Tax Policy

Malawi: New tax measures effective from July 2017

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On 15 August 2017 the Minister of Finance, Economic Planning and Development in his 2017/2018 Budget Statement announced new measures for both customs and domestic taxes. The domestic tax measures became effective on 1st July, 2017. Most of the measures were included in the 2017/18 Budget Statement and were implemented through the relevant Amendment Acts for 2017 that were published in the Official Gazette on 25 July 2017.

One of the major changes is to introduce harmonized tax-related penalties. A penalty is applied of 20% of the amount outstanding for late payment in the first month, plus interest on the amount outstanding equal to 5% plus the prevailing bank lending rate per annum for each month, or part of a month, the tax remains unpaid. A penalty of MWK 200,000 is charged for failing to comply with a notice, for giving incorrect information, for failing to keep records, books, or accounts, etc., plus MWK 50,000 per month, or part of a month, the failure continues. A penalty of MWK 300,000 applies for failing to furnish a return of income, a return of payments to shareholders, and certain other documents, plus MWK 50,000 per month, or part of a month, the failure continues.

A penalty applies amounting to 20% of the amount of tax unpaid as a result of an omission of income, an unlawful deduction/offset, an undue allowance claim, or the failure to deduct (remit) tax when required, plus interest on the amount unpaid equal to 5% plus the prevailing bank lending rate per annum for each month, or part of a month, the tax remains unpaid. A penalty is due amounting to MWK 200,000 or twice the amount of tax due or imprisonment for one year when the above violations are committed with the intent to defraud.

Some other important measures are also taken in the Act including removal of the restriction on the definition of interest income and the introduction of a 10% excise tax on television subscriptions. A new penalty of MWK 300,000 will be applicable for failure to submit VAT returns, plus MWK 50,000 per month, or part of a month, the failure continues.

Zambia: Revenue Authority extends tax amnesty period on interest and penalties

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The amnesty on interest and penalties which was introduced by the Zambia Revenue Authority (ZRA) on 24th April 2017, came to a close on 31st July 2017.

During this period, taxpayers were expected to submit outstanding tax returns and pay all principal tax liabilities for tax periods prior to 1st March 2017, after which all interest and penalties accrued for the said period would be waived in full. Taxpayers were expected to pay all outstanding principal liabilities within the amnesty period. In instances where taxpayers have not been able to settle the principal liabilities before 31st July 2017, the ZRA has offered an opportunity of settling such tax liabilities in installments by entering into Time-to-Pay-Agreements (TPAS) with taxpayers to be settled before 31st December 2017.

Notwithstanding this extension, the deadline for time-to-pay agreements remains 31st December, 2017 and all other rules will remain as announced by the commissioner general during the launch of the amnesty campaign on 24th April, 2017

Nigeria: Government clarifies 27 new industries and products to enjoy tax holiday under pioneer status

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The Federal Government gave clarifications on August 9, 2017 regarding businesses that would qualify to enjoy pioneer status under the extra 27 new industries and products for inclusion in the list of “pioneer industries” and “pioneer products”. Pioneer status is available to companies making investments in eligible industries and products. They can qualify for an exemption from company income tax for an initial period of 3 years to 5 years. This measure was approved by the Federal Executive Council (FEC) on August 2, 2017.

According to the Executive Secretary, Nigeria Investment Promotion Council (NIPC) pioneer status does not relate only to new industries or entrants to the economy. It can also be granted in a situation where the country did not even have an industry at all, or the industry did not have sufficient presence to contribute significantly to economic development. In trying to encourage the establishment or growth of the industry and the economy, the Nigerian government decided to look at its priority sectors in the Nigerian Industrial Revolution Plan, NIRP, and the Economic Recovery and Growth Plan, ERGP, by promoting the 27 industries and products in the approved status document. Businesses that have existed for several years in a specific sector may not get the pioneer status, unless those companies have ventured into a brand-new line of business covered under the list of 27 new industries and products.

The list of 27 industries and products issued on August 7, 2017 includes mining and processing of coal; processing and preservation of meat/poultry and production of meat/poultry products; manufacture of starches and starch products; processing of cocoa, manufacture of animal feeds; tanning and dressing of leather; manufacture of leather footwear, luggage and handbags; manufacture of household and personal hygiene paper products; and manufacture of paints, vanishes and printing ink and so on.

South Africa: SARS releases draft taxation amendment bill for public comment

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The National Treasury and the South African Revenue Service (SARS) published on 19 July 2017 for public comment the 2017 Draft Taxation Laws Amendment Bill (TLAB) and the 2017 Draft Tax Administration Laws Amendment Bill (TALAB). Together with the 2017 Draft Rates and Monetary Amounts and Amendment of Revenues Laws Bill (Rates Bill) published on 22 February 2017, these three draft Bills give effect to the tax proposals announced on Budget Day (22 February 2017), as published in the budget review.

The two draft Bills include most of the more complex and administrative tax proposals but exclude the proposals dealt with in the 2017 Draft Rates Bill, such as changes to the personal income tax brackets and rates and excise duties, and the introduction of the Health Promotion Levy.

Significant proposals contained in the 2017 TLAB include the removal of the foreign employment income tax exemption in respect of South African residents; measures to address the circumvention of anti-avoidance rules dealing with share buy backs, dividend stripping and contributed tax capital; measures to strengthen anti-avoidance rules relating to mining environmental rehabilitation funds; and the extension of controlled foreign company rules to interposed foreign trusts and foreign foundations.

Hong Kong: Government plans to introduce transfer pricing legislation by the end of 2017

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On 31 July 2017, the Hong Kong government released the consultation report on measures to counter base erosion and profit shifting (BEPS) by enterprises. Hong Kong indicated its commitment in June 2016 to implementing the BEPS package put forward by the Organisation for Economic Co-operation and Development (OECD). To take forward Hong Kong’s commitment, the Government held a consultation exercise from October 26 to December 31, 2016, to gauge views on the relevant implementation proposals.

The government welcomed the general support from the respondents for the proposed implementation strategy, which focuses on the four minimum standards set by the OECD (i.e. countering harmful tax practices, preventing treaty abuse, imposing a country-by-country reporting requirement and improving the cross-border dispute resolution mechanism) whilst maintaining Hong Kong’s simple and low tax regime. Having regard to the comments received, the authorities will fine-tune certain parameters of the proposals to address stakeholders’ concerns.

The government is pressing ahead with the preparatory work for the legislative exercise, with a view to introducing an amendment bill into the Legislative Council by the end of 2017.

Germany publishes revised guidance on CbC reporting requirements

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The Germany Federal Ministry of Finance (MoF) on 11 July 2017 issued guidance on the Country-by-Country (CbC) reporting requirements in line with BEPS Action 13 and the EU Administrative Assistance Directive as amended. If certain requirements are met by a taxpayer, CbC reports must be prepared for the first time for financial years starting on 31 December 2015.

Further, the MoF on 19 July 2017 has published a revised Decree on the type, content and scope of Transfer Pricing Documentation Regulations. The Decree provides additional guidance on the documentation measures as a result of the Act that implemented the three-tiered approach of the transfer pricing documentation requirement at the end of 2016, as recommended by the OECD under BEPS Action 13. Accordingly, the reviewed transfer pricing documentation regulations have immediate effect and are applicable for the first time for financial years starting on 31 December 2016.

Mexico: Tax authority launches online tax resolution service

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The Mexican ax authority has launched an online tax dispute resolution service. The project is a co-operation between the tax authority of the country and the tax administration service which allows people to submit their tax disputes digitally and manage them without going through the Attorney General’s office. The tax administration of the country considers that this will reduce the time and compliance costs of the taxpayers.