Hong Kong has recently signed a comprehensive avoidance of double taxation agreement (CDTA) with Saudi Arabia. This brings the number of CDTAs Hong Kong has concluded with other jurisdictions to 38. It is expected that Hong Kong will sign more and more CDTAs with other jurisdictions and in particular, with the Belt and Road countries (e.g. Saudi Arabia). The CDTA with Saudi Arabia contains favorable provisions which are expected to facilitate closer economic ties between Hong Kong and Saudi Arabia. The CDTA will only come into force in the tax year following the calendar year in which the relevant ratification procedures are completed. If the ratification procedures can be completed in 2017, the CDTA shall become effective in Hong Kong for any year of assessment beginning on or after 1 April 2018; and shall become effective in Saudi Arabia for any tax period beginning on or after 1 January 2018.
Leaders of the BRICS’ nations - Brazil, Russia, India, China and South Africa, have gathered on 3-5 September in the Chinese city in Xiamen for their ninth annual summit. In addition, as a part of “BRICS Plus” concept, leaders of Egypt, Guinea, Mexico, Tajikistan and Thailand have also attended the conference.
The summit’s discussions focused on renewable energy initiatives, security, as well as an alternative credit rating agency led by BRICS countries that would cater for the needs of emerging countries and may challenge the Western credit rating agencies.
Under the China Enterprise Income Tax (“EIT”) Law, a resident enterprise may enjoy Research & Development (“R&D”) super deduction incentive, i.e. deduct 150% of qualifying R&D expenses actually incurred in computing its tax liability, if the expenses do not result in the creation of an intangible asset. If intangible asset is developed, the qualifying R&D expenses should be capitalized and amortized based on 150% of the actual qualifying R&D costs. Recently, various Chinese authorities jointly issued a circular to further extend the foregoing super deduction percentage from 150% to 175%, which is available to Small- and Medium-sized Science & Technology Enterprises (“SMSTE”) when computing their EIT liabilities for the period from 1 January 2017 to 31 December 2019. The additional deduction effectively lowers the taxable income of the SMSTE. Self-evaluation and voluntary reporting requirements have to be complied with by the SMSTE in order to enjoy the tax incentive.
As from 1 July 2017, the 13% VAT rate was abolished in China and the rate for agricultural products, public utilities and cultural products was reduced to 11%. Prior to 1 July 2017, there were four VAT rates in China, namely 17%, 13%, 11% and 6%. A separate rate applies to taxpayers that are subject to the simplified VAT regime. This multiple rate system has created tax disputes and challenges for taxpayers, particularly in determining which VAT rate should be applicable. It has been the Chinese tax authority’s key focus in its VAT reform to streamline the VAT rate brackets and simplify the related tax compliance. The elimination of the 13% VAT rate will mainly affect the following categories of products: