merchanting and Trade-related Services (US$ billion)






      Exports of Merchanting and Trade-related Services






      Year-on-year growth






      Contribution to Services Exports






      Sources: Gross Domestic Product (Quarterly), Census and Statistics Department
      Range of Services Hong Kong's import and export trading firms are active in sourcing various industrial goods, including raw materials, machinery and parts, and a wide range of consumer goods. There are three main types of sourcing activities: (1) sourcing goods produced in Hong Kong; (2) sourcing goods from around the region for re-export; and (3) sourcing goods from one country to be shipped directly to a third country without touching Hong Kong territory. The import business of Hong Kong trading firms is mainly managed by distribution through agents or dealers. These trading firms usually specialise in one product area and represent one or more foreign brands. Their trading map usually encompasses Hong Kong, mainland China (or certain parts of it) and/or other Asian countries. With the development of trade support services in mainland China, trading firms increasingly source goods offshore for sale to international markets. Some of these goods are either transhipped via Hong Kong or shipped directly without touching Hong Kong territory. Such offshore trade is not reflected in Hong Kong's trade statistics. According to official statistics, Hong Kong's offshore trade in 2019 (including both “merchanting” and “merchandising for offshore transactions”) was estimated to be US$604 billion (HK$4,709 billion), an decrease of 2.5% over 2018. In comparison, re-exports totalled US$505 billion (HK$3,941 billion) in 2018, down 4.2% over 2018, representing 83.7% of total offshore trade.
      Service Providers Hong Kong's import and export trading firms are typically small, employing less than 10 persons on average. There were 105,675 import and export trading firms in Hong Kong as of December 2020, with the majority of them being SMEs. There are three broad categories of import and export trading firms:
      • Left hand-right hand traders: these refer to trading firms which match sellers and buyers without adding any significant value to the process. These firms conduct a straight-forward sourcing operation, usually identifying goods produced on the mainland or Hong Kong and shipping them to overseas markets. They rely on their specialist knowledge of the sources of products in the region and the low costs of their supplies as their main competitive advantages.
      • Traders with some value-added services: many firms now source raw materials for their suppliers and provide finance for these materials. They often use letters of credit from their customers as a guarantee for raising finance for their purchase orders. Other firms develop a sub-contractor relationship with a number of factories in which they exert significant control over the management of production, including quality control.
      • Traders with sophisticated value-added services: in certain cases exporting firms have added value to their traditional activity to such an extent that it may be difficult to retain the label of being exporters. For example, some firms design and manufacture components for their supplier factories to produce finished goods, which the firms subsequently export. These firms add value mostly from their design team, and their competitive edge comes from their ability to design products which sell well in the target markets. In 2019, the rate of gross margin1 of merchanting fell slightly to 6.3% from 6.4% in 2018. This means that the export market is relatively stable, though margins remain below the 6.9% recorded in 2009. In the same year, the commission rate of merchandising2 for offshore transactions stood at 6.2% (2018:6.7%; 2017: 6.9%).
      • The business environment for Hong Kong's trading firms is becoming more challenging amid the growing trend toward direct dealing between customers and manufacturers, known as “trade disintermediation”. In response to this, Hong Kong traders are adapting to provide more value-added services, in addition to finding more competitive sources of supplies. For example, Hong Kong traders help their overseas clients to inspect the goods produced by the manufacturers to ensure they meet the procurement standard, and monitor production schedules to meet delivery. Hong Kong traders can also help overseas buyers co-ordinate production when the buyers have a sudden surge in orders and quick turnaround is needed.
      The operations of small and big trading firms are quite different. Smaller firms are usually strong in introducing foreign products to the mainland market. In most cases, they specialise in one area, such as medical equipment, and represent some foreign brands as their agents or distributors. Bigger trading firms are usually strong in sourcing products from the region. They usually have regional or even global sourcing networks and do not specialise in just one type of product.
      Exports Hong Kong's import and export trading sector provides services mainly in the form of offshore buying and selling of goods. Given Hong Kong's location and the relocation of Hong Kong's manufacturing bases to the mainland, particularly the Pearl River Delta, mainland China is a major source of offshore trading activities. Hong Kong manufacturers are diversifying their production activities to other low-cost countries, and the offshore trading pattern is expected to reflect this move. In 2019, Hong Kong earned US$39.7 billion from exporting merchanting and trade-related services, accounting for 29.3% of total services exports.
      Industry Development and Market Outlook
      • Impacted by the Covid-19 pandemic and the softening of global demand, Hong Kong’s total merchandise trade decreased by 2.5% to US$1,051 billion (HK$8,197 billion) in 2020, after dropping by 5.4% in 2019. In the same period, Hong Kong’s merchandise exports saw a year-on-year decrease of 1.5%, after a fall of 4.1% in the previous year. In 2020, Hong Kong's major export markets were mainland China (59.2% of total), the ASEAN (7.2%) and the EU (7.1%).
      • In recent years, Asia has become a more integrated market, thanks to the various free trade agreements (FTAs) signed in the region. In particular, the product trade arrangements under the China-ASEAN Free Trade Area (CAFTA) pact, which commenced in 2005 with scheduled tariff elimination completed in 2010, have contributed to higher intra-Asian trade. In November 2015, China and ASEAN concluded an upgraded FTA that covers further liberalisation of trade as well as economic, investment and regulatory co-operation. The upgraded protocol of the CAFTA took effect on 22 October 2019.
      • Over the past few years, there has been an increase in companies in developed economies treating Asia as a market instead of a pure production base. During 2015-2020, North America’s exports to Asia expanded by a CAGR of 1.1%, surpassing the CAGR of 1.0% in respect of its exports to Europe in the same period.
      • ASEAN as a group is the second largest export market and second largest trading partner of Hong Kong, with Singapore, Vietnam and Thailand being the top three markets for Hong Kong products in 2020. To foster stronger economic ties between Hong Kong and ASEAN, the two sides signed the Hong Kong-ASEAN Free Trade Agreement (HAFTA) in November 2017. In addition to the reduction and/or elimination of import tariffs, other key elements covered by the HAFTA include rules of origin, liberalisation of trade in services, promotion and protection of investment, and intellectual property co-operation. Part of the HAFTA entered into force in June 2019.
      • The 14th FiveYear Plan was announced in March 2021, with an emphasis on expanding domestic demand, accelerating the domestic circulation and “dual circulation” development strategy, improving the business environment, and promoting further economic growth. As an international trade center, Hong Kong companies can actively expand the mainland domestic market under the internal circulation, while playing an important role in the cross-border trade under the external circulation, bringing new business opportunities for Hong Kong’s trade sector.
      CEPA Provisions The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) is a free trade agreement concluded by the mainland and Hong Kong. Under CEPA, all products of Hong Kong origin, except for a few prohibited articles, can be imported into the mainland tariff-free. In the services sector, Hong Kong service suppliers (HKSS) can provide, in the form of wholly owned operations, commission agents' services and wholesale trade services, and can set up wholly owned external trading companies in mainland China. After 10 annual supplements signed between 2004 and 2013 to keep widening and broadening the liberalisation measures in favour of HKSS, Hong Kong and the mainland entered into a subsidiary agreement under CEPA in 2014 to achieve basic liberalisation of trade in services in Guangdong (Guangdong Agreement). This was followed by the Agreement on Trade in Services (ATIS) to extend the coverage of the 2014 agreement from Guangdong to the rest of the mainland from June 2016. Unlike the previous supplements which adopted a positive-list approach to introducing liberalisation measures, the two latest CEPA agreements adopt a hybrid approach to granting preferential access to Hong Kong using both positive and negative lists. From June 2020 onwards, the Agreement Concerning Amendment to the CEPA Agreement on Trade in Services (Amendment Agreement) signed in November 2019 takes effect. The Amendment Agreement introduces more liberalisation measures, including the removal of a minimum capital input ratio requirement and the relaxation of qualification requirements in a number of important services sectors. With this enhanced liberalisation of trade in services between mainland China and Hong Kong, the territory’s status as an international trade hub as well as the gateway to the mainland is set to strengthen. Please click to view further information on the latest CEPA agreements.  

      1 “Rate of gross margin” refers to the gross margin from merchanting expressed as a percentage of the sales value of goods involved, while “commission rate” is the commission from merchandising for offshore transactions expressed as a percentage of the sales value of goods involved. “Rate of re-export margin” is defined as the re-export margin expressed as a percentage of the value of re-exports.

      2 The difference between “merchanting” and “merchandising” is that an establishment engaged in “merchanting” takes ownership of the goods involved, whereas one engaged in merchandising transactions does not take ownership of the goods involved.

      Source: HKTDC

    • Guangdong Free Trade Zone: The Trading Gateway to the Greater Bay Area

      As part of continuous efforts to improve the business environment, mainland China recently further streamlined foreign trade approval across the country and in free trade zones. Hong Kong companies can establish Hong Kong-funded import-export enterprises in the China (Guangdong) Pilot Free Trade Zone and start trading there without first seeking approval or completing record filing formalities. Tapping import and export trade opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) will facilitate further exploitation of mainland China’s huge domestic market.

      Reform and opening-up

      Mainland China has been promoting business systems reform and streamlining administrative approval procedures to attract Hong Kong companies and other investors to do business on the mainland in recent years. One effective way to tap the mainland market potential is to set up a domestic sales or import-export company there.

      Guangdong lies adjacent to Hong Kong and is connected by convenient transport and logistic networks. Its position as an important industrial production and product procurement base makes it easy for companies to map out development and cargo transportation plans according to their business situation, ship goods to Hong Kong and other overseas markets, or to sell overseas goods into the mainland. Setting up a Hong Kong-funded enterprise in Guangdong is an important window for entering the mainland, one that opens opportunities for tapping the huge GBA market for domestic sales and import-export trade.

      Hong Kong companies may consider going to the Guangdong Free Trade Zone to explore trade opportunities in the GBA.

      Hong Hong Kong businesses can sell overseas goods to the mainland to tap the domestic market.

      According to the Foreign Trade Law of the People’s Republic of China, foreign trade operators engaged in the import and export of goods or technology must register for record filing purposes with the administrative department of foreign trade at the State Council or the institution entrusted thereby. Based on the Measures for Registration and Filing of Foreign Trade Operators, they are required to use the Ministry of Commerce unified business system platform to apply for record filing and registration as foreign trade operators. The mainland customs authorities will process the relevant customs declaration and release procedures for the enterprise’s goods import or export after application approval.

      In July this year, the Ministry of Commerce released an implementation plan [1] aimed at deepening reform in separating business licences and operation permits and further stimulating the development of market vitality. It is worth noting that in the section on record filing and registration of foreign trade operators it is further stated that approval is replaced by record filing across the country. A highlight in this plan is that the competent department shall initiate filing procedures and will not make a decision to deny filing once an enterprise has submitted the required filing materials. The enterprise may proceed with import-export business after completing the filing and registration procedures.

      Hong Kong companies can take advantage of Guangdong’s leading edge in manufacturing, logistics and transportation and the nationwide reform of record filing for foreign trade operators to develop import and export business on the mainland by setting up companies in Guangdong.

      Scrapping approvals

      Apart from the nationwide reform mentioned above, the implementation plan further deepens the pilot reform in free trade zones by scrapping approval requirements for foreign trade operators outright. Between 1 December 2019 and 30 November 2022, enterprises registered within the free trade zones for import and export activities are no longer required to complete record filing and registration formalities for foreign trade operators before importing or exporting goods. Nor are they required to submit materials on the record filing and registration of foreign trade operators for customs clearance to customs offices before staring operations.

      These measures have greatly simplified the registration procedures for foreign trade business. In the Guangdong Free Trade Zone, for instance, Hong Kong-funded enterprises established within the zone, whether in the Nansha Area of Guangzhou, the Qianhai-Shekou Area of Shenzhen, or the Hengqin Area of Zhuhai, may start import-export business once they are issued the business licence. Scrapping foreign trade operator record filing and registration formalities saves companies time and cost from incorporation to actual commencement of import and export activities.

      In June this year, the Guangdong provincial government also released its own implementation plan for deepening the reform of separating business licences and operation permits [2], putting forward measures to improve the efficiency of enterprises in the province. These measures, including the easing of domicile (place of business) restrictions and the simplification of proof of domicile requirements, make it more convenient for businesses to invest and operate in Guangdong. Hong Kong companies may make use of the free trade zone policy advantages and Guangdong’s business reform measures to start import and export business in the Guangdong Free Trade Zone.

      Record filing formalities streamlining for foreign trade operators across the country, and the outright scrapping of foreign trade approval in the free trade zones make it much easier for Hong Kong companies to venture into the mainland for domestic sales and import-export trade. The release of the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area was followed by the introduction of measures to facilitate the launch of new business in the GBA for the benefit of investors. Using the Guangdong Free Trade Zone as a foothold, Hong Kong companies can exploit the resource advantages of the GBA to further tap potential business opportunities in the GBA market.

      Source: HKTDC

  • Bulgaria
    • Industrial Output Grows by 1,5% in Bulgaria Y/Y

      In May 2021, industrial production in Bulgaria grew by 15.1 per cent compared to May 2020, reads the latest Monthly Report on Bulgarian Economy released by the Economy Ministry on Thursday. Growth continued to be driven by the manufacture  of  motor  vehicles, trailers  and   semi-trailers, of machinery and equipment, and of metal products. The report, elaborated by the Economic and Financial Policy Department, presents the latest developments of main macroeconomic indicators based on statistical data as at July 16. In May 2021 year-on-year, the industrial  turnover from the export of basic metals and energy goods increased, while electricity, gas, steam and air conditioning supply contributed the most to domestic turnover growth. The growth in construction production  slowed down significantly and a decline was registered in building construction. At the same time,  the growth of retail trade turnover was 24 per cent, with an increasing contribution of retail sale of food, beverages and tobacco. According to the National Employment Agency's data, the registered unemployed numbered 170,716 at the end of June, similarly to the same month of 2018 and 2019, which is a historic low for this parameter so far. The Finance Ministry's analysts expect the downward trend in the dynamics  of  the registered unemployed to continue in July, followed by a reversal of the trend in the fall months, mostly due to seasonal factors. In June, the monthly Harmonised Indices of Consumer Prices (HICP) inflation rate was 0 per cent, while the annual HICP inflation rate accelerated marginally to 2.4 per cent largely yjnks to the increase in prices of energy and transport fuels in particular, as the latter reached 24 per cent year-on-year. Core inflation decelerated by 0.1 percentage points to 1.4 per cent. The  rising  international  prices continued to push up nominal growth in trade with goods in April. Export and import increased by 49.6 per cent and 56 per cent, respectively, from April 2020. Trade with the EU had the highest contribution to the nominal growth. Gross external debt reached 59.1 per cent of projected GDP at end-April. It increased by 0.5 percentage points from a month  earlier, driven mostly by higher short-term bank credit. Private sector credit growth accelerated further in May, up by 6.4 per cent year-on-year, compared to an annual increase by 6.1 per cent at the end of April. At еnd-May, a deficit of 0.1 per cent of projected GDP was reported on the Consolidated Fiscal Program (CFP). In January-May 2021, CFP receipts increased by 16.1per cent year-on-year. At end-May, government debt amounted to 24.5 per cent of projected  GDP, compared to 21 per cent of GDP a year earlier.

