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Value Added Tax (VAT) is a type of tax that’s added to most goods and services that are sold.
In many countries, businesses collect VAT from their customers and then pay it to the government.
Recently, Switzerland decided to require online platforms to collect VAT on behalf of sellers, similar to rules in the European Union.
Switzerland is following the lead of the EU in making sure that online platforms like Amazon and eBay collect VAT on the goods sold by independent sellers.
Before this rule, it was up to the sellers themselves to collect and pay the VAT. However, not all sellers complied, and this led to lost tax revenue.
By shifting the responsibility to platforms, Switzerland aims to make sure that VAT is properly collected and paid. This helps ensure a fairer tax system and increases government revenue.
Under the new rule, if an online platform facilitates a sale between a Swiss buyer and an independent seller, the platform must collect VAT on behalf of the seller and pay it to the Swiss government.
This applies to both Swiss-based sellers and sellers from other countries selling to Swiss customers.
This change is important because it makes it harder for sellers to avoid paying VAT. It also levels the playing field for Swiss businesses, which have always had to collect and pay VAT on their sales.
For sellers, this rule means they no longer have to worry about collecting VAT themselves. However, it also means they may have to adjust their prices to include the VAT collected by the platform.
For online platforms, this rule adds extra work, as they need to update their systems to comply with the new VAT requirements.
However, platforms are used to these types of rules, especially in the EU, so most should be able to adjust without too much difficulty.
Switzerland’s new VAT rule for online platforms is a step towards stronger tax compliance.
By requiring platforms to collect VAT, Switzerland ensures that sellers pay their fair share of taxes while making the system simpler for both businesses and the government.
Final thoughts
If you have any queries about this article, Swiss Platforms Required to Collect VAT from Online Sellers, or tax matters in Switzerland more generally, then please get in touch.
In today’s digital age, many people are earning money through social media platforms like Instagram, YouTube, and TikTok.
These individuals are known as social media influencers and content creators. They earn income through brand deals, sponsorships, and even selling their own products.
However, with the rise of this new type of income, tax authorities have had to adapt and create rules on how influencers should report their earnings.
In the UK, HM Revenue and Customs (HMRC) is cracking down on influencers who may not be aware that they need to pay tax on their online income.
If you’re an influencer, it’s important to understand that the money you make from social media is subject to tax just like any other income.
Social media influencers can earn money in a variety of ways, including:
Even though these earnings come from social media, they are still considered taxable income. Just because your income comes from an online source doesn’t mean you’re exempt from paying taxes.
In the UK, influencers must pay both Income Tax and National Insurance Contributions (NICs) on their earnings. The specific amount they owe depends on how much they earn in total. Here are some of the key tax responsibilities influencers have:
Most influencers are self-employed, which means they must file a Self-Assessment tax return every year.
This is where they report all their earnings, expenses, and calculate how much tax they owe.
It’s important to keep records of all income, including payments received from brands, affiliate links, and ad revenue.
Failing to report income correctly can lead to penalties from HMRC.
Additionally, if influencers receive products or services in exchange for promoting a brand, the value of these goods must also be reported as income.
For example, if a clothing company sends an influencer free clothes in exchange for a post, the value of the clothes counts as income and needs to be taxed.
As social media continues to evolve, more and more people are making a living through online platforms.
While this is exciting, it’s important for influencers to understand that their income is taxable and that HMRC is paying close attention to how it is reported.
Keeping accurate records, filing a Self-Assessment tax return, and being honest about earnings are the best ways to stay compliant and avoid penalties.
If you’re an influencer, don’t forget that taxes are part of your business responsibilities!
If you have any queries on Tax for Social Media Influencers, or other UK tax matters, then please get in touch.
Transfer pricing is a method used by multinational companies to set the prices for goods and services exchanged between their subsidiaries in different countries.
Recently, Coca-Cola has found itself in a major dispute with the US Tax Court over transfer pricing.
The court ruled that Coca-Cola must pay an additional $9 billion in taxes due to transfer pricing adjustments, and the company is now planning to appeal this decision.
Coca-Cola, like many multinational companies, sells products across different countries through its subsidiaries.
The US Tax Court found that Coca-Cola had set the prices for these transactions in a way that shifted profits to lower-tax countries, allowing it to pay less tax in the US.
The court ruled that these pricing arrangements violated the arm’s length principle, which requires transactions between related companies to be priced as if they were between independent companies.
As a result, the court ordered Coca-Cola to pay an additional $9 billion in taxes to the US government.
Coca-Cola argues that its transfer pricing arrangements comply with international tax rules and that the court’s ruling is unfair.
