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.
India: CBDT publishes a draft notice on special transitional provisions for a foreign company based in India
The Finance Ministry on 15 June 2017, issued a draft notification of transitional provisions for foreign companies in the first year of becoming resident based on their place of effective management.
The notification has clarified that the tax on foreign companies qualifying as resident firms due to their place of effective management (POEM) will be the same as that for any foreign company and will be imposed at a rate of 40%.
The draft notification by the Central Board of Direct Taxes (CBDT) provides exceptions, modifications and adaptations for computation of total income, treatment of unabsorbed depreciation, set off or carry forward of losses, collection, recovery and special provisions for tax avoidance.
The notification, once finalised, will come into effect from April 1, 2017.
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:
- 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).
- 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.
- 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.
- 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.
Mexico has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) on 7th June 2017. The signing of the MLI will modify over 1,100 international treaties by more than 68 countries aimed to avoid double taxation and tax evasion, including those treaties previously signed by Mexico. The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide. The OECD’s goal is to lessen tax avoidance by Multinational Groups emerged from forceful International Tax and Transfer Pricing positions, which, as per OECD estimations, ranges from 100 to 240 billion dollars every year.
The signing of the MLI effectively concludes the objective put forward by Action 15 of the BEPS Plan, and is without a doubt a watershed moment relating to International Tax. It is accordingly fundamental for Multinational Groups to assess the adequacy of their Transfer Pricing and International Tax policies to the new worldwide condition.
The Ministry of Finance announced in a statement on 7 June 2017, that Mauritius will sign the OECD Multilateral Agreement to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) by the end of June 2017. The agreement will amend bilateral tax treaties to include measures recommended by the OECD project on BEPS.
About 70 countries at all levels of development have signed this Multilateral Instrument (MLI) at the OECD Centre in the presence of Secretary-General OECD. A number of jurisdictions have also expressed their intention to sign the MLI as soon as possible and other jurisdictions are also actively working towards participation in the multilateral instrument.
With regards to Double Taxation Avoidance Agreements that will not be covered by the Multilateral Convention, discussions will be held on a bilateral basis with the concerned countries to ensure the country’s compliance with the BEPS recommendations while safeguarding the legitimate interests of Mauritius.
Previously in June 2015 Mauritius also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, jointly developed by the Council of Europe and the Organization for Economic Cooperation and Development (OECD). Mauritius is equally a member of the Early Adopters Group committed to the early implementation of the Common Reporting Standard on the automatic exchange of financial account information.
Moreover, the country was the first in Africa to have signed up to the Intergovernmental Agreement with the United States for the implementation of the Foreign Accounts Tax Compliance Act.
In view of further supporting its pledge as a cooperative IFC, Mauritius has actively participated in the Ad-Hoc Group set up by the OECD to work on the drafting of the Multilateral Instrument as recommended under Action 15 of the BEPS Report. More recently, the country equally joined the Inclusive Framework to implement the BEPS Recommendations and the new initiative on the exchange of Beneficial Ownership information.
On 8 June 2017, the Prime Minister and Minister of Finance and Economic Development delivered the Budget speech for 2017-18 to the parliament with little change to economic policy. Key points of the budget are summarised below:
Reduced corporate tax rate on profits from the export of goods: Profits from exports of goods will be taxed at the lower rate of 3%, instead of 15%.
Tax Holidays: An 8-year income tax holiday has been introduced for new companies engaged in the manufacturing of pharmaceutical products, medical devices and high tech products; and for companies engaged in the exploitation and use of deep ocean water for providing air conditioning installations, facilities and services.
Tax Incentives: A tax incentive has been introduced for research and development in the form of an accelerated capital allowance of 50% that will apply to capital expenditure incurred on research and development.
A 200% tax deduction is available for:
- Qualifying expenditures on research and development if the expenditure relates to the current business of the taxpayer, applicable for 5 income years from 2017/2018 to 2021/2022;
- Expenses incurred in relation to deep ocean water air conditioning for a period of 5 consecutive years; and
- Expenditure on the acquisition and setting up of water desalination plants.
Transfer of non-incurred tax losses: As in the case of the transfer of losses in takeovers or mergers, unrelieved income tax losses brought forward are to be made available to compensate future taxable income where there is a change in the shareholding of a manufacturing company of more than 50%, provided that conditions relating to the public interest, such as securing employment, are met.
Bulgaria has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). More than 68 countries, including Bulgaria, signed the Convention on 7 June 2017 at Paris.
The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.
The Convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6.
The Convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD.