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The United Arab Emirates (UAE) Federal Tax Authority (FTA) has recently issued a comprehensive guide detailing the taxation policies for partnerships under the newly implemented Corporate Income Tax (CIT) regime.
This guidance is crucial as it clarifies how both incorporated and unincorporated partnerships will be treated for tax purposes, which has implications for numerous entities operating within the UAE.
From the perspective of the UAE’s CIT, legal entities that are incorporated, established, or recognized in the UAE are generally considered taxable persons.
However, the treatment of partnerships depends on whether they are incorporated or unincorporated:
The guide stipulates that individual partners of a fiscally transparent partnership may need to register for CIT depending on their specific circumstances.
For legal persons within the UAE who are partners in these partnerships, CIT registration is mandatory.
On the other hand, if an unincorporated partnership is considered fiscally opaque, it must register for CIT as it is recognized as a taxable person.
For tax purposes, deductible expenses for partners in fiscally transparent partnerships and for fiscally opaque partnerships are treated similarly.
Partners must account for their share of the partnership’s expenses in their taxable income.
Additionally, the guide highlights that transactions between related parties, including those involving partners of unincorporated partnerships, must adhere to the arm’s length principle to maintain compliance with transfer pricing regulations.
While incorporated partnerships based in a Qualifying Free Zone can benefit from the Free Zone Tax Regime if certain conditions are met, this benefit does not extend to unincorporated partnerships treated as taxable persons.
An unincorporated partnership, even if it operates a branch in a Qualifying Free Zone, cannot enjoy the Free Zone Tax benefits due to its non-legal person status.
The guide also addresses the treatment of foreign partnerships, stipulating that they will be considered fiscally transparent if they meet specific criteria such as not being taxed in their home jurisdiction, having partners who are individually taxed on their share of the partnership’s income, submitting an annual declaration to the FTA, and maintaining adequate tax information exchange arrangements with the UAE.
The FTA’s new guide on the taxation of partnerships under the UAE’s CIT regime provides vital clarification for entities navigating this complex area.
This detailed guidance is aimed at ensuring that partnerships and their partners are well-informed of their tax obligations and can plan their tax strategies effectively.
Entities involved in partnership structures in the UAE should carefully review this guide to ensure compliance and optimal tax handling under the new corporate tax environment.
If you have any queries about this article on UAE Clarifies Taxation of Partnerships, or UAE tax matters more generally, then please get in touch.
The German Federal Ministry of Finance (BMF) has issued detailed guidance on the new regulatory requirements for payment service providers under Section 22g of the German Value Added Tax Act (UStG).
This guidance comes in response to the need to strengthen measures against VAT fraud within the European Union.
The new rules, effective from 1 January 2024, emphasize the importance of maintaining records, reporting, and retaining information on cross-border payments.
Under the revised Section 22g UStG, payment service providers operating in Germany must keep detailed records of cross-border payments processed, provided they execute more than 25 transactions per quarter to the same payee.
These records are then transmitted to the Federal Central Tax Office (BZSt) and subsequently fed into the Central Electronic System of Payment Information (CESOP), a European database designed to monitor and analyze cross-border payment data to prevent VAT fraud.
The BMF outlines four specific obligations for providers under the new regulation:
The new rules apply to various entities, including CRR credit institutions, electronic money institutions, payment institutions, and postal giro offices that offer payment services in Germany.
The BMF clarifies that the regulation covers all payment transactions that result in the provision, transfer, or withdrawal of money, including those involving cryptocurrencies.
For a transaction to be considered cross-border under the regulation, the payer must be located in a European Union member state, while the payee could be in another EU state, an EEA country, or a third country.
Domestic payments within Germany and payments originating from third countries are not covered by these rules.
Payment service providers must submit the relevant data to the BZSt by the end of the calendar month following each quarter.
For instance, data for the first quarter should typically be submitted by the end of April.
However, the BMF has introduced a non-objection rule for the first report of 2024, extending the deadline to 31 July 2024, to allow providers adequate time to adjust to the new requirements.
Failure to adhere to the record-keeping, reporting, or retention requirements can result in fines up to EUR 5,000.
These sanctions underscore the seriousness with which the German authorities are treating compliance with these new regulations.
The BMF’s circular includes comprehensive resources such as a questionnaire focusing on the implementation details and a guidance paper that summarizes the GloBE Model Rules along with its commentary and administrative guidance.
These documents are designed to help payment service providers understand and implement the required changes effectively.
