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CBDT introduces mandatory electronic scrutiny assessments from the financial year of 2017-2018

Introduction:

The Central Board of Direct Taxes has issued a circular(1) stating that scrutiny assessment proceedings shall be carried on electronically with effect from the current financial year of 2017-2018. It has been further clarified that there will be no requirement of personal appearance before the authorities with an exception of certain clauses. This circular is also applicable in the case of limited scrutinies, complete scrutinies, and manual scrutinies.

Changes brought forward:

  • All communication between the taxpayer and the authorities shall be carried out via electronic mode only.
  • No personal appearance is required even if there is an comprising stand of the tax payer
  • Tax payers have to keep their email-ids and as well as the portal in active use to be abreast of the proceedings and maintain the correspondence records.
  • The proceedings can be carried effortlessly irrespective of the tax payer’s location.
  • There is no option of choosing manual or online proceedings. The tax payer has to do the assessment via online proceedings.

Cases where personal appearance is mandatory:

  • When the scrutiny assessment is carried under the section 153A and 153C of the Income Tax Act(ITA);
  • If the original documents or books of accounts are to be scrutinized;
  • By the enforcement of section131 where the attendance of the tax payer is compulsory;
  • If a there is a witness examination;
  • If a show cause notice is issued and the tax payer requests a meeting with the authorities.

CBDT has simplified the process of scrutiny assessments and has ensured a way for greater transparency. It is still unclear whether this circular is also applicable for the previous financial years scrutiny assessments. This move in transparency will highly assist the taxpayers in the regards of scrutiny assessment.

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Amendments in Indian Trademark Rules

Introduction

The Ministry of Commerce and Industry in India have issued a new notification on 6th March 2017 through its department of Industry Policy and Promotion (DIPP) mandating the applicability of new trademark rules with immediate effect. The new rules aim to simplify the procedure by reducing the number of forms and promoting online filing. This article shall highlight major changes brought in by the new rules.

Major Amendments

  • The amendment notification identifies two additional types of body corporates namely, Small enterprise and startups, definition of the same are provided under clause 2(v) and 2(x) respectively. Also, based on the feedback received from the stakeholders, the department have kept a lower fee of INR 4,500 only for these body corporates. In the draft notification, it was proposed to keep it INR 8,000.
  • The number of forms required to be filed for trademark registration are reduced from 74 to 8. It will reduce the documentation and compliance cost for the stakeholders.
  • To promote the online filing of forms, the filing fee for online filing is kept as less as 10% from the fee for physical filing of the same form and applications.
  • For an audio trademark registration, the applicant should produce the same in MP3 format accompanying graphical representation. The length of such audio should not exceed 30 seconds.
  • The regulations also provide for the modalities for the “Well known Trademarks” for the first time.
  • In another major step, the department have provided an option to expedite the process from the registration stage itself. Earlier, this option was available till examination stage only.
  • The Rule 26 also now formalize the procedure for registration of 3D trademarks and Trade Mark of combination of colors.
  • New rules for signing of documents by the applicant and the opponent have been introduced.
  • The provision of agency is also amended under the new law. In case of withdrawal of agent fresh service address should be provided under a period of 2 months of withdrawal of agent.
  • The time limit for renewal of the registration of the trademark have been increased from six months to 1 year before the expiry of the trademark.

Please feel free to write us at [email protected] for any further assistance in relation to trademark registration.

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UAE: The Favorite Destination for FDI

The United Arab Emirates (UAE) have been continuously recognized as world’s investment destination. As per the information published in World Investment Report 2017 released by the United Nation’s conference on Trade and Development (UNCTAD) UAE is ranked 12th in the list of countries ranked on basis of preferred jurisdiction for foreign direct investment (FDI) during 2017 to 2019. As per a statement made by senior official from Ministry of Economy of UAE the FDI in UAE grew by 2.2% in the year 2016 amounting an inflow of USD 9 Billion in 2016 in comparison to USD 8.8 Billion in 2015.

It is important to note here that FDI is one of the key determinant for sustainable economic development in the country. The cash inflows support Governments initiatives and development projects. In response to tightening economic scenario around the world, there is a decline in FDI but UAE is an exception with 2.2% growth in FDI in 2016 in comparison to 2015. The official from Ministry of Economy of UAE also indicated that UNCTAD sets a threshold limit of minimum 10% equity ownership of an investor to qualify as FDI and accordingly, if the persons with less than 10% equity shareholding will be considered, the total FDI shall be more than USD 9 billion. He further added that with UAE’s strong economic presence and less dependability on oil, FDI in the country to expected to continue the trend which shall support the country’s mega development projects in various heavy industries and petrochemicals.

UAE is second most favored country in West Asia by FDI’s after Turkey and the top in the GCC with an estimated 50.2% of total FDI in the GCC being invested in UAE alone. UAE offers a business-friendly environment with a stable political and economic situation. The legislations in the country are also one of the most systemized and investor friendly in the entire region. The robust infrastructure facilities woo the investors from around the globe.

Please feel free to write us at [email protected] for setting up your business in the fastest developing nation.

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Explore Business Opportunities in Africa through Mauritius

Africa has been steadily rising as key operator for global economy with its abundant natural resources.

As reported by the African Development Bank (AfDB), the continent has over 30% of the world’s mineral resources. The continent’s combined population of 1.2 billion will reach the working age by 2020, providing the continent an eager and young labor force.

The African economy has proven to be strong and irrepressible despite the shifts in its GDP growth rate.  In 2016, the 5.5% average GDP experienced by the Sub-Saharan African (SSA) decreased to 3.4%, however, World Bank has projected that the region has shown improvement and GDP will reach 4.1% in 2017 -2018.

Changes in the continent proved to be positive to its economy.  Its young and vibrant population has attracted the attention of international firms and investors are now shifting focus to consumer oriented industries rather than to extractive activities such as mining.  In effect, the continent will be reaping promising rewards to these changes.  African household and business to business (b2b) consumption are projected to reach $5.6 trillion in 2025, according to the Mckinsey Global Institute.  Even if the continent’s weaknesses in infrastructure can be hindrance to these rewards, this weakness is also a big vehicle for large opportunities of development.

Economy of Mauritius

One of the countries in Africa that has been a preferred choice of expanding business is Mauritius.  Known as the “Singapore of Africa”, Mauritius has attracted investors through its political and economic stability, risk mitigating avenues and defined legal and regulatory framework as well as its professional labor force and modern infrastructures.

Investors, traders and private companies can also enjoy access to different African markets through the agreements and relationships Mauritius has formed.  The country has relationships with prominent African and international organizations such as the South African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), the World Trade Organization and the Commonwealth of Nations.  The country has also entered into network agreements, composed of 23 signed Investment Promotion and Protection Agreement (IPPAs) and 20 Double Taxation Avoidance Agreements with other African states.

The political stability of Mauritius is attained through its democratic government, a well-regulated financial services sector and an effective legal system.   The country has been ranked as no. 1 in overall governance in Africa for the past 10 years by Mo Ibrahin Index of African Governance, a comprehensive collection of data on African governance.

Its economic stability is evidenced by the sustained economic growth and economic diversity it has experienced.  The GDP of the company has been consistently growing by an annual average of 5.1% between 1977 and 2009.  Its economy is no longer dependent on the export of sugar cane but rather it is now supported by textile, financial and business services and tourism industries.

Mauritius, seeking to become a high-income economy, has been actively inviting foreign nationals and investors in to the country.  Its modern infrastructures and financial incentives boosts the country as a regional hub for international firms.

The foundation of the fiscal regime of Mauritius is its transparent system which promotes equality and its competitive tax brackets for individuals and businesses as the tax rate is at 15%.  Its regime has created separate and independent economies throughout the country.  Investors are also provided with a very tax efficient platform since there are no forex controls and foreign companies enjoy free repatriation of profits.

To fully establish its status a collaborative and responsible international financial hub, Mauritius has taken significant moves to comply with international best practices.  The country has signed with the OECD Multilateral Convention on Mutual Administrative Assistance Tax Matters in June 2015 to improve its transparency and collaboration framework.  The country is also a member of the Early Adopters Group, an organization committed to the early implementation of Common Reporting Standards (CRS).

In its efforts, Mauritius has been rated by the OECD Global Forum as a Largely Compliant Jurisdiction, making the country at par with developed countries such as the US, the UK and Germany.  It is also the first African countries to sign up to an Intergovernmental agreement with the US for the implementation of the Foreign Accounts Tax Compliance Act (FATCA). The country is also partOECD’s Inclusive Framework that seeks to implement the Base Erosion and Profit Shifting (BEPS) recommendations and promote beneficial ownership information.

Establishing Business in Mauritius

The process of establishing a business in Mauritius is easy.  The business structures differ in terms of category, nature and type of company.  Choosing a corporate form is dependent on the type, source and volume of the entity to be established.

The two main corporate forms in Mauritius are as follows:

  • Category 1 Global business license (GBC 1)
    • tax resident in Mauritius and has access its network of 43 DTAAs signed by Mauritius with African and non-African states
    • taxed at 15% for income generated within Mauritius and maximum of 30% outside the country
    • not subject to withholding tax on earnings within remitted abroad
  • Category 2 Global business license 2 (GBC 2)
    • non-tax resident
    • cannot do business within Mauritius
    • not subject to corporate taxation in Mauritius and can trade in any currency except the Mauritius rupee

Companies have the option to change its license from GBC 2 to GBC 1.

The types of company in Mauritius are as follows:

  • Company limited by shares
  • Company limited by guarantee
  • Company limited by shares and guarantee
  • An unlimited company
  • A foreign company
  • Limited life company

Ease in doing business

In World Bank Group’s Ease of Doing Business report for 2017, Mauritius ranks 49 out of 189 countries.  World Economic Forum’s Global Competitiveness Index named Mauritius as sub- Saharan Africa’s most competitive economy and ranks 45 out of 138 countries.

The advantages of doing business in Mauritius are:

  • Good banking system
  • More than a 100 accounting and auditing firms
  • No foreign exchange controls
  • A legal system based on English and French law
  • A bilingual workforce, as the main languages in the country are French and English
  • Strategic time zone

In conclusion, Mauritius has become a highly attractive country for establishing businesses especially for investors aiming to expand into Africa.  Although, the qualities that Mauritius boasts may not be an assurance for a successful business in Africa, they contribute to the likelihood for success.

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Mergers & Amalgamations Market in India to see a Growth in 2017

Introduction

The past year 2016 have not been an exciting year for Indian Mergers & Amalgamations (M & A) market with the investors acting cautiously because of uncertainty in the new Foreign Direct Investment norms and other tax reforms in the country. The first three quarters of the year 2016 have been very slow for the M& A market in the country but October 2016 have bought back the hopes as it sees total deal value of USD 4.5 billion. The sudden announcement of demonetization has made a patellar reflex on the deals in the pipeline but with the new tax reforms including GST and FDI policy are expected to give a push to M&A deals in 2017.

The Positive Side

India is a dominating country when it comes to M & A deals in the region. As per a recent M & A trend report India is becoming more influential in M & A market in Asia Pacific with M & A deals in the country are reaching a record high and amounting to a total of 8.8% of the total deals in the region, which in the highest in past one decade. The tax incentives provided in the latest budget will boost the confidence of prospective investors.

It is important to note here that mining, energy and utilities are now most active deals replacing the financial services. The Essar group deal is a key contributory with a deal value of USD 12.7 billion. Another high-profile M & A deal which can be attributed here in the merger of Makemytrip and Ibibo.

M & A deals are always a preferred route for foreign direct investment in companies facing problems of cash crunch such as companies in telecommunication and ecommerce industry. Other sector to look for quality M & A deals is renewable energy as it looks lucrative for both FDI as well as greenfield investment.

Challenges

The demonetization has forced many corporates to re consider and freshly plan their business strategies, which could slow down the deal structuring. Also, the tech deals are facing difficulties in finding the prospects as the investor are looking for more realistic valuations in the industry. Tech deals amounted for 89 deals in the year 2015 but 2016 witnessed only 56 deals, making it the largest decline among all the sectors.

Conclusion

Considering the present economic scenario and strong position of India in Asia Pacific market, 2017 should be an action-packed year for M & A professionals. The positive expectation set out by UNCTAD World Investment Report 2016 for the M & A deals in 2017 including cross border gives a reason of joy to the Indian markets.


Please feel free to contact us at [email protected] for consultation or assistance in M & A deals.

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Amendments in Oman Tax Law

Introduction

The Sultanate of Oman has recently issued a new Royal Decree which bought a wide-ranging impact on the existing income tax law in the country. This law was published in the official gazette on 26th February 2017. This article aims to share the major highlights and the impacts of the newly introduced amendments.

The major Amendments

The rate of corporation tax is increased to 15 percent from 12 percent. Accordingly, the new standard rate of 15% will apply for corporate taxation. Also, the minimum threshold limit of the OMR 30,000 has been abandoned by the recent amendments.

However, the small and medium scale enterprises have been granted some relief by allowing them to pay tax at a reduced rate. A reduced rate of tax at flat 3 percent rate will be charged from the small and medium scale businesses.

There will also be an increased filing requirements and stricter penalties for failure to fulfill the filing obligations. The defaulters can be punished by fines or imprisonment or both. Therefore, the corporates in the region should be prepared to bear extra compliance cost for filing of returns and avoid punitive actions against them.

The treatment of Withholding Tax

The new amendments now include some new sources of income which are now subject to withholding taxes. Income like receiving dividends, interest on investments and payments for services rendered are now included in the purview of withholding tax. These regulations are effective from the date of publication of new amendments in the official gazette. It is important to note that all the Omani companies paying dividends to their foreign investors are now subject to this provision. It is an important change and it will be interesting to watch out for future regulations affecting cross border corporate structuring and financing arrangement. Another notable fact is that companies situated in the free zones in Oman will not be affected by these changes.

What you Should Do?

If you are a business registered in Oman, these new amendments are certainly going to affect your business. We would like to list out a few important considerations for you to ensure your business do not face any legal complications.

  1. Review of your existing agreements with vendors outside Oman as they are now subject to withholding taxes in Oman.
  2. Checking the details of investors and lenders of the company. The payment of dividends and interest are now also subject to withholding tax in Oman.
  3. What are the tax exemptions or discretionary treatments enjoyed by the company? Will the new amendments affect these benefits in any way?
  4. Negotiate your existing cross border arrangements with vendors and investors to reduce your tax liability.

Conclusion

The new amendments will increase the burden of taxes on the corporates but the business in the region should support the Governments initiative towards a more sustainable economy. These changes will increase source of revenue generation for the government which will ultimately be passed on to the residents and business by economic reforms.

Please feel free to contact us at [email protected] for making your business 100% law complaint and avoid penal provision.

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Hong Kong Leads as the World’s Most Competitive Economy

The IMD World Competitiveness Center has again ranked Hong Kong as the world’s most competitive economy for 2 years in a row, besting 62 other countries.  Hong Kong has been consistently in the top 5 ranking in the published research for the past 4 years.  The country’s Financial Secretary Paul Chan Mo-po said that Hong Kong should strive to maintain its prevailing competitive edge, which includes open and free market principle, fine tradition of the rule of law, efficient public sector and robust institutional framework, to stay on top despite of fierce competition.

Mainland China has also made a mark on the list with having the biggest improvement, ranking 18th this year as compared to 25th last year.  This big leap is due to the country’s efforts to improve its international trade as well as developments in government and business efficiency.

Other countries in the top 5 are Switzerland, Singapore, the United States and Singapore, in second, third, fourth and fifth place, respectively.

Total 63 companies are ranked this year. The Kingdom of Saudi Arabia and Cyprus making their first appearance in the list.

Digital Competitiveness Ranking

This year, the IMD also ranked countries in digital competitiveness.  This intends to measure the different countries capability to adopt and explore digital technologies that lead to transformations in government practices, business models and society in general.  Singapore led the rankings in digital competitiveness with Sweden, the USA, Finland and Denmark, in second, third, fourth and fifth place, respectively.

Professor Arturo Bris, Director of the IMD World Competitiveness Centre, said that supportive and inclusive government institutions help mold technological innovation.

IMBD has been publishing these rankings every year since 1989, using 260 indicator including economic performance, government efficiency, business efficiency and infrastructure.  Information used includes data from national employment and trade statistics and survey responses.

Please feel free to contact us at [email protected] for setting up your business in top most economies of the world.

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New Developments in Nigerian Corporate Laws

Introduction

The lawmakers and regulators in Nigeria are making efforts to attract more and more investors. Recent developments in the corporate laws and introduction of new forms by the Corporate Affairs Commission (CAC) is a proof of that. This article shall highlight some important developments and the introduction of new forms.

New Developments

Introduction of new form CAC 1.1 for incorporation of new companies is a key development as it will replace the existing form CAC 2, 2.1, 3, 4 and 7 and facilitate ease of doing business in the country by filling up a single form. It is important to note here that this new form consolidates the information required in all the forms mentioned above except that it is not required to disclose the names of the shareholders which was earlier required in CAC 2. The fraternity is expecting, that this information should be required to be provided in the new company’s memorandum and articles of association.