The company plans to appeal the decision, which could result in a lengthy legal battle.
If the appeal is successful, Coca-Cola could avoid paying the $9 billion in additional taxes.
However, if the court upholds the original ruling, it could set a precedent for other multinational companies, making it harder for them to shift profits to low-tax countries.
This case is being closely watched by other multinational companies, especially those that rely on complex transfer pricing arrangements.
If Coca-Cola loses the appeal, it could encourage tax authorities in other countries to take a closer look at how companies set their transfer prices.
For multinational companies, this means that they may need to review their transfer pricing policies and ensure they comply with international tax rules to avoid similar disputes.
Coca-Cola’s transfer pricing dispute highlights the challenges that multinational companies face in navigating complex international tax rules.
The outcome of the appeal will have significant implications for both Coca-Cola and other businesses, as it could reshape how transfer pricing is enforced around the world.
If you have any queries about this article on Coca-Cola to Appeal $9B Transfer Pricing Adjustment, or US tax matters in general, then please get in touch
The Alternative Minimum Tax (AMT) is a special tax system designed to ensure that high-income earners pay at least a minimum amount of tax, even if they qualify for a lot of tax breaks under the regular tax system.
The AMT was created to prevent people with very high incomes from using deductions and loopholes to avoid paying taxes altogether.
For 2024, the IRS has raised the AMT exemption, which is the amount of income that’s not subject to the AMT.
For 2024, the AMT exemption has been raised to £85,700 for single filers and £119,300 for married couples filing jointly.
This means that if your income is below these amounts, you won’t have to worry about paying the AMT.
The AMT exemption phases out for higher earners, starting at £578,150 for single filers and £1,156,300 for married couples.
If your income exceeds these thresholds, you may still have to pay the AMT.
The AMT typically affects high-income earners who claim a lot of deductions or have complex tax situations.
For example, if you claim a large number of deductions for state and local taxes, home mortgage interest, or investment losses, you might be subject to the AMT.
The AMT ensures that everyone pays at least a minimum level of tax, even if they qualify for a lot of deductions under the regular tax system.
The IRS adjusts the AMT exemption every year to account for inflation.
Without these adjustments, more and more people would be subject to the AMT over time, even if their real incomes haven’t increased.
By raising the exemption, the IRS ensures that the AMT continues to target only the highest-income taxpayers.
The increase in the AMT exemption for 2024 is good news for high-income taxpayers who might otherwise be subject to the AMT.
By raising the exemption, the IRS is helping to ensure that only those with very high incomes and large deductions will have to pay the AMT, while still ensuring that everyone pays their fair share of taxes.
If you have any queries about the Alternative Minimum Tax (AMT) 2024, or any other US tax matters, then please get in touch.
The United Nations (UN) is stepping up its role in international tax policy, aiming to create a new framework for global tax cooperation.
Historically, organisations like the Organisation for Economic Co-operation and Development (OECD) have led the way in setting international tax standards.
However, the UN’s involvement signals a shift towards giving developing countries a stronger voice in shaping tax rules, particularly as digitalisation and globalisation have created new challenges for traditional tax systems.
The UN’s new framework is expected to focus on improving tax cooperation between countries, addressing issues like tax evasion, and ensuring fair taxation of multinational corporations.
The global tax system is under increasing strain. Large multinational companies, especially in the tech sector, often pay very little tax in the countries where they generate profits.
This is largely due to tax avoidance strategies that involve shifting profits to low-tax jurisdictions.
While developed countries have been trying to address this issue through initiatives like the OECD’s Base Erosion and Profit Shifting (BEPS) project, developing countries argue that they have been left out of the conversation.
The UN believes that a new framework could help level the playing field for developing nations, allowing them to claim their fair share of tax revenues.
This is particularly important as many developing countries rely on corporate tax revenues to fund public services.
The UN’s proposed global tax framework is expected to focus on several key areas:
While the UN’s push for a new global tax framework is ambitious, it faces several challenges.
For one, many developed countries, particularly those in the OECD, are already working on their own tax reforms, including the global minimum tax under Pillar Two.
Some may be reluctant to give the UN a bigger role in tax matters, fearing that it could complicate or slow down existing efforts.
Moreover, multinational companies may push back against any rules that significantly increase their tax burden.
Countries with low tax rates, like Ireland or certain Caribbean nations, may also resist changes that could hurt their status as attractive locations for businesses.
The UN’s involvement in creating a new global tax framework is a sign that the world is recognising the need for more inclusive tax policies.
As the global economy becomes increasingly digital and interconnected, it’s important that all countries—especially developing ones—have a say in how taxes are collected.
