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Amazon’s tax practices in the UK have been under the spotlight for many years, with criticism frequently aimed at the tech giant for its minimal corporation tax payments.
In recent years, Amazon paid very little in taxes due to the utilisation of a government tax break, which has now expired.
This development has led to Amazon paying corporation tax for the first time since 2020, marking a significant shift in both the company’s approach to tax and the broader UK tax policy landscape.
Amazon operates globally, with the UK being one of its key markets.
Historically, like many multinational companies, Amazon has faced criticism for taking advantage of legal tax avoidance strategies.
These strategies often involved reporting profits in low-tax jurisdictions such as Luxembourg, while paying relatively little tax in high-tax markets like the UK.
It is claimed that one of the main tools Amazon and other companies had been using in recent years to reduce their UK tax burden had been Rishi Sunak’s much vaunted “Super Deduction”.
The relief allowed for 130% corporation deduction for qualifying expenditure on qualifying plant and machinery in a two year period beginning in April 2021.
This change in Amazon’s tax payments also aligns with a global push for fairer taxation of multinational companies.
The OECD’s Pillar Two reforms, which aim to introduce a global minimum tax rate of 15%, have garnered widespread support.
These reforms are designed to stop companies from shifting profits to low-tax jurisdictions, ensuring that all multinationals, including tech giants like Amazon, contribute a fair share to the countries in which they generate significant revenue.
Amazon’s recent corporation tax payment in the UK is a reflection of both changes in UK tax policy and global efforts to reform corporate taxation.
With governments across the world, including the UK, pushing for greater tax transparency and compliance from large multinationals, we may see further shifts in how companies like Amazon structure their global tax strategies.
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Transfer pricing refers to the rules and methods used to determine the prices of transactions between related companies, such as subsidiaries of a multinational corporation.
When one subsidiary of a company sells goods or services to another subsidiary, the price at which this transaction occurs is called the transfer price.
These rules exist to ensure that companies price these transactions fairly and in line with the arm’s length principle, meaning the prices should be similar to what independent companies would charge each other.
Transfer pricing is important because it affects how much tax a company pays in each country where it operates.
If a company sets its transfer prices too low or too high, it can shift profits from high-tax countries to low-tax countries, reducing its overall tax bill.
This practice can lead to base erosion and profit shifting (BEPS), where countries lose tax revenue because profits are moved to tax havens.
Governments and tax authorities around the world use transfer pricing rules to prevent this type of tax avoidance and ensure that companies pay their fair share of taxes.
Let’s say a multinational company has a subsidiary in Country A, where the tax rate is high, and another subsidiary in Country B, where the tax rate is low.
The company might try to shift its profits to Country B by setting a low transfer price for goods or services sold from the subsidiary in Country A to the subsidiary in Country B.
This would reduce the profits reported in Country A (where the taxes are high) and increase the profits in Country B (where the taxes are low).
To prevent this, tax authorities require companies to set their transfer prices according to the arm’s length principle.
This means that the price should be the same as it would be if the transaction were between unrelated companies, ensuring that each country gets its fair share of tax revenue.
Transfer pricing is a critical aspect of international tax law because it helps prevent companies from shifting profits to low-tax countries.
By ensuring that transactions between related companies are priced fairly, transfer pricing rules help create a more level playing field for businesses and ensure that governments can collect the taxes they are owed.
If you have any queries about this article, or international tax matters more generally, then please get in touch.
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.
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China’s VAT rebate program is to be expanded to support its export sector.
This is a major policy shift aimed at helping businesses that export goods, especially in light of global economic challenges and reduced demand in some markets.
In this article, we’ll explore what VAT rebates are, why China is expanding this program, and how this could benefit businesses both inside and outside of China.
In many countries, VAT is charged on goods and services as a way to collect tax from consumers. However, when goods are exported, they are often exempt from VAT.
To make sure that exporters aren’t unfairly taxed, governments often offer VAT rebates.
These rebates refund the VAT that was paid when the goods were produced, allowing businesses to recover the tax paid on inputs (like raw materials and manufacturing costs).
For exporters, VAT rebates can significantly reduce costs and increase profits, making their goods more competitive in international markets.
China’s economy has faced several challenges in recent years, including trade tensions, the COVID-19 pandemic, and global inflation.
These factors have put pressure on Chinese exporters, who are struggling with rising production costs and slowing demand from key trading partners.
By expanding its VAT rebate program, China aims to boost its export sector by making it cheaper for companies to produce goods for export.
This policy will give businesses more cash flow by refunding the VAT they paid during production, which could be reinvested into their operations or used to lower prices, making Chinese goods more competitive globally.
While the exact amount of VAT rebates varies depending on the type of goods being exported, the Chinese government has hinted that the rebate program will be expanded to cover a wider range of goods.
This means more industries will benefit from VAT rebates, especially those in manufacturing, electronics, and textiles.
The rebates are likely to be increased to 13%, which is the standard VAT rate in China. This will allow exporters to recover nearly all the VAT they paid when producing goods for international markets.
