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With Donald Trump eyeing another term as U.S. president, the international tax landscape could face significant turbulence.
Trump’s administration has hinted at targeting countries that impose additional taxes on U.S. multinationals.
This raises concerns about retaliatory tariffs and potential conflicts over the OECD’s global minimum tax pact, which aims to ensure large companies pay at least 15% tax wherever they operate.
The OECD’s two-pillar tax reform seeks to address long-standing challenges in taxing multinational corporations.
While many countries, especially in the EU, are implementing these reforms, U.S. Republicans claim the measures unfairly target American companies.
Trump’s administration could respond with punitive tariffs, potentially triggering global economic disputes.
The US plays a crucial role in global economic stability.
A confrontational approach to international tax rules could fragment global cooperation and undermine the OECD’s efforts to harmonize tax systems.
Businesses caught in the crossfire will need robust strategies to navigate these uncertainties.
Trump’s potential return to power adds a layer of unpredictability to the already complex global tax landscape.
As the world adjusts to new tax norms, balancing domestic interests with international commitments will be key to maintaining stability.
If you have any queries about this article on Trump’s global tax war, or tax matters in the US, then please get in touch.
Alternatively, if you are a tax adviser in the US and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
On October 15, 2024, the UAE Ministry of Finance officially announced the cancellation of the Economic Substance Regulations (ESR).
This significant development follows the introduction of the Federal Corporate Tax (CT) Law and marks a pivotal shift in the regulatory landscape for businesses operating in the UAE.
The cancellation was formalised through Cabinet Resolution No. (98) of 2024, which amends the earlier provisions of Cabinet Resolution No. (57) of 2020 on Economic Substance Requirements.
This article explores the background, implications, and key provisions of the latest resolution.
The Economic Substance Regulations were initially introduced on April 30, 2019, through Cabinet Resolution No. 31 of 2019, as part of the UAE’s commitment to the OECD Inclusive Framework on BEPS and to address the EU’s concerns about the UAE’s tax framework.
This move aimed to ensure that the UAE was removed from the EU’s list of non-cooperative jurisdictions for tax purposes (EU Blacklist), which occurred on October 10, 2019.
The regulations required UAE onshore and free zone companies conducting specific “Relevant Activities” to meet an Economic Substance Test by maintaining sufficient substance in the UAE.
However, with the advent of the Federal CT Law, the relevance of ESR has diminished, leading to its eventual withdrawal.
The new resolution limits the applicability of ESR to fiscal years beginning January 1, 2019, and ending December 31, 2022.
For financial years commencing after December 31, 2022, UAE entities are no longer required to comply with ESR obligations, including filing notifications or reports.
Penalties imposed for non-compliance with ESR obligations for financial years beginning after December 31, 2022, have been revoked.
The Federal Tax Authority (FTA) will refund fines already paid, and procedures for claiming these refunds are expected to be announced soon.
Although ESR obligations have ended for financial years after December 31, 2022, businesses must retain documentation for ESR submissions made during the effective period (2019–2022).
The FTA continues to audit filings for this period, and entities should be prepared for such reviews.
With the cessation of ESR, businesses can now direct their focus toward compliance with the UAE CT Law.
Clarifications on administrative procedures for penalties and filings related to the post-ESR period are anticipated.
Entities that have paid fines or filed appeals for fiscal years ending after December 31, 2022, can seek refunds and expect the resolution of their grievances.
Businesses should monitor updates from the FTA on refund procedures.
For the ESR period (2019–2022), entities should maintain proper records of filings and ensure readiness for potential audits.
The cancellation of ESR signifies a shift in the UAE’s approach to economic regulation, reflecting the evolving tax framework under the UAE CT Law.
Businesses must align their operations with the new regulatory requirements while addressing any residual ESR obligations for the 2019–2022 period.
If you have any queries about this article on the UAE Ministry of Finance’s cancellation of Economic Substance Regulations or tax matters in the UAE, please get in touch.
