International economic and tax update

Transcription

1 International economic and tax update Struan Mackenzie Expatriate Tax and Global Mobility Partner, Buzzacott Chartered Accountants Discussion Points United Kingdom landscape Euroland Germany France Switzerland 1

2 United Kingdom Favourable capital gains tax rate at 28% One of the lowest globally International tax treaty relief/ Tax equalization Reduce double taxation Exclusion from worldwide tax Incentives personal & business Intellectual property and Research & Development (R&D) relief United Kingdom Complex tax system Receiving bespoke service from experienced professionals Remitting pre-uk capital on a tax free basis Tax relief Overseas Work Days relief International travelling costs Relocation costs Pension contributions 2

3 UK Political horizon UK Government 2015 and beyond Possible cut in Corporation Tax to 18% by 2020 Brexit 2017 UK pushed towards EU exit? Permanent GDP reduction of 2.25% Freedom from EU rules more prosperous Britain Strengthening UK ties with trading partners UK Politics Corbynomics Top income tax rate could rise from 45% to 50% Improved resources for HMRC (retrieve missing billions) 3

4 Germany Fast growing economy set to grow faster than the 1.6% recorded in the previous year Migrant dilemma Merkel hero? Migrant influx could lead to massive tax increases Germany and France backing common EU Corporation Tax Crackdown on tax havens Resulting in possible increased UK taxes France Promising growth at 1.1% this year Rural urban divide 18% of population reside in the countryside Agricultural yield not meeting targets Housing crisis National Minimum Wage (NMW) increases unimpressive Larger proportion spent to cover accommodation Growing abstention in regional and local elections Loss of faith in integrity of politicians 4

5 France National government black hole Public spending to be cut by $63bn to meet EU budget deficit target Diesel fuel taxed at higher rate Attempt to equalize diesel/petrol prices Financial Transaction Tax (FTT) To include day trading looking to raise an additional 1 billion per annum Switzerland Going against the grain Federal 26 cantons tax regimes Significant variance of income tax rates (Genève 44.75%, Zug %) Steady growth and exceptionally low unemployment Good deflation Falling consumer prices over past four years No evidence of recession, rising debt or weak employment Controlled sovereign debt Highly competitive and productive in global markets 5

6 Switzerland Corporate Tax Reform III Further strengthen and maintain the international tax competitiveness Removal of cantonal holding, mixed and domiciliary company status Cantonal patent box Max of 90% relief on box Increased flexibility for cantons to incentivize R&D locally. Attract innovation UK is open for business With a wide income and corporation tax treaty network the UK is open for business for US companies setting up in the UK Tax incentives for individuals include tax relief on housing, non UK work days and travelling expenses for the first 2-3 years Tax incentives for businesses include corporation tax rate at 20% and research and development tax credits for developing companies 6

7 Thank you! Questions? Struan Mackenzie E mackenzies@buzzacott.co.uk T Visit our website: \ 14 7

8 40 years of continuing service México City General Profile Investing In Mexico Taxes And Duties Auditing Accounting Brief 16 8

9 Quick facts: Population: 110,000,000 One third lives in: Mexico, Guadalajara, or Monterrey Exchange Rate: Mid 2014: Beg 2015: Today: Inflation: 1995: 51% 2005: 3.33% 2015 (est): 3.0% Minimum Wage: Pesos (4.24 USD) General Profile Investing In Mexico Taxes And Duties Auditing Accounting Brief 18 9

10 Main Question: Do we just sell and ship the products? --- or --- Do we have to establish an operation in Mexico? --- or --- Maquiladora for US and exports purposes? Rule No. 1 All legal structures are taxed the same way 10

11 Doing Business in Mexico through: An Affiliate incorporated in Mexico A legal representative or an agent (Risk of triggering a PE) A branch or a company from abroad Must be registered in Mexico. Other: Trusts (Agreements) Joint Venture Agreements Timings and things to look for: Incorporation: 2 to 3 month process to be fully operational Business Cycle: Jan 1- Dec 31 Legal and Tax Domicile to be registered before the tax and administrative authorities 22 11

12 General Profile Investing In Mexico Taxes And Duties Auditing Accounting Brief Impuestos = Taxes Income Tax Value Added Tax Employee Profit Sharing Excise Tax Social Security Contributions Import Duties 24 12

