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More and more people are buying and selling cryptocurrency. It’s exciting, but it’s important to understand the tax rules. If you don’t, you could end up paying more money than you need to.
This guide will help you understand how taxes work with cryptocurrency. We’ll explain what you need to pay tax on, how much tax you might owe, and how to make sure you’re doing everything right.
Whether you’re a beginner or have been trading for a while, this information should come in handy!
This guide covers:
Cryptocurrency, like Bitcoin or Ethereum, are all around us. But with this popularity comes the task of understanding how it all fits into the UK tax system.
Unlike traditional currencies, the UK government treats cryptocurrency as a form of property. This means there are specific rules about when and how you might need to pay tax on it.
You generally need to pay tax when you:
There are two main types of tax that could apply to your cryptocurrency:
It’s important to understand the difference between these two because they’re calculated and reported differently.
If you sell your cryptocurrency for more money than you paid for it, you might need to pay Capital Gains Tax (CGT). This is the tax on money you make when you sell something that’s worth more than when you bought it.
To figure out how much tax you owe, you need to know:
You subtract what your crypto cost from what you sold it for. This is your profit. If you make more than your annual allowance, you might need to pay CGT.
It’s important to keep track of everything you buy and sell. You need to tell that pesky tax man (HMRC) about any money you make from selling crypto.
If you get cryptocurrency instead of regular money, you might need to pay Income Tax. This happens when:
To figure out how much tax you owe, you need to know how much your cryptocurrency was worth when you got it. You add this to your other income to see what tax rate you pay.
There are a few ways to potentially reduce the amount of tax you owe on your cryptocurrency:
Everyone gets a certain amount of money they can make each year without paying tax on it. This is called your ‘annual allowance’. For cryptocurrency, this is the same as for other things you might sell, like shares. If you make less than this amount in profit from selling crypto, you won’t owe any tax.
If you lose money on one cryptocurrency, you can use that loss to reduce the tax you pay on the money you made on another one. This is called offsetting your losses.
There are some special tax breaks for investing in certain types of businesses, including some that deal with cryptocurrency. These can be complicated, so it’s usually a good idea to talk to a tax expert if you think they might apply to you. Hey, why not even join our community of Crypto Tax Degens for access to one of the brightest minds in the crypto tax space?
It’s easy to make mistakes when you’re working out your crypto taxes. Here are some things to watch out for:
By being careful and keeping good records, you can avoid making these mistakes.
That was a whistle-stop tour of the basics of crypto tax, but there is lots more to learn. If you’re looking for more professional crypto tax advice or have specific questions about your situation, join the Crypto Tax Degens community. Here, you’ll gain access to exclusive insights from crypto tax experts and stay ahead of the latest developments in the UK’s evolving tax landscape. Don’t let tax worries hold you back!
Connect with a UK tax advisor today.
The sports industry is changing fast, and technology is leading the way. From the way we watch games to how we connect with our favourite teams, the digital world is taking centre stage.
Cryptocurrency, virtual worlds, and special digital items are becoming big for fans, too. They’re now able to own unique pieces of their team, like digital trading cards, or even have a say in club decisions. It’s like having a pass to a whole new sports experience.
And we think this digital revolution is more than just a trend; it’s changing the entire game for both fans and sports teams. We’ll explore how this is happening and what it means for the future of sports.
This article covers:
Fan tokens are like special digital badges that let you connect deeper with your favourite sports team. They’re built on blockchain technology, a super secure record-keeper.
With a fan token, you can do cool stuff like voting on team decisions, getting exclusive content, or even winning prizes. And just like any other valuable item, you can buy, sell, or trade your fan token. The price can go up or down based on how popular the team is.
So, it’s not just about cheering from the stands; it’s about being a real part of the team!
Manchester United, a global football powerhouse, has made a significant stride into the digital age with the launch of its own fan token. This move allows dedicated supporters to become more than just spectators; they can actively participate in shaping the club’s identity.
By owning a Manchester United fan token, fans gain exclusive voting rights on a range of club decisions. From selecting new merchandise designs to choosing the stadium playlist, fans can directly influence aspects that impact their matchday experience. This level of engagement has not only deepened the connection between the club and its supporters but has also created a bit of a thriving digital community.
Beyond fan engagement, Manchester United’s fan token has opened up new revenue streams. The token has attracted a younger, tech-savvy fan base eager to embrace the future of football. As the token’s value can fluctuate based on team performance and market demand, it has added a shiny new dimension to fan ownership and investment.
Manchester United isn’t the only football giant getting in on the fan token action, though. Top teams like Juventus, Barcelona, and Paris Saint-Germain have also launched their own digital badges.