Alternatively, if you are a tax adviser in the UAE and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
Ghana is raising its corporate tax rate as part of its efforts to boost government revenue and address economic challenges.
The corporate tax rate is now set to increase from 25% to 30%, a significant change that will affect both local businesses and multinational companies operating in the country.
In this article, we will discuss why Ghana is making this change, what it means for businesses, and how it fits into the broader economic picture.
Ghana’s economy has been under strain due to several factors, including a global economic slowdown, inflation, and the effects of the COVID-19 pandemic.
To manage its budget and generate more revenue, the Ghanaian government has decided to raise the corporate tax rate.
This is part of a larger strategy to address the country’s growing debt and finance public services, such as infrastructure and healthcare.
The decision to raise corporate tax is a way for the government to increase its tax base, particularly from larger, more profitable companies.
This move comes at a time when many governments around the world are seeking ways to increase revenue in response to rising economic pressures.
The new 30% corporate tax rate is a significant increase from the previous rate of 25%. This means that businesses operating in Ghana will now pay more on their profits.
For local businesses, this could mean tighter profit margins and the need to cut costs elsewhere to maintain profitability.
For multinational companies, this change could affect decisions about where to invest in the region.
Ghana has been an attractive destination for investment due to its relatively low tax rates and stable political environment.
However, with the increase in corporate tax, some businesses might reconsider their investment plans or pass on the higher costs to consumers.
Despite the higher taxes, there are potential benefits to this move. By raising corporate tax, Ghana aims to improve its public finances and reduce its reliance on foreign loans and aid.
This could lead to more stability in the long term and create a stronger business environment.
Additionally, businesses that rely on government services, such as infrastructure and utilities, could see improvements as the extra revenue is invested in public projects.
In the long run, this could benefit businesses by making it easier to operate in Ghana.
Businesses operating in Ghana should review their tax strategies to understand how the higher corporate tax rate will affect their finances.
This might involve adjusting prices, cutting costs, or finding new ways to increase efficiency.
For multinational companies, it’s important to consider how this change fits into the broader regional picture.
Ghana is still an attractive place to invest, but businesses will need to weigh the higher tax rates against other factors like political stability, infrastructure, and access to markets.
Ghana’s decision to raise its corporate tax rate is a significant development that will affect businesses operating in the country.
While it may lead to higher costs in the short term, it is part of a broader strategy to stabilise the economy and improve public services.
For businesses, it’s important to stay informed and adjust their strategies to navigate these changes.
If you have any queries about this article on corporate tax in Ghana, or tax matters in Ghana, then please get in touch.
Alternatively, if you are a tax adviser in Ghana and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
The United Arab Emirates (UAE) recently introduced its first-ever corporate tax system, and as companies gear up to comply, the UAE government has been issuing public clarifications to help businesses understand the new rules.
These clarifications provide much-needed guidance on how to calculate taxes, report income, and claim exemptions.
In this article, we’ll explore the latest public clarifications and what they mean for businesses operating in the UAE.
The UAE introduced a federal corporate tax on business profits, effective from June 1, 2023. This marks a significant shift for a country known for its zero-tax environment.
The new corporate tax is set at a rate of 9%, applying to both local and foreign businesses that generate profits exceeding AED 375,000 (about $102,000).
However, businesses with profits below this threshold remain exempt.
The aim of the tax is to diversify the UAE’s revenue sources and align its tax policies with global standards, such as those proposed by the OECD’s global minimum tax framework.
One of the most important clarifications involves which entities are exempt from the corporate tax.
The government has confirmed that government entities, investment funds, charities, and certain public benefit organizations are exempt from paying corporate tax.
Additionally, businesses operating in free zones will also remain exempt as long as they don’t conduct business with the mainland UAE.
This is critical for companies based in Dubai, Abu Dhabi, and other key free zones.
The FTA’s guide around Exempt Persons can be found here.
The government has also clarified how companies should calculate their profits for corporate tax purposes.
