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The UK Budget 2024 brought both relief and new challenges for pension savers, scheme trustees, and administrators.
While some feared changes to National Insurance on pension contributions and tax-free lump sums, these concerns were unfounded.
However, significant changes to inheritance tax (IHT) on pension-related death benefits are set to take effect from April 2027, prompting a closer look at the implications.
In yesterday’s Budget, there were a couple of reassuring announcements for pension savers:
However, while these aspects remain unchanged, new IHT rules will bring added complexity for scheme trustees and administrators in the coming years.
Starting immediately, the Budget extends the tax on transfers to overseas (QROPS) pension schemes, impacting those moving pensions outside the UK.
The Chancellor has introduced new measures to include more pension-related death benefits within IHT.
Previously, only unused defined contribution (DC) funds were anticipated to be affected, but now many other death benefit lump sums, including those from defined benefit (DB) schemes, will also be subject to IHT.
This aligns with the government’s aim to prioritize retirement income for the member and their spouse or civil partner, rather than for descendants.
To implement these changes, HMRC has launched a technical consultation on the practical application of IHT to pension death benefits, with draft legislation expected in 2025.
The government has also confirmed its commitment to incentivize pension saving, maintaining tax relief on contributions and investment growth.
The new IHT rules will come into force on 6 April 2027, applying the standard IHT rate of 40%.
From April 2027, the following death benefits from registered pension schemes will be included in a member’s estate for IHT purposes, unless they are left to a spouse, civil partner, or charity:
Currently, where trustees have discretion over lump sum death benefits, these funds typically fall outside IHT.
However, HMRC intends to end the different treatment of discretionary versus non-discretionary death benefits.
Starting from 6 April 202, pension scheme administrators will be responsible for reporting and paying IHT on unused pension funds and death benefits.
This shift means that:
The collaboration between PRs and pension administrators will involve
When a spouse or civil partner is the beneficiary, the exemption from IHT applies. However, if trustees need time to assess beneficiaries, meeting the two-month reporting deadline may prove difficult.
IHT payments must be reported and paid within six months of the month of the member’s death.
From April 2027, pension administrators will face this same deadline, with interest charges for late payments.
After 12 months, the member’s beneficiaries will share liability with administrators for any outstanding IHT on pension funds.
HMRC expects only about 10% of estates to exceed the IHT threshold, currently set at £325,000 (with a potential extra £175,000 if a home is left to direct descendants).
Pension administrators are required to report IHT information only when payable on unused funds or lump sum death benefits.
HMRC clarified that IHT changes won’t apply to certain life policy products purchased with or alongside pensions as part of an employer package.
Further consultations may address specific exclusions for excepted life assurance and unregistered top-up pensions.
While aspects of the Budget 2024 bring relief for pension contributors, new IHT rules on death benefits from 2027 introduce additional obligations for pension schemes and PRs.
This development could significantly impact estate planning for pension holders.
If you have any queries or comments about this article on tax changes for pensions in UK Budget 2024 then please get in touch.
On 12 August 2024, the Canadian federal government unveiled several packages of draft legislation aimed at implementing various tax measures, refining previously released draft laws, and introducing technical amendments (collectively referred to as the “August 12 Proposals”).
These proposals build upon the tax measures introduced in the 2024 Federal Budget (Budget 2024) and include updates to earlier draft legislation.
The Canadian government has invited the public to provide feedback on most of these measures by 11 September 2024, with an earlier deadline of 3 September 2024 for comments on the capital gains inclusion rate and lifetime capital gains exemption amendments.
The August 12 Proposals encompass a broad range of tax measures, many of which are discussed in this update. Tax changes related to green economy initiatives will be covered in a separate update.
Budget 2024 proposed increasing the capital gains inclusion rate for corporations and trusts from 50% to 66.67%, with a similar increase for individuals on capital gains exceeding $250,000 in a taxation year, net of certain deductions.
On 11 June 2024, the House of Commons approved a Notice of Ways and Means Motion (NWMM) to amend the Income Tax Act (ITA) and implement this proposed increase.
The August 12 Proposals include revisions to the NWMM amendments, and the Department of Finance has provided explanatory notes for these changes.
The impact of the increased capital gains inclusion rate on the calculation of the capital dividend account (CDA) is also addressed, ensuring that taxpayers have clear guidance during transitional periods.
The CDA is a notional account that tracks the non-taxable portion of capital gains and losses realized by private corporations, allowing for tax-free distributions to Canadian-resident shareholders.
The proposed increase in the capital gains inclusion rate necessitates adjustments to CDA calculations.
For taxation years that straddle the implementation date (25 June 2024), the August 12 Proposals introduce a “blended” inclusion rate to reflect the timing of dispositions within the transitional year.
This blended rate, while necessary for overall tax calculations, created challenges for CDA assessments, as the exact inclusion rate could not be determined until the year-end. The August 12 Proposals resolve this issue by establishing specific rules for calculating CDA during transitional years.
The hybrid surplus rules, which relate to dividends received by Canadian corporations from their foreign affiliates, are also revised.
The August 12 Proposals introduce separate surplus pools for “legacy hybrid surplus” (pre-25 June 2024) and “successor hybrid surplus” (post-24 June 2024).
These distinctions ensure that the treatment of hybrid surplus dividends aligns with the relevant capital gains inclusion rate at the time of the underlying transactions.
Amendments to the Global Minimum Tax Act (GMTA), enacted on 20 June 2024, are included in the August 12 Proposals.
These changes implement the undertaxed profits rule (UTPR), provide transitional safe harbours, and address other elements from the OECD’s latest guidance.
The amendments will apply to fiscal years of qualifying multinational enterprise (MNE) groups beginning on or after 31 December 2024.
The trust reporting requirements are updated to reduce the number of bare trusts affected. The August 12 Proposals introduce new exemptions and modify existing ones, making the rules clearer and less burdensome for taxpayers.
The revised rules will apply to taxation years ending after 30 December 2025, with the Canada Revenue Agency (CRA) having already suspended the 2023 reporting obligations.
The August 12 Proposals address concerns raised about the anti-deferral rules targeting Canadian-controlled private corporations (CCPCs) and their controlled foreign affiliates (CFAs).
The revised measures introduce a carve-out for “foreign accrual business income” (FABI), offering some relief to CCPCs engaged in legitimate business activities abroad.
However, the proposals remain complex and may still impose significant compliance burdens on affected companies.
The excessive interest and financing expenses limitation (EIFEL) rules are amended to include exemptions for certain interest and financing expenses related to regulated energy utilities and purpose-built residential rentals.
These exemptions aim to provide relief to businesses in specific sectors, supporting their continued growth and investment.
The August 12 Proposals also clarify the application of hybrid mismatch rules to foreign affiliates, ensuring that the rules are applied consistently and preventing instances of double taxation on inter-affiliate dividends.
The CEI, introduced in Budget 2024, is further detailed in the August 12 Proposals.
This incentive reduces the capital gains inclusion rate to one-third for qualifying entrepreneurs, with several conditions relaxed compared to the original proposal.
The CEI aims to support business owners by providing substantial tax relief on the sale of their businesses.
The August 12 Proposals represent a comprehensive update to Canada’s tax laws, addressing a range of issues from capital gains to international tax compliance.
While these changes introduce some relief and clarity, they also add layers of complexity, particularly for businesses with international operations.
As the consultation period progresses, further refinements may be made to ensure that the legislation effectively meets its objectives without imposing undue burdens on taxpayers.
If you have any queries about this article on Canada government releases significant draft tax legislation, or tax matters in general, then please get in touch.
On 17 July 2024, the Luxembourg government unveiled a new bill proposing a range of tax cuts aimed at benefiting both corporations and individuals.
This legislative move aligns with the current government’s commitments for the 2023-2028 period, promising substantial fiscal relief and various other economic benefits.
Starting from the fiscal year 2025, the corporate income tax rate will decrease by one percentage point, bringing it down to 16%.
For income up to €175,000, the reduced rate will be adjusted from 15% to 14%.
This adjustment will see the consolidated corporate tax rate in Luxembourg City (inclusive of the solidarity surcharge and municipal business tax) fall from 24.94% to 23.87%.
Private wealth management companies, known as “société de gestion de patrimoine familiale” (SPF), will see an increase in the minimum annual subscription tax from €100 to €1,000.
Additionally, the determination of the debt portion for the subscription tax base will now be based on the balance sheet at the beginning of the fiscal year rather than January 1st.
Moreover, the government aims to clarify the procedure for withdrawing SPF status in cases of legal non-compliance. Severe breaches can lead to fines up to €250,000 and potential withdrawal of SPF status by the director of the indirect tax authorities (AED) if not remedied within six months. These changes will take effect for breaches occurring after the law’s enactment.
The bill also includes a provision to exempt actively managed exchange-traded undertakings for collective investment in transferable securities (actively managed UCITS – ETF) from the subscription tax.
To bolster Luxembourg’s attractiveness to talent, the government plans to amend the profit-sharing bonus (“prime participative”).
The tax-exempt portion of this bonus will increase from 25% to 30% of annual remuneration, and the total distributable amount will rise from 5% to 7.5% of employer profits.
The tax regime for impatriates will be modernized, introducing a 50% tax exemption on annual gross remuneration up to €400,000, replacing the existing regime that primarily offers tax benefits on certain benefits in kind and impatriation bonuses.
Additionally, a new “young employee bonus” will provide a sliding-scale tax exemption for employees under 30 with annual gross salaries up to €100,000. The bonus, capped at €5,000, will be available only with the first employer and for up to five years.
Starting in fiscal year 2025, the income tax scale will be adjusted to reflect recent inflation and indexed salary increases, significantly reducing the tax burden on individual taxpayers.
Tax credits for single parents will be increased, and a new overtime tax credit (CIHS) will be introduced for employees paid for overtime, excluding civil servants.
This measure aims to resolve tax issues for German cross-border workers who are taxable on overtime earnings in Germany.
Additionally, the maximum allowance for dependent children not living in the household will be raised.
Luxembourg’s proposed tax cuts represent a significant shift in the fiscal landscape, promising substantial benefits for both corporations and individuals.
By reducing corporate income taxes, reforming the tax regime for private wealth management companies, and introducing new tax relief measures for individuals, Luxembourg is positioning itself as an attractive destination for businesses and talent alike.
These changes, aligned with the government’s long-term commitments, are set to take effect from 2025, offering broad-based economic relief and fostering a more competitive and inclusive economic environment.
If you have any further queries about this article on Tax Cuts for Corporations and Individuals in Luxembourg, or other tax issues in Luxembourg, then please get in touch.
On March 12, 2024, the Legislative Assembly of El Salvador passed an amendment to the Income Tax Law (LISR).
This law significantly impacts the taxation of income earned abroad.
Here’s a breakdown of the key changes and their potential effects:
The amendment adds a new provision (IV) to Article 3 of the LISR, specifying that income obtained abroad in any form, including capital movement, remuneration, or emoluments, is not taxable under the law.
Additionally, the amendment exempts income covered under this new provision from the requirement to apply proportionality in determining costs and expenses, as outlined in Article 28 of the LISR.
The reform repeals several existing provisions that currently tax income earned by individuals and entities domiciled in El Salvador from overseas deposits, securities, financial instruments, and derivative contracts.
Overseas profits and returns that were previously taxable will now be considered non-taxable income for taxpayers in El Salvador.
This change is expected to encourage increased capital investment within El Salvador, as investors will no longer face taxation on income generated abroad.
Specifically, the following types of income will be exempt from taxation:
The amendment to El Salvador’s Income Tax Law represents a significant shift in the taxation of income earned abroad by individuals and entities domiciled in the country.
By exempting such income from taxation, the government aims to attract more capital investment into El Salvador.
However, taxpayers should consult with legal and financial advisors to understand the full implications of these changes for their specific circumstances.
If you have any queries about this article on El Salvador’s Income Tax Law, or tax matters in South America more generally, then please get in touch
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On 5 April 2024, the Irish Government released a consultation on a potential new tax exemption for qualifying foreign dividends as part of the Finance Act 2024.
The proposed participation exemption could mean significant changes to the way foreign dividend income is taxed, impacting Irish corporation tax starting 1 January 2025.
Here’s the lowdown…
Currently, Ireland operates on a “tax and credit” system, which taxes foreign dividends but allows credits for taxes paid abroad.
The proposed participation exemption would remove Irish corporation tax on qualifying foreign dividend income, aligning Ireland with international best practices and making the country more competitive for business investment.
The consultation document outlines key features of the proposed regime, including eligibility criteria and other important details.
The exemption is intended to support Irish companies with foreign subsidiaries and make Ireland a more attractive location for international businesses and investment funds.
The consultation outlines a strawman proposal, which serves as a draft for feedback and discussion. Here’s a summary of its key points:
The proposed participation exemption is expected to benefit international businesses with Irish-based subsidiaries, similar to the introduction of a participation exemption for capital gains some 20 years ago.
With the OECD’s Global Minimum Tax rules now in effect in Ireland for large multinational groups, it’s crucial for these companies to manage their tax obligations efficiently.
The new regime could also increase the attractiveness of Ireland for private equity funds, providing more flexibility for investment structures.
The consultation period for the feedback statement runs until 8 May 2024, with a second feedback statement expected later in the year.
If you have any queries about this article on the the Irish Participation Exemption for Foreign Dividends, or tax matters in Ireland more generally, then please get in touch.
On 12 March 2024, the Legislative Assembly of El Salvador passed an amendment to the Income Tax Law (LISR), significantly impacting the taxation of income earned abroad.
Here’s a breakdown of the key changes and their potential effects:
The amendment adds a new provision (numeral 4) to Article 3 of the LISR, specifying that income obtained abroad in any form, including capital movement, remuneration, or emoluments, is not taxable under the law.
Additionally, the amendment exempts income covered under this new provision from the requirement to apply proportionality in determining costs and expenses, as outlined in Article 28 of the LISR.
The reform repeals several existing provisions that currently tax income earned by individuals and entities domiciled in El Salvador from overseas deposits, securities, financial instruments, and derivative contracts.
Overseas profits and returns that were previously taxable will now be considered non-taxable income for taxpayers in El Salvador.
This change is expected to encourage increased capital investment within El Salvador, as investors will no longer face taxation on income generated abroad.
Specifically, the following types of income will be exempt from taxation:
The amendment to El Salvador’s Income Tax Law represents a significant shift in the taxation of income earned abroad by individuals and entities domiciled in the country.
By exempting such income from taxation, the government aims to attract more capital investment into El Salvador. However, taxpayers should consult with legal and financial advisors to understand the full implications of these changes for their specific circumstances.
If you have any queries about this article on El Salvador’s Income Tax Law Revisions and the Implications for Taxation of Overseas Profits etc, or any El Salvador tax matters in general, then please get in touch.
In an announcement by the Chancellor of the Exchequer during the Spring Budget on 6 March 2024, the UK government has introduced the Independent Film Tax Credit (IFTC).
The credit is aimed at revitalising the UK’s independent film industry.
This initiative emerges in the wake of the Culture, Media and Sport Committee‘s examination of sectoral challenges, underlining the government’s commitment to nurturing filmmaking within the country.
The IFTC aims to offer producers of eligible films the opportunity to claim an enhanced Audio-Visual Expenditure Credit (AVEC) on qualifying expenditure.
With a gross rate of 53%, this translates to a net tax credit of 39.75%, capped at £6.36 million per film.
The introduction of IFTC builds upon the AVEC regime, initiated on 1 January 2024, which already provides a tax credit for film and high-end TV programmes, children’s TV, and animation projects.
Notably, the Spring Budget also announced an increase in AVEC for visual effects costs and the removal of the 80% cap on qualifying expenditure in this category from 1 April 2025.
Films aiming to qualify for IFTC must meet specific criteria, including a theatrical release, a production budget up to £15 million, commencement of principal photography on or after 1 April 2024, and adherence to the British Film Institute (BFI) test for UK independent film.
The BFI’s assessment will ensure that films either feature a UK writer or director, or are certified as official UK co-productions.
Films commencing principal photography from 1 April 2024 are eligible to opt-in for IFTC, with claims being submitted from 1 April 2025.
This transitional period allows production companies to choose between AVEC and the previous tax relief schemes for expenditure incurred from 1 January 2024.
However, all new productions from 1 April 2025 must utilize AVEC, with a complete transition to AVEC mandated by 1 April 2027.
The introduction of IFTC and adjustments to AVEC represent a significant boon for independent filmmakers in the UK.
By enhancing support for the independent film sector and incentivizing visual effects production, these measures are expected to bolster creative endeavors, attract new talent, and secure the industry’s future.
The government’s strategic investment in independent filmmaking not only acknowledges the sector’s cultural significance but also aims to catalyze growth and innovation post-pandemic and beyond.
If you have any queries about the new Independent Film Tax Credit, or any other UK tax matters, then please do get in touch.
In this article, we consider some of the developments in the off-ing for Kazakhstan slated for 2024.
The dawn of 2024 brings new regulations for the digital mining sector, transitioning from a notification-based system to a structured licensing regime.
This change not only aims to formalize digital mining activities but also introduces specific requirements for digital miners, including the establishment of an automated system for commercial metering of electrical energy and telecommunications systems.
Kazakhstan marks 2024 with the termination of the business inspections moratorium that had been in place since 1 January 2020.
This moratorium, originally designed to shield small and micro-businesses from unscheduled state inspections, is giving way to a new era of regulatory oversight.
The government plans to introduce an innovative automated control system to halve the frequency of on-site inspections, a move articulated by Minister of National Economy Askar Kuantyrov as a significant shift towards minimizing state intervention and reducing penalties for businesses.
With this system, inspections are slated only for entities presenting an elevated risk, as indicated by the system’s assessments.
2024 also welcomes the third stage of the universal revenue declaration, compelling leaders and founders of legal entities, alongside individual entrepreneurs and their spouses, to submit a comprehensive Declaration of Assets and Liabilities.
This progression from the initial stages introduced in 2021 underscores Kazakhstan’s commitment to enhancing transparency and fiscal accountability among its business and public service sectors.
Significant amendments to the laws governing oil, gas, and subsoil use took effect on January 1, 2024.
These amendments seek to modernize the industry’s practices by updating the rules for metering crude oil and gas condensate and introducing a sophisticated information system for the accounting of crude oil, gas condensate, and processing products.
Starting January 1, 2024, Kazakhstan has refined its currency control measures to bolster oversight on foreign exchange transactions.
This includes the introduction of a new procedure for the repatriation of national and/or foreign currency for export or import, aimed at ensuring adherence to regulations and facilitating accurate and compliant foreign exchange activities.
Highlighting Kazakhstan’s dedication to sustainable energy development, the government ratified an agreement with the United Arab Emirates for the implementation of wind power station projects.
This agreement not only symbolizes international cooperation in the fight against global warming but also sets the stage for the development of significant renewable energy projects in Kazakhstan.
The Ministry of Agriculture has implemented reforms to the procedures for selling land plots at electronic auctions, facilitating a more transparent and efficient process.
These reforms include the formation of land plot lists for auctions and the submission of self-prepared proposals for vacant land plots suitable for auction.
These regulatory changes and initiatives represent Kazakhstan’s strategic approach to fostering economic growth, enhancing regulatory compliance, and advancing sustainable development.
As the nation embarks on these new paths, businesses and stakeholders are encouraged to adapt and align with the evolving regulatory landscape to leverage opportunities and navigate potential challenges effectively.
If you have any queries about this article on the Developments in Kazakhstan for 2024, or tax matters in Kazakhstan, then please get in touch
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On 21 February 2024, South Africa’s Finance Minister Enoch Godongwana presented a budget speech introducing key tax proposals poised to shape the nation’s fiscal landscape.
These proposals, which will undergo public commentary later this year, signal a robust approach to modernising tax regulations and incentivizing economic growth.
But what are the key points?
Tax Natives will go all Top of the Pops and give you a run-down of the top 10 tax takeaways from the budget speech!
From 1 March 2026, a new investment allowance of 150% for investments in electric and hydrogen-powered vehicle production will come into effect.
It is holed that this marks a step towards sustainable industrial future.
As part of the Budget speech, it was announced that the government will explore a flow-through tax regime for specific infrastructure projects.
This is aimed at bolstering investment in crucial sectors.
We are also told that there will be adjustments to the renewable energy allowance under section 12B, which will be effective from 1 March 2025.
In addition, there will be an increase in the carbon offset allowance threshold from 1 January 2024.
Together, these reflect a focus on securing a future from greener energy sources.
The rules limiting interest deductions in respect of reorganisations and acquisition are to be aligned with the rules that limit interest deductions incurred on debt between connected parties,
where the interest earned is not taxed.
The status of a “connected person” in relation to a “qualifying investor” is to be reviewed, in
order to limit its application in respect of limited partners in an en commandite partnership.
In addition, it is proposed that the assessed loss restriction rule be removed for companies that are in the process of liquidation, deregistration or a winding up.
Another announcement was the intention to narrow the scope of the degrouping charge in relation to intragroup transactions.
This is avoid the de-grouping being engaged when there is a change in shareholding affecting a group of companies, whilst the companies involved in the original intragroup transactions are still part of another group.
Extensions to ownership requirement exclusions and adjustments to “contributed tax capital” anti-avoidance measures cater to the dynamics of corporate financing.
Proposals to amend foreign tax credits and expand the definition of exchange items address the intricacies of international capital movements and financial reporting.
There will be amendments to the VAT Act and Electronic Services Regulations.
These will seek to align South Africa’s digital economy taxation with global practices, including adjustments for input tax claims and services supplied to non-resident subsidiaries.
There will be an update to the Carbon Tax Act alongside new requirements for non-resident vendors supplying electronic services emphasise environmental concerns and the digital economy’s tax landscape.
These proposals reflect a strategic pivot towards incentivising green technology, streamlining tax regulations, and enhancing South Africa’s global tax compliance posture.
With public commentary anticipated, stakeholders have a pivotal role in shaping the final legislative outcomes.
The draft Global Minimum Tax Bill, also released alongside the budget, signifies further alignment with international tax standards, marking a new chapter in South Africa’s fiscal policy.
If you have any queries about South Africa’s Budget 2024, or South African tax matters in general, then please get in touch.
The Serbian Ministry of Finance, as of 26 February 2024, has detailed crucial updates regarding the income tax regulations for the year 2023.
These updates, including non-taxable income thresholds and deductions, aim to provide individuals with comprehensive guidance on managing their tax obligations effectively.
For 2023, the non-taxable income threshold is established at 4,269,564 RSD (approximately EUR 36,500).
This figure represents triple the average annual salary per employee in Serbia for 2023.
Serbian residents are required to report and pay taxes on global income, while non-residents are taxed solely on income sourced within Serbia.
Individuals under the age of 40 benefit from a significant deduction, equal to the non-taxable annual personal income tax threshold of 4,269,564 RSD, promoting financial relief for the younger workforce.
Taxpayers can avail of personal deductions, including 40% of the average annual salary (569,275 RSD, approx. EUR 4,860) for themselves and an additional 15% (213,478 RSD, approx. EUR 1,825) for each dependent family member.
Serbia’s progressive tax rate applies a 10% tax on incomes up to double the threshold (up to EUR 73,000) and a 15% rate for incomes exceeding this limit.
The deadline for filing and paying the annual tax return for the year 2023 is set for May 15, 2024, underscoring the importance of timely compliance.
These updates from the Serbian Ministry of Finance are instrumental for individuals in effectively planning and fulfilling their tax responsibilities.
By adhering to these regulations and leveraging the available deductions, taxpayers can optimize their financial positions while ensuring compliance with the nation’s tax laws.
If you have any queries about this article ‘Serbia tax update’ or have any queries about Serbian tax matters generally, then please get in touch.