Juventus was one of the early birds, giving fans a say in club decisions and special VIP perks. Barcelona fans can also have a voice in things like picking the captain’s armband design. And Paris Saint-Germain has really hit it out of the park with fan token perks, offering things like meeting players or watching matches from the best seats in the house.
Fan tokens are a game-changer for both sports fans and teams. For fans, it’s like having a VIP pass to the club. They get to feel like owners by voting on team decisions and getting exclusive perks that regular fans can only dream of. It’s a way to connect with the team on a whole new level.
Sports teams also love fan tokens. It’s a fresh way to make money and reach fans all over the world. By selling these digital badges, teams can learn more about what fans like and don’t like. Plus, because fans can buy and sell fan tokens, it creates a buzz around the team and can even make the token worth more over time. It’s a win-win for everyone involved.
Imagine a world where you can step into a virtual stadium, high-five your favourite player, and collect digital souvenirs. That’s the metaverse. It’s a massive online world where you can hang out with friends, play games, and even experience live events.
And sports are jumping on board. Teams are creating their own virtual spaces where fans can connect with each other and feel closer to the action. From watching games in stunning virtual arenas to owning unique digital items, the metaverse is changing how we experience sports.
Manchester United is leading the way in bringing sports into the virtual world with their partnership with Roblox. Imagine stepping into a digital Old Trafford, hanging out with other fans, and feeling the buzz of a matchday without even leaving your home. That’s what Man United is offering.
This partnership is a huge deal for fans and the future of sports. It shows that the metaverse isn’t just a cool idea, it’s becoming a reality. We expect to see more and more sports teams follow in Man United’s footsteps and create their own virtual worlds.
NFTs, or non-fungible tokens, are special digital items that are like one-of-a-kind trading cards for the digital world. It’s now possible to own a piece of sports history, like a virtual ticket to a legendary game, or get exclusive behind-the-scenes footage of your favourite team. That’s what NFTs can offer for sports fans.
These digital collectibles are super popular among fans because they let you own a unique piece of your team. And just like real-world collectibles, NFTs can go up in value, making them exciting for collectors.
Have you ever wanted to watch a match in virtual reality, feeling like you’re right there in the stadium with the roar of the crowd and the smell of the beer and chips. It’s going to be like nothing you’ve ever seen before.
And that’s not all. Picture this: walking down the street and suddenly your phone shows you amazing stats about the players on a giant poster. Or maybe you’re at a game and your glasses give you a behind-the-scenes look at the action. That’s the power of augmented reality.
It’s clear that the metaverse is changing the game for sports. We’re just scratching the surface of what’s possible. With new technology coming out all the time, the future of sports is looking brighter than ever.
Sports and cryptocurrency are teaming up in a big way. Sports teams are seeing crypto as a golden ticket to make more money and reach a younger crowd of fans. Crypto companies, on the other hand, love the huge fan base that sports have, and they’re using team sponsorships to get their name out there.
It’s a match made in heaven. Sports teams get more cash and cool new fans, while crypto companies get more people talking about them. It’s all about staying ahead of the game in this digital age.
By teaming up with sports stars and leagues, crypto companies are introducing millions of people to the world of digital money. It’s like having an athlete endorse a new kind of trainer– it makes people curious and eager to learn more.
These partnerships are also a huge money-maker for sports teams. With crypto cash flowing in, teams can invest in better facilities, technology, and even discover new talent.
The best part? It’s a win-win situation. Sports get a financial boost and a younger fanbase, while crypto becomes more popular and accepted.
The exciting world of sports and cryptocurrency is also a minefield of rules and regulations. Governments around the world are still trying to figure out how to handle digital money, NFTs, and other fancy tech stuff. This means there’s a confusing patchwork of laws that change all the time.
Sports teams need to be super careful about following these rules, especially when it comes to fan tokens, NFTs, and crypto partnerships. These digital goodies can get them into legal trouble if they don’t play by the book. Things like protecting fans’ money, stopping money laundering, and keeping people’s data safe are all part of the game.
Not knowing the rules can be a real headache. Teams could end up with huge fines or even damage their reputation. So, understanding the legal landscape is key to staying in the game and winning big.
The shiny new world of fan tokens, NFTs, and crypto deals in sports isn’t all glitter and gold, though. There are some serious potential downsides.
For fans, it’s a bit like gambling. The value of these digital things can go up and down like a rollercoaster. You could win big, or you could lose your shirt. And with all the scams out there, it’s easy to get ripped off.
Sports teams aren’t off the hook either. Partnering with the wrong crypto company can be a total disaster. Plus, there’s always the risk that the value of their digital stuff crashes, leaving them with less money than they expected. It’s a risky game, but the rewards can be huge if you play your cards right.