Profits will be based on International Financial Reporting Standards (IFRS), which many businesses are already using for their financial reporting.
However, certain adjustments may need to be made, such as adding back non-deductible expenses.
The FTA’s guide on determining income can be found here.
The UAE allows companies to form tax groups.
This means that a parent company and its subsidiaries can be treated as a single entity for tax purposes, simplifying the tax reporting process.
However, to qualify, the parent company must hold at least 95% of the shares in its subsidiaries, and all group members must be UAE residents.
The FTA’s guide on tax groups can be found here.
Another key clarification involves withholding taxes.
The UAE has confirmed that it will not introduce withholding tax on dividends, interest, royalties, or other cross-border payments.
This is a significant benefit for international investors, as it ensures that the UAE remains an attractive destination for foreign investment.
The introduction of corporate tax and these clarifications mean that businesses in the UAE need to adapt quickly.
Companies must ensure that they have the right systems in place to calculate and report their profits accurately.
This might involve hiring tax professionals, updating accounting software, or training existing staff.
For multinational companies, the UAE remains an attractive destination for investment thanks to the relatively low tax rate and exemptions for free zones.
However, businesses that trade with the mainland UAE from free zones will need to pay close attention to the rules to avoid tax penalties.
The UAE’s new corporate tax system is a significant change, and the recent public clarifications provide businesses with the guidance they need to comply.
Whether you are a local business or a multinational operating in the UAE, understanding these clarifications is key to navigating the new tax landscape.
If you have any queries about this article on UAE corporate tax clarifications, or tax matters in the UAE, then please get in touch.
Alternatively, if you are a tax adviser in the UAE and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.
A Digital Services Tax (DST) is a tax imposed on revenues earned by large multinational companies from providing digital services in a particular country.
It targets companies that offer online services such as advertising, social media platforms, and online marketplaces.
DSTs have been introduced by several countries as a way to ensure that tech giants like Google, Facebook, and Amazon pay their fair share of taxes in the countries where they generate profits, even if they don’t have a physical presence there.
The Digital Services Tax is typically levied as a percentage of the revenue a company earns from digital services provided to users in the country that imposes the tax.
For example, a DST might charge a 3% tax on the revenue a company earns from online advertising or user data collection.
Unlike traditional corporate taxes, which are based on a company’s profits, the DST is based on revenue.
This means that even if a company isn’t making a profit in a given year, it will still have to pay the DST on the revenue it generates from digital services.
The DST usually applies to large multinational tech companies that generate significant revenue from digital services.
Most countries that have introduced a DST apply it to companies with global revenues above a certain threshold, often €750 million or more.
For example, the UK’s DST applies to companies that earn more than £500 million in global revenues, with at least £25 million coming from UK-based users.
It should be noted that the UK has undertaken to withdraw this tax with the introduction of the OECD’s Pillar Two under the BEPS project.
The DST was introduced in response to concerns that large tech companies were not paying enough tax in the countries where they generate significant revenue.
Because these companies often operate online, they don’t need a physical presence in a country to make money, which means they can avoid paying local taxes by basing their operations in low-tax jurisdictions.
The DST ensures that these companies contribute to the tax base of the countries where they earn their revenue, even if they don’t have offices or employees there.
The Digital Services Tax is a response to the challenges posed by the digital economy.
By taxing revenue rather than profits, the DST ensures that large tech companies pay their fair share of taxes in the countries where they operate, even if they don’t have a physical presence there.
This tax is seen as a temporary measure while global tax reforms, like the OECD’s Pillar One are being finalised.
If you have any queries about this artilce or international tax matters in general, then please get in touch.
On 12 September 2024, the European Commission unveiled a set of new tax proposals aimed at simplifying tax rules and closing loopholes that big corporations sometimes use.
The key part of this package is the Business in Europe: Framework for Income Taxation (BEFIT), which proposes a single set of tax rules across the EU.
Another important element is the directive focused on harmonising transfer pricing rules.
