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7 updates from the world of tax

This week’s collection of tax updates is focused on several countries from across the globe: UK, France, Bahrain, Saudi Arabia, Thailand and Australia.

Take a closer look at the details collated for you here in our latest round-up of global tax news.

1) UK – PPE to lose exemption from 20% VAT

Treasury officials have confirmed that the VAT holiday for PPE is to end on 31st October 2020. From November, face masks, gloves and other personal protective equipment are to be charged at a rate of 20% VAT.

The decision has been made despite long-standing exemptions of VAT for other essential equipment such as cycle helmets and protective footwear.

PPE has become crucial for businesses to carry out their normal operations. At a time when many have undergone significant losses due to the continuing pandemic, a rise in costs has been met with much criticism.

However, a spokesperson for the Treasury has stated that the holiday was only ever designed to maintain a decent supply chain to the health sector, not for the purpose of reducing costs to businesses and consumers. Firms are advised to reclaim the cost as a business expense.

Health and social care providers can obtain PPE via a government portal and will not be subjected to the rise in VAT.

2) UK – Introduction of interest rates on Digital Services Tax

Digital Services Tax (DST) was established earlier this year at a rate of 2%. The tax is applicable to revenue generated by search engines, social media platforms and online marketplaces (etc) in excess of £500 million pa.

The UK government has now introduced regulations that will allow HMRC to collect or pay interest on overpaid or unpaid DST. These regulations are expected to be put into effect on 14th October 2020.

Details of the new interest rates are as follows:

  • The rate of interest will be the reference rate less 0.25 per cent, or 0.5 per cent if greater, for DST paid before the required due date.
  • The rate of interest will be the reference rate less one per cent, or 0.5 per cent if greater, for overpaid DST.
  • The rate of interest will be the reference rate plus 2.5 per cent, for underpayments of DST liability.

In all cases, the reference rate is the official bank rate as determined by the most recent meeting of the Monetary Policy Committee of the Bank of England.

3) France – Proposal of VAT group regime listed in Finance Bill

On 28th September, the French Minister of Finance revealed the Finance Bill for 2021.

The Bill detailed proposals to introduce a VAT group regime, which will enable a single entity to represent groups of companies for VAT purposes. It will furthermore disregard transactions between members.

These changes will roll out in conjunction with reduced rates of corporation tax over the next 2 years.

4) Bahrain – Entry into the multilateral convention authorised

By implementing tax treaty related measures, Bahrain has been authorised entry into the multilateral convention (MLI) to prevent artificial profit shifting to low or no tax jurisdictions.

This means that, once ratified, Bahrain will be able to add or amend clauses to its existing network of double tax treaty agreements.

The change will impact multinational businesses operating in Bahrain. Careful assessment of the new measures will be required.

5) Saudi Arabia – Introduction of Real Estate Transaction Tax

In an effort to boost the real estate sector, Saudi Arabia implemented the Real Estate Transaction Tax (RETT) on 4th October 2020.

Property transfers were previously subject to 15% VAT. As part of its introduction, transfers are currently exempt of VAT and are only liable to pay the new RETT at 5%.

The new regime highlights further similarities between UK and GCC tax regulations; RETT seeming to play a similar role to the UK‘s Stamp Duty Land Tax.

6) Thailand – Further tax deductions in bid to boost domestic consumption

Tax incentives have been approved by Thailand’s cabinet on 12th October 2020 to boost domestic consumption. According to the Prime Minister, the country’s economy has been struggling from the impact of Covid-19 and these incentives are a bid to help revive it.

Between October and December 2020, the government is expected to offer up to 30,000 baht (£740) of tax deductions on purchases of goods and services. This is expected to inject 120 billion baht (£2.96 billion) into the economy.

With Thailand’s key tourism industry taking a hit, this year could see southeast Asia’s second largest economy contract by a record 7.8%.

7) Australia – 2020-21 Federal Budget announces tax deduction for capital assets.

The 2020-21 Federal Budget was presented by the Treasurer on 6th October. A range of measures were discussed, both financial and social (e.g. health, education, climate change etc).

Detailed in the budget is the news of an immediate tax deduction for the cost of capital assets acquired from now until 30th June 2022. Only companies with a turnover of AUD5 billion (£2.7 billion) or less are eligible for this tax deduction.

Furthermore, businesses of this size can benefit from a temporary loss carry-back scheme which will let them offset tax losses against previous years’ profits. Any losses occurred in 2020, 2021 or 2022 may be carried back to 2019.

With tax codes, rates, regulations, and exemptions constantly changing, now is the time to keep on top of it all. At Innovate Tax our solution is instantly updated to reflect these changes across the globe, giving your business the security and flexibility to react in a timely fashion and remain fully compliant.

For more information on our specific tax logic for over 150 countries, contact us today.