The Minister of Finance has published the tax proposals on 3 June 2016 in the Finance Bill 2016 as part of the annual budget for fiscal year 2016/17. The main details of the Budget on income taxes are summarized below:
The following measures relate to corporate tax:
-From 1 July 2016, the corporate income tax rate will be reduced to 31%.
-The Economic Coordination Committee proposed that tax concessions are to be granted to the concession holder and its operating companies. Therefore, businesses must be established in the Free Zone, and contractors and sub-contractors of the concession holder must comply the concession agreement.
-In order to encourage the new industry, the credit will be increased to 2% from 1% and the date for setting up an industrial undertaking extended to June 2019. The tax credit period for companies investing in the purchase of plant and machinery for the purposes of balancing, modernization and replacement has been extended from June 2016 to June 2019.
-Presently, a 100% tax credit on tax payable is allowed if 100% fresh equity is raised through the issuance of new shares. This tax credit is granted for a period of 5 years from the date of commercial production.
-The Budget also introduced transfer pricing documentation requirement. A taxpayer who has entered into a transaction with associated enterprises must maintain master and local files as well a CbC report. A taxpayer also needs to furnish the transfer pricing documentation and the CbC report within 30 days upon request. A 45-day extension may generally be obtained from the Commissioner.