13 Income Tax A corporate income tax rate of 30% is applied to the net result of reconciliation between financial and tax information From Add Subtract Tax Reconciliation Net accounting profit Non-deductible expenses for tax purposes Other taxable income Other taxable deductions Non-taxable income Equal to Net tax profit Multiplied by 30% Equal to Income tax payable 25 Net Operating Losses (NOL s) Previous tax losses (Carryforward) may be carried forward over a period of 10 years from their year of claim, and be deducted from the net tax profit for the period with a positive balance

14 Dividends and Capital Reductions Special Accounts CUFIN CUCA Dividend Payments Net Tax Profit Account The excess or amounts that are paid outside of this account must be multiplied by a gross-up factor of , and then multiplying by a 30% tax rate New 10% dividend withholding scheme Capital reductions From that point a tax is levied from the operation of multiplying the amount by a grossup factor of , and then multiplying by a 30% tax rate 27 And for the Employees: Employee Profit Sharing ISR PTU Employees are entitled to 10% of the profits, based on reconciliation similar to that of the Income Tax. The result is divided by a prorate (Prorata) based on salary and time provided to the company and includes all the employees except the managing director and top executives. 14

15 Import Duties Import Duty (3% - 18%) Value Added Tax (16%, 11%, 0%, Exempt) Federal Tax on Production and Services (Excise Tax) (10% - 110%) Custom s processing fee (.8%) Countervailing fees (100% %) 29 General Profile Investing In Mexico Taxes And Duties Auditing Accounting Brief 15

16 Bookkeeping (Contabilidad) The Commerce Code, Civil Code, Tax Code, Income Tax Law, and in general the Mexican Legislation stipulates that the accounting must be: In Spanish Could be processed in currencies other than MxP, but must be reported in MxP to all authorities Kept in the domicile of the company (all supporting and original information) Kept for at least 10 years General Ledger Profit and Loss Statements Changes in the Stockholders Equity Changes in the financial situation of the company Notes Usual Issues Between US Parent- Mexico Subsidiary Exchange Rate, who absorbs and registers it? US or Mexico? When paying for goods or services When intercompany debt is incurred Goodwill: Non Deductible in Mexico No-no s (More tax and legal, than accounting): Debt Push Down Allocation Accounting Pro-Rata Expenses Intercompany All payments must be performed 16

17 CHINESE CULTURE AND BUSINESS CONTENT Part 1 Subject Page About China Economic development 3 Business environment 4 Government s policy- Five Years Plan 5 Doing business in China Starting a business 6 Preparation checklist 7 Investment structures 8 Typical company set up 9 China taxation Major taxes in China for foreign invested companies 10 Corporate tax summary 11 Preferential taxes Individual income tax Cash repatriation from China 19 S.J. GRAND Financial and Tax Advisory 2 17

18 ABOUT CHINA: ECONOMIC DEVELOPMENTS Recent Economic Developments i) Traditional manufacturing faces overcapacity and environmental issues ii) Service sector continues to maintain a relatively high growth rate iii) Real estate sector has been in a cyclical decline iv) Tax, legal and administrative reforms are being launched to improve business environment v) China s economic restructuring creating more development potential for private capital and SMEs Economic Growth Outlook i) Economic restructuring process likely to have temporary negative impact on China s economic growth. ii) China s economy to be driven by innovation, service sector and private capital. The Road Forward i) Yangtze River Economic Belt: service sector, green energy and modern agriculture ii) One Belt and One Road: AIIB to help with capital for infrastructure. Sectors include, oil and gas transportation, and tourism. iii) Coordinated development of Beijing-Tianjin-Hebei. Sector includes transportation, environment and high value manufacturing. S.J. GRAND Financial and Tax Advisory 3 ABOUT CHINA: BUSINESS ENVIRONMENT Business environment No longer merely a cheap manufacturing country. Domestic market is becoming increasingly important Government Policy Stimulation for SMEs, environmental protection, energy saving and Hightechnology Development Zones New Go West Policies : development of infrastructure, tax and investment stimulation S.J. GRAND Financial and Tax Advisory 4 18

