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Kazakhstan's Tax Overhaul: What Foreign Investors Need to Know About the Upcoming Reforms On 1 September 2023, President Tokaev addressed the nation and announced a number of important tax policy considerations.  Here is a summary of expected developments which are based on the Presidential address and also on statements by other governmental agencies: Tax reporting will be simplified. 30% of existing tax reporting forms will be cancelled and 20% of taxes abolished. This will likely affect smaller taxes and fees where collection costs exceed revenues. At the same time, 20% of tax incentives will be terminated as well. Refunds of VAT, delays of which refunds resulted in many complaints, will be simplified. Tax administration is going to switch to a service model with the main purpose of facilitation and prevention of tax offenses rather than investigation of existing tax violations. Part of tax revenues will go to regional budgets and regions will be entitled to introduce more local tax incentives to increase their budgetary self-governance and independence. Significant incentives will be granted to the manufacturing industry, including 3 years' tax holidays.   At the same time, different sectors of the economy will be subject to different tax rates. In particular, it is expected that mining, banking and the oil and gas sector will be subject to 26% CIT. Considering the efforts of the Government to bring back home large domestic groups, which historically kept holding companies abroad, it would be reasonable to expect the introduction of a participation exemption regime, though there were no public statements on this matter yet.   The long-term flat individual income tax is going to transform into a progressive tax on non-employment, passive items of income (dividends, interest etc.).   At the same time, the scope for a simplified tax (4% on the gross proceeds of small entrepreneurs) will be expanded. Therefore active and employment income will remain taxed at moderate rates and the increase will concern mainly passive income.   VAT was not particularly addressed, although from reports by other government agencies it may be expected that the rate will increase from the current 12% to 16%.   And, as mentioned above, VAT refunds are going to be simplified and streamlined. The address indicates reforms to decentralize fiscal policy, simplify taxes, improve tax administration through digitization, and attract foreign investment in key sectors. Foreign businesses may need to monitor changes to regional incentives, tax reporting, VAT refunds, the minimum wage, and new priority sectors.   Considering that final tax rates and details are not yet known though many of these changes will enter into effect in a few months already, it is very advisable to follow the developments closely.   To facilitate the flow of information, Crowe Kazakhstan plan an online conference to discuss the anticipated changes to the Tax Code and tax reform on 25 October. 

 EUROPEAN UNION REVISES TAX HAVEN BLACKLIST   The European Union (EU) recently revised its list of non-cooperative tax jurisdictions as of November 27, 2023. Key updates include:   - The EU's blacklist, aimed at identifying countries not complying with tax standards, has been updated. - The British Virgin Islands, Costa Rica, and the Marshall Islands were removed, recognizing their efforts in improving tax transparency and compliance. - Belize, Seychelles, and Antigua & Barbuda were added to the blacklist, although specific reasons for their inclusion were not detailed.   The decision, made by the European Council on October 17, 2023, reflects ongoing assessments of international tax governance standards. The criteria for listing include tax transparency, fair taxation practices, and compliance with measures against profit shifting and tax base erosion.   As of October 17, 2023, the blacklist includes American Samoa, Antigua and Barbuda, Anguilla, Bahamas, Belize, Fiji, Guam, Palau, Panama, Russia, Samoa, Seychelles, Trinidad and Tobago, Turks and Caicos Islands, US Virgin Islands, and Vanuatu.   For EU-based companies, like those in Cyprus, these changes have significant tax implications. Cyprus, which typically does not impose withholding taxes on non-resident payments, will now apply withholding taxes on transactions with entities in blacklisted jurisdictions. This includes 17% on dividends from non-quoted companies, 30% on interest, and 10% on royalties, excluding individual payments. The removal of the British Virgin Islands is notable for Cyprus, given their frequent inclusion in Cypriot corporate structures. Conversely, the addition of Seychelles and Belize poses challenges due to their common usage.   Businesses affected by these changes may consider options like suspending payments or changing the beneficial ownership jurisdiction of Cypriot companies through re-domiciliation or share transfers. When setting up offshore structures, selecting a jurisdiction requires careful consideration of tax, asset protection, and other factors, often necessitating guidance from an international tax advisor.   Additionally, the amendment may influence DAC6 reporting, especially for deductible cross-border payments to recipients in blacklisted jurisdictions. Cypriot entities should review their DAC6 obligations in light of these new blacklisting updates.   The EU's approach to blacklisting is based on an established set of criteria for fair taxation and transparency, engaging in dialogue with jurisdictions to encourage compliance and reform. Those listed are typically uncooperative in discussions with the EU or fail to meet commitments to implement necessary reforms.