The implementation of these new regulations marks a significant step in Germany’s efforts to combat VAT fraud.
By ensuring that payment service providers maintain accurate records and report cross-border payment activities, the BMF aims to create a more transparent and secure financial environment.
Payment service providers are encouraged to review these new regulations closely, establish appropriate compliance mechanisms, and maintain diligent records to avoid penalties.
If you have any queries about these New Rules for Payment Service Providers, or German tax matters more generally, then please get in touch.
In a significant ruling, the Upper Tribunal (UT) has upheld a penalty against Kevin John Pitt for failing to take corrective action in response to a follower notice (FN) issued by HM Revenue and Customs (HMRC).
The case, referred to as K Pitt v HMRC [2024] UKUT 21 (TCC), serves as a critical reminder of the stringent requirements imposed by HMRC concerning tax compliance.
HMRC issued a follower notice to Mr. Pitt in 2016, based on the judicial ruling in Audley v HMRC [2011] UKFTT.
The FN identified that the tax avoidance arrangements Mr. Pitt had entered into, which involved the acquisition and disposal of loan notes and claimed a loss of £694,684, were similar to those previously ruled on.
HMRC contended that these arrangements did not warrant the claimed tax relief of £278,557.60.
When Mr. Pitt failed to amend his tax returns in line with the FN, HMRC subsequently imposed a penalty amounting to £83,547. This penalty was calculated based on a percentage of the tax advantage that had been incorrectly claimed.
Mr. Pitt challenged both the closure notice that denied his loss relief claim and the penalty at the First-tier Tribunal (FTT), but was unsuccessful.
He then escalated the challenge concerning the penalty to the UT, arguing that the FTT had erred by comparing evaluative conclusions and inferences rather than the primary facts of the Audley case.
The UT dismissed the appeal, affirming that the legislative intent required an analysis that extends beyond mere primary facts to include evaluative conclusions and inferences.
This approach aligns with the Ramsay principle, which advocates for a realistic view of facts in light of the legislative purpose.
The UT clarified that reconstituted facts, when construed purposively and realistically, are indeed facts and must be treated as such in the assessment of follower notices.
This ruling underscores the effectiveness and reach of the FN regime beyond just mass-marketed tax avoidance schemes.
It highlights the necessity for taxpayers to adhere strictly to the directives specified in FNs, especially when prior judicial rulings clearly delineate the bounds of permissible tax relief claims.
The decision of the UT provides crucial insights into the interpretation and application of laws related to follower notices and corrective actions.
While FNs have been controversial since their introduction about ten years ago, the UT’s detailed narrative and analysis offer valuable guidance for taxpayers who might find themselves subject to such notices.
The ongoing legal narrative around FNs and the responsibilities they place on taxpayers continue to evolve, and this decision is a pivotal addition to the existing body of case law.
Taxpayers and tax professionals alike should note the implications of this ruling, as it not only affirms the breadth of the FN regime but also reinforces the need for compliance with its requirements.
If you have any queries about this article on Upper Tribunal Upholds Follower Notice Penalty, or UK tax matters more generally, then please get in touch.
On 1st July 2023, Australia ushered in a comprehensive reform with the activation of the Foreign Ownership Register, under Part 7A of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA).
This new register has absorbed and expanded upon the functionalities of previous registers maintained by the Australian Taxation Office (ATO), marking a significant shift in how foreign ownership of Australian assets is documented and regulated.
The Foreign Ownership Register amalgamates several previously separate registers into a unified system.
Notably, it encompasses the Agricultural Land Register and the Water Register, both previously under the 2015 Register of Foreign Ownership of Water or Agricultural Land Act (Cth) (Old Register Act), along with the register for foreign ownership of residential land.
However, registers pertaining to critical infrastructure assets and foreign media ownership remain independently managed by the Cyber and Infrastructure Security Centre and the Australian Communications and Media Authority, respectively.
The broadened scope under Part 7A significantly enhances the transparency around foreign investments in Australia, imposing new reporting and compliance obligations on foreign investors.
Among the critical updates are the requirements for notifying certain acquisitions of interests in Australian entities, businesses, and all types of Australian land.
From 1st July 2023, foreign persons must notify acquisitions of specific interests in Australian assets, including interests in entities, businesses, and land.
Notices for these acquisitions should be submitted within 30 days, except for registrable water interests, which have a 30-day window post-financial year-end.
If a holder of a Registrable Interest becomes a foreign person post-acquisition, notification is required.