19 Ranking 12/1/2015 ABOUT CHINA: FIVE- YEARS PLAN The 12 th five years plan: Improve domestic consumption and standard of living Pay attention to it and take into consideration while making strategic business and investment decisions Foster innovation and high-tech firms Key goals Increase energy efficiency and environmental protection Industries likely to benefit - Information Technology - Renewable energy - Advanced equipment manufacturing - Environmental protection and energy saving Modernize production Industries processes likely to - Polluting face industries restriction s S.J. GRAND Financial and Tax Advisory 5 ABOUT CHINA: Doing business in China in 2015 China overall rank in 2015 = 90 China overall rank in 2014 = No change Starting a business Getting credit Protecting minority investors Paying taxes Trading across borders Enforcing contracts Key reforms making it easier to do business in China Source: World Bank Group S.J. GRAND Financial and Tax Advisory 6 19

20 STARTING A BUSINESS: PREPARATION CHECK-LIST Before making your investment Define precise business scope and assess feasibility/ regulatory requirements Analyze set up costs in detail Be cost-skeptical and conservative with income and growth estimates Develop company financing plans with and without the support Address main tax concerns and expenses in consultation with a tax professional: Business Tax, Income Tax, Tariffs, VAT, and other local taxes Pay attention to suppliers hubs and distribution centers, client bases, export/import logistics, local tax rebates and employment options Inform yourself about China s social welfare and insurance systems Have management team in place and start local recruitment Most importantly, brace yourself for unexpected events and obstacles S.J. GRAND Financial and Tax Advisory 7 STARTING A BUSINESS: INVESTMENT STRUCTURES No capacity under Chinese law; head office liable for RO s activities in China HQ is the only source of fund Cannot directly hire Wholly Foreignowned Enterprise ("WFOE") 100% control; legal status Registered foreign capital as main source of fund Can hire directly Main usage: Trading and distribution of goods for retail business, franchising, etc. No limitation of opening retail stores in China Same advantages as WFOE Relatively new investment structure Representative Office ("RO") S.J. GRAND Financial and Tax Advisory Foreign-Invested Commercial Enterprise ( FICE ) More than one option to make your presence in China Contractual Joint Venture ("CJV") Equity Joint Venture ("EJV") Limited liability company; Profits and losses are distributed between parties based on their proportion of shares in EJV Can operate as limited liability company or as nonlegal person; Profits and losses distributed according to provisions of CJV contract 8 20

21 STARTING A BUSINESS: COMPANY SET UP WFOE INCORPORATION PROCESS Timeline(weeks) STEP Company name approval STEP 2 Certificate of approval STEP 3 Business license registration POST INCORPORATION PROCESS STEP 4 Registration of company code STEP 5 Tax registration STEP 6 Legal existence of WFOE Registration with other authorities- Customs, Statistics, Finance, SAFE Opening of RMB bank account NOTES The timeline mentioned here is subject to change. For special business may be required to obtain pre approval before applying for business license from the corresponding authorities. 9 CHINA TAXATION: MAJOR TAXES IN CHINA Income tax Turnover tax Corporate Income Tax Withholding Tax Value Added Tax Business Tax Individual Income Tax S.J. GRAND Financial and Tax Advisory 10 21

22 CHINA TAXATION - CORPORATE TAXES SUMMARY 43 CORPORATE TAXES Frequency Level Rate Corporate Income Tax (CIT) - Normal - Small Scale - High Tech Quarterly State/ Local 25% 20% 15% Import Tariffs Within 14 days before import State 0-270% Export Tariffs Within 24 hours before arrival of the exported goods in the Customs Surveillance Zone State 0-40% Value Added Tax (VAT) Every 1 / 3 / 5 /10 / 15 days or Monthly State 0-17% Business Tax (BT) Every 1 / 3 / 5 /10 / 15 days or Monthly Local 3%, 5%, 5-20% Consumption Tax (CT) Every 1 / 3 / 5 /10 / 15 days or Monthly Local 3-45% Stamp Tax (tax on documents) According to province Local 5 RMB; % Resource Tax Every 1 / 3 / 5 /10 / 15 days or Monthly Local Unit taxation Share Transaction Tax Transaction State 10% Surcharge Tax (including Urban Construction and Maintenance Tax + Education Tax) Monthly Local 13% on VAT+BT+CT liability S.J. GRAND Financial and Tax Advisory 11 CHINA TAXATION: PREFERENTIAL TAX PREFERENTIAL TAX POLICIES ON CORPORATE INCOME TAX Type of company Effective date Preferential tax Tax implication Regulation Small profit companies with annual taxable income RMB 200,000 From Jan 1, 2015 to Dec 31, 2017 Corporate income tax at 20% on 50% of the taxable income Small profit companies with From Oct 1, annual taxable income more 2015 to Dec 31, than RMB 200,000 and up to 2017 RMB 300,000 10% Caishui [2015] No. 34 Caishui [2015] No. 99 S.J. GRAND Financial and Tax Advisory 12 22