💰 Urgent tax agenda 💱 🎯 Vietnam has been urged to create more incentives for foreign investors following the country’s decision to apply a new international corporate income tax top-up. 🧲 Vietnam is to apply the global minimum tax (GMT) of 15 per cent on multinational corporations (MNCs) with a revenue exceeding €750 million ($821.6) million from January 2024. 🧭 The National Assembly a month ago passed a resolution on the imposition of top-up corporate income tax (CIT) of 15 per cent under Global Anti-Base Erosion model rules, which will take effect on January 1 next year until the country’s new law on CIT is released. 🔎 Under the resolution’s Article 2 on taxpayers, the taxpayers in Vietnam include a member company of an MNC with a turnover equivalent to $821.6 million or more in the consolidated financial statements of the ultimate parent company for at least two of the four years immediately preceding the fiscal year. 🌍 For Vietnam, the imposition of the GMT will help ensure the country’s right to levy the tax, in line with the international practices and trend currently deployed by so many nations. 📜 Under a government report on assessing the impact of the resolution, based on 2022 CIT data analysis, it calculated that over 120 FIEs will be subject to the resolution, with a total amount of top-up CIT of about $616 million. 💡 Vietnam’s current general CIT rate is 20 per cent, which is higher than the GMT rate. However, this rate is just of nominal value because all major foreign-invested projects in Vietnam have been currently enjoying special incentives policies covering various investment fields, locations, and labour use scales. 💣 Thus, many MNCs are entitled to a four-year tax exemption and a half tax reduction for nine years, or a two-year tax exemption and half tax decrease for four years, so the total amount of their paid tax is less than 15 per cent. ℹ️ In the global context, the major stakeholders are quickly responding to the adoption of GMT. Specifically, it is being carried out by the EU, the UK, and South Korea in 2024. Vietnam is strongly attracting investment from these nations, as well as the United States and other powerhouses. What is more, Malaysia and Thailand are set to implement the GMT in 2024 and 2025, respectively, and they are big rivals of Vietnam in luring funding from abroad. 💰 According to the International Monetary Fund (IMF), the GMT adoption in 2024 will increase tax revenues but will require improvements to the investment climate. Vietnam could be among those most affected by the GMT – as it has often granted tax incentives to MNCs to attract FDI, including lower income taxes, that will be eroded. https://lnkd.in/gfUg-jEq

It’s that time again! Read our latest Snippet below.

Loyens & Loeff NY regularly posts ‘Snippets’ on a range of EU tax and legal topics. This Snippet describes the impact of the July 2023 OECD guidance (the ‘Guidance’) on the Pillar Two (‘P2’) position of US MNEs.   The Guidance provides welcome relief for US MNEs as it clarifies the treatment of transferable tax credits (‘TTC’) and introduces a temporary UTPR safe harbour (‘UTPR SH’). Both topics are discussed below. In our previous Snippet about the treatment of tax credits (‘TC’) for P2 purposes, we discussed that a distinction is made between QRTC (a TC that is refundable in cash within four years) and NQRTC (a TC refundable after four years) and that a QRTC generally leads to a more beneficial outcome under P2. The Guidance introduces TTC as one of the new categories of tax credits. TTC are treated similarly to QRTC and, hence, as income for P2 purposes (‘P2 Income’) for the taxpayer generating the TTC (the ‘Originator‘) if the following two conditions are met: 1) the TTC is transferable to a third party ultimately within 15 months after the fiscal year of origination; and 2) the TTC is actually transferred, or is transferable, to a third party in said period for a price of at least 80% of the net present value of the TTC. If the TTC is not actually transferred to a third party in that period, this condition is assessed based on market prices of similar credits.   If a TTC meets only one of these conditions, the TTC reduces the tax liability for P2 purposes. Both conditions are tested at the level of the Originator and the purchaser separately.   The treatment of a qualifying TTC as P2 Income is good news for US MNEs that benefit from renewable energy TTC introduced by the Inflation Reduction Act.   The Guidance also introduces the UTPR SH. Under the UTPR, group companies located in countries that have implemented P2 can levy top-up tax on a pro-rata share of the undertaxed profits of – for example - a US parent company (‘USCo’). This is relevant for a USCo with an ETR in the US of less than 15% (e.g., because of US tax incentives such as FDII and/or R&D TC). The UTPR will enter into force for book years starting as from Dec. 31, 2024.   The UTPR SH temporarily eliminates top-up tax under the UTPR in relation to ultimate parent entity jurisdictions with a statutory corporate income tax (‘CIT”) rate of at least 20%. The UTPR SH applies to book years starting on or before Dec. 31, 2025 and ending before Dec. 31, 2026. The UTPR SH can be applied to a USCo as the US has a CIT rate of 21%. It means that a USCo with a calendar book year can benefit from the UTPR SH in the year 2025 (i.e., one additional year when compared to the date of entry into force of the UTPR).   If a USCo qualifies for both the UTPR SH and the Transitional CbC Safe Harbour, the choice of a safe harbour should be carefully analyzed.   Want to know more? Reach out to Steffie Klein, Lisanne Bergwerff or myself.  #loyensloeff #lawandtax #Pillartwo #USA #EU