Sports are no longer just about the game on the field. The digital world has turned the industry upside down with things like fan tokens, NFTs, and virtual stadiums. It’s like a whole new way to be a fan, with more ways to connect with your team and own a piece of the action.
Sure, there are some bumps in the road, like figuring out all the new rules and making sure everyone plays fair. But the possibilities are endless. Imagine a world where every fan can feel like an owner and where teams have more ways to connect with people around the globe.
So, what’s next? Whether you’re a die-hard fan or a sports business pro, it’s important to stay up-to-date on the latest trends. Learn about the risks and rewards, and be ready to embrace the future of sports.
For those looking to get into the crypto tax world with confidence, joining the Crypto Tax Degens community offers valuable insights and educational advice on managing your crypto assets. By staying engaged and informed, we can all be part of the exciting future of sports.
If you’re in need of professional advice, speak to one of the Crypto Tax consultants at Tax Natives.
Thinking about giving cryptocurrency as a gift? It’s becoming a bit of a popular choice amongst crypto-lovers, but is it really the best option?
I’ll be honest, it can get a little bit tricky when it comes to taxes… But try not to let that put you off. Cryptocurrency has gone from being a digital oddity to a mainstream investment, so there’s definitely space for gifting it, as long as you remember that the rules around it are still being figured out.
Basically, gifting crypto isn’t as simple as giving cash. There are specific tax rules you need to follow in the UK, and getting it wrong can lead to some unexpected tax bills. This guide will break down the complicated stuff and make the whole thing a little easier to digest.
We’ll explain how gifting crypto works for tax purposes, what you need to report, and how to potentially lower your tax bill. By the end, you’ll know how to give crypto as a gift without any nasty surprises.
This guide covers:
Cryptocurrency isn’t like regular cash. It’s a digital asset, which means it’s treated more like a piece of property than something you can spend freely. This has big implications when it comes to taxes.
The UK government, for example, actually views cryptocurrency as a form of property. This means it’s subject to the same kind of tax rules as when you sell a house or shares. It’s important to understand this difference because it affects how much tax you might owe.
Because of these tax rules, it’s super important to keep track of all your cryptocurrency transactions. This includes when you bought it, how much you paid, when you sold it, and how much you got. These records will help you calculate your taxes accurately and avoid any problems with HMRC.
To sum it up – cryptocurrency can be a complex investment so that makes it a complex gift – especially when it comes to taxes. Understanding how it’s treated by the government and keeping detailed records will help you stay on the right side of the taxman.
Why is giving away your crypto as a gift not as easy as a simple transfer? It’s to do with Capital Gains Tax like we mentioned earlier.
If your crypto is worth more now than when you bought it, you might have to pay Capital Gains Tax (CGT) when you give it away. This is because giving it away is like selling it.
You need to figure out how much more your crypto is worth now compared to when you bought it. This is your profit. If you’ve made a profit and it’s over a certain amount, you’ll need to pay CGT on that profit.
Example: You bought £1,000 worth of Bitcoin and it’s now worth £3,000. If you give it away, you’ve made a profit of £2,000. You might have to pay CGT on this £2,000.
If you give away a lot of crypto and then die within seven years, your family might have to pay Inheritance Tax (IHT) on some or all of the crypto.
Tip: There are some ways to give away crypto without having to pay IHT, like giving tiny amounts to lots of people or giving it to your spouse. Could be worth considering.
Luckily for you, there are a few sneaky (but completely legal) ways to reduce the tax you might owe when gifting crypto:
This depends. Gifting cryptocurrency can be a generous and rewarding gesture, as long as you understand the implications. With crypto tax rules changing so often, you need to plan carefully.
This guide offers an overview, but for more specific advice, consider joining our Crypto Tax Degens community. Gain exclusive access to expert insights from Andy Wood and ensure your crypto tax planning is on point. Don’t leave your financial future to chance—get the right guidance and stay ahead of the game.
Choose Tax Natives if you are looking for professional crypto tax services.
More and more people are buying, selling, and trading cryptocurrencies, there is no denying that… But not all of them know you need to pay tax on your crypto assets.
That’s why we are here. This guide will help you figure everything out, from working out if you need to pay tax in the first place, to helping you to understand how to calculate your gains. We’ll also explain the UK tax laws so you can understand how they apply to you and your assets.
Ready? Let’s start with the basics…
This guide covers:
You may already know this but sometimes it is helpful to start from the beginning. Cryptocurrency is a type of digital money that uses special codes (called cryptography) to keep it secure. Unlike regular money, cryptocurrency doesn’t have a physical coin or bill. Instead, it exists only online.
Cryptocurrencies use something called blockchain to record transactions. This is like a digital diary that everyone can see, but no one can change. This makes it very hard for anyone to cheat or fake money.