For Chinese businesses, this expanded VAT rebate program is a lifeline. It will help them reduce costs and make their goods more competitive in global markets, particularly in sectors where price is a key factor in attracting buyers.
The rebates will also boost profitability and give companies more financial flexibility in a challenging economic environment.
For foreign businesses that import goods from China, this could mean lower prices on Chinese-made products, as exporters may pass on some of the savings from the VAT rebates to their customers.
This is especially important for industries like retail and electronics, which rely heavily on Chinese imports.
China’s decision to expand its VAT rebate program is a significant step towards supporting its export-driven economy.
By giving businesses more financial relief, China hopes to keep its goods competitive in the global marketplace, especially in industries that have been hit hard by rising costs and weakening demand.
For exporters, this policy could provide much-needed support as they navigate a complex global economy.
If you have any queries about this article on China’s VAT rebate program, or tax matters in China, then please get in touch.
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A non-cooperative tax jurisdiction is a country or territory that does not follow international tax transparency and information-sharing standards.
These jurisdictions often have low or no taxes and strict privacy laws, making them attractive to individuals and businesses looking to avoid or evade taxes in their home countries.
However, because these jurisdictions do not cooperate with international efforts to combat tax avoidance, they are often labelled as “non-cooperative” by organisations like the European Union (EU) and the Organisation for Economic Co-operation and Development (OECD).
Non-cooperative tax jurisdictions make it easier for individuals and businesses to hide their income and assets, reducing the amount of tax revenue that countries can collect.
This can lead to significant losses for governments, which depend on taxes to fund public services like healthcare, education, and infrastructure.
In addition, non-cooperative jurisdictions often allow companies to shift their profits to low-tax or no-tax countries, a practice known as profit shifting.
This deprives the countries where the profits were actually made of tax revenue, contributing to **base erosion**.
The **EU** and the **OECD** maintain lists of non-cooperative tax jurisdictions. These lists are based on criteria like:
Countries that do not meet these criteria may be placed on a black list or grey list of non-cooperative jurisdictions.
Countries and territories on these lists may face penalties or sanctions.
For example, businesses operating in or through non-cooperative jurisdictions may be subject to higher taxes or stricter reporting requirements in other countries.
In some cases, non-cooperative jurisdictions may also face restrictions on accessing international financial markets.
Non-cooperative tax jurisdictions contribute to global tax avoidance and profit shifting, depriving countries of much-needed revenue.
By identifying and penalising these jurisdictions, the EU and OECD aim to create a fairer global tax system where companies and individuals pay their fair share of taxes.
If you have any queries about this article or on international tax matters more generally, then please get in touch.
The ongoing battle over Digital Services Tax (DST) has put Ireland in a tough position.
With the European Union (EU) pushing for a tax on digital services provided by large tech companies, Ireland must decide where it stands—supporting the EU or maintaining strong ties with the United States, home to many of these tech giants.
The US government views these taxes as discriminatory because they primarily target American firms like Google, Facebook, and Amazon.
The DST is a tax levied on the revenues generated by large multinational digital companies that provide services such as social media, online advertising, and e-commerce platforms.
These taxes aim to address the gap where companies generate large revenues from countries where they have no physical presence, meaning they often pay minimal taxes.
The EU has been pushing for a 3% DST across its member states, with many countries already implementing it on a national level.
Ireland, as a key hub for US tech companies in Europe, finds itself at the heart of this debate.
Ireland is home to the European headquarters of major tech companies like Facebook, Google, and Apple (for our recent article on the EU’s ruling on Apple – see here).
These companies have set up in Ireland largely due to the country’s 12.5% corporate tax rate and other favourable tax policies.
The US has raised concerns that the DST unfairly targets American companies and could lead to retaliatory tariffs.
While the EU is keen on creating a unified DST, Ireland is balancing its economic dependence on the US tech sector with its obligations as an EU member.
Ireland’s decision will have significant consequences for its relationship with both the US and its EU partners.
Ireland faces a complex decision in the US-EU DST standoff. Its role as a tech hub makes it crucial to these discussions, and whatever path it chooses will shape its tax landscape for years to come.
If you have any queries about this article on Digital Services Tax, or tax matters in Ireland, then please get in touch.
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Kenya has taken a significant step toward adopting the OECD’s global tax standards by introducing a Minimum Top-Up Tax.
This new measure ensures that multinational companies operating in Kenya will pay a minimum tax of 15% on their profits, aligning Kenya with the OECD’s Pillar Two framework.
The OECD’s Pillar Two framework was designed to prevent large corporations from avoiding taxes by shifting profits to low-tax jurisdictions.
Under this framework, countries are encouraged to introduce a global minimum tax rate of 15%.
Kenya’s new Minimum Top-Up Tax will apply to multinational corporations operating in the country, ensuring that these companies are taxed at an effective rate of at least 15%.
If a company’s profits are taxed at a lower rate, the Kenyan government will impose a top-up to bring the effective rate to 15%.
The introduction of this tax is part of a broader global effort to ensure tax fairness and prevent profit shifting.