No Global Minimum Tax payment for firms in Vietnam until 2025. If the headline article is accurate, then a collective sigh of relief may be heard amongst all the legal and tax professionals in Vietnam. Even those consultants hyping and drumming to the beats of global pressures for Vietnam to join the global minimum tax (GMT) implementation. It seems cool heads and practical policy considerations have trumped the tremendous noise generated in recent months on the need for Vietnam to meet its Inclusive Framework committments in such a short period of time (relative to the aggressive pace of OECD push-through of the BEPS 2.0 agenda). For developing countries like Vietnam that rely on its low cost and attractive investment incentives to attract multinational players the likes of Samsung, Panasonic, Intel etc. the agreed consensus is that there will be short-term to medium-term pain at the loss of tax revenues and investment attractiveness. Significant literature and other international bodies like the United Nations (via the International Bureau for Fiscal Documentation (IBFD) and the Tax Justice Network point to the criticism and deficiencies in the BEPS IF 2.0. The question of who really benefits from the GloBE rules is demonstrated by a study published by the Tax Justice Network which points out that 60% of the additional revenue would be collected by the G7 countries under the original design of the GloBE rules. Additionally, the EU Tax Observatory estimates that only 3% of the additional revenue would go to the lowest income jurisdictions. We agree with the UN’s framing of how the international tax system should work. That is, the consideration of policy options and arrangements that an be effectively implemented by all jurisdictions (not just developed ones we might add) - taking into account their different needs, priorities, and capacities - to help ensure that taxes are paid where economic activity occurs, including relevant market participation. International tax rules need to be simple and as easy to administer as the subject allows. Sufficient stability is paramount so that businesses can reasonably plan for the long term. Finally, the system needs to be sufficiently flexible and resilient to continuously ensure equitable results as technology and business models and the international tax cooperation landscape evolve. It is heartening to see that on the important issue of taxing rights, Vietnam policy makers have not “jumped into the deep” without due considerations for the short, medium and long term impacts on its FDI dependent economy. Now that there is no immediate rush to the GMT implementation in Vietnam, we can all sit down and enjoy the dramas of Jane Austen’s Sense and Sensibility timepiece. https://lnkd.in/g-VhCd3y

No Global Minimum Tax payment for firms in Vietnam until 2025. If the headline article is accurate, then a collective sigh of relief may be heard amongst all the legal and tax professionals in Vietnam. Even those consultants hyping and drumming to the beats of global pressures for Vietnam to join the global minimum tax (GMT) implementation. It seems cool heads and practical policy considerations have trumped the tremendous noise generated in recent months on the need for Vietnam to meet its Inclusive Framework committments in such a short period of time (relative to the aggressive pace of OECD push-through of the BEPS 2.0 agenda). For developing countries like Vietnam that rely on its low cost and attractive investment incentives to attract multinational players the likes of Samsung, Panasonic, Intel etc. the agreed consensus is that there will be short-term to medium-term pain at the loss of tax revenues and investment attractiveness. Significant literature and other international bodies like the United Nations (via the International Bureau for Fiscal Documentation (IBFD) and the Tax Justice Network point to the criticism and deficiencies in the BEPS IF 2.0. The question of who really benefits from the GloBE rules is demonstrated by a study published by the Tax Justice Network which points out that 60% of the additional revenue would be collected by the G7 countries under the original design of the GloBE rules. Additionally, the EU Tax Observatory estimates that only 3% of the additional revenue would go to the lowest income jurisdictions. We agree with the UN’s framing of how the international tax system should work. That is, the consideration of policy options and arrangements that an be effectively implemented by all jurisdictions (not just developed ones we might add) - taking into account their different needs, priorities, and capacities - to help ensure that taxes are paid where economic activity occurs, including relevant market participation. International tax rules need to be simple and as easy to administer as the subject allows. Sufficient stability is paramount so that businesses can reasonably plan for the long term. Finally, the system needs to be sufficiently flexible and resilient to continuously ensure equitable results as technology and business models and the international tax cooperation landscape evolve. It is heartening to see that on the important issue of taxing rights, Vietnam policy makers have not “jumped into the deep” without due considerations for the short, medium and long term impacts on its FDI dependent economy. Now that there is no immediate rush to the GMT implementation in Vietnam, we can all sit down and enjoy the dramas of Jane Austen’s Sense and Sensibility timepiece. https://lnkd.in/g-VhCd3y No global minimum tax payment for firms in Vietnam until 2025theinvestor.vn • 3 min read

