Tax Policy

Vietnam: National Assembly passes law on supporting SMEs

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On 12 June, the National Assembly passed the Law on the support of small and medium-sized enterprises (SMEs). The measure will help to improve the quality of growth and change the nation’s economic growth model.

Under the new law, SMEs include micro-enterprises and small- and medium-sized enterprises whose average number of employees with social insurance is less than 200 in the year. These companies must also meet one of the following two criteria:

  • Total investment capital of a maximum of US $ 10 billion (US $ 4.4 million) and a total annual turnover of US $ 100 billion; or
  • Companies must be operating in the fields of agriculture, forestry, fisheries, industry, construction, trade and services.

SMEs that meet these requirements can be eligible for various incentives, such as assistance with credit access, support for tax and accounting or support for the acquisition of production areas, among others. In addition, the new measures provide for specific support measures for innovative start-up companies and SMEs involved in industrial interconnection clusters and value chains in the area of production and processing.

The law will take effect from January 1, 2018.

Tanzania: 2017 Budget effective from July 1, 2017

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The Minister for Finance and Planning (MoFP) on 8 June 2017, issued to the National Assembly the estimates of government revenue and expenditure for 2017. The government plans to organise and spend TZS 31,712.0 billion in the 2017/18 budget.

The Budget reflects priorities to speed up economic growth to achieve middle income status, keep back revenue leakage and resource wastage, develop infrastructure, and reform government bureaucracy to boost service delivery. The Budget Bill 2017 has been published, pending tabling before the National Assembly for debate and approval. It is assumed that this Bill will be enacted into law later in the year. It will be effective from 1st of July 2017 as specified in the Bill. The overview of tax proposals contained in Budget 2017 are given below:

  • A 5% withholding tax (WHT) on payment made for specified minerals (minerals that a licenced dealer is authorized to deal with) or minerals supplied by a resident person.
  • A reduction of the corporate income tax rate (from 30 per cent to 10 per cent) applicable for new plants to assemble vehicles, tractors and fishing boats or outboard engines for those who have a performance agreement with the Government for the first five years from commencement of operations.
  • The bill provides for a rise in the threshold from TZS 15 million to TZS 30 million  to apply for tax relief on non-commercial motor vehicles.
  • A zero VAT rate is proposed for ancillary transport services in relation to goods in transit in Tanzania. This will reduce costs of transporting goods through Tanzania and will ultimately make Tanzanian ports more competitive.
  • An extension of time to submit VAT returns to the first working day following a weekend or public holiday when the due date falls on a Saturday, Sunday or a public holiday.
  • Tax exemption is proposed on machinery and plant used in textile, edible oil, leather and pharmaceutical (including veterinary) industries. It is geared towards promoting investments in small and medium scale industries.
  • The Bill also includes some amendments to the Excise (Management and Tariff) Act. A 5% excise duty increase is proposed on specific non-petroleum products, including alcohol, soft drinks and tobacco (except locally produced water, fruit juices and spirits).
  • A decrease of excise duty is proposed on locally produced fruit juices and wines.
  • An increase in excise duty on petrol, diesel and kerosene by TZS 40 per litre.
  • The Minister has proposed an increase of TZS 40 per litre in the excise duty on fuel.
  • An increase of 5% or 3,481 per litre in excise duty is proposed for imported spirits.

Ethiopia: Budget for 2017/18

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The Minister of State for Finance and Economic Cooperation presented the draft budget to Parliament on 8 June 2017.

The Council of Ministers proposed to spend 320.8 birrs (USD 13.8 billion), which is a rise of 2.02 billion (16.9%) over the current financial year. Of this total, approximately $ 4.9 billion is allocated to investment spending, while some $ 3.55 billion is scheduled for regular spending.

Over $ 5.08 billion (around 36.6%) is allocated to subsidies to regional states. About 303 million US dollars are made available to implement the goals of sustainable development (SDGs).

The State Secretary said that the draft budget was designed to take into account socio-economic activities and the impact of the continental and global economic situation as well as the promises of the international donors.

After discussion, Parliament referred the draft budget to the committee for budgetary and financial matters for further consideration. It is expected to be approved by the end of June 2017.