Some popular cryptocurrencies are:
You definitely need to know that in the UK, cryptocurrency is treated like other types of property, a bit like stocks or houses. This means you might have to pay tax if you sell or trade it. It’s important to understand this so you know what taxes you need to pay.
Capital Gains Tax (CGT) is a tax imposed by the UK government on the profit you make when you sell an asset that has increased in value. This asset can be anything from a property to shares, and, importantly, it includes cryptocurrencies.
When you sell a cryptocurrency for more than you paid for it (aka, you have a crypo asset), the difference between the selling price and the purchase price is considered a capital gain. This gain is generally subject to CGT, unless it falls within a few specific exemptions or reliefs.
CGT is typically triggered in the following scenarios:
It’s important to note that simply holding onto your cryptocurrency without selling or exchanging it does not trigger CGT.
To calculate your capital gain, you need to determine the following:
Now for the maths… The calculation looks like this:
If the result is a negative number, you have a capital loss, which can be offset against other capital gains in the same tax year.
Keeping detailed records of your cryptocurrency transactions is really important for calculating your CGT liability. Accurate records means you’re less likely to slip up and face some hefty fines (or worse, jail time.) You should keep records of:
These records will be crucial when completing your Self Assessment tax return. It’s probably a good idea to keep digital and paper copies of your records in a secure location, though.
There are some exemptions you may be eligible for that could help cut down your tax bill.
Every individual in the UK has an annual exempt amount for CGT. This means you can make a certain amount of profit from selling assets, including cryptocurrency, without paying any tax.
If your total capital gains for the tax year are below the annual exempt amount, you won’t owe any CGT. However, any unused portion of the exempt amount cannot be carried forward to future tax years.
There are even some other circumstances where you might be able to reduce or completely get rid of your CGT liability:
Some cryptocurrency transactions are completely exempt from CGT:
It’s important to note that the tax landscape can be pretty complicated, and these are just general guidelines. For specific advice and up-to-date information, why not join our community of Crypto Tax Degens?
There’s another tax to consider: Income Tax. This tax applies when you receive cryptocurrency as a form of income, rather than from selling it for a profit.
Here are some common situations where Income Tax might apply:
Figuring out how much Income Tax you owe on your cryptocurrency income can be a bit tricky. Here’s a general guide:
Important: Like we said with CGT, you need to be keeping detailed records of all your cryptocurrency transactions. This includes when you received the cryptocurrency, how much it was worth, and any fees you paid. These records will help you work out your tax bill and prove your numbers to the tax authorities if needed.
Remember: Tax rules can be complicated, especially when it comes to something new like cryptocurrency. If you’re unsure about anything, it’s always a good idea to talk to a tax professional or join a community like ours at Crypto Tax Degens.
Figuring out your taxes on cryptocurrency can be tricky, there is no getting around that fact. There are different kinds of taxes you might need to pay, depending on what you do with your crypto.
Like we said, it’s important to keep track of everything and know the rules, so you don’t end up owing more tax than you should.
If you’re not sure what to do, it’s a good idea to ask someone who knows about taxes and cryptocurrency. There are people who can help you understand the rules and work out how much tax you owe.
And for the best advice in the game, consider joining our Crypto Tax Degens community! Gain exclusive access to expert insights from Andy Wood, a seasoned crypto tax professional, who can guide you through the complexities of crypto taxation. Don’t leave your tax planning to chance—get the right advice today and ensure you’re fully prepared.
Don’t stress about it too much! Getting help can make things a lot easier.
Corporation tax is a major financial obligation for UK businesses, and knowing how to reduce corporation tax is a savvy move for good financial management.
In April 2023, the UK government increased corporation tax from 19% to 25% (for profits above £250,000), making it more important than ever for businesses to pay the least amount possible.
Fortunately, there are several ways to reduce corporation tax, and in this Tax Natives blog post we’re going to discuss a handful of ways that you can save on corporation tax so you can put your money back into your business.
Capital allowances are a tax relief claimed on assets that have been bought for use within a company. They let companies deduct some of the cost of the asset from their taxable profits each year over the time it is used.
There are two types of capital allowances: Annual Investment Allowances (AIA), and Writing Down Allowances (WDA).
AIAs allow you to deduct the full cost of most new plant and machinery from your taxable profits in the year of purchase. This means you can effectively claim a 100% tax deduction on the prices of assets including:
WDAs allow your company to deduct a portion of the cost of other types of assets from their taxable profits each year over the time it is used. The rate of WDA depends on the type of asset, which includes:
This is a government-backed scheme designed to encourage businesses of all sizes to invest in research and development (R&D).
Like capital allowances, there are two different types of R&D tax relief. Each type applies to the size of the business: SMEs and large companies.