Various changes, such as disposal of interests or significant modifications in the nature of the interest, necessitate notification within 30 days, with specific provisions for registrable water interests.
The introduction of the Foreign Ownership Register represents a pivotal step towards greater transparency and control over foreign investments in Australia.
By centralising and broadening the scope of reporting requirements, the Australian government aims to ensure that foreign investments are made transparently and responsibly, aligning with the national interest.
If you have any queries on this article on the Foreign Ownership Register in Australia, or Australian tax matters in general, then please get in touch.
Like any tax system, Albania’s tax rules come with critical dates for taxpayers with April 30 being one of the most significant.
This marks the deadline for the declaration and payment of Personal Income Tax through the Annual Individual Tax Declaration (DIVA) for the previous fiscal year.
Understanding the DIVA process is essential for both residents and non-residents alike, as it carries legal obligations and implications.
The DIVA declaration process for the fiscal year 2023 remains consistent with previous years, maintaining similar categories and obligations.
Despite upcoming changes with the implementation of the new “Income Tax” law in 2025, which will affect declarations for the fiscal year 2024, the current process remains unchanged.
The Albanian Tax Authorities issue reminders to both resident and non-resident individuals who meet specific criteria.
Those with an annual gross income exceeding ALL 2,000,000 in 2023 or individuals engaging in moonlighting activities for at least one tax period within the year are legally obligated to complete the “Annual Individual Income Statement” as part of the DIVA process.
It’s crucial to note exemptions for individuals classified as ‘self-employed’ and those employed by an entity, whether an individual or a legal entity, from whom they receive income in the form of wages and employment-related benefits.
These individuals are exempt from declaring the DIVA, justified by the ‘self-employed’ category’s responsibility for paying social and health insurance, with their ‘Gross Salary’ section specified as zero.
The DIVA 2023 declaration includes pre-filled data regarding annual gross income from wages or benefits derived from employment relationships for individuals.
Additionally, the calculation of Income Tax from Employment is provided.
While prefilled, these sections are editable fields, enabling declarants to review and make necessary changes.
Moreover, the amount paid during the year related to Income Tax from Employment is prefilled, streamlining the declaration process.
Beyond its legal obligation, income declaration offers individuals an additional guarantee regarding the justification of their wealth.
It fosters transparency and accountability while ensuring compliance with tax regulations.
As April 30 approaches, it is important that you ensure that you fulfill your DIVA obligations to avoid penalties and remain compliant with Albanian tax laws.
If you have any queries about Albania’s DIVA Tax Declaration, or Albanian tax matters in general, then please get in touch.
Corporate taxation is a fundamental aspect of operating a business in Nigeria, with tax revenues contributing significantly to public infrastructure, social services, and developmental projects.
This guide aims to elucidate the intricacies of corporate taxation and regulatory compliance in Nigeria, fostering a transparent and conducive business environment.
The Nigerian tax landscape comprises various taxes mandated by law for companies conducting business activities in the country:
Governed by the Finance Act 2019 and the Company Income Tax Act, CIT is an annual federal income tax levied at a rate of 30% for most companies.
However, companies with gross revenue below NGN 25 million enjoy a reduced rate of 0%, while those with revenue between NGN 25 million and NGN 100 million are taxed at 20%.
Additional state-level income taxes may also apply.
Varies based on company status and accounting period.
Imposed on profits from the sale of chargeable assets, governed by the Capital Gain Tax Act, and levied at a rate of 10% on gains.
Applicable to upstream petroleum operations, with rates ranging from 50% to 85% based on contract type and operational phase.
Required by law to be withheld from payments made to contractors and remitted periodically to tax authorities. Rates vary based on the nature of transactions.
A consumption tax levied at a rate of 5% on goods and services consumed, with returns filed monthly.
Mandated for companies employing five or more workers or with turnovers above a certain threshold, contributing 1% of annual payroll to ITF.
Imposed at a rate of 2% of assessable profit, payable within two months of assessment notice.
Mandatory for businesses and individuals with tax authorities to obtain Tax Identification Numbers (TINs) for identification purposes.
Timely submission of accurate tax returns, detailing income, deductions, and liabilities, is imperative to avoid penalties.
Ensuring prompt and accurate tax payments within specified deadlines to avert interest charges or penalties.
Tax evasion attracts severe penalties, including fines, imprisonment, or both, depending on the severity of the offense.
Failure to remit taxes may result in penalties and interest charges.
Companies complying with tax obligations may enjoy incentives such as investment tax credits, tax allowances, and exemptions provided by the Federal Government to encourage investment and economic growth.
Navigating corporate taxation and regulatory compliance in Nigeria is essential for businesses to thrive and contribute to sustainable economic development.
If you have any queries about Corporate Tax in Nigeria, or any tax matters in Nigeria, then please get in touch.
The United Arab Emirates (UAE) has established specific deadlines for the application process of Corporate Tax (CT) Registration.
This move follows the implementation of the UAE CT law, which came into effect for the financial year starting on or after 1 June 2023.
The Federal Tax Authority’s Decision No. 3 of 2024, effective from 1 March 2024, outlines the crucial timelines for entities to comply with this registration requirement, emphasizing the nation’s commitment to a structured tax framework.
Entities established or recognized before March 2024 must adhere to specified deadlines based on the issuance date of their earliest license. These are set out in a table in the Decision (link provided above)
Those incorporated or recognised post the decision’s effective date must secure their Tax Registration within three months from their date of incorporation, establishment, or recognition.
Entities with a Place of Effective Management (POEM) in the UAE need to obtain registration within three months from the end of their financial year.
Similar timelines apply, with specific deadlines set for non-resident entities established or recognized prior to and following March 2024.
Individuals engaged in business or professional activities must apply for Tax Registration by stipulated deadlines to ensure compliance.
Failure to submit the CT Registration application within the designated timelines incurs a substantial penalty of AED 10,000, underscoring the importance of timely action to avoid financial repercussions.
This structured approach to CT Registration necessitates careful planning and evaluation, particularly for foreign companies operating in the UAE through various business models.
The decision signifies the UAE’s proactive stance in tax regulation, aiming to streamline the process while ensuring entities contribute their fair share to the national economy.
Entities, both resident and non-resident, must diligently assess their operations within the UAE to adhere to the new registration mandates.
This includes evaluating any exposure related to Permanent Establishments, Nexus, and POEM, and initiating the registration process promptly to sidestep penalties.
The Federal Tax Authority’s recent decision marks a significant step in reinforcing the UAE’s corporate tax framework, aligning with global tax practices and enhancing the nation’s competitiveness.
Businesses operating within the UAE’s jurisdiction must now navigate these new requirements with strategic foresight, ensuring compliance to maintain their standing and avoid penal implications.
If you have any queries about this article on UAE Corporate Tax Registration, then please get in touch
In a significant move to clamp down on tax evasion, the Internal Revenue Service (IRS) unveiled a new initiative on February 29, aimed at individuals who have neglected to file their income tax returns for 2017 and subsequent years.
This program, powered by the financial backing of the Inflation Reduction Act, represents a continuation of the IRS’s intensified efforts to scrutinize the tax compliance of large corporations, partnerships, and high-net-worth individuals, a strategy highlighted in a GT Alert from September 2023.
This initiative also aligns with the IRS’s ongoing operations to recover taxes from millionaires who owe substantial amounts in back taxes.
Thanks to these concerted efforts, the agency has successfully recuperated nearly $500 million to date.
The current non-filer campaign specifically targets taxpayers who earned between $400,000 and $1 million from 2017 to 2021.
The IRS plans to dispatch over 100,000 compliance letters to this demographic, sending out between 20,000 and 40,000 letters (CP-59) each week.
Additionally, for those with incomes exceeding $1 million, over 25,000 individuals will receive compliance notifications.
The IRS identifies potential non-filers in these income brackets using third-party data, including information from W-2s and 1099 forms, among other sources.
The IRS has issued a stern warning to these high earners, urging them to promptly rectify their filing status to avoid further notices, escalating penalties, and the possibility of criminal prosecution.
Taxpayers who disregard the initial compliance letters will face additional notifications and could be subjected to audit and collection enforcement measures.
In extreme cases, the IRS has the authority to prepare a Substitute for Return (SFR) for non-filers, using only reported income information.
This action could lead to a higher tax liability for the taxpayer, as it doesn’t account for any deductions or exemptions they may be entitled to.
Such individuals might then find themselves compelled to either settle the increased tax debt or challenge the IRS’s assessments in court.
The message from the IRS is clear: with enhanced resources and a firm commitment, the agency is actively pursuing high-income individuals who have failed to file their tax returns.
This initiative underscores the importance of staying compliant with tax filing obligations and consulting a trusted tax professional if you’ve missed filing returns for 2017 or later years.
If you have any queries around this article, or US tax matters more generally, then please get in touch with us.