Hong Kong: Inland Revenue (Amendment) (No. 2) Ordinance 2017 gazetted

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Inland Revenue (Amendment) (No. 2) Ordinance 2017 (Amendment Ordinance) was gazetted June 16 and will come into effect on July 1, 2017. The Amendment Ordinance enables Hong Kong to implement automatic exchange of financial account information in tax matters (AEOI) more effectively.

As an international financial centre Hong Kong has been committed to enhancing tax transparency and combatting cross-border tax evasion. Hong Kong has been making preparations for the implementation of the common reporting standard for AEOI as set out by the Organisation for Economic Cooperation and Development (OECD). At the same time, both the OECD and the European Union (EU) have been closely monitoring jurisdictions’ progress in the implementation of AEOI.

The Amendment Ordinance can ensure that Hong Kong preserves the financial account information from the second half of 2017 for exchanging with other jurisdictions. This enables the effective implementation of AEOI without introducing an undue compliance burden to financial institutions.

To implement AEOI, from July 1, 2017, the list of “reportable jurisdictions” under the Inland Revenue Ordinance will be expanded to cover 75 jurisdictions, comprising 13 confirmed AEOI partners and 62 prospective AEOI partners. The 62 prospective AEOI partners include the following three categories:

(a) jurisdictions which have expressed an interest in conducting AEOI with Hong Kong or jurisdictions suggested by the OECD;

(b) Hong Kong’s tax treaty partners which have committed to AEOI; and

(c) all member states of the EU.

The Amendment Ordinance does not alter the privacy and data protection requirements on AEOI under the Inland Revenue Ordinance. Hong Kong would only conduct AEOI with jurisdictions which have signed dedicated exchange agreements with Hong Kong and have fulfilled the OECD’s standard and relevant safeguards for protecting data privacy and confidentiality of the information exchanged.

Canada: Minister announces consultations on changes to the Voluntary Disclosures Program

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The Canadians pay their tax shares and expect a responsive and fair tax system. Unfortunately, some rich Canadians continue to find ways to not pay what they owe, which places an unfair burden for this country.

The Canadian Government and the Canada Revenue Agency (CRA) have taken action by highlighting resources in the highest risky areas, both domestically and internationally. The Minister of National Revenue, Diane Lebouthillier, on 9th of June 2017, announced an online consultation to give Canadians a say about the CRA proposed changes to tighten its Voluntary Disclosures Program.

The proposed changes to the Voluntary Disclosures Program (VDP) follow an extensive review of the program that was completed over the past months in response to the recommendation by the Standing Finance Committee. The proposed changes to the Voluntary Disclosures Program contains:

  • narrowing the criteria of who is eligible;
  • confirming that severe cases of non-compliance do not benefit from the same level of penalty and interest relief;
  • ensuring that requests that reveal proceeds of crime are excluded from relief; and
  • requiring payment of the estimated taxes owing as a condition to qualify for the program.

Voluntary Disclosures Program applies to disclosures relating to income tax, excise tax, excise duties under the Excise Act, 2001, source deductions, GST/HST and charges under the Air Travelers Security Charge Act and the Softwood Lumber Products Export Charge Act, 2006. The CRA’s online consultations on the Voluntary Disclosures Program will be open for 60 days. The CRA will announce changes to the program in the fall of 2017. The Voluntary Disclosures Program gives taxpayers a chance to voluntarily come forward and correct preceding omissions in their dealings with the CRA.

A new guidelines was proposed by the Canada Revenue Agency (CRA) to limit voluntary disclosures program’s use. Large Canadian companies would no longer be allowed to qualify for the program regarding income tax matters according to these proposed changes. But, some relief remains present for GST/HST matters. Additionally, the CRA has proposed to give only reduced relief in some cases. To show the eligibility for the program, taxpayers would have to pay their estimated taxes at the time of submitting an application. The CRA is inviting public comments on its proposed changes on or before 8th of August 2017. The official announcement of the amendments to the voluntary disclosures program would be announced in the fall of 2017, with effect for 2018.

