A decision was made and governed by an Israeli District Court that when an Israeli company gained IP ownership and shortly thereafter its employees and other assets (with IP) to a related party, the transfer should be counted as a sale for whole business doing. Also, in that case, IP value was also well-defined and it was resulting from the share acquisition (from Israeli companies) price for tax purposes.
For the first time, the court ruling notices that this type of transaction occurs in acquisitions of Israeli companies where the employees and assets (including IP) are shifted as well as it creates a capital gain. The Court also give its explanation regarding transfer pricing principles, which notifies the way of describing the essence, the chance of assets being transferred and the way of selecting the price of those assets.
On July 1, 2017, the Federal Board of Revenue (FBR) amended the rules in SRO 583 (I) / 2017 as regards the payment of increased sales tax by the steel industry. The FBR has increased the sales tax to 10.5% from 9% for the consumption of each distinct amount of electricity consumed for the production of steel bolts, raw blocks and mild steel products without stainless steel.
However, the payment of the sales tax of 10.5% per electricity unit is the final discharge of tax for the steel circulation plants and composite units of melting and re-rolling including their preheating sections, which are powered by other fuels than electricity.
The FBR also increased the sales tax rate for ship breakers. They will now pay sales tax of Rs 8,500 per ton, increased from earlier rates of Rs 8,000 per metric ton, on re-rollable scrap and other materials obtained from ship breaking.
The Inland Revenue Department (IRD) plans to launch an Automatic Exchange of Information (AEOI) portal from 3 July 2017, according to a spokesman for the IRD. The portal would be used for financial institutions to furnish notifications and file returns in relation to the reporting of financial account information for automatic exchange of financial account information (AEOI) purposes.
Financial institutions have to register under the AEOI Portal in order to use the online services. The users are required to use their e-Cert (Organisational) with AEOI Functions for the purposes of authentication so as to ensure confidentiality of the data being transmitted.
A financial institution maintaining reportable accounts on or before 3 July 2017 is required to register under the AEOI Portal and submit a notification of commencement of maintaining reportable accounts no later than 3 October 2017. Financial institutions who commence to maintain any reportable accounts after 3 July 2017 should submit the required notifications through the AEOI Portal within three months from the commencement of maintaining such accounts.
The IRD has organised seminars to familiarize financial institutions with the operation of the AEOI Portal. The Portal can be accessed through https://aeoi.ird.gov.hk from 3 July 2017.
Three orders made by the Chief Executive in Council under the Inland Revenue Ordinance to implement the Comprehensive Agreements for the Avoidance of Double Taxation (CDTAs) with Latvia, Belarus and Pakistan respectively were gazetted on June 30 2017.
The CDTAs ensure that investors will not have to pay tax twice on a single source of income. The CDTAs will bring tax savings and a greater certainty on taxation liabilities for investors from the respective treaty partner countries when they engage in trade and investment activities with Hong Kong and vice versa.
The three orders will be tabled at the Legislative Council on July 5 2017 for negative vetting. The CDTAs will enter into force after both Hong Kong and the treaty partners have completed their ratification procedures. Hong Kong signed the CDTAs with Latvia, Belarus and Pakistan in April 2016, January 2017 and February 2017 respectively.
The Department of Finance (DoF) declared that, the proposed second package of the Comprehensive Tax Reform Program (CTRP) will be submitted to the Congress by the fourth quarter of the year. According to the DoF government’s plan to introduce a fuel marking and monitoring system in the local downstream oil industry as a way to curb fuel smuggling that has been costing the government an estimated P26.9 billion to P43.8 billion in foregone revenues each year.
The comprehensive tax reform package proposed by the executive department requires considerable cuts in personal income tax rates, extension of the value added tax base, and adjustments of excise taxes on oil, automobiles and other products. The original proposal is expected to generate P162.5 billion.
The key features of the substitute bill include the following:
- Lower PIT rates as proposed by the DOF but indexed to cumulative Consumer Price Index (CPI) inflation every three years;
- A flat rate of 6% for the estate and donor’s taxes;
- Broadening the tax base by removing special laws on VAT exemptions, including those for cooperatives, housing and leasing, but retaining exemptions for senior citizens and persons with disabilities;
- Staggered “3-2-1” excise tax increase for petroleum products from 2018 to 2020 but with no indexation to inflation, and liquefied petroleum gas (LPG) used as feedstock to be exempted from the hike;
- A five-bracket excise tax structure for automobiles with a two-year phase-in period for the tax increases;
- A tax on sugar-sweetened beverages or SSBs equivalent to P10 per liter; and
- Earmarking of 40% of the proceeds from the fuel excise tax increase for social protection programs for the first three years of the tax reform measure’s implementation.
On 21 June 2017, the OECD published a new list of countries and jurisdictions participating in the Inclusive Framework on Base Erosion and Profit Shifting (BEPS). Based on this list, Vietnam has become the 100th jurisdiction to join the Inclusive Framework (IF) on BEPS.
BEPS refers to tax avoidance strategies that use gaps and mismatches in tax regulations to shift the profits artificially too low or non-tax locations. Within the framework of the IF, over 100 countries and jurisdictions work together to implement the BEPS measures and combat the BEPS.
On 23 June 2017 the Hong Kong SAR Government published in the Gazette the Inland Revenue (Amendment) (No. 4) Bill 2017 to implement the 2017-18 Budget initiative of extending profits tax exemption to privately offered open-ended fund companies (OFCs) with their central management and control exercised in Hong Kong.
The Bill seeks to create a level playing field for all kinds of OFCs by allowing onshore privately offered funds, like the offshore ones, to enjoy profits tax exemption. Hong Kong considers that the Bill would be conducive to enhancing Hong Kong’s competitiveness in respect of the domiciliation of privately offered funds in the form of an OFC, thereby generating demand for services along the whole fund service chain. This would help strengthen Hong Kong’s position as an international asset management centre and foster the further development of the financial services industry.
The legal framework for the OFC structure was enacted by the Legislative Council (LegCo) in June 2016 by way of the Securities and Futures (Amendment) Ordinance 2016. This is a key initiative to help diversify Hong Kong’s fund domiciliation platform and build up fund manufacturing capabilities. An OFC is a collective investment scheme with variable capital set up in the form of a company, but with the flexibility to create and cancel shares for investors’ subscription and redemption in the funds, which is currently not enjoyed by conventional companies. Also, OFCs will not be bound by restrictions on distribution out of capital applicable to conventional companies, and instead may distribute out of capital subject to solvency and disclosure requirements. The Bill aims to complement the OFC initiative by providing a more facilitating tax environment for OFCs.
The Bill was introduced into LegCo on 28 June 2017.