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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.
The Indonesian government, in collaboration with the Investment Coordinating Board (BKPM) and the Ministry of Finance (MOF), is introducing additional incentives for the battery electric vehicle (BEV) sector.
These incentives, which include a 0% import duty tariff, exemption from the tax on sales of luxury goods, and a reduced value-added tax (VAT) rate of 1%, are designed to stimulate further investment in the burgeoning electric vehicle industry.
These measures are aligned with Indonesia’s ongoing commitment to accelerating EV investment and complement previous fiscal incentives outlined in the 2019 Presidential Regulation.
Issued on 19 January 2024, BKPM Regulation No. 6 of 2023 offers a range of incentives for BEV manufacturing in Indonesia. Highlights include:
In alignment with BKPM Regulation No. 6 of 2023, the MOF issued three critical regulations to implement the new incentives:
An additional 10% VAT borne by the government for BEV deliveries in 2024, applicable to BEVs with a TKDN of at least 40%;
Further outlines the exemption from the tax on sales of luxury goods for the fiscal period of January to December 2024.
Updates goods classification and import duty rates, specifically adding BEV under certain tariff posts to be subject to a 0% customs duty rate.
To avail of these incentives, manufacturing companies must submit a proposal through the OSS system by no later than 1 March 2025.
This process involves a proposal letter, commitment statements, and subsequent assessment by relevant ministries.
Upon meeting all requirements, companies will receive an approval letter, which serves as the basis for obtaining incentives from the Ministry of Finance and an import certificate from the Ministry of Trade.
As these regulations represent a significant boost for Indonesia’s EV sector, they mark a promising step towards the country’s sustainable and innovative automotive future.
While the application process is still evolving, these incentives are expected to attract considerable investment, drive EV manufacturing, and position Indonesia as a leader in the electric vehicle market.
If you have any queries over this article on Indonesia EV Sector Incentives, or Indonesian tax matters more generally, then please get in touch.
Also, we are looking for tax experts in Indonesia to join our ranks. If you fit the bill, then please get in touch. For more details, please see here.
On 6 March 2024, the Federal Parliament in Belgium saw the introduction of a transformative draft bill aimed at refining Belgium’s investment deduction and tax credit regimes.
This initiative reflects a proactive response to ongoing technological advancements and the pressing demands of climate policy.
Traditionally, Belgium’s tax system encouraged investments through deductions on taxable profits, pegged at a certain percentage of the acquisition value for newly acquired tangible or intangible assets.
Currently, individuals and SMEs enjoy an 8% deduction, with opportunities for enhanced deductions tied to specific investments and adjustments for inflation. However, the landscape is set to change dramatically.
The proposed legislation introduces additional tax deductions for companies and self-employed individuals engaging in specific categories of new assets utilized within Belgium for business operations. Exclusions apply, maintaining a strategic focus on environmental and digital progress.
The basic Investment Deduction is set at 10% for SMEs and self-employed, excluding climate-detrimental investments.
It is boosted to 20% for digital assets investments, with a forthcoming detailed exclusion list.
The Thematic Deduction offers an enhanced 40% deduction for SMEs and self-employed and 30% for larger companies.
Eligible investments include efficient energy, carbon-free transport, eco-friendly projects, and digital advancements in these areas.
A 13.5% deduction for eco-conscious R&D and patents, increasing to 20.5% for staggered deductions.
The bill retains the mechanism for carrying forward unused deductions, ensuring flexibility.
Set to take effect from 1 January 2025, the new regime keeps the current spread investment deduction for assets acquired before this date, promoting a seamless transition.
Belgium’s forthcoming tax reform is a bold step towards marrying fiscal incentives with the urgent need for sustainable and technological advancement.
By fostering a conducive environment for eco-friendly and digital investments, the country positions itself at the forefront of economic resilience and environmental stewardship.
If you have any queries on Belgium’s Investment Deduction for a Sustainable Future, or Belgian tax matters more generally, than please get in touch.
Saudi Arabia’s tax landscape has undergone significant transformations in alignment with the ambitious Saudi Vision 2030.
In this article, we’ll look at some of the incentives designed to attract investments to the Kingdom.
Taxation in Saudi Arabia falls under the purview of the Zakat, Tax and Customs Authority (ZATCA).
The tax regime is unique due to the inclusion of zakat and its approach to personal income tax which is levied only on non-residents.
The fundamental distinction in the Saudi tax system is between:
For non-Saudi businesses, income tax is levied on profits while zakat is calculated on the net worth for Saudi entities, at a rate of 2.5%.
The Income Tax Law imposes a 20% tax rate on profits, while income from hydrocarbons is taxed between 50% and 85%.
Notably, a new draft tax law introduced in December 2023 – which is open for public feedback – is set to further align Saudi tax policy with international standards.
Customs duties in Saudi Arabia protect local production, with rates up to 25%.
Value Added Tax (VAT) experienced an increase from 5% to 15% in 2020, with excise taxes levied on products like tobacco and energy drinks to discourage consumption.
Furthermore, a Real Estate Transaction Tax (RETT) applies to property transactions at a rate of 5%.
To attract multinational corporations to set up regional headquarters in Saudi Arabia, ZATCA has introduced lucrative tax exemptions for income tax, WHT on dividends, and more.
These incentives can last up to 60 years.
The Kingdom provides incentives for investments in certain underdeveloped regions, offering deductions on training, education expenses, and salaries of Saudi personnel.
Payments to non-residents from within Saudi Arabia are subject to WHT, with the rate depending on the type of payment.
Saudi Arabia’s revised tax framework reflects its attempts to foster a competitive, integrated global economic environment.
For more insights on Saudi Arabia’s changing tax environment and investment opportunities, feel free to get in touch.
“No one has become poor by giving” so that saying goes.
Indeed, charitable giving is a worthy pursuit. However, when it comes to getting it right for US / UK taxpayers, a failure to navigate the tax rules on both side of the pond might result in one becoming poorer than one needs!
This is particularly the case for UK residents who are also US citizens.
Here, understanding the tax implications and opportunities for relief is crucial.
The remainder of this short article sets out some of the considerations for such taxpayers when it comes to tax-efficient giving.
For donors aiming to optimize their contributions, the UK offers several tax reliefs, including for:
These reliefs encourage donations by reducing the tax impact on the donor. However, there’s no such thing as a free lunch – so each of them comes with specific requirements, particularly concerning the recipient charity’s eligibility.
A key consideration for UK taxpayers is ensuring donations are made to entities recognised as charities under UK law.
This recognition is crucial for accessing tax reliefs, and recent clarifications have emphasized that only donations to UK charities qualify, excluding those to charities based in the EU, EEA, or beyond.
For US taxpayers, the criteria for charitable tax relief differ, posing challenges for those looking to donate to UK charities.
Given the discrepancies between US and UK definitions of charitable entities, a direct donation to a UK charity may not be eligible for US tax relief.
This discrepancy necessitates exploring alternative giving options that satisfy both jurisdictions’ requirements.
A DAF serves as a flexible option, allowing donors to contribute to a fund recognized for tax purposes in both the US and UK.
This approach offers the convenience of less administrative burden, as the DAF provider handles compliance and reporting requirements.
While it provides a streamlined way to support charitable causes, it may offer less control over the exact use of the funds compared to more direct involvement in a charity.
For donors seeking a more hands-on role or aiming to support activities beyond grant-making, establishing a dual resident charitable structure may be preferable.
This setup involves a US charity that wholly owns a UK charitable entity, enabling tax-efficient grants that are eligible for relief in both countries.
This structure is ideal for those looking to actively engage in charitable operations or governance.
Another option for one-off donations is to contribute to a ‘friends of’ entity within the donor’s home jurisdiction, which then forwards the funds to the main charity abroad.
This method ensures tax reliefs are applicable, though it’s dependent on the existence of such ‘friends of’ branches.
Charitable giving for US-UK taxpayers involves navigating a maze of tax regulations to ensure donations are both impactful and tax-efficient.
Whether opting for a DAF, a dual resident charity, or a ‘friends of’ charity, the goal is to maximize the benefit to both the donor and the recipient charity.
Given the potential for tax pitfalls, seeking expert advice is paramount to ensuring that charitable gestures do not inadvertently lead to tax liabilities, thereby preserving the spirit of giving in a financially savvy manner.
If you have any queries on this article on Charitable donations and US / UK taxpayers, or US tax matters in general, then please get in touch.
In a strategic move to diversify its economy and offer an attractive environment for investors, the Kingdom of Saudi Arabia (KSA) announced the creation of new Special Economic Zones (SEZs) on 13 April 2023.
This initiative, led by the Economic Cities and Special Zones Authority (ECZA), marks a significant development in the Kingdom’s efforts to enhance its business landscape and stimulate investment.
The ECZA, responsible for regulating the Kingdom’s Economic Cities (ECs) and SEZs, released a brochure detailing the tax and non-tax incentives available in these newly established zones.
These incentives are designed to make the SEZs highly competitive on a global scale, providing substantial benefits to businesses operating within them.