These proposals could reshape how companies across Europe pay taxes.
Let’s take a closer look at what these proposals include.
BEFIT stands for Business in Europe: Framework for Income Taxation. It’s a new proposal from the European Commission aimed at creating a common set of tax rules for businesses across the EU.
Right now, every country in the EU has its own tax laws. Under BEFIT, businesses would calculate their profits using the same formula, no matter where in the EU they operate.
On the one hand, this might potentially reduce the complexity and cost of doing business across borders, and it would also make it more difficult for companies to shift their profits to low-tax countries within the EU.
However, it will also effectively erode the control that a country has over tax as a method of shaping its economic policies – what good a carrot offered to businesses if the EU rules simply cancel it out?
Another big part of the new proposals is the plan to harmonise transfer pricing rules across the EU. Transfer pricing refers to the prices that one part of a company charges another part for goods or services.
Sometimes, companies use transfer pricing to shift profits to parts of their business located in countries with lower taxes.
This practice has been controversial, as it allows companies to avoid paying taxes in higher-tax countries.
The new directive would create a standard set of transfer pricing rules across the EU. This would make it harder for companies to use transfer pricing to reduce their tax bills.
The idea is to ensure that companies pay taxes in the countries where they actually make their profits, rather than shifting those profits around to save money.
The European Commission’s proposals are arguably part of a larger effort to create a neutral tax system across the EU where there is no tax competition amongst member states.
If these proposals are accepted, they could have a big impact on how businesses operate in the EU. Companies would need to adjust to the new rules and might have to pay more taxes in some countries.
However, this would also effectively water down each member state’s ability to control their own tax affairs which would be controversial.
By creating a single set of rules across the EU, the European Commission hopes to prevent tax avoidance, ensure that businesses pay their fair share of taxes and that tax competition is moved from the equation when it comes to where a company might choose to do business.
However, for many, this will represent evidence of over-reach by the EC.
If you have any queries about this article on New EU tax proposals, or tax matters in the European Union, then please get in touch.
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Singapore has become a global hub for startups and entrepreneurs due to its business-friendly environment, strategic location, and supportive tax policies.
To further boost the growth of new businesses, Singapore offers several tax relief programs designed to help startups during their early years.
These tax reliefs make it easier for entrepreneurs to focus on growing their businesses without worrying about excessive tax burdens.
Singapore has introduced several tax relief programs specifically aimed at newly incorporated companies. The two main tax relief schemes are:
To qualify for the Startup Tax Exemption (SUTE) scheme, companies must meet certain conditions:
It’s also important to note that the SUTE scheme does not apply to companies engaging in certain industries, such as property development or investment holding.
The Partial Tax Exemption (PTE) scheme, however, is open to all companies, regardless of their size or shareholders, making it a flexible option for businesses that don’t qualify for the SUTE scheme.
Starting a business often involves significant financial challenges, especially during the first few years.
These tax relief schemes help reduce the tax burden on startups, allowing them to reinvest their profits back into the business.
This can be particularly beneficial for tech startups, which often require significant capital for research and development (R&D) before they start generating profits.
By offering tax relief, Singapore encourages innovation and entrepreneurship, helping businesses grow faster and contribute to the country’s economy.
Singapore’s tax relief programs for startups provide a strong incentive for entrepreneurs to set up their businesses in the country.
The Startup Tax Exemption and Partial Tax Exemption schemes reduce the financial burden on new companies, allowing them to focus on growth and innovation.
For entrepreneurs looking to launch a business in Asia, Singapore’s supportive tax environment, combined with its strategic location and infrastructure, makes it an ideal place to start and grow a business.
If you have any queries about this article on Singapore’s Tax Relief for Startups, or tax matters in Singapore at all, then please get in touch.
Germany is known for having one of the most robust economies in Europe, but it also has a reputation for relatively high corporate taxes.
To remain competitive and attract more international investment, Germany has proposed new corporate tax reforms.