If successful, the UN’s efforts could lead to a fairer and more transparent international tax system, where corporations contribute their fair share and countries can cooperate more effectively to combat tax evasion.
If you have any queries about this article on the United Nations New Global Tax Framework, or other international tax matters, then please get in touch.
Every year, the IRS adjusts tax brackets to account for inflation. Inflation is the increase in the price of goods and services over time, which means that your money doesn’t stretch as far as it used to.
By adjusting the tax brackets, the IRS ensures that people don’t end up paying more taxes just because of inflation.
For 2024, the IRS has made changes to the federal income tax brackets, which could result in lower taxes for many people.
Here’s a quick look at the 2024 federal income tax brackets for single filers:
For married couples filing jointly, the brackets are doubled.
These new tax brackets reflect inflation and help ensure that people don’t pay more tax just because of the rising cost of living.
The new tax brackets mean that more of your income will be taxed at lower rates in 2024.
For example, if you earn the same amount of money in 2024 as you did in 2023, you might end up paying less tax because the income thresholds for each tax bracket have increased.
This is especially helpful for people who receive raises or cost-of-living adjustments to their wages.
Without these changes to the tax brackets, you could be pushed into a higher tax bracket and end up paying more taxes, even though your real income hasn’t increased.
The 2024 tax bracket adjustments are a positive change for most taxpayers. By accounting for inflation, the IRS ensures that you don’t pay more tax than necessary.
This helps make the tax system fairer and ensures that people aren’t unfairly penalised by the rising cost of living.
If you have any queries about this article on Changes in 2024 Tax Brackets Due to Inflation, or US tax matters in general, then please get in touch.
As of 1 July 2024, the Australian Taxation Office (ATO) has implemented new measures to strengthen legal protections for individuals reporting tax avoidance activities.
These new protections now extend to whistleblowers connected with the Tax Practitioner Board (TPB) and establish a robust framework to ensure the safety and confidentiality of those who disclose such information.
To be eligible for protection as a tax whistleblower, the following conditions must be met:
Even if these criteria aren’t fully met, individuals can still provide a tip-off, with the ATO committing to maintaining confidentiality.
Protected disclosures include:
Eligible recipients are usually those with a formal relationship to the entity, such as registered tax agents or BAS agents.
It is illegal to reveal a whistleblower’s identity without their consent. Disclosure is only permissible to authorised bodies like the ATO or an auditor under strict confidentiality rules. Whistleblower identities are protected during court proceedings unless the court deems it necessary for justice.
Communications made to legal practitioners for advice or representation related to tax whistleblowing are protected, even if the whistleblower does not meet the full eligibility criteria.
Whistleblowers are safeguarded against civil, criminal, and administrative liabilities arising from their disclosures.
They are also protected from employer retaliation, such as wrongful termination or contract breaches.
Additionally, while the ATO can use disclosed information for tax assessments or penalties, it cannot use self-incriminating evidence against the whistleblower in criminal proceedings.
It is illegal to inflict any form of detriment on a whistleblower, including dismissal, harassment, or financial harm.
If detriment occurs, whistleblowers can seek legal remedies, including compensation for damages, reinstatement of employment, injunctions to prevent further harm, and formal apologies.
Whistleblowers can report tax avoidance using the ATO’s tip-off form, available online, via the ATO app, by phone, mail, or through tax practitioners.
Whistleblowers have the option to remain anonymous, with confidentiality assured throughout the process.
Since 1 January 2020, public companies, large proprietary companies, and proprietary companies acting as trustees of registrable superannuation entities are required to have a corporate whistleblower policy.
The Australian Securities & Investments Commission (ASIC) offers guidance on how to incorporate tax whistleblower policies into broader corporate governance frameworks.
The ATO’s new measures, effective from 1 July 2024, provide substantial legal protection for tax whistleblowers, including those linked to the Tax Practitioner Board.
These enhanced protections ensure confidentiality, safeguard against retaliation, and offer pathways for compensation, thereby fostering a safer environment for reporting tax avoidance and misconduct.
This strengthened framework highlights the ATO’s dedication to upholding integrity within the tax system and supporting those who contribute vital information.
If you have any queries about this article on Australian Tax Whistleblowers, or tax matters in Australia more generally, then please get in touch.
For years, Israel’s regulators and financial system have faced criticism for their lack of clear guidelines on cryptocurrencies.
However, the Israel Tax Authority (ITA) has been taking steps to establish clearer taxation rules for digital currencies, especially in light of rising inflation, interest rates, and the financial strains of ongoing conflicts.
The ITA treats digital currencies as “assets” for tax purposes, meaning that any sale of such currencies triggers a tax event.
Typically, profits from selling digital currencies are classified as capital income and subject to capital gains tax.
However, if the activity involving these currencies is considered a business operation, the income may be taxed at standard income or corporate tax rates.
For VAT purposes, non-business investors in digital currencies are exempt, but those with business-related activities must register as a “financial institution” and pay VAT accordingly.
The ITA has also clarified its stance on various related topics, such as the sale of NFTs, digital token offerings, and how to record receipts in digital currencies for services rendered.
Despite the ITA’s efforts to clarify tax obligations, many digital currency holders face practical challenges, particularly when depositing cryptocurrency profits into Israeli bank accounts.
The Israeli banking system remains wary of accepting funds from digital currencies, largely due to concerns about tracking the source of funds and potential links to money laundering or terrorist financing.
This reluctance has made it difficult for sellers to deposit proceeds and, consequently, pay their taxes, leading to legal challenges in Israeli courts.
In response, the ITA introduced a “Temporary Order Procedure for Receiving the Payment of Tax for Profits Generated from the Sale of Digital Currencies” in January 2024.
Initially set for six months, this procedure was extended to December 31, 2024. The Procedure allows taxpayers who have earned profits from digital currencies to report and pay their taxes through a special bank account managed by the Bank of Israel, bypassing the traditional banking system.
To use this Procedure, taxpayers must prove that an Israeli bank refused to accept their cryptocurrency funds or open an account for this purpose.
Taxpayers wishing to use the Procedure must submit a detailed request to the ITA, including a report of their digital currency activities, the taxable income, and the calculated tax.
This request must be accompanied by Form 909, detailing the purchase and sale prices of the digital currencies, income earned, and the tax due.
Additionally, taxpayers must provide information on currency movements, foreign accounts involved, and agree to waive confidentiality, allowing the ITA to share information with anti-money laundering authorities and law enforcement.
The Procedure also requires taxpayers to declare the legal sourcing of funds used to purchase digital currencies and confirm sole ownership of the assets in question.
If the ITA rejects a request, the taxpayer will be notified in writing, with reasons provided for the decision.
It is important to note that the Procedure does not exempt taxpayers from disclosing unreported income through the voluntary disclosure process, where applicable.
The ITA is expected to release further guidelines on voluntary disclosure, specifically addressing unreported income from digital currencies.
This evolving framework reflects Israel’s ongoing efforts to adapt its tax system to the realities of digital currencies, providing clearer guidance for taxpayers while addressing the complexities of cryptocurrency transactions within the current regulatory environment.
Israel’s evolving approach to cryptocurrency taxation underscores the nation’s commitment to adapting its financial regulations to modern realities.
The ITA’s recent initiatives, including the Temporary Order Procedure, provide a clearer framework for taxpayers while addressing the practical challenges posed by digital currencies.
As Israel continues to refine its tax policies, these measures are crucial in ensuring that the regulatory environment keeps pace with the rapid developments in the digital economy, offering both clarity and compliance pathways for those engaged in cryptocurrency transactions.
If you have any queries about this article on Israel Crypto Tax Update, or tax matters in Israel more generally, then please get in touch.
The Court of Quebec has recently delivered a significant judgment in the case of Neko Trade v RQ.
The decision provides important insights into Quebec’s income tax legislation.
The court ruled that a loan from a corporation to its owner-manager for home refinancing did not constitute a shareholder benefit.
Instead, it fell under Quebec’s equivalent of a provision known as the Employee Dwelling Exception.
Additionally, the court criticized Revenu Québec’s (RQ) aggressive decision to reassess the owner-manager on a statute-barred year concerning this loan.
The Employee Dwelling Exception can reduce a seller’s capital gains tax rate from 20% to 10% for the first £1 million of lifetime qualifying capital gains, offering potential tax savings up to £100,000.
Historically, this provision has been risky for shareholder-employees due to the ambiguity in the criteria, which require the loan to be granted to the shareholder-employee as an employee, not as a shareholder, and that bona fide arrangements be made for repayment within a reasonable time.
Neko Trade provides valuable guidance for shareholder-employees considering this option.
The Canada Revenue Agency (CRA) and RQ often challenge any transfer of value from a corporation to a shareholder that is not reported as salary, dividend, or another taxable transaction.
The tax code prescribes tax consequences for taxpayers receiving such “shareholder benefits,” which include loans from a corporation to an individual shareholder. However, it also creates several exceptions, including the Employee Dwelling Exception.
This exception applies to loans given to a shareholder-employee (or their spouse) to acquire a dwelling for their habitation, provided specific conditions are met.
Neko Trade involved a corporation (Neko) established in 2009 by Dimitry Korenblit, its sole employee and shareholder.