Small and medium enterprises (SMEs) can claim R&D relief on qualifying expenditure against their taxable profits, this includes:
Larger companies can claim R&D expenditure credit (RDEC), a cash payment made in addition to a corporation tax refund, depending on qualifying expenditure. To claim RDEC, your R&D activities must meet the following criteria:
This is another valuable tool in reducing corporation tax. It involves companies ‘carrying back’ trading losses to offset against taxable profits of previous accounting periods.
This means you can effectively claim a refund of corporation tax you’ve already paid – up to a maximum of three years.
Similarly, you can ‘carry forward’ trading losses to offset against the taxable profits of the future accounting period.
This can be done indefinitely and allows you to defer paying corporation tax on a trading loss until a profit is made in the future.
Both methods allow companies to effectively eliminate or reduce corporation tax liability for several years.This is especially helpful for companies that experience periods of profitability and periods of loss.
Allowable business expenses – also known as tax deductible expenses – are a big part of planning for corporation tax.
There are several allowable business expenses for companies to consider, including:
Companies can also reduce their corporation tax bill by making pension contributions on behalf of their employees. This is because these are considered “allowable expenses”, meaning they can be deducted from taxable profits.
The ways in which you can make pension contributions are: Defined contribution (DC) schemes, and defined benefit (DB) schemes.
In a DB scheme, the company guarantees to pay the employee a certain pension at retirement, no matter the investment performance of the scheme.
The company is responsible for funding the scheme’s liabilities, something that can be a major financial commitment.
In a DC scheme, the company makes regular contributions to the employees’ pension pot. The value of the pot grows over time based on investment performance, and the employee’s eventual retirement benefit is based on the value of the pot at retirement.
You can make pension contributions via salary sacrifices, where your employee puts some of their salary away for retirement. This is tax-efficient because the employee’s income tax national insurance liability is lower on the reduced salary.
Then there are non-salary sacrifices, whereby the company makes pension contributions directly from its profits.
Working from home (WFH) allowances are tax credits that can be claimed by companies that allow their employees to work from home.
These allowances can help to reduce the company’s corporation tax bill, and can be claimed on certain expenses like work furniture and equipment, and other WFH-related costs like heating, electricity, and internet.
The Patent Box is a tax incentive scheme introduced in 2013 to encourage companies to develop, protect, and commercialise intellectual property (IP). It allows companies to pay a lower rate of corporation tax on profits made from their patented inventions.
This reduced rate of corporation tax on profits from patented inventions can be as low as 10%, more than half the standard rate of 25%.
Corporation tax is a major expense for businesses, but as you can see, there are several ways to lower it. Whether it’s claiming all allowable expenses, investing in R&D, utilising the Patent Box, and taking advantage of other tax credits, you can lower your corporation tax bill and save big. Speak to a corporate tax specialist today.
For extra advice and guidance on navigating the realm of UK tax, get in touch with Tax Natives. We’ll get you in contact with a professional, regulated tax advisor that perfectly suits your unique needs.
Investing in UK property is an alluring prospect. Generating passive income through rental properties or property appreciation has long captivated those lucky enough to do so.
However, there are many complexities in the UK property market that can deter potential investors from exploring it further.
In this blog post, we’re going to demystify this world of UK property investment and offer you some ways to navigate the intricacies of how to invest in UK property – from property acquisition, financing, management, and the tax implications that come along with it all.
Location has always been a major factor when it comes to investing in UK property.
A well-chosen location can greatly impact your return on investment, and a less-informed decision about where to invest can bear much less financial fruit.
But how do you choose a “good” location to invest in property?
Well, there are some things to consider, including:
Generally speaking, major UK cities (e.g. Manchester, Edinburgh, Birmingham, etc.) tick many of these boxes, enjoy many of the points listed above, being the major social hubs that they are.
However, investing in property in a major UK city can be expensive for many first-time investors, making it all but inaccessible.
Fortunately, there are many places in the UK outside of the major cities that make for good investment opportunities.
These include ex-industrial towns, towns with a student presence, and areas with decent transport and road connections.
Another important factor to consider when wondering how to invest in UK property is the type of property.
Fortunately, there is a wide variety of property types for you to invest in, all with their own ROI, risk profile, and management responsibilities.
Houses have long been a popular investment option, with potential for income and capital gains, though they do come with their own unique considerations:
Like houses, apartments offer similarly unique investment opportunities for those looking to invest in UK property.
Investing in UK property, like many financial endeavours, is heavily influenced by the broader market conditions. These should be considered thoroughly before investing, and include:
Market conditions can be fickle, so the savvy investor should develop a keen eye for noticing subtle shifts and potential trends.