      Source: Novinite

    • Bulgaria Proposes a Reduced 9% VAT Rate for Medicinal Products

      A proposal was submitted to the Bulgarian parliament by its members for the application of a reduced 9% VAT rate for certain medicinal products. Currently, they are subject to the standard 20% VAT rate. These products, including medical devices and dietary foods for medical purposes, are listed in Article 262 of the Law for the Medicinal Products in Human Medicine and are paid with funds from the budget of the National Health Insurance Fund.

      The full text of the proposal, issued on 30 July 2021, is available here (in Bulgarian only).

      As a next step, the parliament will vote on the proposal.

    • Bulgarian Export to EU Increased by 23 percent

      In January-May 2021, Bulgarian export to the EU increased by 23/4 per cent from this time last year, reaching a total of 17,616.9 million leva, according to snap statistics by the National Statistical Institute released Thursday. In May alone, the export to the EU increased by over a third, 31.4 per cent, from this time last year, to a total of 3,363.2 million leva. EU export to Bulgaria in January-May 2021 went up by 25 per cent from the same period of 2020, reaching 17,879.5 million leva. Value-wise, the biggest import was from Germany, Romania, Italy, Greece, the Netherlands and Hungary. In May alone, the export grew by 50.4 per cent from this time last year, reaching 3,682.7 million leva. Bulgaria ran a deficit of 262.6 million leva (FOD export - CIF import) in its foreign trade in January-May. Trade with third countries The Bulgarian export to third countries (non-EU members) increased by 14.4 per cent from a eyear earlier, to a total of 10,580.7 million leva. In June alone, the export to this countries grew by 26.8 per cent to 1,838.6 million leva. Imports from third countries in January-June 2021 rose by 24.2 per cent from this time last year to 13,970.7 million leva. The biggest imports were from Turkey, the Russian Federation, China and Ukraine. In June alone, imports grew by 44 per cent to 2,690 million leva. Trade with third countries showed a deficit of 3,390 million leva for Bulgaria in January-June, including a deficit of 851.4 million leva in June alone.

        Source: Novinite
    • Bulgaria Proposes Reduced 9% VAT Rate for Fruit and Vegetables

      A proposal was submitted to the Bulgarian parliament by its members for the application of a reduced 9% VAT rate to supplies of fruit and vegetables. The main objective of the introduction is to reduce tax fraud in the sector.

      The temporary measure would be applicable between 1 January 2022 and 31 December 2023.

      The full text of the proposal, issued on 26 August 2021, is available here (in Bulgarian only).

      As a next step, the parliament will vote on the proposal.

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

      $2.75 billion
      Value of the African Development Bank's recently launched 5-year Global Benchmark bond, its second of the year. With this latest issue, the bank continues to carry out its funding strategy of issuing large liquid benchmark transactions (AfDB)  
      Stake in container terminal port operator Marsa Maroc that the Moroccan government plans to sell to Groupe Tanger Med, operator of the Mediterranean's largest port. The sale is part of the state's efforts to manage its budget deficit and overhaul state-owned enterprises through privatisation and mergers. (The North Africa Post)  
      Number of new branches of Kukito fast food outlets, Java House restaurant chain plans to open in Nairobi in the next five years, bringing more competition to quick-service eateries in Kenya's capital. (Business Daily)  
      $100 million
      Investment by the IFC in Egypt's first private sector green bond. Issued by Commercial International Bank (CIB), the country’s largest private bank, the bond will help CIB increase lending to businesses that want to invest in eco-friendly initiatives (Daily News Egypt)  
      Increase in the value of cash transactions executed via mobile phones in Kenya in the first six months of the year over the same period of 2021. The record value of $30 billion reflects the continued economic recovery after the Covid-19 lockdowns of last year. (Business Daily)  
      Units proposed under Eskom's restructuring plans. The South African power company put out a call for financial advisors to support its unbundling into transmission, generation and distribution units to better manage its debt profile. (Business Tech)  
      $3 million
      Financing raised by B2B logistics platform Omnibiz to digitise supply chain management for informal retailers in Nigeria. The seed round will support the startup to expand its asset-light distribution model from four cities to six. (Tech Crunch)  
      Investors in the initial public offering (IPO) of Tanzanian agribusiness firm, Jatu, on the Dar es Salaam Stock Exchange. Led by local investors, the IPO raised $7.6 million for the youth-led firm, which will be used to finance commercial farming and processing activities. (Daily News)  
      Kenya's share of tea sold via the Mombasa auction, highlighting the country's position as the leading exporter in the region. However, Rwandan tea ranks first in terms of price, at $2.46 per kilo compared to $2.07 per kilo for Kenyan tea. (Business Daily)
      $34 million
      Injected into Africa's first renewable energy yieldco. UK Climate Investments has established this innovative green finance vehicle alongside Investec Bank Limited and Eskom Pension and Provident Fund. Managed by Revego, the initial portfolio comprises stakes in six projects located across South Africa. (ESI Africa)  
      100 years
      Production supported by resources at Kenmare Resources's titanium mineral mine in Mozambique at current rates of output. The company, which is one of the world's leading producers of titanium minerals, saw a 278% jump in profits in the first half of the year on the back of increased production and sales. (Club of Mozambique)  
      Number of Massmart grocery stores in South Africa acquired by Shoprite's grocery unit, Checkers, in an $89 million deal. Walmart-owned Massmart is selling off its fresh food operations to focus on its better performing businesses as it seeks to return to profitability. (Food Business Africa)  
      $2 billion
      Value Chinese-backed African fintech start-up, OPay, after it raised a $400 million in a round led by SoftBank. The Series C raise is a record in Africa's tech scene and makes OPay the continent's third unicorn after Jumia and Flutterwave. (Techcrunch)  
      Protection Designation of Origin (PDO) certificate issued by the EU to an African product. South Africa's rooibos tea will now receive the same protection as Champagne, Porto, Queso Manchego and other iconic products, creating greater product recognition and demand. (Food Business Africa)  
      162 MW
      Generation capacity added to the Inga II hydropower plant on the Congo River with funding from Kamoa Copper SA and the DRC's power company. The upgrade will bring the plant's capacity to 240 MW. The Kamoa-Kakula Copper Mine will have priority access to the power generated, furthering its aim to be the greenest copper producer. (ESI Africa)   Review by Kili Partners . Powered by Asoko Insight
    • Government Launches United Kingdom Declaration Facilities for Voluntary Offshore Assets Regularization Scheme

      The Federal Government of Nigeria has opened United Kingdom declaration facilities based in London for the Voluntary Offshore Assets Regularization Scheme (VOARS). This is the third facility after the Nigeria (based in Abuja) and Dubai facilities. Under the VOARS, pursuant to the Presidential Executive Order 008 2018 Amendment 2019, relevant persons or their intermediaries can regularize their residual (offshore) assets located anywhere in the world by the payment of a one-time levy. All proceeds from the VOARS are to be invested in infrastructure development through Nigeria Essential Infrastructure Fund (NEIF).

      Relevant persons or their intermediaries (upon presentation of a valid power of attorney) may make declarations through any of the three facilities in Abuja, Dubai or London. Upon such declaration, the declarant will benefit from the government's permanent waiver of prosecution for offences related to the offshore assets voluntarily declared under Special Clearances and Non-Prosecution Agreements.

      According to the Attorney-General and Minister of Justice, the declaration will also offer banks, asset managers, trusts and other intermediaries the opportunity to clean their books whilst regularizing undeclared assets under their custody. The Minister of Finance noted that in addition to the numerous benefits of the scheme, declarants and their custodian banks can also invest parts of the regularized assets and earn high returns whilst investing in the country's infrastructure development.

    • Kenya Enacts Direct Taxation Amendments Aimed at Widening Tax Base

      The Kenyan government enacted several tax amendments related to direct taxation including the deeming of family trust income as chargeable income. This income will, however, be exempt if the family trust is registered.

      More details of the various amendments which unless otherwise indicated will apply from 1 July 2022 relating to direct taxation are as follows:

      • exempting the following from minimum tax:
        • persons whose retail price is controlled by the government;
        • persons engaged in insurance business;
        • persons engaged in manufacturing businesses whose cumulative investment from 2017 to 2021 is at least KES 10 billion; and
        • persons engaged in distribution businesses whose income is wholly based on a commission and persons licensed under the Special Economic Zones Act;
      • family trust income is deemed as income chargeable to income tax;
      • applying an income tax exemption to registered trusts on:
        • any amount that is paid out of the trust income on behalf of any beneficiary and is used exclusively for the purpose of education, medical treatment or early adulthood housing;
        • income paid to any beneficiary which is collectively below KES 10 million in the year of income; and
        • such other amount as the Commissioner General of the Kenya Revenue Authority (Commissioner) may prescribe from time to time;
      • exempting the transfer of property to a family trust from capital gains tax;
      • exempting registered family trusts from income tax;
      • introducing withholding tax on deemed disbursements to trust beneficiaries at a rate of 25% except where such income is exempt from tax; and
      • the new limitation of interest deductibility rule, which will take effect on 1 January 2022, will not apply to banks or financial institutions licensed under the Banking Act or to micro and small enterprises registered under the Micro and Small Enterprises Act 2012. This rule limits the deductible interest expense to 30% of the earnings before interest, taxes, depreciation and amortization (EBITDA;
      • the double taxation agreements or arrangements shall be subject to the Treaty Making and Ratification Act 2012;
      • extending the transitional period on capital allowances claimable relating to capital expenditure for bulk storage and handling facilities supporting the Standard Gauge Railway to 31 December 2022;
      • reintroduction of the definition of farm works with effect from 1 January 2022. "Farm works" means "farmhouses, labourers quarters, any other immovable building necessary for the proper operation of the farm, fences, dips, drains, water and electricity supply works and other works necessary for the proper operation of the farm". The Finance Bill 2021 had only proposed a review of the definition of "manufacture" and reintroduced a definition of "civil works" to include:(i) roads and parking areas; (ii) railway lines and related structures; (iii) water, industrial effluent and sewerage works; (iv) communications, electrical posts, pylons and other electrical supply works; and (v) security walls and fencing; and
      • introducing investment deductions at 100% with effect from 1 January 2022 where:
        • the investment value outside Nairobi City County and Mombasa County in that year of income is at least KES 250 million;
        • a person has invested in a special economic zone; and
        • the cumulative investment value in the preceding 3 years outside Nairobi City County and Mombasa County is at least KES 2 billion: Provided that where the cumulative value of investment for the preceding 3 years of income was KES 2 billion on or before 25 April 2020, and the applicable rate of investment deduction was 150%, that rate shall continue to apply for the investment made on or before 25 April 2020.
  • United Arab Emirates
    • Dubai Customs introduces comprehensive guide on its customs services during EXPO2020 Dubai

      Dubai Customs launched a comprehensive guide for all the services and facilities it provides to enable traders and businesses, which selected Dubai as their preferred investment destination, increase their trade and boost their revenues. The guide will be introduced to the participants and exhibitors of EXPO2020 Dubai.
      Within the national efforts and preparations to fulfil the requirements of the bold plans and agendas including the UAE Centennial 2071 and the 50th year Jubilee, Dubai Customs has built a sophisticated smart network of channels that adds a big value to any business activity. These included the Smart EXPO2020 Customs Channel, dedicated to serve the exhibitors of the global event. The Channel was part of the UAE’s nomination portfolio in 2013 to host EXPO2020 in Dubai. Customs centers at Jebel Ali and Al Maktoum International Airport will help complete all EXPO’s customs transactions around the clock to ensure streamlined and quick customs processes, saving the exhibitors time and cost following the directions of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai.
      “The Smart EXPO Customs Channel will facilitate all customs transactions for the participants in EXPO2020 Dubai,” said H.E. Ahmed Mahboob Musabih, Director General of Dubai Customs. “We have many outstanding services that can help advance trade and investments including the Authorized Economic Operator (AEO) program, which was launched at the federal level to enhance external trade. There are now 80 companies’ members in the AEO whose external trade reaches AED20 billion. Dubai Customs has also launched the Cross Border e-Commerce platform to lure more business and investments into the emirate. It is the first of its kind in the region and it aims to raise businesses’ share in e-commerce local and regional e-commerce to AED24 billion by 2024. Participants can now benefit from the second phase of the iDeclare App and the AI potential it has. The app enables users learn about the commodities they need to declare, simply by taking a photo of the item, which will then show the HS Code and any customs charges required. Users can also learn about the services and amenities available at Dubai International Airport, including restaurants, free zone, exit gates and others. The app helps passenger pass through the red lane and complete their customs transactions in less than 4 minutes.
      “All these facilities will not compromise on security. We have in place a number of advanced systems and programs that will help further secure the borders and streamline trade activity. These include the Smart Risk Engine, the Smart Auditing System, the Integrated B2G Business Channel and the Smart Workspace. These sophisticated systems will help ensure 97.8% of customs transactions completed automatically without any human intervention.”
      Last May, Dubai Customs organized the 5th WCO Global AEO Conference in cooperation with the World Customs Organization and the UAE Federal Customs Authority. The conference saw participation of around 100 speakers and 12,000 specialists from 160 countries who confirmed the importance of enhanced cooperation and coordination between customs administrations, government departments and the private sector. It was the first AEO conference to be held in the region.
    • Dubai Customs’ transactions grow 53% to 11m in H1, 2020

      Dubai showed quick recovery from the repercussions of Covid-19 in different economic sector thanks to the resilient strategies and plans the emirate followed in the face of the pandemic, and the dynamic and wise initiatives directed by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai.

      Trade sector continued its growth exceeding the pre-Covid-19 period. Customs transactions completed by Dubai Customs reached 11.2m transactions in the first half of 2021 staggeringly growing 53.4% from 7.3m transactions in the corresponding period in 2020. This reflects a versatile and resilient economy that is able to absorb severe shocks like that caused by the pandemic.

