- Newsletter
- June 23, 2016
RIYADH: Saudi Arabia has completed the process for endorsing the WTO Trade Facilitation Agreement.
The Kingdom is the second country to endorse the treaty, according to the Ministry of Commerce and Investment, local media reported on 15.06.2016.
Minister of Commerce and Investment Majed Al-Qassabi said on 14.06.2016 that the agreement is one of the most important trade accords with the WTO.
The agreement seeks to ease the procedures and documentation demands that are required by authorities and government parties concerned with exporting and importing to bring them in line with world standards without compromising government-established monitoring systems.
This will include the removal of obstacles to commercial movements across borders.
He said that this will benefit small and medium-size enterprises that Saudi Arabia is very keen to promote in light of Vision 2030, adding that this will also increase transparency in the market.
Ahmad Al-Haqabani, foreign trade undersecretary of the ministry, said that studies by the WTO and World Bank support the application of this agreement and state that the new measures will reduce the cost of international trade by one percent.
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- Newsletter
- June 23, 2016
The Financial and Economic Cooperation Committee in the Gulf Cooperation Council will hold an extraordinary meeting in Riyadh, Saudi Arabia, 24.05.2016 to discuss the introduction of taxes.
The official Saudi Press Agency (SPA) reported that the meeting will discuss a number of topics, including the recommendations regarding the draft of a unified agreement on value added tax (VAT) and selective taxes in GCC member states.
It is expected that the Gulf states will introduce VAT of five per cent to by 2018 to combat the reduction in revenue due to the drop in oil prices. This will be the first time such a tax will be introduced in the region.
Last November, GCC states agreed to impose a selective tax on tobacco.
The Gulf Cooperation Council consists of six countries: Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman.
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- Newsletter
- June 23, 2016
New Delhi: India announced on 20.06.2016, sweeping reforms to rules on foreign direct investment, opening up its defence and civil aviation sectors to complete outside ownership and clearing the way for Apple to open stores in the country.
The move comes two days after central bank governor Raghuram Rajan, a darling of financial markets but under pressure from political opponents at home, announced he would not seek another term, a surprise move that raised concerns about whether reforms he set in motion will stall.
Prime Minister Narendra Modi hailed the changes to the foreign direct investment (FDI) rules, stressing his government’s reform credentials. He tweeted that the changes would make India “the most open economy in the world for FDI” and provide a “major impetus to employment and job creation”.
“These changes are fairly significant, particularly if you look at them in the context of what happened over the weekend with Governor Rajan’s decision to step down,” said Shilan Shah, India economist at Capital Economics in Singapore.
“It might be the government’s way to illustrate its commitment to reforms and mitigate any investor fallout following Rajan’s decision.”
The last time Modi’s government announced a loosening of FDI norms was after his nationalist political party suffered a heavy defeat in a state election last autumn.
The new reform measures also relax restrictions on inbound investments in pharmaceuticals and single-brand retail.
Apple is expected to be a beneficiary of a three-year relaxation India is introducing on local sourcing norms with an extension of up to five years possible if it can be proven that products are “state of the art”.
“We will inform Apple to indicate whether they would like to avail new provisions,” Rajesh Abhishek, secretary of the Department of Industrial Policy and Promotion, told a news conference.
Other single-brand retailers like furniture giant IKEA also stand to benefit.
Defence contractors that have been reluctant to transfer technology to manufacture equipment in India would get the right to own local operations outright, with government approval, up from a cap of 49 per cent previously.
In other changes, India allowed 100 per cent FDI in civil aviation, following on launch of a new policy that lowered barriers to entry for airlines that want to fly international routes.
The government also allowed foreign companies to own up to 74 per cent in ‘brownfield’ pharmaceuticals projects without prior government approval. India already allows 100 per cent ownership of greenfield pharma businesses.
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- Article
- June 23, 2016
This is an update to the attached Tax alert sent on June 9, 2016 with regard to the grace period of implementing the revised UAE Commercial Companies Law (CCL) that was coming to an end in June. The UAE Cabinet recently approved a proposal by Sultan bin Saeed Al Mansouri, Minister of Economy, to extend the period for existing companies in the UAE to comply with the law to one year. The adjustment of positions now starts from July 1, 2016 and ends on 30 June, 2017.
The extension came after Al Mansouri received several requests from the Securities and Commodities Authority, the Departments of Economic Development across all the emirates, and a number of existing companies in the UAE to have more time to adjust to the new law given the substantial time needed to complete the statute amendments and obtain government approvals and the effort required for holding general assemblies for some companies.
During this period companies covered by the new Commercial Companies Law are requested to make the necessary adjustments in accordance with the law’s provisions.
Notice:
In case of Late Adjustment companies will be fined Dh2,000 per day of delay calculated from the day following the expiry date of the applicable period for such purpose as per article 357.
Should existing companies fail to adjust their positions within the extended grace period, the company shall be deemed as dissolved in accordance with the provisions of this Law.
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- Article
- April 23, 2016
- Newsletter
- April 16, 2016
India and Maldives signed two new tax agreements on April 11, 2015, for the exchange of information in tax matters and for the avoidance of double taxation of income from international air transport.