Malta has been tasked with implementing three essential reforms to its anti-money laundering (AML) strategies to be removed from the Financial Action Task Force’s (FATF) enhanced monitoring list, commonly referred to as the grey list.
Following an agreement on an action plan with the FATF, Malta’s government is under pressure to address significant issues identified by the global financial crime watchdog.
The action plan outlines a comprehensive strategy for Malta, focusing on:
Malta must ensure that company ownership information is precise, with strict enforcement actions against inaccuracies.
This includes imposing sanctions on legal persons and gatekeepers failing to maintain accurate beneficial ownership information.
The government’s Financial Intelligence Analysis Unit (FIAU) is expected to better utilize financial intelligence to support the pursuit of criminal tax evasion and associated money laundering cases.
This entails clarifying the roles of the Revenue Commissioner and the FIAU.
The FIAU’s analytical efforts must focus on criminal tax offences to produce intelligence that aids Maltese law enforcement in detecting and investigating tax evasion-related money laundering activities in alignment with Malta’s risk profile.
Malta, alongside Haiti, the Philippines, and South Sudan, was grey-listed by the FATF, signaling the need for enhanced AML measures.
Despite having a robust legal framework on paper, Malta’s practical implementation of these laws has been under scrutiny.
The nation’s commitment to fighting tax crimes and policing beneficial ownership rules is central to the FATF’s concerns.
Although Malta has made significant strides in addressing some issues flagged in 2019, including improving financial intelligence analytics and resourcing law enforcement, the FATF’s latest review indicates that critical areas still require attention.
The Maltese government has acknowledged progress on most recommended actions but admits that three critical points have only been partially addressed.
The Maltese government has expressed disagreement with the grey-listing, emphasizing its dedication to rectifying the remaining deficiencies promptly.
The economic impact of the FATF’s decision on Malta, a notable financial hub, hinges on the government’s effectiveness in implementing the necessary reforms.
Rating agencies and investors are closely watching the situation, as Malta’s attractiveness for foreign investment is at stake.
Malta’s path to exiting the FATF grey list is paved with stringent AML reforms and enhanced financial transparency measures.
The nation’s ability to fulfill the FATF’s action plan will not only determine its removal from the grey list but also reinforce its standing as a reliable and compliant financial centre.
The Maltese government’s commitment to these reforms is crucial for restoring international confidence and securing Malta’s economic future.
If you have any queries regarding this article relating to Malta AML Reforms to Exit FATF Grey List, or Maltese tax matters, then please get in touch.
The Internal Revenue Service (IRS) is setting its sights on the skies, announcing an upcoming audit initiative focused on the use of private jets by large corporations, partnerships, and high-income individuals.
Perhaps they’ve been watching Succession?
This move aims to look at the allocation of aircraft usage between business and personal purposes, a practice that has seen significant growth in recent years.
According to a report by the Wall Street Journal, executive personal use of corporate jets has surged by 35% since 2015, with spending on such flights increasing by a staggering 92%.
Despite previous audits in this area, the IRS believes that private aircraft usage has not been sufficiently monitored over the past decade.
With plans to expand the team of examiners, the IRS indicates that the number of audits concerning aircraft usage could rise based on the findings of this initial initiative.
The audits will investigate whether:
IRS Commissioner Werfel emphasised the agency’s commitment to increasing scrutiny on high-income taxpayers, signaling a broader effort to ensure compliance among the wealthiest individuals and organisations.
This initiative aligns with the objectives set forth by the Inflation Reduction Act, aiming to reverse historically low audit rates and enhance the focus on substantial income and corporate entities.
Tax law surrounding the business use of aircraft is complex, and maintaining accurate records can be challenging for taxpayers.
Issues often arise due to inadequate contemporaneous documentation, leading the IRS to classify the aircraft as an “entertainment facility” under IRC Section 274 in some examinations.
This classification can result in the denial of all deductions, including those associated with business use.
As such, affected taxpayers that are utilising private jets are advised to review and assess whether their record-keeping practices are fit for purposes. In other words, they can ensure a clear distinction between business and personal use to comply with IRS requirements.
The IRS’s new audit initiative on private jet usage underscores the agency’s dedication to ensuring tax compliance among high-income individuals and large entities.
As the IRS bolsters its examination efforts, taxpayers should take proactive steps to ensure their usage of business aircraft aligns with tax laws and regulations, particularly in maintaining and documenting usage accurately.
If you have any queries about this article, IRS Targets Private Jet Usage, then please get in touch.