      It also reflects the vital role Dubai plays as a global trade hub and the resilience of its infrastructure and systems in dealing with tough challenges including covid-19.

      “Dubai is leading the global recovery way. The emirate’s non-oil external trade grew 10% to AED354.4b in Q1, 2021, from AED323b in the corresponding period in 2020,” said H.E. Ahmed Mahboob Musabih, Director General of Dubai Customs. “We work with all our energy to develop systems and programs that speed up the completion of transactions and the flow of foreign trade movement in the Emirate. This comes as part of our quest to realize the vision of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai to hit the 2 trillion milestone in external trade.

      “Trade sector in Dubai plays a pivotal role in supporting the economy. We work hard in Dubai to ensure the continuous success of this sector, helping Dubai maintain its leading global position as a global hub for business and investment. We developed several programs and plans to facilitate trade including the recent ‘Electronic Confirmation of Exit/Entry’ initiative, which was launched in cooperation with DP World, UAE Region. The project eases the process of refund claims submission at Dubai Customs, saves time and cost, while further expediting the exports of all kinds of goods.

      “Dubai Customs has launched 24 initiatives, which are dedicated to serve the visitors and exhibitors of EXPO2020.The initiatives are fully integrated with other government partners’ systems.”

      Dubai Customs completed 11.16 million transactions through smart and electronic channels (99.6%). Around 7.9 million customs transactions (70.8%) were completed through smart channels, 3.2 million (28.8%) through electronic channels, and only 41,800 (0.37%) transactions were done manually.

      “The World Customs Organization sees us as an example to be followed by other customs organizations, thanks to the outstanding projects and initiatives we develop to serve the global customs sector. Our recent hosting of the 5th WCO Global Authorized Economic Operator Conference indicates that the business world has much trust in the emirate as a leading hub for trade, and reflects the major role it plays in facilitating global trade, and  the close and fruitful relationship between Dubai Customs and the World Customs Organization,” said Musabih.

      The Conference presented an important forum for the exchange of ideas and insights between trade and supply chain professionals and officials, and brought together all stakeholders of global trade to explore the challenges, opportunities, and way forward for global trade under the Authorized Economic Operator programme.

      Customs declarations rose 66.6% in the first 6 months of this year to reach 10 million declarations compared to 6 million declarations in the corresponding period in the previous year. This means more than 55,500 declarations a day in average. This big figure would not have been achieved without the outstanding technological structure in place including the advanced Smart Workspace, which helped complete a declaration in 4 minutes in average.

      The transactions also included 475,900 claim requests, 298,000 certificate and report requests, and 139,800 customs inspection date booking requests, and 110,600 business registration requests.

      Source: Government of Dubai - Media Office

    • DMCC Records Best August Since Inception in 2002, With 204 New Companies Joining

      DMCC – the world’s flagship Free Zone and Government of Dubai Authority on commodities trade and enterprise – today announced it recorded its best August on record since its establishment in 2002, with 204 new member companies registered, and best eight-month performance in seven years. This builds on the business district’s record-breaking success in recent months, with strong performance in the first half of the year, during which it welcomed 1,230 companies, the best 6-month performance since 2013.

      DMCC has witnessed persistent growth over the years, supported by strategic partnerships that enhance the ease of doing business, roadshows that attract trade flows to Dubai and new launches, including its latest DMCC Crypto Centre – a comprehensive ecosystem for businesses operating in the cryptographic and blockchain sectors.

      Ahmed Bin Sulayem, Executive Chairman and Chief Executive Officer, DMCC said: “DMCC continues to edge closer to the target we set ourselves – to reach 20,000 members by the end of 2021. The record-breaking level of business activity, even during the quieter summer months, reflects the continued appeal of our business district to companies of all sizes and origins. As Dubai prepares to welcome the world to EXPO 2020 Dubai in a few weeks, we see a wealth of opportunities on the horizon. Building on this momentum, we are looking forward to the next few months which will undoubtedly be marked by many more milestones and achievements.”

      Ahmad Hamza, Executive Director – Free Zone, added: “I am incredibly proud of the DMCC’s record-breaking performance. The ecosystem we offer, our fully digitalised set up process, along with the innovative solutions, products and services we bring mean we remain the business community’s partner of choice. Our network is unmatched and with that comes unique connectivity – these are pre-requisites for any company seeking growth.”

      Source: Media Office - Government of Dubai

  • China
    • China to roll out measures to stabilize manufacturing investment

      China will adopt multiple measures to stabilize manufacturing investment, the country's top economic planner said Tuesday.

      The country will boost green investment by encouraging investment in technological upgrading and stepping up policy support for the traditional manufacturing industry to reduce carbon emissions, said Meng Wei, spokesperson for the National Development and Reform Commission.

      The country will also support investment in advanced manufacturing and improving weak links in the industrial and supply chain, Meng added.

      Comprehensive measures will be taken to ease the upward pressure on commodity prices and strengthen investment incentives for middle and downstream manufacturing enterprises while implementing various cost reduction policies, the spokesperson said.

      China's fixed-asset investment amounted to 30.25 trillion yuan (about 4.67 trillion U.S. dollars), up 10.3 percent year on year in the first seven months of this year, data from the National Bureau of Statistics showed.

      Specifically, investment in manufacturing gained 17.3 percent year on year during the period, the data showed.

      Source: Xinhuanet

    • China spurs digital economy as new driver of growth

      Putting on a helmet and sitting in front of several big screens, you are able to experience the exciting moment of a spacecraft launch. This is one of the highlights of the 2021 Global Digital Economy Conference that concluded in Beijing Tuesday.

      During the two-day event that opened on Monday, cutting-edge technologies featuring data-driven innovation were displayed while participants focused on discussions concerning the digital economy as a new driver of China's economic growth despite the COVID-19 pandemic.

      China's digital economy kept a high growth rate of 9.7 percent in 2020 amid the pandemic and global economic downturn, according to a white paper released by the China Academy of Information and Communications Technology (CAICT).

      The country's digital economy scale hit 39.2 trillion yuan (about 6.1 trillion U.S. dollars) last year, accounting for 38.6 percent of the GDP.

      "As people are more connected than ever due to the increasingly diversified communication means, we have all benefited from the progress of digitalization, especially during the hardest time of the pandemic," said Guido Giacconi, vice-president of the European Union Chamber of Commerce in China.

      The digital economy has become a key to achieving economic recovery and promoting sustainable development with the global economy, which is still in a fragile state of recovery, said Zhuang Rongwen, director of the Cyberspace Administration of China, at the opening.

      The digital economy has displayed strong resilience in the face of the pandemic, as it gives a strong boost to a number of new business models such as online shopping and education, telemedicine and artificial intelligence, said Cai Fang, an expert with the Chinese Academy of Social Sciences.

      China has built the world's largest optical fiber and 4G and 5G mobile broadband networks, with the number of 5G terminal connections exceeding 365 million and 5G application scenarios becoming increasingly rich, said Xiao Yaqing, minister of industry and information technology.

      With its digital economy ranking second in the world, China has highlighted the digital economy development in its 14th Five-Year Plan (2021-2025) to build a digital China.

      Chinese companies will also be encouraged to tap opportunities in the overseas digital market in the following decade, said Lei Jun, chairman of Xiaomi Corporation, a Chinese smartphone manufacturer.

      According to a guideline jointly released by Chinese government departments on July 23, more efforts will be made to enable domestic digital economy enterprises to accelerate their deployment of overseas research and development centers and product design centers and strengthen cooperation with overseas technology companies in fields such as big data, 5G and artificial intelligence.

      The capital city Beijing has also introduced an action plan Monday on accelerating the process of building itself into a worldwide pioneer in digital economic development.

      As noted in the plan, the added value of Beijing's digital economy is expected to account for about 50 percent of its GDP by 2025. Last year, the added value of the city's digital economy has exceeded 1.44 trillion yuan, accounting for about 40 percent of its total economic volume.

      The World Trade Organization predicts that digital technologies will promote an annual growth of the global trade volume by around 2 percentage points by 2030, and the proportion of global service trade will be increased from 21 percent in 2016 to 25 percent by then.

      "In face of the challenges such as sluggish economic growth and aging society, the digital economy will enable an inclusive high-quality development that enables more elderly people to overcome the digital divide," said Cai.

        Source: Xinhuanet
    • Shanghai Unveils Five-year Development Plan to Become International Financial Center

      Shanghai municipal government released on August 24, 2021 the Development Plan of Shanghai International Financial Center in the 14th Five-year Plan Period, which contains 44 policy measures.

      The plan proposed to enhance business climate for financial services and create a sound financial ecosystem. Financial lease firms and commercial factoring companies are encouraged to be connected to the central bank's credit reference system; the city will support Dishui Lake to build a financial bay, Lingang New Area to play a helpful role for integrating onshore and offshore financial services, and Hongqiao to optimize trade financing services. The plan also proposed to reinforce financial support to key sectors like electronic information, life science, automobile, high-end equipment, and new materials.

      Source: Shanghai Municipal People's Government

    • Adoption of Simple Procedures for Unilateral Advance Pricing Arrangement

      On 30 July 2021, the State Taxation Administration (STA) announced on the Matters Regarding Application of the Simplified Procedures for Unilateral Advance Pricing Arrangements (State Taxation Administration Announcement [2021] No. 24, hereafter “No.24”). Relying on the advance pricing arrangement (APA) framework set out in the Announcement of the State Taxation Administration on Issues to Improve Administration of Advance Pricing Arrangements (State Taxation Administration Announcement [2016] No. 64, hereafter “No.64”), the STA has further simplified the procedures for unilateral APAs, valid from 01 September 2021.

      Highlights of No. 24-Simplify the Procedures and Set a Time Limit

      No. 64 regulates that the APA process consists of the following six phases: (i) pre-filing meeting, (ii) intention for an APA, iii) analyses and evaluation, (iv) formal filing, (v) negotiations and signing, and (vi) monitor and execution (collectively referred as "general procedures"). The simplified procedures contain three phases, namely (i) evaluation of application, (ii) negotiation and signing, and (iii) monitor and execution. The pre-filing meeting and other phases are exempted.

      The simplified procedures set clear processing time limits for tax authorities on the acceptance of APA applications, and the negotiation and signing. Tax authorities must send a Notice on Tax Matters to the submitting enterprise within 90 days of receiving the APA application to inform the enterprise of whether or not the application has been accepted. The in-charge tax authorities must complete the negotiation within six months of issuing the Notice of Tax Matters to the enterprise accepting the application. During the negotiation, any time spent by the enterprise on preparation and submission of additional information required by the tax authorities is not included in the six month period. As such, if the related documents are fully-prepared in advance and submitted by the enterprise in time, a unilateral APA application could be concluded within six to nine months under the simplified procedures[1]. Unilateral advance pricing arrangements shall apply to related party transactions in the period of three to five years from the tax year following the date of service of the "Notice on Tax Matter" on the enterprise by the tax authorities in charge for acceptance of application.

      The left column of the following table shows the two applicable conditions, both of which must be met for using the simplified procedures. The right column of the table also shows the circumstances under which the tax authorities may reject an application and when the simplified procedures are temporarily not applicable.

      Table: Application Conditions and Rejection Circumstances of the Simplified Procedures for Unilateral APAs

      Observations and Recommendations

      APAs are arrangements reached between enterprises and tax authorities, or between two tax authorities, with respect to the pricing principles and calculation methods for related-party transactions. It is an important tool for enterprises to obtain transfer pricing and tax certainty for cross-border business operations, and it plays an important role in reducing multinational enterprises' transfer pricing compliance costs and in promoting enterprises' cross-border investments and operations. No. 24 announces simplified procedures for unilateral APAs, improving the efficiency of APA negotiation and signing by simplifying the phases of the application and specifying time limits.

      Based on our practical experience, we consider that enterprises should focus on the following aspects:

      • Time limits – This is the first time that APA regulations have specified timeline requirements for tax authorities, where decisions on whether or not to accept the APA application must be made within 90 days and negotiation and signing must be completed within six months. This will help enterprises and tax authorities complete the entire unilateral APA negotiation and signing process within a shorter period. We believe that such time limits requirement may reduce enterprises' concerns on the relatively time-consuming process of APA negotiation and signing.
      • Applicable conditions — When evaluating whether an enterprise meets the applicable conditions for the simplified procedures, the enterprise may proactively plan to meet the requirements. For example, an enterprise that is exempt from preparing the contemptuous transfer pricing documentation may consider obtaining the application by preparing and submitting the contemporaneous transfer pricing documentation for the latest three tax years to tax authorities.
      • Applicable to unilateral APAs — While there are advantages, the simplified procedures do not change the effect of unilateral APAs. If both parties in the cross-border related-party transaction want to obtain tax certainty and reduce double taxation risks more effectively, we recommend applying for bilateral APAs in accordance with the general procedures under No. 64.

      Before, STA shall involve in each case of  Unilateral Advance Pricing Arrangement, which objectively makes the number of arrangements signed can not meet the actual needs of enterprises. With the formally establishment of the Simple Procedures for Unilateral Advance Pricing Arrangement, STA delegates the executive power to competent tax authorities of enterprises, which can improve the ability to process applications. Thus, it can help enterprises effectively avoid or eliminate double taxation and achieve CIT certainty in transfer pricing arrangements.

      We recommend that taxpayers with cross-border related-party transactions should actively understand the simplified procedures for unilateral APAs, one of the most critical measures of improving the business environment in the field of taxation, and should communicate and discuss internally. Enterprises may leverage this new policy to gain tax certainty in a more time-efficient and cost-effective way.

      [1] The time to completion is expected to be significantly shorter under the new regulations. According to the 2019 China Advance Pricing Arrangement Annual Report published in October 2020, the STA signed 101 unilateral APAs between 1 January 2015 and 31 December 2019, most of which were completed within 2 years, with 52.48% completed within 1 year, 36.63% within 1 to 2 years, and 10.89% over 2 years.

    • Notice on Further Improving the Simplified Deregistration to Facilitate the Market Exit of Micro, Small and Medium-sized Enterprises

      The State Administration for Market Regulation and the State Taxation Administration issued a joint circular on August 3, 2021 to clarify matters related to simplified deregistration of enterprises, so that small, medium-sized and micro firms can exit the market more easily.