23 CHINA TAXATION: PREFERENTIAL TAX PREFERENTIAL POLICIES ON VAT AND BUSINESS TAX FOR SMALL TAX PAYERS Type of company Qualification for Effective date Preferential preferential tax treatment tax Regulation Small scale VAT taxpayers Monthly sale RMB 30,000 Business tax payers Monthly sale RMB 30,000 October 1, 2014 to December 31, 2017 Exemption from VAT Exemption from BT Caishui [2015] No. 71/ Caishui [2015] No. 96 S.J. GRAND Financial and Tax Advisory 13 OTHER PREFERENTIAL POLICIES OTHER PREFERENTIAL POLICIES FOR SMALL BUSINESSES Type of company Qualification for preferential tax treatment Effective date Preferential tax Regulation Small and microsized enterprises Small and microsized enterprises Monthly sale RMB 30,000, or Quarterly sale RMB 90,000 January 1, 2015 to December 31, 2017 Hiring < 20 employees Exemption from governmental funds charges, such as China s Educational Surcharge, Local Educational Surcharge, Water Conservancy Construction Charge and Cultural Construction Fee Exemption from social security payments for the employment of disabled people within 3 years upon the incorporation date Caishui [2014] No. 122 S.J. GRAND Financial and Tax Advisory 14 23

24 INDIVIDUAL INCOME TAX (IIT) BASIS OF TAX LIABILITY How long the expat stays in China Who bears the expat s income Factors determining expat s liability to pay IIT How much the expat earns What kind of position the expat holds S.J. GRAND Financial and Tax Advisory 16 INDIVIDUAL INCOME TAX (IIT) TAX RATES AND LIABILITIES Monthly Net Taxable Income (RMB) Tax Rate Quick Calculation Deduction (QCD) Effective tax rate (foreign employees) Effective tax rate (Chinese employees) 0-1,500 3% 0 0% 0% 1,501-4,500 10% 105 0% 2% 4,501-9,000 20% 555 0% - 3.5% 2% - 6% 9,001-35,000 25% 1, % - 19% 6% - 20% 35,001-55,000 30% 2,755 19% - 22% 20% - 23% 55,001-80,000 35% 5,505 22% - 26% 23% - 27% 80, % 13,505 26% + 27% + IIT Payable= [Monthly Salary-Monthly Standard Deduction] x Applicable Tax Rate Quick Deduction S.J. GRAND Financial and Tax Advisory 17 24

25 INDIVIDUAL INCOME TAX (IIT) Items subject to IIT for foreign employees Foreign medical insurance Foreign employee welfare (employer portion is exempted) Cost of living allowance distributed in cash Amounts exceeding maximum Chinese welfare charges (additional insurance, higher housing funds, etc.) Items not subject to IIT for foreign employees (max 40% of the total package) Housing allowance Home leave travel allowance Relocation and moving costs Reimbursement of meals and laundry Children s education Reimbursement of business- related expenses (including transportation and accommodation expenses) Foreign language courses (Mandarin) S.J. GRAND Financial and Tax Advisory 18 CASH REPATRIATION FROM CHINA: DIFFERENT STRATEGIES 51 SERVICE FEE Service Provider CHINA Licensor LOAN Investor Financier S.J. GRAND Financial and Tax Advisory 19 25

26 CONTACT US Stephane J GRAND, Managing Partner E: sjgrand@sjgrand.cn T: (21) / (10 ) BEIJING Suite 2304, e-tower, 12 Guanghua Lu, Chaoyang District, Beijing T +86 (10) beijing@sjgrand.cn HONG KONG 21/F, On Hing Building, 1 On Hing Terrace, Central- Hong Kong T hongkong@sjgrand.cn SHANGHAI 1807 Haitong Securities Tower, 689 Guangdong Lu, Shanghai T +86 (21) shanghai@sjgrand.cn SHENZHEN Suite 8, 51st Floor, Excellence Times Plaza Building, 4068 Yi Tian Road, Futian District, Shenzhen T +86 (755) shenzhen@sjgrand.cn Contact us info@sjgrand.cn Follow us 26