During an audit of Neko’s 2015-2017 taxation years, RQ reviewed a loan made by Neko to Mr Korenblit in 2011 to refinance his home.
Mr Korenblit and his spouse initially financed their family residence with a bank mortgage and a line of credit.
In 2011, following advice from an accountant, Mr Korenblit arranged a loan from Neko to replace this temporary financing.
The loan was disbursed in three tranches, and all payments were duly recorded over the years.
Mr Korenblit transferred the residence title to his wife to mitigate financial risks related to his business, and they took out another bank loan secured by the residence’s value.
RQ argued that the Loan was a “smoke screen” to conceal a shareholder benefit and that a “simple employee” would not have obtained such a loan.
They cited several factors, including deficiencies in the loan documentation and the lack of a hypothec on the residence.
The Court concluded that the Loan qualified for the Employee Dwelling Exception, citing eight key factors:
The Court emphasized that the Loan was not a “smoke screen” and that Mr Korenblit was transparent in his tax returns.
RQ’s argument that the Employee Dwelling Exception cannot apply to refinancing an already-acquired residence was rejected.
The Court found that RQ’s published position allowed for such refinancing if agreed upon at the time of the original acquisition.
The Court also addressed the short possession period of the residence, noting that the Employee Dwelling Exception does not prescribe a minimum ownership period and that the transfer of title did not negate the Exception’s applicability.
Neko Trade offers encouragement to taxpayers in disputes over shareholder benefits, highlighting the importance of strict compliance with loan terms, specifying market rates and terms, and maintaining accurate corporate records.
The decision contrasts with the Tax Court of Canada’s 2013 decision in Mast, emphasising the need for detailed and transparent handling of shareholder-employee loans.
If you have any queries about this article on Neko Trade v RQ, or Canadian tax matters in general, then please get in touch.
As part of Saudi Arabia’s ongoing economic and structural reforms, and in alignment with the Saudi Vision 2030 program, several significant tax developments are anticipated in 2024.
These developments are expected to impact businesses operating within the Kingdom by modifying the current tax framework to better align with international practices and encourage investment.
Announced by the Zakat, Tax and Customs Authority (ZATCA) on October 25, 2023, this draft law aims to overhaul the existing income tax system.
The new law is designed to enhance tax compliance and transparency, and align Saudi Arabia’s tax framework with international best practices.
The public consultation period ended on 25 December 2023, with further announcements expected soon.
Similarly, ZATCA has introduced a draft for new Zakat and Tax Procedures Regulations aimed at unifying and regulating the procedures across Zakat and tax systems.
This includes stipulating the rights and obligations of ZATCA and taxpayers. Like the income tax draft law, the public consultation period for this draft ended on December 25, 2023.
Announced in the previous year, four new SEZs have been established, offering multiple tax incentives to encourage business investments.
These incentives include a reduced Corporate Income Tax (CIT) rate of 5% for up to 20 years, 0% withholding tax on profit repatriation, and various customs and VAT benefits.
Formal guidelines are expected to be released soon.
Effective from January 1, 2024, these regulations aim to enhance the legislative framework for Zakat and clarify payer obligations.
Established businesses in the SILZ can enjoy extensive tax incentives, including a 0% CIT rate for 50 years on eligible income. This zone particularly benefits logistics sector businesses.
Starting January 1, 2024, multinational companies dealing with Saudi authorities or government bodies must establish their Regional Headquarters (RHQ) in Saudi Arabia. This initiative offers a 30-year tax relief, including a 0% CIT rate on eligible activities.
With the recent approval of amendments extending transfer pricing principles to Zakat payers, businesses are encouraged to align with these new regulations as they took effect on January 1, 2024.
ZATCA has extended its initiative to cancel fines and exempt penalties to June 30, 2024.
This aims to alleviate the financial burdens businesses may face due to delays in tax-related obligations stemming from the COVID-19 pandemic.
Businesses are advised to consider how these new regulations and incentives might interact with the BEPS 2.0 Pillar Two rules, and to evaluate their potential fiscal impacts carefully.
This analysis is particularly crucial for companies planning to take advantage of the tax incentives offered by the new SEZs, SILZ, and RHQ initiatives.
The upcoming tax developments in Saudi Arabia reflect the Kingdom’s efforts to modernize its tax system and foster a more inviting business environment as part of its broader economic diversification goals.
Businesses operating in or entering the Saudi market should prepare for these changes and seek professional advice to navigate the new tax landscape effectively.
If you have any queries about Saudi Arabia 2024 Tax Developments, or Saudi tax matters in general, then please get in touch.