These reforms are designed to lower the tax burden on businesses, promote innovation, and make the country more attractive to foreign investors.
Germany’s new corporate tax proposals are aimed at both large and small businesses. Here are the key changes:
Germany is already a top destination for foreign investment, but the country wants to remain competitive as other nations cut their corporate tax rates.
For example, the United States and the United Kingdom have both taken steps to lower corporate taxes to attract more business.
By lowering its tax rates and offering incentives for innovation, Germany hopes to encourage multinational companies to invest in the country.
This will create more jobs, improve the country’s technological capabilities, and boost the economy overall.
While the tax cuts are popular with many businesses, there has been some criticism of the proposals.
Critics argue that lowering corporate taxes could lead to a reduction in government revenue, which may impact public services like healthcare and education.
Additionally, there are concerns about whether the tax cuts will disproportionately benefit large corporations while smaller businesses may not see as much of a reduction in their tax bills.
Germany’s new corporate tax proposals are part of a broader strategy to make the country more competitive in a global market.
By lowering the corporate tax rate, offering more incentives for R&D, and simplifying tax compliance, the German government hopes to attract more foreign investment and boost the country’s economy.
For foreign investors and multinational companies, these changes represent an exciting opportunity to invest in a country known for its economic stability and innovation. However, businesses should stay informed as the specific details of the reforms are finalised.
If you have any queries regarding Germany’s Latest Corporate Tax Proposals, or German tax matters in general, then please get in touch.
On January 5, 2023, a new EU directive came into force that provides rules on corporate
sustainability reporting – the Corporate Sustainability Reporting Directive (CSRD).
This will significantly change the sustainability reporting requirements for companies. CRS reporting is therefore becoming increasingly important.
The aim of the new CSR Directive is to close previous gaps in the reporting regulations, expand the requirements overall and thus create binding standards for reporting at EU level for the first time.
The European Commission published the proposal for the new directive back in April 2021.
The Commission was then able to agree on a compromise with the Council and the European Parliament in June 2022, which was finally formally adopted by the EU Parliament and the Council.
The new directive was published in the Official Journal of the European Union on December 16, 2022.
The member states had to transpose the new directive into national law within 18 months of its
entry into force, i.e. by July 2024.
Previously, the Non-Financial Reporting Directive (NFRD) applied to certain companies within the EU and had been in force since 2014.
It contained regulations for companies of public interest and aimed to enable stakeholders to better assess the contribution of the respective company to sustainability.
In contrast to the regulations in the new CSRD Directive, however, the scope of application was
rather limited.
The new CSR-Directive extends the reporting obligation to a large number of additional companies.
From around 11,600 companies previously affected, around 49,000 companies now fall within the
scope of the directive.
Specifically, the directive applies to corporations and commercial partnerships with exclusively
limited liability shareholders, provided that
Micro-enterprises are not included.
The scope of application will be gradually expanded; for financial years starting from January 1, 2024, the regulations will initially only apply to public interest entities with more than 500 employees, from 2025 they will apply to all other large companies as defined by accounting law and from 2026 they will generally apply to capital market-oriented small and medium-sized enterprises. However, the latter have the option of deferral until 2028.
The new directive contains the following important changes:
The Corporate Sustainability Reporting Directive (CSRD) marks a critical step in the EU’s pursuit of enhanced transparency in corporate sustainability practices. By expanding the reporting scope to cover a larger number of companies, the directive ensures that sustainability reporting is as important as financial reporting.
With double materiality, companies are now accountable for both their impact on the environment and the effect of sustainability issues on their business. Additionally, the introduction of a standardised electronic format underlines the EU’s commitment to digital transparency and the comparability of sustainability data across the region.
In essence, the CSRD paves the way for businesses to adopt sustainable practices, providing crucial data that will help drive the EU’s broader sustainability goals forward.
If you have any queries about the EU Corporate Sustainability Reporting Directive (CSRD), or other international tax matters, then please get in touch.