A reduced rate of 5% for up to 20 years, significantly lower than the standard rate, to boost profitability and encourage long-term investment.
A 0% rate on the repatriation of profits from the SEZs to foreign countries, facilitating free movement of capital and enhancing the attractiveness of the SEZs to international investors.
A deferral of customs duties for goods within the SEZs, with specific exemptions for capital equipment and inputs in Jazan, reducing operational costs for businesses.
A 0% VAT rate on all intra-SEZ goods exchanges, both within and between zones, to encourage trade and manufacturing activities without the burden of additional tax costs.
Goods imported into SEZs from outside KSA are treated as outside the scope of VAT, simplifying the import process and reducing the cost of bringing goods into the SEZs.
Zero-rated VAT is applicable on all goods exchanged within the SEZs and between zones, promoting internal trade and collaboration between businesses within the SEZs.
The brochure also highlights several non-tax incentives, including flexible and supportive regulations regarding the employment of expatriates during the initial five years.
This approach aims to attract global talent and ease the process of setting up and staffing operations within the SEZs.
The establishment of these new Special Economic Zones is poised to significantly impact both the conduct of business within Saudi Arabia and the broader KSA tax regime.
It represents a clear commitment by the Kingdom to create a more diversified and investor-friendly economic environment.
As the SEZs begin to take shape, further guidance and regulations detailing the specific incentives and reliefs are anticipated in the coming months.
This forthcoming information will be crucial for businesses looking to capitalize on the opportunities presented by these new economic zones, marking an exciting chapter in Saudi Arabia’s economic development journey.
If you have any queries on this article, KSA Introduces New Special Economic Zones, or GCC tax matters in more general, then please get in touch.
Business Assets Disposal Relief (“BADR”), formerly known as Entrepreneurs Relief, is an important relief in the UK tax system.
The relief offers significant savings (though not as significant as it once did!) on capital gains from the sale of qualifying businesses.
BADR is primarily accessible upon the sale of shares in a private trading company, assuming specific conditions are met.
A fundamental criterion is the notion of the “personal company.”
This concept encompasses individuals who have been directors or employees holding a minimum of 5% of the company’s shares for at least two years leading up to the sale.
Notably, before 2019, the required holding period was one year.
The scope of BADR also extends to trustees, particularly when dealing with life interest trusts.
Here, the relief is applicable if the trustees sell shares in a company that is the personal company of the life tenant — the beneficiary entitled to the trust’s income.
The catch, however, lies in meeting the personal ownership requirement of 5% of the shares by the life tenant.
The stringent nature of BADR’s conditions was starkly highlighted in the First Tier Tax Tribunal case of Trustees of the Peter Buckley Settlement v HMRC.
Here, in tax year 2015-16, the settlement lodged a claim for Entrepreneurs’ Relief (ER), now BADR, on the disposal of a solitary share in Peter Buckley Clitheroe Ltd (PBCL) dated 8 November 2015.
PBCL acted as a trading entity with Peter Buckley (PB) serving as a director from its inception until 9 November 2015.
The company’s equity was comprised of one Ordinary voting share initially allocated to PB but subsequently transferred to the settlement on 9 September 2012.
In January 2018, HMRC initiated an inquiry into the settlement’s ER claim and, by May 2021, issued a Closure notice.
This notice rejected the settlement’s ER claim and imposed an additional Capital Gains Tax (CGT) liability of £251,280.
HMRC contended that to legitimately claim ER on the share sale, PB was required to personally possess a minimum of 5% of PBCL’s shares for a year within the three-year period preceding the settlement’s share disposal, a criterion that was unfulfilled since the sole PBCL share was in the settlement’s possession since 2012, not in PB’s personal capacity.
The trustees appealed to the First Tier Tribunal (FTT).
The FTT established that PB, in his capacity as a trustee of the settlement and not as an individual owner, held the sole PBCL share.
The trustees, despite having the authority to terminate the settlement in PB’s favor, did not execute this before 8 November 2015.
Consequently, the PBCL share was invested in the settlement immediately before its sale.
Given that PB did not personally own the PBCL share as mandated by s169S(3) TCGA 1992, HMRC’s rejection of the ER claim was justified.
The tribunal underscored that the legislative intent was clear: to qualify for ER, PB had to personally hold at least 5% of the shares and voting rights in PBCL for one year within the three years before the disposal, which he did not, leading to the disallowance of ER and the dismissal of the appeal.
The complexities of trust ownership and the stringent requirements of BADR converged to result in the trustees being denied relief on the sale of company shares, leading to a significant tax liability.
This case serves as a crucial reminder of the meticulous planning required when considering shareholding structures, especially in the context of trusts.