Property market reports, for example, provide insights into market trends and economic forecasts. Similarly, comparative market analysis (CMAs) allow you to compare property prices in a target area, revealing trends in property values and potential areas of under/overvaluation.
Understanding market conditions isn’t just about deciphering data, it’s about developing a holistic understanding of the factors that drive property values and rental demand.
By staying afloat of these factors, you can make an informed decision that aligns with your investment goals and risk tolerance.
Financing is the cornerstone of successful property investment in the UK. Securing the necessary funding lets you buy, but also will determine your overall returns.
These remain the most common and popular option for financing property in the UK. They offer the advantage of secured financing, meaning the property itself serves as collateral.
This often translates to competitive interest rates and flexible repayment terms.
These can be a valuable tool for enhancing the value and rental potential of a property investment, attracting higher rental rates and more desirable tenants after improving a property’s condition and amenities.
This is an alternative financing option for property investors seeking more substantial funding, and it involves raising capital from experienced investors or investment firms.
Whilst you may have less control over the property itself, you do share responsibility with people who have extensive experience in the property market.#
Like any investment, property investment in the UK comes with its own set of tax implications. You should understand these to the best of your ability in order to optimise your returns and ensure you’re staying compliant with the law.
When you sell a property for a higher price than you paid for it, you may be liable to pay CGT. The amount payable is determined by the difference between the sale and the purchase price – the gain.
The current CGT for residential properties is 28% for higher-rate taxpayers and 18% for basic-rate taxpayers.
Rental income from your property investment is subject to income tax. The amount of tax you pay depends on your tax band, of which there are five in the UK currently.
This is the local tax levied on property owners based on property value, and determined by the valuation band of your property.
As a property investor in the UK, there are several ways to minimise your tax burden, including:
Property investment can be compelling for anyone looking to secure a financial future. By carefully considering the factors outlined in this guide, you can navigate the complexities of the UK property market and make informed decisions that align with your overall goals.
For any further advice or guidance on navigating the realm of UK tax, get in touch with Tax Natives, and we’ll get you in contact with a professional, regulated tax advisor that perfectly suits your unique needs.
This is a dramatic week on the Israeli judicial front. Two massive amendments to the Judgement basic law passed their first reading in the Knesset. First, it is proposed to prohibit judicial review of the reasonableness of government decisions. Second, it is proposed to abolish the Israeli Bar Association (i.e. the Law Society). Many people are out demonstrating. But how will this impact the Israeli business scene? We briefly review these proposals.
A bill which passed its first reading in the Knesset on July 11, 2023, proposes to ban the Israeli High Court of Justice (“Bagatz”) from discussing or giving injunctions concerning the reasonableness of decisions of the government, the prime minister or any other minister. This would also apply to decisions of others “chosen by the public” as determined in any law. (Proposed Basic Law: Judgment (Amendment 5)(Reasonableness Standard)).
Why? The Commentary to the bill explains that the reasonableness standard currently enables the High Court to disqualify a governmental decision that does not give sufficient weight to different interests that ought to be considered…amounting to material or extreme unreasonableness. The Commentary says elected representatives of the public should consider this, not a Court. The Commentary also says the proposal would not stop the Court considering and issuing injunctions on other grounds, such as proportionality (presumably against a disproportionate decision).
Another bill which passed its first reading in the Knesset on July 5, 2023, proposes to wind up the Israel Bar Association and replace it with a quite different Israeli Lawyers Council (Draft Law Israeli Lawyers’ Council, 2022).
Currently the Israeli Bar Association is an autonomous body whose leaders are democratically elected by lawyers in Israel. It admits new lawyers, administers disciplinary matters and promotes other professional matters. This is all legal, pursuant to the Bar Association Law, 1961.
According to the latest Bill, the Israeli Lawyers Council would be an appointed body with the following members: a Chairman (District Court judge) appointed by the Justice Minister; 4 private lawyers appointed by the Knesset Constitution and Law Committee; a District Court judge appointed by the Supreme Court President; 3 public sector lawyers appointed by the Justice Minister; 2 representatives of the Finance Minister; 1 academic appointed by the Knesset Constitution and Law Committee.
The Lawyers’ Council would largely take over the Bar Association’s functions according to detailed provisions in the proposed bill. Note that the Justice Minister would issue ethical rules for lawyers. This would be after consulting the Lawyers’ Council and the Knesset Constitution and Law Committee.
According to the latest Bill (Section 67), the Lawyers’ Council would not take over the Bar Association’s function of appointing two representatives to the Judges’ Appointment Committee….
Currently, Israeli judges are appointed by the President based on the selection of the Judges’ Appointment Committee which has 9 members: the Supreme Court president; 2 other Supreme Court judges appointed by the Supreme Court; the Justice Minister; another Minister; 2 Knesset Members; and 2 members of the Bar Association. According to the proposed Bill, the last 2 would drop out leaving 7 members on the Judges’ Appointment Committee.
