Policy announcements by legislature
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.
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.
The draft bill implementing EU Council Directives 2016/881 regarding mandatory automatic exchange of tax related information (EU CbC reporting) was submitted to the Greek parliament on July 21, 2017.
The Parliament of Greece introduced a draft Law 4484/2017 on July 20, 2017 that amends to the Corporate Income Tax Law L.4170 / 2013 and 4474/2017. The suggested amendments contain additional transfer pricing documentation requirements corresponding to the European Union (EU) Guidance 2016/881. In accordance with the draft law, the country-by-country (CbC) reporting will be applicable for business years beginning on or after January 1, 2016.
Greek tax resident entities those are members of a multinational enterprise (MNE) group, with a consolidated group turnover more than Euro 750 mil in the fiscal year previous the fiscal year to which the CbC report applies will have to file the report. The draft law requires that the reporting entity notification is made for domestic subsidiaries and permanent establishments of non-EU MNEs to the Greek tax authorities by December 31, 2017 (for those entities whose fiscal year ended December 31, 2016). The report is required to be provided to the tax authorities within 15 months after the last day of the tax year it refers to. However, the first CbC report will need to be submitted by June 30, 2018 for MNEs with a fiscal year ended on 31 December 2016. Also, CbC report should be prepared in Greek or any other official language of the EU. The report has to cover group revenue, earnings before income tax, income tax paid, Income tax accrued, Shared Capital, Accumulated earnings.
Failure to submit accurate CbC report is sanctioned with monetary penalty (apart from the consequence of the unfavorable risk assessment increasing the probability of a full scope tax audit). The penalty amounts Euro 10,000 is charged in case of non-filing and Euro 5,000 is imposed on late or inaccurate filing.
The chamber of deputies approved a legislation that implements a new information exchange duty, i.e. country-by-country (CbC) reporting into Czech legislation. The legislation will be effective when all legislative and processes are done. According to the legislation, companies those are members of a multinational enterprise (MNE) group, with a consolidated group turnover more than Euro 750 mil in the fiscal year have to file the CbC report. The report is required to be submitted within 12 months after the end of the period.
The GST Council held its 14th meeting in Srinagar on 18 May 2017 and 19 May 2017. In the meeting, the GST council has approved seven GST rules relating to Registration, Invoice, and Valuation, Input Tax Credit, Payment, Refund and Composition.
The GST Council has broadly approved the GST rates for about 1211 items along with the GST rates for services at a nil rate, 5%, 12%, 18% and 28%. The Council has also approved the GST Rate Schedule for Services to be taxed under a Reverse Charge along with the rates of GST Compensation Cess to be levied on certain goods.
The GST Council has finalised the following tax rates under GST:
0% tax (No tax):
- Goods and foods: No tax (0%) will be imposed on items such as jute, fresh meat, fish chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, bindi, Sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, bones and horn cores, bone grist, bone meal, etc.; hoof meal, horn meal, cereal grains (hulled), palmyra jaggery, salt (all types), kajal, children’s picture, drawing or colouring books, or human hair.
- Services: Hotels and lodges with tariff below Rs 1,000 have been exempted from GST. Rough precious and semi-precious stones will attract a GST rate of 0.25 per cent.
- Goods: Items such as fish fillet, apparel below Rs 1000, packaged food items, footwear below Rs 500, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene, coal, medicines, stent, lifeboats, cashew nuts, cashew nuts in the shell, raisins, ice and snow, biogas, insulin, agarbatti, kites, postage or revenue stamps, stamp-post marks, first-day covers.
- Services: Transport services (railways, air transport) and small restaurants will be under the 5% category because their main input is petroleum, which is outside GST ambit.
- Goods : Apparel above Rs 1000, frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, Bhutia, namkeen, Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, cellphones, ketchup and sauces, all diagnostic kits and reagents, exercise books and note books, spoons, forks, ladles, skimmers, cake servers, fish knives, tongs, spectacles (corrective), playing cards, chess boards, carom boards and other board games, like ludo,
- Services: State-run lotteries, non-AC hotels, business class air ticket, fertilisers and work contracts will fall under 12 per cent GST tax slab.
- Goods: Most items are under this tax slab which includes footwear costing more than Rs 500, Trademarks, goodwill, software, bidi patta, biscuits (all categories), flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, tampons, note books, steel products, printed circuits, camera, speakers and monitors, Kajal pencil sticks, Headgear and parts thereof, Aluminium foil, Weighing Machinery (other than electric or electronic weighing machinery), printers (other than multifunction printers), electrical transformers, CCTV, optical fiber, bamboo furniture, swimming pools and paddling pools, curry paste; mayonnaise and salad dressings; mixed condiments and mixed seasonings
- Services: AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will attract 18 per cent tax under GST. Also included in this category are room tariffs between Rs 2,500 and Rs 7,500 and restaurants inside five-star hotels.
- Goods: Bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala, aerated water, paint, deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, and aircraft for personal use will attract 28 per cent tax slab under GST.
- Services: Private-run lotteries authorised by the states, hotels with room tariffs above Rs 7,500, 5-star hotels, race club betting and cinemas will attract tax 28 per cent tax under GST.
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.