Navigating the intricate landscape of international taxation can be a perplexing endeavor, especially for non-resident aliens (NRAs) working in the United States. However, tax treaties between the U.S. and foreign countries provide a pathway for alleviating the burden of double taxation and optimizing tax obligations. In this comprehensive guide, we'll delve into the intricacies of tax treaties, outlining their benefits, requirements, and key considerations for international workers. Understanding Tax Treaties Tax treaties serve as bilateral agreements between countries to collaborate on tax rules, aiming to prevent double taxation and mitigate tax evasion. For small business owners, this often means workers can avoid paying taxes on the same income to both their home country and the US. Benefits for Foreign Residents Under these treaties, residents of foreign countries may be taxed at reduced rates or exempted from U.S. income taxes on specific items of income sourced within the United States. The extent of these benefits varies among countries and depends on the nature of the income. Eligibility and Documentation To avail themselves of tax treaty benefits, individuals must possess either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). Additionally, they must meet residency requirements outlined in the tax treaty and provide appropriate documentation to support their claims. Determining Treaty Benefits Several factors come into play when determining eligibility for tax treaty benefits, including the presence of an income tax treaty between the individual's home country and the U.S., the individual's tax residency status, and the specific provisions outlined in the treaty related to the individual's primary purpose in the U.S. This page provides links to tax treaties between the US and particular countries: https://lnkd.in/gbthhy2 Application and Compliance If eligible, individuals must complete the necessary forms, such as Form 8233 for dependent or independent compensation income, or Form W8-BEN for non-compensation income. It's imperative to comply with IRS policies regarding residency requirements and status changes to ensure continued eligibility for treaty benefits. Key Considerations and Provisions Several key considerations, such as the tie-breaker rule, savings clause, and back-to-back rule, may impact an individual's ability to claim treaty benefits. Understanding these provisions is essential for navigating the complexities of international taxation effectively. Conclusion Tax treaties offer valuable opportunities for international workers to optimize their tax obligations and avoid double taxation. By understanding the benefits, requirements, and key considerations outlined in this guide, individuals can make informed decisions to minimize their tax liabilities and ensure compliance with relevant regulations.

Cyprus Tax Reform 2024: Beyond Green Initiatives Cyprus is gearing up for a sweeping tax reform set to launch in the spring of 2024, promising changes that extend far beyond environmental concerns. This comprehensive overhaul is poised to reshape the landscape of corporate tax, income tax, capital gains tax, stamp duties, and various other forms of taxation. Its primary objective? To redistribute the tax burden away from labor, aiming to combat tax evasion and shadow economy practices. Outlined by the Ministry of Finance to the Parliament, this reform amalgamates diverse tax policies. Its blueprint factors in effectiveness, redistributive impact, tax compliance, and administrative efficiency. This upcoming tax framework, as detailed by the Ministry, will blend elements from both green and digital transitions. Aligned with the EU's Recovery and Resilience Plan and international standards, it's a crucial step in modernizing Cyprus' tax structure. The initial phase, slated for the first quarter of 2024, introduces a green tax, commencing with levies on fuels. These changes will be accompanied by compensatory measures aimed at cushioning the impact on sectors affected by these new taxes. Details regarding the precise rates and nature of these compensations are yet to be finalized, but this green tax is a prerequisite for the country's Recovery and Resilience Plan. The reform isn't solely about environmental matters. It also focuses on vital aspects: -Encouraging investment through tax policies that reduce business risks and incentivize research funding. Streamlining the tax system and lowering tax costs are expected to foster innovation and enhance competitiveness. -Redistributing the tax load away from labor toward other forms like consumption, green taxation, and real estate, aiming to bolster employment. Labor taxation in the EU is notably higher compared to similar economies. -Implementing green taxation to encourage environmentally friendly practices and discourage polluting activities. Recognizing its impact on lower-income groups, measures to counterbalance this effect are anticipated. -Tackling shadow economy practices and mitigating tax evasion, crucial issues in Cyprus contributing significantly to the GDP. The reform endeavors to confront and resolve these challenges. The Ministry's collaboration with the University of Cyprus for a comprehensive two-year study, potentially extended by six months, highlights the seriousness of this reform, with a budget totaling €1.02 million. Our team is always ready to provide quality advice and help you solve any of your tasks. If you have any questions, would like to order services or consultations from us, please write to us on WhatsApp/Viber/Telegram +380 98 363 6493 or call us. #CorporateTaxation #IncomeTax #CapitalGainsTax #TaxCompliance #FiscalPolicy #EconomicDevelopment #Financial #Tax #EUStandards #InternationalTaxation #Cyprus #GreenPolicies #TaxationStrategies #FinancialRegulations