Why? The Commentary to this Bill says the interests of all citizens should be promoted, not just the welfare of the legal profession.
These are controversial proposals which the government may or may not refine before they are finally enacted. Regrettably, no written constitution is yet proposed to lay down separation of powers or checks and balances, not even a second Knesset chamber. A simple majority of the Knesset would be sufficient. All this is different from the situation in many other Western democratic countries.
Start-ups in Israel often now set up US parent companies which own intellectual property (IP) and Israeli limited scope subsidiary companies. This benefits the US treasury and puts the Israeli hitech economy and tax revenues on borrowed time.
Whenever an exit deal occurs, the US IRS would collect capital gains tax.
On the legal side, Israeli attorney Gidon Cohen, based in Ramat Gan, commented to us that judges must be seen to be impartial, professional and free from political influence. Otherwise, commercial disputes won’t be heard in Israel and Israel won’t be the forum for litigation. A left-wing liberal businessman will not want a biased right-wing judge, and vice versa. Impartiality is absolutely vital. Loss of faith in the Israeli legal system to enforce rights would reinforce the need to register IP abroad among other things.
Also, businesses don’t like surprises – the proposed Israeli judicial reform was scarcely mentioned in the last Israeli general election, it was mainly about personalities. The Shekel is fluctuating and international credit rating agencies have expressed reservations.
The next Israeli election is 3 years away. Market forces are here now.
It remains to be seen how things develop. One possibility is that compromise talks might perhaps resume at the residence of President Herzog, a lawyer, before the Knesset passes the proposals…..
If you would like more information about this issue or Israeli tax matters in general then please get in touch. The content of this article is provided for educational and information purposes only.
It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
The wheels of international tax reform continue to turn as Canada takes significant strides to implement the OECD’s Pillar Two global minimum tax (GMT) recommendations.
On August 4, 2023, the Department of Finance unveiled draft legislation outlining the implementation of two pivotal elements of Pillar Two: the income inclusion rule (IIR) and a qualified domestic minimum top-up tax (QDMTT).
The aim is to align Canada’s tax landscape with the evolving international consensus on curbing tax base erosion and profit shifting.
Let’s have a look at the key aspects of this draft legislation, along with insights into the broader implications it holds.
The draft legislation holds particular importance for multinational enterprises (MNEs) as it focuses on two crucial aspects of the GMT framework:
These provisions are designed to ensure that MNEs pay a minimum level of tax on their global income, irrespective of their jurisdiction of operation
The IIR, closely aligned with the OECD’s model rules and the accompanying commentary, obliges a qualifying MNE group to include a top-up amount in its income.
This amount is determined by evaluating the group’s effective tax rate against the stipulated minimum rate of 15%.
Notably, the draft legislation incorporates mechanisms for calculating this top-up amount, encompassing factors such as excess profits, substance-based income exclusions, and adjusted covered taxes.
The goal is to prevent instances where MNEs might be subject to lower tax rates in certain jurisdictions.
The QDMTT, on the other hand, allows jurisdictions to implement a domestic top-up tax to align with the principles of Pillar Two.
This is aimed at domestic entities within the scope of Pillar Two, counterbalancing the global minimum tax liability.
The intricacies of the QDMTT provision, including computations and adjustments, are outlined in the draft legislation to ensure an encompassing and fair application.
To effectively implement the Global Minimum Tax Act (GMTA), the draft legislation covers a spectrum of administrative facets.
These include provisions for assessments, appeals, enforcement, audit, collection, penalties, and other vital components to ensure the smooth functioning of the new tax regime.
As part of compliance measures, the legislation introduces the requirement of filing a GloBE information return (GIR) within 15 months of the fiscal year’s end, with potential penalties for non-compliance.
It’s important to note that the legislation doesn’t shy away from significant penalties for non-compliance.
Failure to file the required GIR within the stipulated timeframe could result in penalties of up to $1 million. Moreover, penalties may also be imposed as a percentage of taxes owed under the GMTA for not filing Part II or Part IV returns, adding a layer of urgency to adhere to these provisions.
One of the central themes that emerge from the draft legislation is the intricate interplay between the GMTA and Canada’s existing tax framework.
While the legislation attempts to bridge these two domains, certain aspects remain to be ironed out.
Notably, the interaction between the GMTA and provisions within the Income Tax Act (ITA) raises questions about the allocation of losses or tax attributions under the ITA to offset taxes owing under the GMTA.
Additionally, the draft legislation is deliberately silent on the specifics of this interaction, particularly concerning issues like Canadian foreign affiliate and foreign accrual property regimes.
