Worldwide: Global Expansion Update - July 2018

Last Updated: 2 August 2018
Article by SKP  

We are pleased to present the July issue of SKP Global Updates – our newsletter that covers employment, payroll, Goods and Services Tax (GST)/Value Added Tax (VAT) and corporate tax-related developments globally.

The key highlights of this issue include, amendments to 2018 tax filing deadlines for individuals in South Africa, effective date for revised withholding tax ordinance for employment income has been set in Switzerland and HMRC announces making tax digital for business – VAT.

Africa

Ghana

Mandatory Use of Fiscal Electronic Device for VAT Purposes

The Parliament of Ghana has sanctioned the Taxation (Use of Fiscal Electronic Device) Act, 2018 and it came into force on 4 May 2018. The Act serves the purpose to provide for the mandatory use of a Fiscal Electronic Device (FED) by taxable persons of specified categories at each point of sale and to promote non-cash sales transactions.

The FED is an electronic invoicing system to be used by taxable persons, and they are required to use and keep another as a backup, an approved FED, at each sales location on their premises. They are also required to maintain records including a printout of a summary sales report generated by the FED and records of transaction details accessible in a read-only mode. The records shall be retained for at least six years. Once the device is installed, it is mandatory for taxable persons to issue FED receipts to their customers.

A taxable person who fails to use the FED, be deemed to commit an offense and is liable on summary conviction to a fine of not less than GHS 500 and not more than GHS 2,000 or a term of imprisonment of not less than two years and not more than four years, or to both. Additionally, the Commissioner-General (CG) of Ghana Revenue Authority (GRA) may impose a penalty on the person apart from the above mentioned.

Kenya

Regularisation of Immigration Status

The Government of Kenya has commenced a work permit verification and registration exercise at the Department of Immigration Services (DIS) for the foreign nationals to regularize their immigration status in the country. The practice has been commenced since 21 May 2018 and will run up to 21 July 2018. Foreign nationals who are working in Kenya on long-term work permits should appear physically at the immigration department for biometric registration along with the following documents:

  • Original work permit
  • Original passport endorsed with the work permit
  • Valid original foreigner's certificate or original waiting slip
  • Official payment receipt
  • Personal Identification Number (PIN) certificate. It is also the employer's responsibility to maintain proper immigration records for all foreign nationals working for them in order to produce the same (if required) at the Immigration Department.

Mauritius

Mauritius's FATCA Filing Deadline July 31

Recently, Mauritius Revenue Authority has cautioned financial institutions who are obliged to report information on the accounts of US persons under the US Financial Account Tax Compliance Act that declarations are required by 31 July 2018. For more details, click here.

Highlights of Mauritius Budget 2018- 2019

Recently, Mauritian Prime Minister has delivered the 2018-2019 Budget Speech. Following are the significant tax-related measures from the budget.

Individual-Related Measures:

The eligibility criteria and conditions for the negative income tax will be relaxed.

  • The individual income tax exemption thresholds will be increased effective 1 July 2018 as follows:

    • Individual with no dependent - MUR 305,000 - Individual with one dependent - MUR 415,000
    • Individual with two dependents - MUR 480,000
    • Individual with three dependents - MUR 525,000
    • Individual with four or more dependents - MUR 555,000
    • Retired/disabled person with no dependent - MUR 355,000
    • Retired/disabled person with dependents - MUR 465,000
  • A new individual income tax rate of 10% will be introduced for individuals with an annual net income of up to MUR 650,000 (earlier it was 15%, single flat rate).
  • A final withholding tax of 10% will be introduced on lottery winnings and winnings in casinos and gaming houses in excess of MUR 100,000.

Business-Related Measures

Companies subject to Corporate Social Responsibility (CSR) contributions will not be allowed to offset any unused tax credit such as the foreign tax credit against CSR payable, and those that have been granted tax holidays will be required to contribute to CSR.

  • The Deemed Foreign Tax Credit (DFTC) regime available to companies holding a Category 1 Global Business License will be abolished as from 31 December 2018 and replaced with a new partial exemption regime whereby 80% of specified income will be exempted from income tax for all companies in Mauritius, except banks, including for:

    • Foreign source dividends and profits attributable to a permanent foreign establishment;
    • Interest and royalties; and
    • Income from the provision of specified financial services, subject to certain conditions.

An incentive system will be introduced for banks having chargeable income exceeding MUR 1.5 billion, including that any chargeable income in excess of the chargeable income for a set base year will be taxed at a reduced tax rate of 5% if pre-defined conditions are satisfied. The current special levy on Banks and the formula applied will be maintained up to June 2019, after which the special levy will be replaced by a new special levy under the VAT Act that will be charged on the net operating income derived by banks from its domestic operations.

  • The Freeport regime will be amended, including the removal of the corporate tax exemption granted to Freeport operators and private Freeport developers on the export of goods will be removed, with grandfathering till 30 June 2021 for those that have been issued with a Freeport certificate before 14 June 2018.
  • The 3% reduced rate of corporate tax applied to profits derived by any company from the export of goods will be extended to companies involved in global trading activities.
  • The solidarity levy on telephony service providers per of book profit + 1.5% of turnover will be further extended for two years to June 2020, and will be made payable by profitable companies (the requirement for the book profit of a company to exceed 5% of its turnover will be removed);
  • The DFTC regime available to banks will be abolished as from 1 July 2019, and will be replaced by a new regime specific that will make no distinction between Segment A and Segment B income, and will include the following tax rates:

    • Chargeable income up to MUR 1.5 billion will be taxed at 5 %; and
    • Chargeable income above MUR 1.5 billion will be taxed at 15%.
  • Tax Deduction at Source (TDS) will be extended to 'commission payment' at the rate of 3%, and the TDS rate applied on rent paid to a non-resident will be increased from 5% to 10%.
  • An investment tax credit of 5% over 3 years will be introduced in respect of expenditure in new plant and machinery (excluding motor cars) by a company importing goods in semi-knocked-down form on the condition that at least 20% local value addition is incorporated therein (applies for investments made up to 30 June 2020).
  • To ease the cash flow of businesses, a VAT-registered person will no longer be required to pay VAT on import of capital goods in case the VAT payable exceeds MUR 150,000, although the VAT-registered person will still have to declare the import in the VAT return (currently VAT must be paid, but a refund may be claimed).
  • A new Work@Home scheme will be introduced, which will allow for a double deduction from tax, of the wage and salary costs of employees under the scheme for the first two years, and an annual tax credit of 5% for employers on investments in the required IT system for the first three years.

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