In conclusion, while BADR presents a valuable opportunity for tax savings, its intricate conditions and interplay with trust structures underline the need for diligent planning and expert guidance.
As entrepreneurs and trustees seek to navigate these waters, proper tax advice remains key.
If you have any queries about this article on Business Asset Disposal Relief for Trusts and Trustees or any UK tax matters, then please get in touch.
In July the Government published draft legislation dealing with the abolition of the lifetime allowance (LTA) with effect from 6 April 2024.
The draft legislation provides for the introduction of two new lump sum allowances which will apply to an individual and are used when a relevant lump sum is paid in respect of an individual and at least part of that lump sum is tax free.
The new allowances are the lump sum and death benefit allowance of £1,073,100 (the same as the LTA immediately before its abolition) and the lump sum allowance of £268,275 (25% of the LTA immediately before its abolition).
The individual’s lump sum allowance is used when the individual takes tax free cash in the form of:
The individual’s lump sum and death benefit allowance is used when the individual takes tax free cash in the form of an authorised lump sum and also when a person receives tax free cash in the form of an authorised lump sum death benefit in respect of the individual.
Where part of a lump sum is taxable and part isn’t, only the tax free element counts towards the relevant lump sum allowance.
Pension benefits will be taxed through the existing income tax structure for pension income. To the extent that a lump sum is taxable, it will normally be taxed at the recipient’s marginal rate of income tax.
A “pension commencement lump sum” equating to 25% of the value of the benefits being taken can generally be taken tax free provided the individual has sufficient headroom available under both types of lump sum allowance. 25% of an UFPLS will also be tax free provided the individual has sufficient lump sum allowance headroom.
Any amount in excess of the limits will be taxed as pension income.
Lump sum death benefits paid within 2 years in respect of a deceased member aged under 75 will generally still be tax free provided there is sufficient headroom under the deceased individual’s lump sum and death benefit allowance. Any excess will generally be taxed as income in the hands of the recipient.
The draft legislation contains extensive provisions dealing with individuals who currently benefit from the various statutory protections in relation to the LTA.
“Primary protection” will cease to exist, but will be replaced with a new set of protections.
For individuals with enhanced protection, their “applicable amount” for a pension commencement lump sum is the amount that could have been paid on 6 April 2023.
The deadline for applying for fixed/individual protection 2016 will be 5 April 2025.
The Government plans to publish transitional provisions to deal with the situation where one or more lump sums have been paid in respect of an individual before 6 April 2024, but at least one further lump sum is paid on or after that date.
When the draft legislation was first published, the Association of Consulting Actuaries suggested that it would have the effect of extending to defined benefits the “pension freedoms” that have applied to money purchase benefits since 6 April 2015.
In its Pension schemes newsletter 152 HMRC has confirmed that it is not the Government’s intention to significantly expand pension freedoms.
As we prepare for the abolition of the lifetime allowance (LTA) and the introduction of new lump sum allowances in April 2024, the UK pension landscape is undergoing a transformative shift.
These changes, unveiled in the government’s draft legislation, bring both challenges and opportunities for individuals and pension scheme providers.
Understanding the intricacies of the individual lump sum allowance, the lump sum and death benefit allowance, and the taxation implications for various scenarios is paramount.
The introduction of transitional measures and the preservation of certain protections, albeit with modifications, underscore the government’s commitment to managing this transition smoothly.
Importantly, HMRC’s assurance that there will be no significant expansion of pension freedoms in relation to defined benefits provides clarity in an ever-evolving landscape.
If you have any queries about the lifetime allowance changes, or any other UK tax matters, then please do get in touch.
In a bold move aiming to alleviate the financial pressure on the middle class, the National Party has unveiled their ‘Back Pocket Boost’ Election Tax Plan.
With a focus on tax relief and strategic revenue measures, this $14.6 billion tax cut policy is set to bring substantial changes to New Zealand’s economic landscape.
At the heart of the ‘Back Pocket Boost’ plan lies a dual approach: approximately $8.4 billion in cuts and $6.2 billion in revenue increases.
The key ambition is to reduce Government expenditure while also streamlining contractor and consultant spending.
A pivotal change proposed by the National Party revolves around rental properties.
The plan seeks to fully restore interest deductibility for these properties, with a comprehensive implementation expected by April 2026.
Additionally, the Brightline test, which assesses capital gains tax on rental properties, will undergo a significant transformation. The existing ten-year rule will be shortened to just two years by July 2024.
This alteration implies that properties acquired before July 2022 will be exempt from the Brightline test upon sale.