By ensuring that companies pay at least 15% in taxes, Kenya is joining other countries in trying to curb tax avoidance strategies that see profits moved to low-tax jurisdictions.
For Kenya, this is a significant move, as many multinational companies, particularly in the tech and financial sectors, operate within the country.
Large corporations operating in Kenya will need to carefully examine their tax structures to ensure compliance with the new rules.
Companies that have relied on tax incentives or reduced tax rates will now be subject to the Minimum Top-Up Tax, potentially increasing their overall tax liabilities.
More information about Kenya’s implementation of the Minimum Top-Up Tax can be found through the Kenya Revenue Authority here.
Kenya’s decision to adopt the Minimum Top-Up Tax aligns the country with global tax standards and demonstrates its commitment to tax fairness.
This move is expected to generate additional revenue for the country while reducing the risk of tax avoidance by multinational corporations.
Concerned about Kenya’s new Minimum Top-Up Tax and its impact on your business? Find your international tax advisors here to ensure compliance with global tax standards. For specific Kenya tax advice, get in touch with our experts today.
Alternatively, if you are a tax adviser in Kenya 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.
Canada is making changes to its carbon tax rebate system, aiming to provide more targeted financial relief to low- and middle-income households.
The carbon tax, which applies to fossil fuels like gasoline and natural gas, is part of Canada’s broader effort to reduce carbon emissions and combat climate change.
However, as the cost of living continues to rise, the government is adjusting the rebate system to ensure that those most affected by the carbon tax are getting the help they need.
In this article, we’ll explore what the changes mean and who stands to benefit.
The carbon tax is a fee that Canadians pay on the fossil fuels they use, such as gasoline, diesel, and natural gas.
The idea behind the tax is to encourage people and businesses to reduce their carbon emissions by making fossil fuels more expensive.
The money collected from the tax is then returned to Canadians in the form of rebates, which help offset the higher cost of fuel.
The Canadian government has decided to adjust the rebate system to ensure that lower-income households receive more financial relief.
Under the new system, rebate amounts will be based on household income rather than just the amount of carbon tax paid.
This means that families who are struggling to make ends meet will receive a larger rebate than they would have under the old system.
Another key change is that rebates will now be paid out on a quarterly basis, rather than as a lump sum.
This will give households more regular access to the money they need to cover the higher costs of fuel and energy.
The new rebate system is designed to target low- and middle-income households, who tend to spend a larger portion of their income on necessities like heating and transportation.
These households will see an increase in their rebate payments, while higher-income households may see a reduction.
As Canada continues to transition to a low-carbon economy, the carbon tax is expected to rise in the coming years.
This means that the cost of fossil fuels will continue to increase, putting pressure on household budgets.
The new rebate system is intended to ensure that those most affected by the carbon tax are not left behind.
Additionally, by providing more regular payments, the government hopes to give households the financial flexibility they need to manage rising costs.
While the rebate system is designed to help households, businesses may also feel the impact of the changes.
With higher carbon tax rates expected, companies that rely heavily on fossil fuels may need to find ways to reduce their emissions or pass on the increased costs to consumers.
In the long run, businesses that invest in green technology and energy efficiency will be better positioned to thrive in a low-carbon economy.
Canada’s decision to adjust its carbon tax rebate system is a step towards making the transition to a low-carbon economy more equitable.
By targeting relief towards low- and middle-income households, the government aims to ensure that the most vulnerable Canadians are protected from rising fuel costs.
These changes, along with the ongoing rise in carbon tax rates, underscore the importance of reducing carbon emissions and investing in green energy.
If you have any queries about this article on Canada’s carbon tax rebate, or tax matters in Canada, then please get in touch.
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India has introduced new Goods and Services Tax (GST) regulations targeting e-commerce platforms.
The updates include stricter rules around GST collection at source (TCS) and increased penalties for non-compliance.
This is part of India’s broader effort to improve tax compliance and ensure that digital businesses operating in the country are meeting their tax obligations.
GST (Goods and Services Tax) is a comprehensive tax applied to the sale of goods and services in India. TCS (Tax Collected at Source) is a system where the e-commerce platform collects GST on behalf of sellers and then remits it to the government. This ensures that tax is collected at the point of sale, reducing the risk of evasion.
India’s latest GST updates include:
India’s digital economy has been growing rapidly, and the government is keen to ensure that all businesses, including those operating online, pay their fair share of taxes.
The new GST rules are designed to close loopholes that some e-commerce platforms have used to reduce their tax liabilities.
Platforms like Amazon India, Flipkart, and other digital services will need to review their tax compliance procedures.
The increased reporting requirements may result in higher administrative costs for these companies, but they are also likely to reduce the risk of tax audits and penalties.
India’s new GST regulations for e-commerce platforms represent a significant step towards improving tax compliance in the digital economy.
These changes will ensure that online businesses contribute fairly to the tax system while making it harder for companies to evade their obligations.
If you have any queries about this article on India’s GST update, or tax matters in India, then please get in touch.
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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.
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