The new forms along with the memorandum and articles of association, then needs to be submitted online on the website of CAC. This will waive off the new companies from the requirement of filing return of allotment within one month.

Further, the CAC has created a new user interface to facilitate the investor and uploading the scanned incorporation documents online. It shall facilitate and speed up the registration process as the authorities shall print the registration certificate based on documents uploaded on the interface. To ensure the integrity of the data the login details shall be provided to users. Accordingly, only authorized users can access and modify the data.

In another welcome move, CAC is in talks with Federal Inland Revenue Services (FIRS) for collaborating, for integrating the e-stamping module into the CAC company registration portal (CRP). This shall further reduce the cost and time for registration of new companies.

Conclusion

The recent efforts should strengthen the country’s ranking in the ease of doing business and attract prospective investors to register their companies with minimized efforts and time.

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Transparency Measure in Hong Kong

Considering the various steps being taken for enhancing transparency across various jurisdictions the Financial Services and the Treasury Bureau (FSTB), of the Hong Kong Government has also started preparing itself and committed to support the implementation of automatic exchange of financial account information to deal with terrorist financing and money laundering. The country’s Inland Revenue Department has issued ordinance to the financial intuitions instructing to collect the information from the Account holders and thereafter exchange of will start by 2018.

Soon, after the legislative amendment by the Authority in Hong Kong the Multinational enterprises having business in the country would be required to file country by country reports for the accounting periods commencing on or after 1 January 2018. The Authority is in phase of setting out procedures for the same.

With regards to the disclosure and the transparency measures being taken by the Government it is important to take note of the conclusion of the public consultation on corporate beneficial ownership released on 13 April 2017 by the FSTB. Following are the measure being adopted for base erosion and profit shifting (BEPS) and know the details of the Beneficial Ownership Registers:

In Hong Kong, on or after 1 January 2018 all the multinational enterprise group will be required to submit a country by country reports (Cbc) for the accounting period with the Authority.

The time line to file the Cbc for Hong Kong resident ultimate parent company would be within 12 months after the end of the relevant accounting period. However, if the ultimate parent company is having resident in another jurisdiction – it will not require the filing of CbC report.

The Cbc Report will require disclosure of details in relation to the global allocation of the income, tax payment and location of economic activity in the jurisdictions of operation

It would be required to be filed, if the following conditions are met:

  • If the preceding accounting period consolidated group revenue is EUR750 million or more.
  • Having entities or operations in two or more jurisdictions

As currently the existing laws of the Hong Kong does not require the companies to maintain and disclose information in relation to the ultimate beneficial ownership. However, the listed companies are required to maintain and disclose the same.  After the public consultation on the subject in March 2017 it is proposed to maintain a register of individuals with significant controls (PSC register) by all the companies. The register must contain the following details:

  • Name of the registrable individual or entity
  • Date when the individual or the entity became registrable
  • Nature of the control of the individual or the entity.
  • Details of Identity card, passport number and issuing country of the individual
  • Legal form and company registration number of the entities
  • Correspondence details of the individual and entity

Thus, implementation of the above-mentioned transparency and disclosure norms by the Hong Kong Government would be a good step to deal with terrorist financing and money laundering in line with the steps being taken across the world in other jurisdictions.

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Role of Free Zones in UAE Economy

United Arab Emirates is one of the most preferred jurisdiction among the businesses around the world. The GCC economy have witnessed some difficult days in past year due to steep fall in oil prices. But the UAE economy is still going strong because it has successfully managed to divest its source of revenues from non-oil resources.

Sultan Bin Suleyem is the chairman of DP World. It is the holding company of Jabel Ali Free Zone Authority (JAFZA). It is one of the largest and oldest free zone in the UAE. It has attracted more than 470 companies in the UAE to register their business and shown a growth of seven percent is preceding five years. It is also important to note here that fifty eight percent of these companies are from Middle east itself. It is phenomenal growth rate considering the tightening economic situations around the world and falling oil prices. Asia pacific have been the largest contributor from outside the middle east as 21 percent of companies registered in 2016 are from this region. Europe and America follows with 16 and 3 percent respectively.


If you are looking to register your business in the free zone, please feel free to contact us at [email protected]

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