Brazil: The Federal Government establishes the Special Tax Regularization Program

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On 31st May 2017 the Federal Government published Provisional Measure No. 783, which established the Special Tax Regularization Program (PERT). Under the program’s rules, taxpayers may settle debts with the Federal Revenue Service and the Attorney General of the National Treasury, due by April 30, 2017.

Membership of PERT may be made through a request to be made by August 31 of 2017 and will cover debts indicated by the taxable person, in the condition of taxpayer or responsible, even if they are in administrative or judicial discussion, as long as the taxpayer has previously withdrawn from the litigation. Likewise, the taxpayer may include in this program debts that have already been included in other installments.

The PERT allows the taxpayer to opt for one of four modalities:

  1. Exclusively for debits in the Revenue, the taxpayer can choose the cash payment, with a minimum of 20% of entry and the remainder to be paid with credits of tax loss and Base of Negative Calculation of the Social Contribution on the Net Income (CSLL).
  2. For debts in the Revenue and in the Attorney of the National Treasury, the option may be by installment in 120 installments, without reductions, being:
  • 4% of the debt in installments 1 to 12;
  • 5% of the debt in installments 13 to 24;
  • 6% of the debt in installments 25 to 36;
  • Installment of the remaining balance 84 times, as of the 37th month.
  1. Also for debts in the Revenue and in the Office of the Attorney General of the National Treasury, an option can be made for the payment of 20% in 2017, in 5 installments, without reductions, and the remainder under one of the following conditions:
  • Discharge in January 2018, in a single installment, with reductions of 90% interest and 50% of fines; or
  • Installments in up to 145 installments, with reductions of 80% of interest and 40% of fines; or
  • Installments in up to 175 installments, with reductions of 50% of interest and 25% of fines, with installments corresponding to 1% of the gross revenue of the previous month, not lower than 1/175.
  1. Finally, for debts of less than R $ 15 million under the Revenue and the Attorney of the National Treasury, the taxpayer may choose to pay 7.5% in 2017, in 5 installments, without deductions, and the remainder to be paid Under one of the following conditions, with cumulative use, in this order, of reductions in additions and the utilization of credits:
  • Payment in full in January 2018, with reductions of 90% interest and 50% of the fines and use of credits of Tax Loss and Negative Calculation Base or other own tax credits administered by the Internal Revenue Service; or
  • Installments in up to 145 installments, with reductions of 80% of interest and 40% of fines and use of credits of Tax Loss and Negative Calculation Base or other tax credits managed by the Federal Revenue Service; or
  • Installments in up to 175 installments, with installments corresponding to 1% of the gross revenue of the previous month, not less than 1/175, with reductions of 50% of interest and 25% of fines and use of credits of Tax Loss and Base of Negative calculation or other own credits of taxes administered by the IRS.

New Zealand: Budget for 2017

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The budget for 2017 was passed by Parliament on 26th May 2017. The Budget bill contains changes to tax thresholds and to Working for Families. The changes will come into effect on 1 April 2018.

The changes are given below:

Income tax thresholds: Income tax threshold increases the $14,000 to $22,000, and the $48,000 threshold to $52,000. This provides a tax reduction of $11 a week to people earning $22,000 or more rising to $20 per week for anyone earning $52,000 or more.

Family Tax Credit: The Family Tax Credit rates increases for the first child under 16 by $9 a week, and for each subsequent child under 16 by between $18 and $27 a week. Also increases the abatement rate to 25% and reduces the abatement threshold to $35,000.

Housing supplement: The accommodation supplement goes up by between $25 and $75 a week for a two person household and for larger households by between $40 and $80 a week.

Accommodation Facilities: Accommodation Benefit Increases weekly payments by up to $20 for students to reflect increasing housing costs for students.

Rail: $548 million investment in the rail network with KiwiRail, including $98 million for the Wellington Commuter Rail Network.

Economy: The Treasury forecasts economic growth of 3.1% in the June 2017 year to peak at 3.8% in 2019, before easing back.

Education: Invest $1.1 billion for schools and early childhood centres, roll growth and demand, and an increase in operational grant funding for schools.

Independent Earner Tax Credit: Independent Earner Tax Credit will be discontinued. Those claiming it are fully compensated by the tax threshold adjustments.