However, the plan also entails the removal of the depreciation tax break for commercial buildings, previously introduced in response to the post-Covid landscape.
National’s plan includes an assertive approach towards foreign property buyers.
A 15% foreign buyer tax will be introduced for home purchases valued at $2 million or more, excluding individuals without a resident class visa.
To respect the existing agreements with Australia and Singapore, citizens from these nations will be exempted from this new tax rule.
The introduction of a Climate Dividend is another standout feature. Revenue generated from the Emissions Trading Scheme will be earmarked to provide tax relief to individuals, pivoting away from subsidizing large corporations.
Similarly, revenue from the Climate Emergency Response Fund will be directed toward this endeavor.
National is also committed to a proactive regulatory environment. They intend to establish a regulatory framework for online casino gambling to ensure offshore operators comply with tax regulations.
Tax bracket adjustments form a crucial facet of the plan. Changes to threshold amounts for marginal tax rates will facilitate tax relief for the middle class.
While there will be alterations to the middle-class threshold rates, National has confirmed that the 39% top tax rate on income exceeding $180,000 will remain unchanged in their first term.
The National Party envisions enhancing after-tax income through a series of tax credit expansions:
The plan includes the repeal of several tax mechanisms, including the controversial “App Tax,” the Auckland Regional Fuel Tax, and the Ute Tax, indicating a commitment to simplify and refine the existing tax structure.
In a bid to align with global practices, National intends to implement a ‘user pays’ visa processing model, effective from 1 July 2024.
While this will result in increased visa processing fees for most applicants, Pacific Island origin applications will remain exempt. A priority processing fee will also be introduced to expedite applications.
The National Party’s ‘Back Pocket Boost’ Election Tax Plan is poised to reshape the tax landscape of New Zealand.
By addressing the needs of the middle class through tax relief, credit expansions, and strategic revenue measures, the plan endeavors to foster economic growth while easing the financial burden on individuals and families.
As the election approaches, the implications of these proposed changes on the nation’s economic future will undoubtedly take centre stage.
If you have any queries about the so-called back pocket boost, or New Zealand 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 bold move to bolster its standing as a global high-tech hub, Israel recently introduced the revamped Angels Law, packed with enticing tax incentives to attract investors into its burgeoning tech sector.
The legislation, effective until the end of 2026, is a strategic successor to the original Angels Law that concluded its run in 2019.
This reinvigorated legal framework seeks to accelerate investment in Israeli high-tech startups while offering an array of tax benefits that promise to reshape the landscape of tech investments.
In order to ignite investment in high-tech startups under specific criteria, the new Angels Law delivers a tax credit as a carrot to investors who put their money into Israeli high-tech startups.
This credit is calculated by multiplying the investment amount by Israel’s applicable capital gains tax rate – a tax credit that mirrors what would have been levied had the investor sold their allocated shares within the same tax year of investment.
This is a game-changer that empowers investors to recoup a portion of their investment costs swiftly, thus paving the way for lower entry barriers to high-tech startups.
However, there’s a cap of ILS 4 million for this tax credit, and unused credit can be carried forward to future tax years.
The Angels Law introduces the concept of deducting investments in Israeli high-tech startups from capital gains realized through the sale of shares in other high-tech companies.
For this benefit to kick in, the investment must be made within 12 months before or 4 months after the shares’ sale.
By allowing investors to trim their capital gains with the investment amount, this provision optimizes the tax landscape for experienced investors, fostering a nurturing environment for their invaluable business acumen.
In an innovative twist, the Angels Law permits an Israeli high-tech company that acquires control over another local or foreign high-tech entity with a “beneficial intangible asset” to deduct the purchase cost from its “preferred technological income.”
This deduction can be claimed over five years, post-acquisition.
This shift empowers companies to manage their profitability during the early stages post-acquisition, giving time for strategic investments to mature.
Large Israeli high-tech firms often look to foreign financial institutions for funding due to restricted domestic financing options.
The new Angels Law aims to ease this burden by granting foreign financial institutions tax exemption on interest income generated from loans extended to Israeli high-tech firms.
This exemption aims to reduce the financial strain on tech firms, facilitating smoother access to essential funding from global sources.
With the clock ticking until the Angels Law’s expiration at the close of 2026, the window of opportunity for both local and foreign investors to capitalize on these lucrative tax benefits is a limited one.
Israel’s high-tech sector is now primed for an influx of investments, as startups and established tech giants alike stand to gain from these enticing incentives.
As the world watches, Israel is poised to maintain its reputation as a tech powerhouse with innovation-friendly policies that will reverberate throughout the global investment landscape.
If you would like more information about Israel’s new Angels Law 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..