As businesses and professionals delve into the consultation process, these areas of ambiguity are likely to be focal points of discussion, aiming to ensure a harmonious alignment between the new regime and the existing tax landscape.
The consultation process for the draft legislation is underway, with the Department of Finance welcoming feedback until September 29, 2023.
During this period, stakeholders, including businesses, tax professionals, and policymakers, have the opportunity to contribute insights and perspectives to shape the final legislation.
The complex and evolving nature of international taxation underscores the importance of robust consultation, as the new rules have far-reaching implications for cross-border businesses.
Canada’s proactive approach to aligning its tax laws with the global consensus on minimum taxation is a significant stride.
As the draft legislation undergoes scrutiny and refinement, it’s essential to recognize its implications not only for multinational enterprises but also for the broader tax landscape.
The interplay between the GMTA and the existing tax regime will be closely watched, highlighting the intricate path of international tax reform and the commitment of nations to creating a fair and balanced tax environment.
If you have any queries about this article on Canada and Global Minimum Tax, or Canadian tax matters in general, then please get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article..
In a notable step towards combating overseas economic crime and tax offences, representatives from the Financial Intelligence Units of Gibraltar, Guernsey, Isle of Man, and Jersey met at London’s Gibraltar House.
The meeting marked the continued commitment of the Quad Island Form to strengthen its framework and enhance collaboration with other authorities responsible for tackling financial crime.
During the three-day event, participants engaged in productive discussions involving the Economic Crime and Confiscation Unit from Jersey and the Isle of Man Proactive International Money Laundering Investigation Team. The primary focus was on sharing best practices in preparation for upcoming Moneyval assessments.
An important outcome of the meeting was the establishment of a dedicated subgroup that integrates tax authorities from all four jurisdictions. This initiative aims to foster greater cooperation between tax authorities and FIUs, enabling them to combat serious tax-related crimes and sophisticated fraud schemes that result in substantial illicit gains.
The participants discussed other matters, including:
The formation of this sub-group represents an encouraging step, showcasing the commitment of each jurisdiction to equip themselves with comprehensive financial intelligence and mechanisms to target criminals and illicit proceeds.
It also serves as a collaborative platform for sharing knowledge and experiences, allowing the four jurisdictions to work collectively towards their objectives.
Recognising the significance of international cooperation in combating money laundering, financial terrorism, and proliferation, the Forum emphasises the importance of collaboration, providing a vital avenue for identifying and addressing criminal activities effectively. The Forum members share common values, face similar challenges, and closely collaborate on issues of mutual importance.
Lynette Chaudhary, Director of Sovereign Tax Services, welcomes the Forum’s continued commitment to strengthening its framework and expanding collaboration. Emphasising the collaborative approach would facilitate closer working and knowledge sharing within the quad, and aid in the fight against financial crime.
The Gibraltar Association of Tax Advisers (GATA) was formally launched in mid-February 2023. The main objective of GATA is to:
Tax Advisers play an important role in the administration of the tax system and many taxpayers choose to use their services to assist them with their tax compliance and planning.
GATA believes that it will be beneficial to the profession, and to Gibraltar as a whole, for there to be a professional organisation that represents and promotes this distinct profession.
GATA will provide specialist tax support and a local voice for cross-border tax matters impacting Gibraltar.
In achieving this, GATA aims to work with connected well-established organisations locally, along with building relations between Gibraltar’s tax profession and its international counterparts, most notably the UK’s Chartered Institute of Taxation (CIOT).
The CIOT is the leading body in the UK for tax professionals whose primary purpose is to promote tax education. One of its key aims is to achieve a more efficient and less complex tax system for all.
GATA is looking to do something similar in Gibraltar. Its views and recommendations on tax matters will be made on this basis. GATA has met with Gibraltar’s Commissioner of Income Tax, and the CIOT, both resulting in encouraging outcomes.
GATA is looking to promote education in a variety of ways, both on its own and in conjunction with the CIOT. As a starter, it would like to offer quarterly open tax training seminars.
These seminars will be designed to cover a broad range of tax topics, from aspects which may be of interest to many taxpayers locally, to others which will focus on technical aspects of the tax regime which may be of more interest to relevant professionals.
Therefore, GATA is looking to provide a tax education and tax discussion platform. Membership of GATA is open to anyone who:
The founding members of GATA, whose specialisms cover the many aspects of tax, and represent a variety of local firms, include:
GATA officers have been elected: the Chair, Grahame Jackson; Education Officer, John Azzopardi; GSA Liaison Officer, Darren Anton; Tax Technical Officer, Paul McGonigal; and Secretary, James Bossino and Marco De La Chica.
In the first year of operation at least, there is no fee to join GATA. An open invitation stands to all those who meet the entry requirements and who are interested in joining.