The tax information exchange agreement is based on international standards on transparency and exchange of information. The Indian Government said it covers taxes of every kind and description imposed by both territories, and enables the exchange of information, including banking information.
The second Agreement provides for relief from double taxation for the airlines of India and Maldives by way of an exemption for income from the operation of aircraft in international traffic. Under the deal, profits from the operation of aircraft in international traffic will be taxed in one country alone; the taxing right will be conferred upon the country to which the enterprise belongs. The agreement includes Mutual Agreement Procedure provisions, to help resolve any disputes surrounding the agreement’s application.
- Newsletter
- April 16, 2016
Chile and Uruguay concluded a second round of negotiations towards a free trade agreement (FTA) on April 12, 2016, according to a statement from Chile’s Directorate General of International Relations (DIRECON).
Experts from both countries discussed various issues related to the proposed agreement, including access to goods, rules of origin, trade in services, technical barriers to trade, and trade facilitation.
The two countries are already part of the Economic Complementation Agreement between Chile and Mercosur (ACE 35), which entered into force on October 1, 1996. The agreement also includes Argentina, Brazil, and Paraguay.
Trade between Chile and Uruguay during 2015 totaled USD349m, according to DIRECON. Chilean exports to Uruguay in that period reached USD149m, while imports totaled USD200m.
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- Article
- April 16, 2016
The European Commission has released an Action Plan on VAT, setting out plans for the next two years to modernize European Union value-added tax (VAT) rules.
By the end of 2016, the Commission is to propose legislation that would extend the current One Stop Shop concept to all cross-border e-commerce, including distance sales. It will also introduce common EU-wide simplification measures to help small start-up e-commerce businesses, and streamline audits for companies engaged in the sector. In line with the OECD’s recommendations in its Action 1 report on the tax challenges of the digital economy, it will also remove the VAT exemption for the importation of small consignments from suppliers in third countries.
Further, the Commission will seek to improve cooperation between tax administrations including from non-EU countries and with customs and law enforcement bodies, to strengthen tax administrations’ capacity for a more efficient fight against fraud. A report evaluating the Directive on the mutual assistance for the recovery of tax debts will also be released. This work will be taken forward in 2017 also, alongside a proposal to enhance VAT administration cooperation and bolster Eurofisc, the anti-fraud agency.
The Commission will also ensure that member states have greater freedom on setting value-added tax rates, including providing for technology-neutral VAT treatment for digital economy supplies, by allowing the same VAT treatment for the digital equivalents of traditional supplies (for example, for e-books and tangible books).
The VAT Directive sets out general rules limiting member states’ freedom to set VAT rates. Rules on tax rates were designed over two decades ago in the context of a definitive VAT system based on the origin principle. They were intended to guarantee, above all, the neutrality, simplicity, and workability of the VAT system and featured, notably, lower limits on the levels of the VAT rates and a list of the goods and services which could benefit from reduced rates.
The Commission has proposed that member states could be granted greater autonomy on setting VAT rates, subject to appropriate safeguards to prevent excessive complexity and distortion of competition, and to ensure that the operation of the Single Market is not affected.
The Commission has put forward two options for giving member states more freedom. However, the degree of autonomy on rates to be granted to member states is not purely a technical matter, but requires political discussion, the Commission said. The Action Plan aims at initiating such political discussion with the member states in the Council, as well as in the European Parliament, to allow the Commission to submit, in 2017, detailed legislative proposals based on a mandate from the Council.
Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, said: “Today, we are starting a dialogue with the European Parliament and the Member States for a simpler and more fraud-proof VAT system in the EU. Every year, cross-border VAT fraud costs our Member States and taxpayers about EUR50bn (USD57bn). At the same time, the administrative burden for small businesses is high and technical innovation poses new challenges for VAT collection. This Commission has already proposed clear measures to address corporate tax avoidance, and we will be equally decisive in tackling VAT fraud.”
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “VAT is a major source of tax revenue for EU member states. Yet we face a staggering fiscal gap: the VAT revenues collected are EUR170bn (USD193.6bn) short of what they should be. This is a huge waste of money that could be invested on growth and jobs. It’s time to have this money back. We are also keen to grant member states more autonomy on how to define their VAT reduced rates. Our Action Plan will deliver on each of these points.”
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- Article
- April 9, 2016
The OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters entered into force in respect of Saudi Arabia on 1 April 2016.
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- Article
- April 9, 2016
Georgia and South Korea have recently signed a double tax agreement, which allocates taxing rights to the two countries to prevent the double taxation of the same income.
The agreement was signed by Georgian Finance Minister Nodar Khaduri, and South Korea’s Deputy Prime Minister and Minister of Finance, Yoo II-Ho, on March 31, 2016.
At a meeting held after the signing ceremony, the ministers discussed economic cooperation and investment prospects in the two countries. Khaduri briefed II-Ho about his Government’s planned tax reforms and said he sought investment from South Korean firms.
Georgia is seeking to introduce a corporate income tax regime similar to Estonia’s, with support from experts from that country, to encourage new investment in Georgia. A draft law setting out the proposed changes is expected to be laid before Parliament soon.
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