      According to the circular, the scope of simplified deregistration will be expanded to companies that have no creditor's rights or debts such as outstanding expenses for settlement, employee wages, social insurance premiums, statutory compensation, taxes (late fees or fines) payable, etc. All the investors shall make a written commitment to assume legal liability for the authenticity of the above situation. Through information sharing, tax authorities shall verify the relevant tax-related information under the prescribed procedures and requirements. Tax authorities will raise no objection if the taxpayer is shown to fall under any of the following circumstances upon the inquiry system:

      • it is a taxpayer that has never handled tax-related matters;
      • it is a taxpayer that has handled tax-related matters but has never received or used invoices (including invoices issued on a commission basis), has no tax in arrears or has no other pending matters;
      • it is a taxpayer that has completed tax clearance formalities, such as the handing in of invoices and the settlement of tax payable, at the time of inquiry.
  • India
    • Reserve Bank of India: Financial inclusion grew 24% across FY17-21: RBI

      The Reserve Bank of India (RBI) has said that there was a 24% improvement in financial inclusion (FI) as measured by RBI’s FI-Index between March 2017 and March 2021.

      MUMBAI: The Reserve Bank of India (RBI) has said that there was a 24% improvement in financial inclusion (FI) as measured by RBI’s FI-Index between March 2017 and March 2021. The FI-Index incorporates details of banking, investments, insurance, postal as well as the pension sector in consultation with government and respective sectoral regulators. In April this year, the RBI had announced that it would launch the FI-Index to capture the extent of financial inclusion. On Tuesday, the RBI announced the first numbers of the FI-Index, and will henceforth publish the data once a year in July. The highest weightage in the index (45%) is given to the usage of various financial services, followed by access (35%) and quality (20%).

      The index captures information on various aspects of financial inclusion in a single value, ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion.

      Financial inclusion grew 24% across FY17-21: RBI

      One of the biggest drivers of financial inclusion in the country has been the Pradhan Mantri Jan Dhan Yojana (PMJDY). There are about 42.6 crore PMJDY account holders with more than 55% being women. While the JDY was launched in 2014, the usage of the accounts picked up with the increase in direct benefit transfers (DBTs), which were facilitated by digital platforms and Aadhaar. The impact of the digital payment in DBT can be discerned from the fact that Rs 5.5 lakh crore was transferred digitally across 319 government schemes spread over 54 ministries during 2020-21. Since the pandemic, financial inclusion got a boost due to the increased usage of digital platform by small merchants and peer-to-peer payments. “Lessons from the past and experiences gained during the Covid pandemic clearly indicate that financial inclusion and inclusive growth reinforce financial stability,” RBI governor Shaktikanta Das had said, speaking at the financial inclusion summit. “As of March 2021, banks have achieved a digital coverage of 95.9% of individuals, while the achievement for businesses stood at 89.8%,” Das said in the summit.

      The rise of the fintech’s have also supported financial inclusion as they innovated to simplify and promote digital payments like the UPI (Unified Payments Interface). According to a report by Macquarie, while the retail payments (by value) have grown at an 18% CAGR over FY15 to ’21, UPI has grown at a CAGR of around 400% over FY17-21 and now forms 10% of overall retail payments (excluding RTGS) from 2% seen couple of years ago. “Despite being a late entrant, UPI’s FY21 annual throughput value of around Rs lakh crore was almost 2.8x that of credit and debit card (at POS) combined largely,” the report said.

        Source: ETBFSI from the Economic Times
    • Parliament Passes Bill Withdrawing Retrospective Tax on Indirect Transfers

      Both the lower and upper houses of Parliament have passed the Taxation Laws (Amendment) Bill, 2021. The Bill was introduced in the Lower House on 5 August 2021, and passed in the Lower House on 6 August 2021 and the Upper House on 9 August 2021. The Bill is awaiting presidential assent and is expected to become law in the coming weeks.

      The issue of taxability of gains arising from the transfer of assets located in India through the transfer of shares of a foreign company (hereinafter referred to as "indirect transfer of assets") was a subject matter of protracted litigation. In order to give rest to the matter, the government passed the Bill to withdraw the retrospective amendment to the indirect transfer provision in section 9 of the Income Tax Act, 1961 which was originally introduced in the 2012 Union Budget. The indirect transfer provision will now apply prospectively.

      The development comes after major setbacks for the government in arbitration cases involving retrospective tax demands contested by Cairn Energy and Vodafone.

      As per news reports, there are about 17 companies that are impacted by the indirect transfer of assets provision, including Vodafone, Cairn Energy and WNS. The government is yet to prescribe the rules around the withdrawal of indirect transfer of assets litigation, and the procedure of how companies can go about it. Several companies have already reached out to the government to understand the precise amendments and rules to settle the matter.

    • Foreign direct investments in India rise to $12.1 bln in May

      "India has received the highest ever FDI inflow in 2020-21. It surged by 10 per cent to USD 81.72 billion and FDI during May 2021 is USD 12.1 billion, i.e. 203 per cent higher than May 2020," Piyush Goyal said while addressing a meeting of different industry associations on promoting exports. Foreign direct investments into the country is on the rise, jumping to USD 12.1 billion in May this year, Commerce and Industry Minister Piyush Goyal said on Monday. He also said the government is working on a mission mode to achieve exports target of USD 400 billion in 2021-22.

      He said that exports are recording healthy growth and during August 1-14, the outbound shipments grew 71 per cent over 2020-21 and 23 per cent over 2019-20. According to the minister, India's average applied import tariff (duty) has dropped to 15 per cent in 2020 from 17.6 per cent in 2019, and the country's applied tariffs are way below the bound rate of 50.8 per cent (permissible limit under the World Trade Organization). Talking about employment, he said more than 54,000 startups were providing about 5.5 lakh jobs and over 20 lakh jobs will be created by 50,000 new startups in the next five years. "It is time for our industry to expand our capacity, capability and commitment to develop resilient global supply chains," he said, adding that the Centre expects that the Indian industry should suggest areas for intervention through research, handholding of exporters/ manufacturers, and deeper engagement with states and Missions. During the meeting, industry suggested steps like increasing export competitiveness, addressing logistic problems, active role of states in building capacity of exporters and developing international markets for Indian products. They also suggested inclusion of pharma and chemicals under Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. Industry body PHDCCI's President Sanjay Aggarwal said these sectors are essential to achieve the target of USD 400 billion exports and "it is therefore requested to consider these sectors in RoDTEP scheme". "The government has budgeted only Rs 17,000 crore for a scheme that is supposed to reimburse embedded levies paid on inputs consumed in exports in FY'22. It is far less than the government's initial estimate of Rs 50,000 crore each year. The budget for the RoDTEP scheme, including all tariff lines, need to be increased," he said.

    • EASE 4.0 Reforms: Enhanced Access and Service Excellence 4.0

      Hon. FM Nirmala Sitaraman presented the EASE 4.0 reforms along with felicitating PSB’s for their exceptional performance under EASE 3.0. Some of the banks that were felicitated are - State Bank of India, Bank of Baroda, and Union Bank of India. The EASE 3.0 was a success as the PSB’s reported healthy profits. These banks reported a profit of INR 31,817 crore in FY21 as compared to a loss of INR 26,016 crore in FY20.

      Ease 4.0 is a reform for the Public Sector Banks to ensure smart banking. It was presented by the finance minister to be implemented by the IBA. The key issues touched upon in the EASE 4.0 reforms are co-lending with non-banking firms, digital, agriculture financing, and technological resilience for 24x7 banking. A huge focus has been given to data analytics, automation, and digitization.

      Ease 4.0 is a continuation and further improvement of the Ease 3.0 initiative.

      The key aspects under EASE 4.0 are highlighted as under-

      Digital Lending

      • There is an aim to promote and introduce analytics-based system which would be used in the fields of pre-approved loans, MSME loans and EMI offers.
      • The new initiatives include Dial-a-loan initiative for doorstep loan facilitation. Under dial-a-loan, the govt has tried to improve the loan initiation process using simplification, SOP based action steps, and ensuring availability of on-site product advice.
      • Credit@click is another initiative used for end-to-end retail and MSME lending. The improvements that have been made aims to ensure customized loan terms, interest rates and processing charges based on behavior of customers and information from third party sources
      • There is also a focus on cloud-based IT systems and improved cyber resilience. There would be a fast-track implementation of cybersecurity measures.

      Mobile/ Internet Banking and Customer Service

      • Focus has been laid on deeper penetration of mobile and internet banking and automation of all banking processes.
      • EASE 4.0 sets the agenda and roadmap to transform all PSBs into digital-attacker banks working hand-in-hand with key constituents of the financial services ecosystem to offer industry-best customer experience.
      • The new reforms aim to establish a call center-based retail and MSME customer outreach in regional languages and subject to customer preferences.
      • There is also an aim to improve the design and performance of the mobile banking app.

      Date Enabled Agricultural Financing

      • Dial-a-Loan feature will also be used for agricultural lending.
      • There are plans to automate the processing and sanctioning of agricultural loans based on field visits, borrower interaction, and risk assessment in states with digitized land records.

      Collaborating with Financial Ecosystem

      • This will help in ensuring increased digital payments in semi-urban and rural areas.
      • Improvement in delivery of doorstep banking services and initiate such services via mobile apps and calls.
      • There is a plan to have API-based data exchange and IT system linkage between banks and NBFC’s.

      The EASE Index will measure the performance of each PSB on 135+ objective metrics across five themes. It will provide all PSB’s a comparative evaluation showing where banks stand on the basis of the benchmarks and among their peers on the reforms agenda. The Index will follow a fully transparent scoring methodology, which will enable banks to identify precisely their strengths as well as areas for improvement. The index will be similar as what was adopted under EASE 3.0.

      Source: Invest India

    • Tax Treaty Between India and Switzerland – MFN Clause on Dividends Activated

      On 13 August 2021, the Swiss Federal Tax Administration published a clarification, announcing that the conditions for the activation of the most favoured nation (MFN) clause contained in the amending protocol, signed on 30 August 2010, to the India - Switzerland Income Tax Treaty (1994) have been met.

      The MFN clause should apply as of 1 January 2021. If India does not apply the clause on a reciprocal basis, Switzerland will apply the reduced rate from 1 January 2023.

      Currently, the treaty provides for a 10% withholding tax on dividends.

      The MFN clause of article 11 of the 2010 protocol provides that this rate will be reduced when India afterwards signs a new treaty with another OECD Member States providing for a lower rate.

  • United Kingdom
    • Claim for wages through the Coronavirus Job Retention Scheme

      The Coronavirus Job Retention Scheme has been extended until 30 September 2021. For claims relating to August and September 2021, the government will pay 60% of wages up to a maximum cap of £1,875 for the hours the employee is on furlough.

      For all claims from 1 July 2021, employers must top up their employees’ wages to make sure they receive 80% of their wages (up to £2,500) for the hours they are on furlough. The caps are proportional to the hours not worked.

      The Coronavirus Job Retention Scheme will be ending on 30 September 2021. Claims for September must be submitted by 14 October 2021 and any amendments must be made by 28 October 2021.

      Find out more about how the scheme is changing.

      Claims for furlough days in August 2021 must be made by 14 September 2021.

      Source: HM Revenue & Customs

    • Reporting rules for digital platforms – consultation

      As announced at Budget 2021, the government is consulting on the implementation of the Organisation for Economic Co-operation and Development (OECDModel Reporting Rules for Digital Platforms, which require digital platforms to report details of the income of sellers on their platform to the tax authority and also to the sellers.

      Consultation description

      Following the announcement at Spring Budget 2021, the government is consulting on the implementation of the Organisation for Economic Co-operation and Development’s (OECD’s) Model Reporting Rules for Digital Platforms. From January 2023, these rules will require platforms to report information about the income of sellers providing goods and services to help sellers get their tax right and to enable HMRC to detect and tackle non-compliance. The consultation sets out the details of the rules and seeks views on the government’s implementation, including on optional elements of the rules. The government welcomes input from a wide range of stakeholders to ensure the rules are implemented proportionately and effectively.


      The digital economy empowers individuals and businesses to connect with consumers both at home and abroad. It thereby offers huge benefits and opportunities for UK businesses, workers, and consumers, which is why the government is committed to encouraging the growth of the UK’s digital economy.

      However, the growth of the digital economy also creates challenges of compliance and tax collection for HM Revenue & Customs (HMR”) and other tax authorities. To address some of these challenges the OECD has developed model rules for digital platforms to report the income of individuals or companies selling goods or providing services via their platform (“sellers”) to the tax authority where the platform is resident, incorporated or managed. This information will then be sent to the tax authority where the seller is resident. The platforms will also be required to provide a copy of the information to the seller, which will help the seller declare the correct amounts for tax purposes.

      The UK plays a leading role in promoting international tax cooperation and transparency, and the UK government contributed to the development of the OECD model rules. At Spring Budget this year, the Chancellor of the Exchequer announced that the government will consult on the implementation of the rules and this announcement has been widely welcomed.

      The new rules will improve international cooperation on the exchange of information for tax purposes. They will allow HMRC to have access to data from platforms based outside the UK quickly and efficiently, which should encourage compliance and increase the visibility of transactions. The rules will also help taxpayers to get their tax right, and will help HMRC to detect and tackle tax non-compliance. The fact that the rules are standardised is designed to ensure that platforms do not face a patchwork of different tax reporting requirements across jurisdictions, minimising the administrative burdens on them.

      The government is aware of the need for proportionate and measured reform, especially given the present recovery from COVID-19. The reporting rules for digital platforms will come into force from January 2023 at the earliest. This will give a long lead-in time for platforms to prepare for the new rules.

      I would encourage the widest possible range of stakeholders to give their views through this consultation process. The government welcomes feedback from digital platforms large and small, gig workers and small businesses operating on platforms, and representative bodies, so that it can ensure that the implementation of the OECD reporting rules for digital platforms is balanced and effective.

      Rt. Hon. Jesse Norman, Financial Secretary to the Treasury

      1. Introduction

      Background to the OECD model rules

      1.1 The use of digital platforms, which are websites or apps that facilitate transactions between providers of goods and services (sellers) and their customers, is growing rapidly. This provides the opportunity for sellers to work more flexibly and more easily access customers globally at a lower cost. As a result, there are increasing numbers of people who will need to declare their income from online transactions and complete their own income tax return.

      1.2 In some cases, sellers of goods and services may not get their tax right. This could be for a variety of reasons including failing to understand their tax obligations, not keeping track of income across multiple different platforms, or a conscious decision not to tell the tax authorities about their taxable income. The flexibility of the opportunities created by platforms also leads to complexity in sellers’ tax affairs. As a result, some sellers may under declare their taxable income or not declare it at all.

      1.3 Growing digital platform activity presents opportunities for tax authorities to have greater visibility over sellers’ income and support them to be tax compliant, as transactions are recorded electronically. This enables information sharing with tax authorities, as well as enabling sellers to access a record of their transactions and income, making it easier to get their tax right.

      1.4 Tax administrations may gain visibility over the income of sellers through requiring digital platforms to report this information, with carve-outs for those who present a low compliance risk. However, as platforms are based overseas, there is limited effectiveness in tax authorities operating individually to implement domestic reporting agreements, given the challenges of enforcing such reporting on companies overseas. This is an issue replicated across multiple jurisdictions. Such a fragmented approach would also be burdensome and inefficient for digital platforms, who would have to comply with multiple different reporting regimes.

      1.5 The OECD therefore developed Model Reporting Rules with respect to the provision of services (“model rules”) in consultation with the UK and other member jurisdictions to provide a standardised way of collecting and reporting relevant information about sellers and their income from digital platform activities to tax authorities. This approach enables jurisdictions to effectively enforce the reporting regime on an international level and facilitates the exchange of information between such jurisdictions. It also means platforms operating in multiple jurisdictions avoid facing a number of different domestic reporting requirements.

      1.6 The OECD published the model rules in June 2020. Jurisdictions can opt into implementing the model rules with the UK being one of the first countries to confirm that it would do so. Subsequently, the OECD has included an optional module in the model rules to extend their scope to the sale of goods and transport rental, and published the resulting changes to the rules in June 2021.

      How the model rules work

      1.7 Broadly, the OECD model rules work as follows:

      • platforms must collect certain details about their sellers, including information to accurately identify who the seller is and where they are based, as well as how much they have earned on the platform over an annual period
      • platforms must verify the seller’s information to ensure it is accurate
      • platforms must report the information, including the seller’s income, to the tax authority annually by 31 January
      • platforms must also give that information to the sellers, so that they can use it to help them complete their tax returns
      • tax authorities then exchange information with other tax authorities where the sellers are resident (or rental property is located)
      • the information is used by tax authorities to ensure that sellers are complying with their tax obligations and to tackle non-compliance if they are not
      • tax authorities must enforce the rules and see that platforms are operating them correctly, and there may be penalties for non-compliance

      UK policy objectives in implementing the model rules

      Making it easier for sellers to get their tax right

      1.8 The government is committed to making it easier for taxpayers to get their tax right first time. Requiring platforms to provide information to sellers about the income they have earned on the platform will support this policy objective. This will raise sellers’ awareness of their tax obligations, and support them to fill in their tax returns or check the information they have filed with the tax authority is correct. The government is also considering how platforms can work with HMRC to build on the work they already do to support their sellers to be tax compliant, for example, by providing links to relevant HMRC guidance.

      Identifying and tackling tax evasion and non-compliance

      1.9 The government wants to bear down on tax evasion, particularly involving platforms located in other jurisdictions. Implementing the OECD rules will allow the exchange of seller information with other tax authorities which will give HMRC quick, efficient and secure access to data on UK resident sellers and rental property in the UK from platforms based outside the UK. This will ensure that taxable activities do not remain undetected or not declared.

      Promoting international, standardised reporting rules for business

      1.10 The government wants to simplify the reporting obligations and minimise compliance costs for digital platforms. Implementing the model rules will provide platforms with a standardised and consistent approach for collecting, verifying and reporting information across different jurisdictions, and will avoid lots of different reporting requirements.

      Limiting burdens on business and reporting high-quality and relevant information

      1.11 The government recognises that the reporting requirements are an additional burden for platforms, and will look to minimise that burden where possible while also ensuring the rules are workable and effective. The information that platforms will be required to collect, verify and report will only be the information that is necessary to ensure that tax authorities can match taxpayers and use it effectively for compliance purposes. Much of this information is also likely to be collected by platforms as part of their on-boarding process.

      Introducing a proportionate but effective penalty regime

      1.12 The government will develop a penalty regime to ensure that platforms comply with the rules and report information which is accurate and of high quality by the deadline. Penalties for failure to comply with the requirements of the rules, or for inaccurate or incomplete reports, should be proportionate and an effective deterrent.

      Maintaining the UK’s leadership on tax transparency and international cooperation

      1.13 The UK plays a leading role in promoting international tax cooperation and transparency, and is one of the first jurisdictions to consult on implementing the model rules. Implementation of the model rules will strengthen international cooperation between the UK and other implementing jurisdictions.

      Aim and scope of the consultation

      1.14 At Spring Budget 2021 the government announced that it would consult on the implementation of the OECD model rules published in June 2020. As the model rules have already been consulted on and agreed at an international level, the government intends to follow them closely to ensure a consistent and standardised approach. However, there are areas of the model rules which are optional for jurisdictions, or where jurisdictions have some discretion about how they are implemented, such as the optional extension to the sale of goods and transport rental published in June 2021. This consultation sets out the details of the OECD model rules at the start of each section, points out where there is scope for any change, and then presents the government’s proposed approach to implementing the optional or discretionary elements.

      1.15 This consultation seeks views on the government’s proposals on those optional or discretionary elements, not on the main rules or their details. It also welcomes comments on the impacts for business from the UK’s proposed implementation of the model rules.

      1.16 The final version of the OECD’s rules was published on 22 June 2021, too late to be incorporated into this consultation in time for publication on 20 July (Legislation day). The consultation has been published as soon as practicable, and in line with the government’s commitment to consult over the summer of 2021.

      Stakeholder engagement and next steps

      1.17 The government would like to hear views from anyone who is affected by or interested in these proposals including individuals, businesses, agents and representative bodies. HMRC will engage directly with existing stakeholder networks and would be happy to have meetings with interested parties. Please contact the lead official if you are interested in meeting to discuss this document.

      1.18 Responses and general queries about the content or scope of the consultation can be sent by email to, using the subject “Reporting Rules for Digital Platforms”.

      1.19 A summary of responses will be published after the consultation closes. The government will also make regulations that will set out the requirements on platforms in the UK rules in detail. A further technical consultation on draft regulations is expected to take place in 2022.

      2. Scope and definitions

      Key definitions and concepts

      2.1 The scope of the OECD model rules is framed in terms of:

      • the platforms that have to collect and report information
      • the relevant services and goods that are provided
      • the persons who provide those services and goods (‘sellers’)
      • other definitions relevant to applying the rules


      2.2 A ‘Platform’ means any software, including a website or app, which allows sellers to be connected to consumers of the goods and services offered by those sellers. This includes third party sellers that provide the goods or services directly to users (customers), as well as platforms that purchase services or goods from sellers and offer them in their own name.

      2.3 Platforms may provide services themselves such as operations to collect payments from users and pass them to sellers either before or after they have provided the relevant goods or service. However, software that merely lists or advertises services, or just processes payments, or only redirects or transfers users to another platform does not meet the definition of a platform. This is because it does not immediately facilitate the linking up between sellers and users for the provision of services.

      2.4 More specifically, the model rules refer to a ‘Platform Operator’. This is an entity (a legal person or arrangement other than an individual) that contracts with a seller to make all or part of the platform available to the seller, or that collects payments from users for relevant services facilitated through the platform. As part of the contractual arrangements, platform operators will have various legal obligations to know their sellers, so should be well placed to obtain the information from the seller to comply with the model rules.

      2.5 Platform operators are subject to the model rules, and are therefore ‘Reporting Platform Operators’, if they:

      • are resident for tax purposes, incorporated or managed in a jurisdiction adopting the rules
      • have not been specifically excluded
      • facilitate the provision of relevant services

      Excluded platform operators

      2.6 Jurisdictions implementing the model rules can also choose to exclude certain platform operators from the requirements to report information. The model rules include three optional categories of ‘Excluded Platform Operators’. These are platform operators that:

      a. facilitate the provision of relevant services for which the total payments (or ‘consideration’) over the previous year are less than 1 million euros, and that make an election to be treated as excluded from reporting

      b. demonstrate that the platform’s business model does not allow sellers to profit from the payments received, or

      c. demonstrate that they do not have any ‘reportable sellers’ (see paragraph 2.22)

      2.7 These exclusions ensure that small-scale platform operators such as start-ups, and those where the risk of any non-compliance with tax obligations by their sellers is very low, do not have to collect information and report it. However, platform operators that fall within the first of the exclusions may also choose to be subject to the model rules if, for example, they expect to grow rapidly and adopting the rules would make future compliance with the rules easier.

      2.8 The government wants to ensure that the reporting rules are proportionate and minimise burdens for platforms where possible. The government also wants to promote growth amongst UK start-up companies so does not want to impose additional burdens on small platforms. The government therefore proposes that all three optional categories of excluded platform operators should be incorporated in the implementing regulations, and that platform operators should also be able to choose to opt out of the first of the exclusions in paragraph 2.6.

      2.9 The government needs to be able to identify platforms which are not reporting because they are subject to the exclusions (and have chosen to be excluded), so that these platforms are not subject to enforcement procedures. The government therefore proposes that platform operators should be required to indicate if they want to be excluded from the scope of the rules.

      2.10 The government envisages that platform operators will be able to indicate whether they fall within the exclusion categories, and hence are exempt from the reporting requirements, as part of the initial registration process, or subsequently if their circumstances change (see paragraph 4.12).

      Relevant services

      2.11 Only certain services provided by sellers come within the scope of the model rules. These ‘relevant services’ are rental of ‘immovable property’, ‘personal services’ and transport rental if they are provided for a ‘consideration’.

      2.12 ‘Immoveable property’ includes residential and commercial property and other fixed property such as parking spaces. Rental includes both short and long-term rentals, irrespective of how the property is held (freehold, leasehold etc.). However, some hotel accommodation is excluded – see paragraph 2.21.

      2.13 A ‘personal service’ covers a wide range of services involving time or task-based work performed by a seller, or one or more individuals if the seller is an entity, at the request of a user. It involves work carried out online as well as performed offline at physical locations, and includes the following:

      • transport services (such as taxis and private hire)
      • delivery (for example, food delivery)
      • freelance & professional work (such as accountancy, clerical and legal tasks)
      • providing labour (for example, gardening, housekeeping, renovation)
      • online services (data entry, IT services, copywriting)
      • seasonal and temporary work (such as at restaurants or events)
      • services provided by a group of sellers or to several users at the same time

      2.14 However, a ‘personal service’ does not include a service provided by a seller who is an employee of a platform operator, or of an entity related to that platform operator, because they will already be subject to PAYE. For these purposes, entities are related if either controls the other or both are under common control. A service also does not qualify as a ‘personal service’ if it is incidental to a transaction, for example, packaging goods which have been sold to a user.

      2.15 The model rules allow jurisdictions to include an ‘expansion mechanism’ within the definition of a relevant service to add further categories of services to future proof the rules so that they may adapt as new business models emerge and the sharing and gig economy develops. The government considers that a specific expansion mechanism is not needed as the power to make the regulations for implementing the model rules, which the government introduced in section 129 Finance Act 2021, allows for the regulations to be amended if the model rules are subsequently revised to expand the scope of relevant services.


      2.16 The model rules define the ‘consideration’ that sellers receive for providing services or selling goods as “compensation in any form that is paid or credited to a Seller in connection with Relevant Services, the amount of which is known or reasonably known by the platform operator.” This can include money, cryptocurrencies, payments in kind, tips, gratuities and incentives paid or credited to a seller. It is considered to be paid to a seller if an amount is paid or credited to an account specified by the seller, even if the account is not in the seller’s name. The amount of consideration paid or credited is after deduction of any fees, commission or taxes withheld or charged by the platform operator; these are reported separately (see paragraph 4.3).

      2.17 Sellers may receive consideration for services either directly from customers, or via the platform operator. For example, the platform operator may receive a payment from the customer and then pass it on to the seller. If a platform operator withholds a fee, commission or tax based on amounts paid by customers, the platform operator would be expected to reasonably know the amount received by the seller. However, where the platform operator does not know, or is not reasonably expected to know, the amount that has been paid to the seller for a service, the payment is not treated as ‘consideration’ and therefore the service provided is not a ‘relevant service’.


      2.18 A ‘seller’ is a user who is registered on a platform to provide relevant services or sell goods. It can be an individual or an entity. Registration is interpreted broadly and can include, for example, where a user has created a profile or account with the platform, as well as being contracted by a platform operator.

      2.19 A seller is defined as an ‘active seller’ if they provide relevant services during a reportable period, or are paid or credited during that period. It follows that sellers who are registered with a platform but who do not provide any services or who are not paid for services during a reportable period are not ‘active’, and platform operators do not have to report any information about them.

      2.20 Certain sellers present a very low compliance risk as they are usually aware of their tax obligations, are subject to other forms or regulation, or do not represent typical sellers in the gig and sharing economy. The model rules carve out three categories of ‘excluded sellers’ from their scope. These are broadly entities that:

      • provide more than 2000 property rentals per year (generally large providers of hotel accommodation)
      • are government entities (including local authorities and government agencies), or
      • are listed entities, or related entities, whose stock is regularly traded on an established securities market

      In addition, as part of the extension of the scope, the amended OECD rules also exclude occasional sellers who make less than 30 sales of goods a year for a total of not more than €2,000 (see paragraph 2.25).

      2.21 Although the model rules require platform operators to collect information and carry out due diligence procedures on all their sellers apart from those that are specifically excluded (see Chapter 3), platform operators only have to report information about ‘reportable sellers’. These are defined as active sellers, other than excluded sellers, who are resident or who have rented immoveable property located in a ‘reportable jurisdiction’.

      2.22 For the purposes of determining reportable sellers, a ‘reportable jurisdiction’ is one which exchanges reportable information with another reportable jurisdiction. They are expected to be identified in a list published by the OECD which reflects exchange of information agreements. This ensures that information about sellers is collected and exchanged only with the relevant jurisdictions that have implemented the model rules.

      2.23 The model rules allow jurisdictions to require reporting on all sellers if this is permitted under domestic legislation. However, the government proposes that UK platform operators should only report information about sellers who are resident in the UK or in another reportable jurisdiction, which avoids platform operators reporting information that will not be used or exchanged by HMRC. The required information includes the seller’s country of residence (see paragraph 4.3) so that the details are exchanged with the jurisdiction in which the seller is resident. For property rentals, UK platform operators will also have to report information about sellers who rent out property in the UK or in other participating jurisdictions. The required information includes the address of the rented property so that the information can be exchanged with the jurisdiction in which the property is located.

      Extension of scope

      2.24 In June 2021, following consultation with stakeholders, the OECD introduced an optional extension of the model rules that allows interested jurisdictions to implement them with an extended scope to also cover the sale of goods and transport rental. The wider scope is achieved by extending the definition of a relevant service to include the rental of ‘a means of transportation’, and adding a new ‘relevant activity’ to the rules, which includes a relevant service or the sale of goods for a consideration. ‘Goods’ in this context means any tangible property.

      2.25 In addition, as outlined in paragraph 2.20, the definition of an ‘excluded seller’ is extended to cover sellers where the platform operator solely facilitated less than 30 relevant activities for the sale of goods and for which the total consideration paid or credited was not more than €2,000 during the reportable period (a calendar year in which the platform operator is required to report). This ensures that ‘casual’ sellers that only make occasional small sales of items are not caught by the extension of the rules.

      2.26 The government proposes to adopt the extension as the wider scope will increase the benefits of implementing the model rules for sellers, platforms, and HMRC. The extension broadens the range of sellers that will be helped to comply with their tax obligations and also enables HMRC to detect and tackle tax non-compliance in relation to the additional activities.

      Interaction with DAC 7

      2.27 In March 2021, the Council of the European Union adopted an amendment to the Directive on Administrative Cooperation (Council Directive 2011/16/EU on administrative cooperation in the field of taxation) known as DAC 7. This amendment extended the European Union’s (EU’s) automatic exchange of information rules to include reporting requirements for digital platforms. DAC 7 is largely based on the OECD model rules published in June 2020 but with a broader scope that includes the sale of goods and transport rental as relevant activities. The new rules will apply from 1 January 2023 and include an obligation for digital platforms, regardless of whether or not they are based in the EU, to provide information about the income of sellers that are located, or whose rental property is located, in the EU. DAC 7 therefore creates obligations for some UK platforms.

      2.28 The extension of scope to the model rules to goods gives implementing jurisdictions the option of aligning with the scope of DAC 7. This provides the opportunity for EU and non-EU jurisdictions to exchange information on all relevant activities covered by DAC 7 by implementing the model rules.

      2.29 DAC 7 contains a provision to prevent double reporting by platforms which are within the scope of the two sets of rules. It is expected that with the adoption of the model rules extension, UK platforms which fall within the DAC 7 rules can report directly to HMRC under the model rules, rather than reporting to an EU Member State under DAC 7HMRC would then exchange the information with the tax authority in the relevant EU Member State.

      2.30 The government’s aim is to ensure that the reporting requirements minimise burdens for platforms and work well in practice. The government would therefore welcome comments on whether the interaction of the model rules and requirements of DAC 7 would impose any additional burdens on platforms in practice to better understand the impact of the two regimes.

      3. Due diligence procedures

      3.1 The model rules require platform operators to carry out due diligence procedures to ensure that the information they collect and report about sellers is useful, relevant and accurate for tax authorities. Due diligence processes should also be proportionate and minimise burdens on platform operators where possible. This chapter sets out the various due diligence procedures that the model rules require platform operators to carry out, discusses the options for some of the information that has to be provided, and sets out the government’s proposals for optional elements of the requirements.

      Identification of excluded sellers

      3.2 Some sellers are excluded from the scope of the model rules (see paragraph 2.20). Platform operators will therefore need to identify which of their sellers are excluded and not subject to due diligence and reporting. The method they will use to do so depends on the type of excluded seller.

      3.3 The model rules state that platform operators may rely on their available records of sellers and property listings to determine if a seller qualifies as an excluded seller if they are:

      • an entity that provides more than 2000 property rentals per year (generally large-scale hotel businesses who are likely to be aware of their tax obligations), or
      • an occasional seller who has undertaken less than 30 sales of goods and for which they were paid not more than €2,000 for the reportable period

      This determination can be done at the end of the reportable period, for example, on the basis of the actual transactions carried out. Alternatively, platform operators may put other procedures in place at an earlier stage to determine if any of their sellers are likely to meet the exclusion criteria. For example, if a seller has consistently made significantly more than 2000 property rentals each year and is likely to continue to do so, the platform operator may decide that the seller will qualify as an excluded seller at the start of the reportable period.

      3.4 For government and listed entities, platform operators may rely on publicly available information or on a confirmation from the entity seller to determine whether they meet the conditions for this type of excluded seller.

      Collection of seller and rental property information

      3.5 The model rules set out the information that platform operators will be required to collect for all sellers, other than excluded sellers. The type of information to be collected depends on whether the seller is an individual or an entity, and the nature of the activity carried out by the seller.

      3.6 For each individual seller, the required information is:

      • first and last name (and middle name if provided)
      • primary address (usually their home address, unless the platform only collects a billing address)
      • tax identification number (TIN) and the jurisdiction which issued it
      • date of birth

      3.7 For each entity seller, the required information is:

      • legal name
      • primary registered office address
      • TIN and jurisdiction of issue
      • business or company registration number (if different from the TIN)

      3.8 Where a seller provides property rental services, platform operators are also required to collect the address of each property listing. For this purpose, ‘property listing’ means all immovable property units, including rooms, apartments, houses or other forms of fixed property, at the same street address and offered by the same seller. For example, multiple rooms in a hotel or separate apartments in a building with a single street address are treated as a single property listing. Platform operators should usually be aware of rental property details as they will provide this information to users; but if not they will need to put procedures in place to collect and verify the address of the property.

      3.9 The information to be collected reflects its importance and use by tax authorities to identify sellers and match them to details held on their databases, and to determine the residence of the seller or the jurisdiction in which a rental property is located. For example:

      • the date of birth is important to ensure that individuals who may have the same or very similar names living at the same address can be distinguished and matched to their tax records
      • TIN will enable a tax authority to identify an individual or entity and match them with their tax records (see paragraphs 3.10 to 3.17)
      • the primary address will be used to determine where an individual lives or where an entity’s registered office is located to determine the residence of a seller and link them to a jurisdiction for reporting purposes (see paragraph 3.21)
      • the address of a rental property will be used to identify the jurisdiction where it is located so that information about the seller can be sent to the appropriate country
      Tax Identification Number (TIN)

      3.10 The TIN is a unique number, or number/letter combination, which enables an individual or entity to be identified and matched with their tax records. It provides a convenient and more reliable method for matching taxpayers than using a name (which may not be unique) and address (which could be out of date or incorrect). The TIN must be issued by the jurisdiction where the seller’s primary address is located so that it can be used by that jurisdiction on receiving the information to link the seller to their taxpayer databases. Some jurisdictions issue a TIN to all taxpayers. Where a jurisdiction does not issue a TIN, another functionally equivalent number can be provided instead, such as a social security number or personal registration number.

      3.11 The model rules do not specify which type of reference number should be used as a TIN as this will be different for each jurisdiction. For UK resident sellers there are several possible options for a TIN – a Unique Taxpayer Reference (UTR), National Insurance number (NINO), Company Registration Number (CRN), VAT Registration Number (VRN) or a bespoke registration number/code. The government is currently minded to propose that platform operators can report a TIN from a range of options for UK resident sellers. This is because there does not seem to be an ideal TIN to use for both individuals and entities, and each option has advantages and disadvantages.

      For individuals

      3.12 A NINO can be used to match an individual’s personal data to their tax record and can be shared with third parties in some cases so it could be a suitable TIN. Although NINOs are commonly used, they are still sensitive pieces of information so platform operators will need to ensure that the details are held securely and not disclosed inappropriately. However, some UK sellers may not have a NINO; for example, if they are not employees or self-employed, or do not claim benefits, or if they do not have a specific reason to be issued with a NINO. This is only likely to apply to a very small number of individuals who provide property rental services but it nonetheless creates a difficulty as such individuals will not be able to obtain a NINO and provide one as a TIN.

      For entities

      3.13 For UK companies and other entities, the CRN is already held on HMRC’s systems and can be used effectively for matching purposes. It is also in the public domain at Companies House. The CRN therefore seems to be an obvious choice for a TIN for UK sellers who are entities but it will not be relevant for individuals, or for some companies operating through a platform who were incorporated, or are resident, outside the UK.

      For individuals and entities

      3.14 UK sellers who are self-employed or within Self Assessment for another reason are very likely to have a UTR, which could be used to accurately match their details with their tax records. This could be an option for individuals who do not hold a NINO. Although as a general principle HMRC advises taxpayers not to disclose their UTR to anyone to help protect customers from fraud and identity theft and prevent unauthorised access to HMRC systems and records, UTRs are reported and exchanged in other exchange of information agreements, such as the Common Reporting Standard (CRS) for financial accounts. Platform operators would need appropriate levels of security to keep the UTR details protected and secure.

      3.15 Another option for a TIN is the VRN if it is available. This is also in the public domain so presents fewer disclosure risks than a NINO, and can be checked to see if the number is valid and the name and address of the business is correct. However, UK sellers who are not registered for VAT will not have a VRN. In some circumstances there is more than one VRN associated with a business, so it may not be very effective for matching purposes.

      3.16 A possible alternative option that the government is exploring is to introduce a new ‘verification’ service for the purposes of the model rules (see paragraph 3.26) which sellers could use to generate a bespoke code or reference number that could be used as a TIN. This option would have the advantage of applying to all UK sellers and has the lowest disclosure risk since the reference number/code would not be used for any other purpose. On the other hand, it would create another reference number that sellers would need to note. If the government was minded to introduce a verification service it would take time to implement and it may not be available when the rules are currently expected to come into force in January 2023.

      3.17 The government is keen to hear from both platforms and sellers on which one or more options above would be a good choice for a TIN.

      Verification of seller information

      3.18 The model rules require platform operators to verify the information provided by the seller to make sure it is accurate and reliable. This must be done using all available records including information already collected or maintained for on-boarding, payment, regulatory or other commercial purposes. For example, the name of a seller must be verified against government identification documents the platform operator holds, as well as cross checking the details with financial records, emails or other available information. Likewise, a seller’s address and country where the TIN is issued must be verified against transactional records that can identify and confirm where the seller is resident. Such checks should take into account other relevant information that show the link between the seller and jurisdiction, such as a local IP address. Platform operators should also use any publicly available checking tools or verification services to confirm the validity of a TIN such as a CRN or VRN.

      3.19 Where sellers are already active before the rules are implemented or the platform operator is required to report, the verification of collected information may be done using available existing electronically searchable records. If some of the information is no longer reliable, for example, when an address becomes out of date because the seller has moved, the platform operator is required to collect new information or documentation to correct or update the details. That new information also has to be verified using all available records so that the platform operator can show that all the data collected about a seller is reliable, up to date and accurate.

      3.20 In some cases, a platform operator may be informed by a tax authority that certain previously collected and verified data is inaccurate. This could happen, for example, if a tax authority has received data on a seller following an exchange of information and cannot match a record to the taxpayer, or it has some other reason to believe the information is inaccurate. In these cases, the platform operator must collect the relevant information again and verify it using reliable independent documents or data.

      Determination of sellers’ jurisdiction of residence

      3.21 Once collected information has been verified, platform operators will need to determine the jurisdiction of residence of a seller so that it can be reported to the appropriate tax authority. The model rules explain that the jurisdiction of residence of a seller is usually the jurisdiction in which the seller’s primary address is located. In most cases the primary address will be the seller’s home address (for individuals) or registered office address (for entities). A platform operator should therefore be able to determine a seller’s jurisdiction of residence from their home or registered office address.

      3.22 Alternatively, if a Government Verification Service is available (see paragraph 3.26) in the jurisdiction where the seller has their home or registered office address, the platform operator may be able to use it to determine a seller’s jurisdiction of residence. The platform operator should be able to use the service to confirm the seller’s name and primary address. That address will then determine the seller’s jurisdiction of residence.

      Government Verification Service (GVS)

      3.23 The model rules require platform operators to collect from sellers the information listed in paragraph 3.6 and 3.7. The only exception to this is where a jurisdiction provides a ‘Government Verification Service’. This is an electronic process that is made available by a jurisdiction and allows platform operators to confirm the identity and/or residence of a seller. It may include the use of Application Programming Interfaces (APIs) which are a type of software that connects computers or applications so they can ‘talk’ to each other.

      3.24 It is up to a jurisdiction to decide on the appropriate scope for a GVS for these purposes. As an illustration, the commentary (See paragraph 63 on page 19 of the Model Rules) on the model rules proposes one possible process for a GVS identification method:

      a. a reporting platform operator identifies that a seller is linked to a GVS jurisdiction during its on-boarding process and directs the seller to the GVS portal

      b. the seller provides their details (for example, a TIN or user name) which enables the GVS to identify the seller

      c. the jurisdiction/GVS provides the reporting platform operator with a unique reference number/code

      d. the platform operator includes the number/code in the information they report allowing the jurisdiction receiving that information to match it with their seller database

      3.25 Separately, HMRC is introducing a ‘tax check’ that will take place when people renew their licences to drive taxis or private hire vehicles, or deal in scrap metal. A new digital service is being developed to enable individuals and companies in these sectors to do the tax check and obtain a code, which will be used by the licensing body to obtain confirmation from HMRC that the licence applicant has carried out the ‘tax check’. Broadly, the service is expected to work as follows:

      • The applicant will use the digital service to provide some basic information about themselves, their licence and their tax situation to complete the tax check
      • If the details match the ones held by HMRC’s systems, the applicant will be given a tax check code, which they will give to the licensing body with their application
      • The licensing body will be able to access the service using the code and the applicant’s ID details and licence type to get confirmation that they have completed the tax check

      3.26 The government is considering whether this ‘tax check’ service could be adapted and used as a GVS since it has many of the features outlined in the process proposed in the model rules commentary. For example, a seller might be able to use a similar digital service to provide their personal details which would be checked against information about the seller held by HMRC systems. If there was a match, the seller would be given a unique code which they could pass to their platform operator. The platform operator would be able to use the code to access the service to confirm the identity and address of the seller, thus avoiding the need to verify that information with its own records. The unique code could also be used as a TIN (see paragraph 3.16) and could be reported to HMRC in order to match the seller with their tax records.

      3.27 There is no suggestion that a seller would be required to use the service and get a code in order to become a seller, or to provide services or sell goods on a platform. Even if the government is minded to implement a GVS, then it may not be developed in time to be available from the start of implementation.

      3.28 The government welcomes comments on whether platforms, sellers and other stakeholders would make use of such a service if it was available, or if they would prefer to collect and verify the information by a different method, and any potential practical issues a GVS might create.

      Timing and validity of due diligence procedures

      3.29 The model rules also state that platform operators must complete the due diligence procedures by 31 December of the reportable period. This is defined as any calendar year in which a platform operator must report under the rules as a reporting platform operator. However, the model rules provide some flexibility around timing for new reporting platform operators and processes for established platform operators.

      3.30 For entities who become reporting platform operators for the first time (due to the introduction of the rules, or because they are a new platform, or are no longer an excluded platform operator), the due diligence procedures outlined above are only required to be completed by 31 December of the second reportable period in which the platform operator is subject to the reporting rules. This is to ensure platforms have enough time to collect and verify the required information and build the relevant IT systems. The extended deadline means that, for example, if a platform becomes a reportable platform operator in January 2023 (so their first reportable period is the year ended 31 December 2023), it must complete the due diligence procedures by 31 December 2024. However, some platform operators may wish to complete their due diligence procedures and report the information to tax authorities and/or sellers earlier than this extended deadline.

      3.31 The rules also acknowledge that collected and verified information about sellers or their residence status may remain unchanged over time. Platform operators may therefore rely on due diligence procedures for previous reportable periods provided that:

      • the primary address of each seller has either been collected and verified or confirmed in the last 36 months
      • the reporting platform operator does not have any reason to believe the info collected is incorrect or unreliable

      This confirmation could be made by, for example, a statement from the seller that their previously collected address is still valid.

      Application to active sellers

      3.32 The model rules provide an option for completing the due diligence procedures only for active sellers in a reportable period (see paragraph 2.19). This means that platform operators can choose to collect and verify seller details and determine their residence from the date that a seller provides a relevant service or sells goods or is paid for those activities. In other words, platform operators can opt not to carry out due diligence procedures for new sellers who have only just registered with the platform or for existing sellers who are not active. The government supports this option to reduce administrative burdens for platform operators and will include the relevant provisions in the regulations.

      3.33 Platform operators who make use of this option should have procedures and enforcement measures in place to ensure that all active sellers have provided the required information by 31 December of a reportable period. The model rules suggest that these measures could, for example, include mechanisms to prohibit undocumented sellers access to the platform or withhold payment from such sellers until they provide the information. However, the government considers that it is the responsibility of platform operators to decide what enforcement measures are appropriate and does not propose any additional requirements to compel platform operators to put such measures in place (see paragraph 5.14).

      Due diligence by third parties

      3.34 Platform operators may also rely on an independent third party service provider, including another platform operator, to carry out the due diligence procedures, especially if they have better resources or technology to do so. This takes into account the situation where platforms use a number of platform operators to provide different services or functions in one or more jurisdictions. For example, one platform operator may provide access to the platform’s website, while another platform operator may collect payments from users. Where there is more than one platform operator in respect of a platform, any of the platform operators may carry out the due diligence procedures in respect of all or a defined group of sellers. This arrangement avoids duplication of the due diligence processes by multiple platform operators with respect to the same platform.

      3.35 In order for a platform operator to rely on a third party to perform the due diligence, it should put appropriate contractual arrangements in place to ensure that:

      • information needed to complete the procedures is available to the third party service provider
      • the platform operator can obtain any information collected and verified on sellers from the third party provider

      Even if due diligence procedures are carried out by another platform operator or third party service provider, the reporting platform operator remains responsible for their completion and must be able to demonstrate compliance with the due diligence requirements.

      3.36 Where a platform operator carries out due diligence procedures for a reporting platform operator in a different jurisdiction, it can rely on the rules in its own jurisdiction provided they are substantially similar to the ones in the other country. This ensures the due diligence procedures are consistent across a number of jurisdictions.

      4. Reporting information

      4.1 The model rules require platform operators to report certain information to tax authorities so that it can be exchanged with other tax authorities, or used by a tax authority for its own compliance purposes, and also given to the sellers to help them comply with their tax obligations. The rules, and this chapter, set out:

      • the details of the information that must be reported about the platform operator, sellers and property rentals
      • the manner in which the information has to be reported
      • the deadlines for reporting the information to tax authorities and sellers
      • the circumstances in which information does not have to be reported

      Information to be reported

      4.2 Each reporting platform operator must provide the following identification information:

      • their name, registered office address and TIN
      • the business name(s) of the platform(s) in respect of which they are reporting

      4.3 For each reportable seller who has provided ‘relevant services’ other than immoveable property rental (see paragraph 2.10), a reporting platform operator must report the following information to identify the seller and the jurisdiction that they are linked to for reporting purposes, and to provide details of the payments made to them:

      • details of the seller (see paragraphs 3.6 and 3.7)
      • any other TIN available to the reporting platform operator, such as a VAT number
      • the ‘financial account identifier’ – if this is available (see paragraph 4.5)
      • the name of the holder of the account to which payments are made – if this is different to the name of the seller and available – and any other available identifying information
      • the country in which the seller is resident on the basis of their address (see paragraph 3.21)
      • the total ‘consideration’ paid (see paragraph 2.16) during each quarter of the reportable period and the number of services for which it was paid
      • the amount of any fees, commission or taxes withheld or charged by the platform operator during each quarter

      4.4 For each reportable seller who has provided immoveable property rental services, a reporting platform operator must report the following information:

      • the information listed in paragraph 4.3
      • the address of each property listing (see paragraph 3.8)
      • the number of rentals with respect to each property listing
      • the number of days each property listing was rented during the reportable period and the type of listing – if available

      Bank account information

      4.5 The ‘financial account identifier’ is a unique identifying reference or number (e.g. IBAN, sort code and account number) of the seller’s bank or other account to which payments are made. These account details are very reliable items of information for taxpayer matching purposes since they are likely to be correct if payments are made to the account. However, not all tax authorities can use this information to match sellers. The model rules therefore set out that the details only have to be reported if they are available to the reporting platform operator, or another platform operator using the same platform, and are requested by a tax authority who can use the data for matching purposes. Jurisdictions whose tax authorities can use the details for such purposes, and who opt in to receive the information before it is exchanged, will be included on a published list so that platform operators will be able to determine if sellers’ bank details need to be reported.

      4.6 The government proposes requiring that a seller’s bank account details, or details of another account to which payments are made, are reported if these are available to the platform operator (or to a related platform operator). Financial account information supports good data matching and has been used effectively to improve matching processes. The government is aware of the sensitivity of this information. As for other exchanges of information which involve bank details, such as CRS, the data will be held securely in line with the HMRC Records Management and Retention Policy and any sharing of personal data will follow the relevant guidance and legal requirements (see the International Exchange of Information Manual (IEIM100010)).

      4.7 Bank account details, and other reported information, will be exchanged with other tax authorities under international treaties which contain strict secrecy requirements to ensure customer data is safe and secure. In addition, exchanges of information will only take place with treaty partners who have appropriate confidentiality and data safeguards in place. These safeguards are evaluated using, for example, the Information Security Management work that monitors and reviews the Standard for Automatic Exchange of Financial Account Information in Tax Matters (see Confidentiality and Information Security Management toolkit).

      Other information

      4.8 During discussions with the OECD, some platforms indicated that they may be able to provide additional information about a seller, such as their mobile phone number, if tax authorities found this helpful. The government would not require these additional details to be provided as this would be inconsistent with the standard information that the model rules require. However, the government is considering whether other information about a seller could be provided on a voluntary basis, if platforms already collect this information, providing that the schema for submitting and exchanging the required information allows these additional details to be reported.

      Form of reporting

      4.9 The information specified above must be reported in a standardised OECD Sharing and Gig Economy XML Schema. This ensures maximum compatibility of the IT formats used for reporting information by platform operators, and for tax authorities to use that data. The schema is currently being developed at the OECD and details will be available to platform operators once they are published.

      4.10 Information about the amount of consideration must be reported in the currency in which it was paid or credited. If the consideration is paid in some other form than government-issued or fiat currency, the amount should be reported in the local currency, converted or valued in a manner that is consistently determined by the platform operator.

      Online service

      4.11 HMRC will develop an online service to enable platform operators to report the required information. This is expected to be similar to the existing service for reporting to HMRC under Automatic Exchange of Information (AEOI) agreements, such as CRS. Currently, this service enables financial institutions and their agents to register for AEOI, and then to either upload an XML file with the required information, or to create an online return and enter the information manually. It also allows customers to amend the information if necessary and update the relevant contact details. Reporting platform operators will be able to register, report and amend information in a similar way.

      4.12 The government is considering only offering the option to submit reports directly to HRMC in an XML file format, as this is the mechanism currently used for most other AEOI reports, and not including the option to enter reportable information manually in the online service for reporting the information required by the model rules. The government is also exploring whether to offer an option of using an Application Programming Interface (API) to seamlessly transfer the relevant information from a platform operator’s IT system to HMRC’s systems.

      Registration and nil returns

      4.13 It is expected that all UK reporting platform operators, as well as UK excluded platform operators (see paragraphs 2.5 to 2.7), will have to register on the new online service to indicate that they potentially fall within the scope of the model rules. Although excluded platform operators will still have to register, they will be able to indicate at the beginning that they are exempt from the reporting requirements and do not need to do anything else. This will enable a distinction to be made between platform operators who have not reported anything because they are exempt from those that have not reported due to a failure to comply with their reporting obligations.

      4.14 The model rules allow a jurisdiction to require the filing of nil returns to indicate that a reporting platform operator did not identify any reportable sellers during a reportable period. The government considers that reporting platform operators should indicate that they are submitting nil returns for a particular reporting period. This could be because, for example, they have only recently started to operate as a platform and do not yet have any reportable sellers. A nil return would distinguish between reportable platform operators who have not submitted any information because they have nothing to report from those that have not done so because they have failed to comply with their reporting obligations. It also enables a distinction to be made between reporting platform operators who do not report any information and excluded platform operators who are not required to report anything. To minimise administrative burdens, it is envisaged that nil returns could be made simply and quickly by confirming the position at the start of the online reporting process.

      Reporting deadlines

      4.15 Reporting platform operators must report all the required information about the platform operator and each reportable seller (see paragraph 2.21) to the tax authority of the jurisdiction in which the platform operators are resident for tax purposes, or in which they are incorporated or managed if they do not have a tax residence. UK resident (or incorporated/managed) platform operators will therefore report to HMRC. The model rules specify that the reporting deadline for any reportable period is 31 January of the year following the calendar year in which a seller is identified as a reportable seller (the ‘reporting date’).

      4.16 New reportable platform operators may not be able to identify a reportable seller until the second reportable period when their due diligence procedures are completed (see paragraph 3.30). In such cases, the required information would not have to be reported until 31 January of the year following that second reportable period.

      4.17 Platform operators are also required to provide the information relating to each reportable seller to that seller by the same 31 January reporting date. This will help sellers to work out their total income and fill in their tax returns. However, in some cases, the information about income may be given to sellers at the same time as the deadline for filing their UK Income Tax Self-Assessment tax return (which is also 31 January). This will only apply where sellers need to complete tax returns and have accounts for income tax purposes for a period (an ‘accounting period’) which ends between 1 January and 5 April. In these cases, the information about the seller’s income for the period from 1 January will come from a later reporting period. This is illustrated by the following example.


      Seller S receives income from providing services on a platform P and is liable to UK income tax on the trading profits derived from this income. He includes the income in his accounts which are made up each year to 31 March. He has no other income and his taxable platform income for the year ended 31 March 2026 (that is, for the accounting period 1 April 2025 to 31 March 2026) must be included on his 2025 to 2026 Self Assessment tax return. The deadline for submitting this return is 31 January 2027.

      Platform P provides S with statements of his income each year. For the reporting period ended 31 December 2025, P provides S with a statement on 31 January 2026. S can use this statement to work out his income for the period from 1 April 2025 to 31 December 2025 but not for the period from 1 January 2026 to 31 March 2026. To do that, S has to wait until P provides him with a statement for the reporting period ended 31 December 2026, which includes the income for the period from 1 January 2026 to 31 March 2026. P provides the statement on the next reporting date on 31 January 2027, but this is the same as the filing date for the 2025 to 2026 tax return and is too late if S wants to file his return earlier, as shown in Figure 1 below.

      Figure 1

      Figure 1 - diagram showing overlap between a seller's accounting period and a platform's reporting periods, as explained in the body text.
      This diagram shows the relationship and overlap between a seller’s accounting period for the tax year 2025 to 2026 (shown in blue) and a platform’s reporting periods for the year-ending 31 December 2025 (shown in red) and the year-ending 31 December 2026. It also shows the Self Assessment return due date and reporting dates.

      4.18 The government is keen to make the information about income as useful as possible for sellers. The government is not proposing a change to the reporting date but would like to hear from platforms about any flexible solutions to how they may provide reports to sellers ahead of the 31 January reporting date. As platform operators have to report the amount of consideration paid to each seller during each quarter of the reportable period, the government would be interested in whether platforms would be able to, for example, send reports to the sellers on a more frequent basis (such as monthly, quarterly, half-yearly). This could be an option which ensures that the information is as useful for sellers as possible, whilst minimising burdens for platforms.

      Information for sellers

      4.19 The details that platform operators must provide to each reportable seller, including the total amount paid to them, should help sellers to work out how much income they have received from providing their services and/or selling their goods on the platforms they use. This in turn should help them to declare that income correctly on their tax returns and comply with their tax obligations, providing they get the information before they need to submit their tax return.

      4.20 However, some sellers may be unaware of their tax obligations, and may not realise that the income from providing their services or selling goods using a platform is taxable and has to be declared on their tax return, particularly if that income is in respect of assets held abroad such as a rental property. Some may also not be aware of available reliefs and exemptions, such as the Trading Income Allowance (note: total receipts from self-employment and miscellaneous income of up to £1,000 are exempt from tax and generally do not need to be reported on a tax return). The working relationship and interactions between a seller and the platform operator also presents an opportunity for the platform operators to tell sellers about potential tax obligations as part of any general information given to new sellers during on-boarding or in periodic updates for existing sellers. Because of the closer relationship, some sellers may also prefer to approach a platform operator regarding any tax consequences of providing their services or selling goods on the platform rather than refer to official HMRC or government guidance.

      4.21 The OECD’s Code of Conduct, which has some areas of overlap with the model rules, encourages platform operators to engage with their sellers to help them understand their tax obligations and report taxable income to their tax authority. In addition to providing each seller with an annual notification of payments received from platform transactions, the Code suggests that platform operators should:

      • send each seller a statement on their responsibility to meet their tax obligations
      • direct sellers to guidance issued by the tax administration of their jurisdiction of residence (or where immoveable property is located, if appropriate)

      The Code of Conduct also places an obligation on tax authorities to provide information setting out the circumstances when sellers may be liable to tax, including details of any thresholds, exemptions, allowable expenses and reporting obligations.

      4.22 Although some platforms already provide excellent guidance about tax obligations and potential tax liability on their websites, the government would like more platform operators to draw sellers’ attention to the tax consequences of providing services or selling goods on their platforms and to direct them to the appropriate guidance for further details. The government is not proposing that platform operators should provide tax advice to sellers, but it would like to explore if more can be done to ensure that sellers are sufficiently aware of taxation consequences to seek further advice and guidance as required. This is particularly relevant to complex areas such as the taxation consequences of assets held or income arising overseas.

      4.23 HMRC is keen to work with platform operators to help them to provide relevant tax information for their sellers, or to direct sellers to the appropriate guidance on GOV.UK, so that sellers understand the tax consequences of providing their services and know what they should do to comply with their tax obligations. In addition, HMRC would like to use the data about sellers to help them comply with their tax obligations and correct any non-compliance, particularly in the light of the recent discussion document about helping taxpayers to get their offshore tax right. The government welcomes views on how HMRC might do that, including any suggestions for collaborative working with platform operators and other stakeholders on suitable guidance, particularly for overseas platforms who may not be familiar with UK tax rules.

      Avoiding duplicate reporting

      4.24 A reporting platform operator does not have to report information about a seller if another platform operator will be reporting the required information about that seller. The reporting platform operator must obtain adequate assurances from the other platform operator that it will report the required information. This could be done by a written confirmation or agreement, and mechanisms should be put in place to ensure that the reporting obligations are performed effectively. This arrangement avoids duplicate reporting in situations where there is more than one reporting platform operator in respect of the same seller. However, the arrangement does not apply in respect of a seller who is resident in either:

      • the same jurisdiction as the reporting platform operator, or
      • in a jurisdiction that does not have an exchange agreement with the jurisdiction (that is, it is not a partner jurisdiction) of the other platform operator


      A platform is operated by two platform operators: PO1 is resident in the UK and PO2 is resident in the US. The platform is used by 2 sellers: seller A is resident in the UK, and seller B is resident in France which is a partner jurisdiction of the UK and the US. PO1 relies on PO2 to carry out the due diligence procedures since PO2 provides the on-boarding functionality.

      • PO1 must report information about seller A to HMRC because seller A is also resident in the UK
      • PO1 does not have to report information about seller B to HMRC providing it gets an adequate assurance from PO2 that it will fulfil the reporting obligations with respect to seller B
      • PO2 must report information about seller B to the US tax authority who will exchange it with France

      4.25 The rules also suggest that jurisdictions may consider introducing an obligation that both the platform operator transferring their reporting responsibility and the platform operator taking it over notify their tax administrations of the arrangement. The government proposes that a simple process is introduced as part of the new reporting service for notifying HMRC when arrangements to transfer reporting obligations to another platform operator for a particular reporting period have been made. A notification process would also avoid any unnecessary possible penalties for not reporting if a platform operator has already made arrangements for another platform operator to report the required information.

      5. Administration and enforcement

      5.1 Jurisdictions implementing the model rules are expected to have rules and administrative procedures in place to ensure effective implementation and compliance with the due diligence procedures and reporting requirements set out in the rules. While the model rules have some guidance on the types of enforcement procedures that are expected to be in place, jurisdictions have discretion to determine the precise details of any penalty or enforcement regime taking into account the existing compliance framework in that jurisdiction as well as the expected procedures set out in the guidance.

      5.2 This chapter sets out the government’s initial views on what the UK’s penalty and enforcement regime should be like, and invites views on the proposed approach to ensure that it is effective whilst also being reasonable and proportionate. The proposed penalties fall into two broad types:

      • one-off single penalties for reporting incorrect or incomplete information
      • initial and continuing daily penalties for failing to comply with the collection, verification, reporting and other requirements in the model rules

      Reporting of incorrect or incomplete information by a platform

      5.3 It is important that the information collected, reported and exchanged under the model rules is complete and accurate. The model rules therefore expect jurisdictions to develop procedures to discourage reporting platform operators from reporting incorrect or incomplete information and take appropriate follow up action if they do. Incorrect information may be reported if a platform operator does not implement adequate due diligence processes to ensure that the seller details are correct, or fails to take care when reporting. Information may be incomplete if certain data items are missing because, for example, a seller has not provided the required information.

      5.4 Given that the effectiveness of the rules relies on good quality information, the government considers that a platform operator should be liable to a penalty for providing incorrect or incomplete reportable information. This approach would also be consistent with existing penalties where a financial institution provides inaccurate information in relation to the Common Reporting Standard (CRS) or the US Foreign Account Tax Compliance (FATCA) reporting obligations (see Regulation 15 of The International Tax Compliance Regulations 2015), and Country-by-Country (CBC) Reporting (see Regulation 14 of The Taxes (Base Erosion and Profit Shifting)(Country-by-Country Reporting) Regulations 2016).

      5.5 Penalties should be sufficiently high to act as a deterrent and be effective at compelling compliant behaviour, yet should also take into account exceptional circumstances or the reasons for the failure or non-compliance. The government also recognises that it will take some time for platforms to adjust to the new rules and wants to be reasonable and proportionate in its approach to penalties.

      5.6 The government proposes that a platform operator should be liable to a penalty for reporting inaccurate or incomplete information up to an appropriate maximum amount for each report, but that amount should be reduced for a number of mitigating factors. These could include, for example:

      • the scale of the inaccuracy or omission
      • the behaviour leading to the error (for example, whether it is deliberate or an accidental oversight)
      • the previous history of good compliance, or any failure or non-compliance
      • the degree of co-operation in identifying, disclosing and correcting the inaccuracy/omission
      • the timescales involved
      • the size of the business so that the impact of the penalty is proportionate

      The government considers that this approach would be fairer, more proportionate and more effective than imposing a fixed amount penalty regardless of circumstances. The government welcomes views on this approach, the amount that would be appropriate for a maximum penalty, and comments on whether any other factors should be taken into account.

      Failure to comply with reporting and other requirements

      5.7 Jurisdictions are also expected to introduce effective enforcement provisions to address non-compliance with the collection, verification and reporting requirements in the model rules. This may include using existing rules that provide for the imposition of fines and penalties for failing to comply with particular requirements set out in legislation.

      5.8 For other reporting regimes, such as CRSFATCACBC and disclosable arrangements under the amendment to the EU Directive on Administrative Co-operation (DAC6), where the various requirements are set out in regulations, the penalty provisions are triggered by a failure to comply with the relevant regulations or obligations. Since the collection, verification, and reporting requirements of the model rules will also be set out in regulations, the government considers that penalty provisions could also be activated if a reporting platform operator fails to comply with those regulations. This could happen, for example, if a platform operator fails to report the required information by the deadline, does not collect or verify the required information, or fails to keep records (see paragraph 5.12).

      5.9 The CRS and CBC penalties for failing to comply with the relevant regulations consist of an initial penalty for the first failure, and continuing daily penalties for continuing failure after the initial penalty has been assessed. The DAC6 regulations (the International Tax Enforcement (Disclosable Arrangements) Regulations 2020) also provide for daily penalties from the outset if the initial penalty appears to be too low. While this approach is meant to encourage prompt compliance, it is only effective if the amount of the initial and daily penalty is sufficiently high to act as a deterrent.

      5.10 In line with the proposed approach for penalties for reporting inaccurate or incomplete information, the government proposes that both initial and continuing daily penalties for failing to comply with the model rules regulations should be up to an appropriate maximum amount, although this would be reduced to take into account various mitigating factors as explained in paragraph 5.6. The government welcomes views on this approach, the amount that would be appropriate for a maximum initial and continuing daily penalty, and whether the proposed approach would be more effective than the current CRSCBC and DAC6 penalties.

      Record keeping requirements

      5.11 The model rules guidance includes an expectation that jurisdictions will introduce rules requiring platform operators to keep records of steps undertaken and any information relied on for due diligence procedures and reporting. Such records should be available for at least 5 years following the end of the reporting period, and should be made available to a tax authority if requested.

      5.12 The government proposes including the requirements in the previous paragraph to keep records and make them available to HMRC on request (when reasonably required to determine if the obligations in the regulations have been complied with) in the regulations. Failure to keep records or to provide the information would trigger the relevant penalty provisions as discussed in the previous section.

      Other enforcement matters

      5.13 The government recognises that sometimes there will be valid reasons why a platform operator is unable to meet various obligations. The government therefore proposes that a liability to a penalty should not arise if a platform operator can show that there was a reasonable excuse for failing to comply with the regulations or for providing inaccurate or incomplete information. As with other penalties, the platform operator will be able to appeal against a penalty determination in writing to the independent tax tribunal, giving grounds for the appeal.

      5.14 The guidance on enforcement of the model rules expects that jurisdictions will have rules requiring reporting platform operators to enforce the due diligence collection and verification requirements. It gives examples where platforms may prevent sellers from connecting to consumers via the platform or may withhold payment for their services if they do not provide the required information. The government expects platform operators to put appropriate contractual arrangements in place with their sellers to ensure that they provide the relevant details so that the due diligence requirements are met. The government does not propose any additional requirements to compel platform operators to put those contractual or other arrangements in place, since the proposed penalties would apply if due diligence procedures are not carried out correctly.

      5.15 Finally, jurisdictions are expected to introduce administrative procedures to verify compliance with due diligence and reporting requirements. HMRC already has administrative procedures to check that the information received from financial institutions and other reporting entities is accurate, complete and reported by the required deadlines. These procedures will also apply to information received from platform operators. In addition, the requirement to keep records and provide information as required to HMRC (see paragraph 5.12) should ensure that platform operators comply with their obligations. The government therefore does not consider that any other administrative procedures are needed to meet this expectation.

      5.16 The government welcomes views on whether the proposed penalty approach is reasonable, proportionate and effective in ensuring that platform operators comply with the model rules and that the rules are implemented effectively. The government will consider stakeholder views in determining the details of the penalty regime and will include further details in draft regulations when they are published for consultation.

      6. Assessment of impacts

      The summary of impacts below was published at Spring Budget 2021 as part of the Tax Information and Impact Note for the measure on Reporting rules for digital platforms.

      Exchequer impact (£m)

      2020 to 2021 2021 to 2022 2022 to 2023 2023 to 2024 2024 to 2025
      Empty Empty Empty Empty Empty

      The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at a future fiscal event.

      Economic impact

      This measure is not expected to have any significant macroeconomic impacts.

      Impact on individuals, households and families

      The measure is not expected to have an impact on individuals who use digital platforms to buy goods or services.

      This measure is not expected to have an impact on family formation, stability or breakdown.

      Equalities impacts

      It is not anticipated that there will be impacts for groups sharing protected characteristics.

      Impact on businesses and Civil Society Organisations

      This measure is likely to significantly increase customer costs for some of the platform businesses affected. HMRC is working to understand these costs and the scope of any impacts better.

      The consultation process will also enable HMRC to establish the costs with more certainty.

      Digital Platforms

      This measure is expected to have a significant impact on UK digital platform businesses who will have to collect specific pieces of information about sellers, which some platforms will not already collect. UK platforms will have to verify that information using third party documentation, collate and report that information to identify the residency of the seller and the jurisdiction in which a property is located.

      There will be one-off costs which will include familiarisation with the change and could also include updating their website/software to collect more information, updating their IT and upskilling staff to provide information to tax authorities in XML schema format, upskilling staff to implement the new information collection and verification processes, and communicating the changes to sellers using the platform.

      Continuing costs could include digital platforms collecting more information than they currently do now from sellers on their platforms and sending that information to HMRC annually.

      Customer experience for digital platforms could be negatively affected as this change is complex and will require them to perform tasks they do not currently perform. Digital platforms were consulted in the OECD drafting process and HMRC will consult on new regulations in the UK and, in due course, issue clear guidance on how to comply with the new rules.

      The government will look to minimise burdens for platforms where possible, while also ensuring that the information reported is accurate and useful. There will also be an optional exemption for start-ups and a phasing in period for some of the obligations to help spread out the initial impact.

      Businesses including individuals who sell services or rent out property through Digital Platforms

      This measure is expected to have a significant combined impact on an estimated 2-5 million businesses who provide their services via digital platforms though the impact for each seller is expected to be small.

      Data, including bank account information if the platform holds that information, will be collected and provided to HMRC, and exchanged with other tax authorities when appropriate. This information will be used to identify and risk assess the individual or company.

      One-off costs will include familiarisation with the change and could include providing specific information and documents to digital platforms either when registering or as part of a verification process. This includes name, address, and tax identification number.

      There are not expected to be any continuing costs.

      Customer experience for these sellers is expected to improve as they will receive a copy of the information that has been submitted to a tax authority. This should help them to declare the right income and may make complying with their tax obligations easier.

      HMRC will use findings from their external research programme and from the consultation to estimate the number of businesses who will be affected by this measure more precisely. There is expected to be no impact on civil society organisations.

      Impact on HMRC or other public sector delivery organisations

      There is an estimated cost to HMRC of £21m including 24 Full Time Equivalent (FTE) required. However, the costs to HMRC are currently being developed further.

      Other impacts

      A Data Protection Impact Assessment will be undertaken for regulations introduced using this power.

      Other impacts have been considered and none has been identified.

      The government would welcome views from platform operators and sellers on whether the above impacts on businesses are realistic and accurate. It would also welcome any further details about the impact of collecting, verifying and reporting the required information to HMRC, particularly in terms of the costs that may be incurred, the time taken on additional processes, and the number of platforms and sellers that would be affected.

      Source: HM Revenue & Customs

    • Extended Loss Carry Back for Businesses

      The Government introduced legislation in Finance Act 2021 that provides a temporary extension to the loss carry back rules for trading losses of both corporate and unincorporated businesses.

      The current rules allow trading losses to be carried back one year without restriction. For accounting periods ending between 1 April 2020 and 31 March 2022, this is extended to three years, with losses required to be set against profits of most recent years first before carry back to earlier years.

      There is no change to the current one-year unlimited carry back of trade losses, however, for the extended relief, the amount of loss that can be carried back to the earlier 2 years of the extended period is capped for those 2 years. This is a cap of £2,000,000 of losses for all relevant accounting periods ending in the period 1 April 2020 to 31 March 2021 (financial year 2020). A separate cap of £2,000,000 applies for all relevant accounting periods ending in the period 1 April 2021 to 31 March 2022 (financial year 2021). Groups are subject to a group cap of £2,000,000 for each relevant period.

      Extended loss carry back claims must be made in a return, however, claims below a de minimis limit of £200,000 may be made outside a return. This means that any stand-alone or group company with losses capable of providing relief up to a maximum of £200,000 of losses, may make a claim in respect of a relevant accounting period without having to wait to submit its company tax return.

      Any stand-alone company or group company wishing to make a claim exceeding £200,000 must make the claim in their company tax return.

      Groups are subject to a group cap of £2,000,000 where any company is able to make a claim that exceeds the de minimis. Any de minimis claims for the relevant period will be taken into account in determining the total amount available for any claims in excess of the de minimis.

      Source: HM Revenue & Customs