Year 2022 is here and it is time to start planning ahead for tax payments.

It is advisable that you follow this tax diary and comply with your tax obligations in order to avoid paying unnecessary penalties and interest.

Tax diary can be downloaded using the following link

Our experienced tax team is available if you need professional consulation.

NOTE: Tax information contained in our publication is accurate as of the day of release.

We kindly remind you that under the provisions of the Income Tax Law, every Company resident in the Republic is deemed to have distributed 70% of its profits after taxation (as adjusted for DDD purposes) in the form of dividends within two years from the end of the tax year in which such profits were generated. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time.

SDC – Special defense contribution is imposed to the extent that the ultimate direct/indirect shareholders of the company are Cyprus tax resident and domiciled individuals at the rate of 17%.

GHS – General healthcare system contribution is imposed to the extent that the ultimate direct/indirect shareholders of the company are Cyprus tax resident individuals at the rate of 2.65% (gross emoluments earned by individuals subject to GHS are capped to EUR 180,000 per annum).

Both SDC and GHS on deemed dividend distribution for profits generated in the year 2019 are payable by the company for the account of the shareholders by 31/01/2022.

Late payment of the SDC and GHS due will be subject to interest at the current rate of 1.75% per annum and to a 5% penalty on the tax due. An additional penalty of 5% on the tax due may be imposed if the tax remains unpaid two months after the above due dates.

We are at your disosal to assist you with the calculations, the administration of the payment and the submission of the relevant declarations.

15% corporate minimum tax

The bill introduces a new 15% minimum tax on corporations to help pay for climate and health care measures. The tax applies to companies that generate $1 billion in annual earnings. The Joint Committee on Taxation (JCT) estimates the tax will raise $313 billion in revenue over the next decade. Exemptions from the tax demanded by Sen. Kyrsten Sinema (D-Ariz.) to secure her 'yes' vote include: Exemption for companies that use accelerated depreciation to help pay for new investments. Exclusion of small businesses that are subsidiaries of private equity firms.Prescription drug pricing reformThe bill allows Medicare to negotiate prices for some drugs for the first time. This is a policy Democrats have attempted to enact, over objections from the pharmaceutical industry, for many years. The provisions are expected to save $288 billion over 10 years according to analysis by the CBO.Enhanced IRS tax enforcementThe Inflation Reduction Act of 2022 allocates $80 billion to increase enforcement by the IRS. Supporters of the measure hope that additional employees and better technology will allow the IRS to catch more tax cheats, especially among the ultra-wealthy. The CBO believes this could boost IRS revenue by at least $124 billion over the next decade.Stock buybacks will be subject to an additional tax once the legislation becomes law. A 1% excise tax on buybacks is expected to generate $74 billion by 2031.In a bid to recoup tax revenue lost to private equity, the act imposes a limit on losses businesses can deduct from their taxes. These measures are designed to prevent wealthy individuals from reducing or even wiping out their income tax liability.Energy security and climate change investmentThe largest investment made by the Inflation Reduction Act of 2022 is for energy security and climate change. It totals $369 billion and consists of the following:3Business Incentives and Tax Credits Incentives to businesses to deploy lower-carbon and carbon-free energy sources. Tax credits for energy production and investments in wind, solar, and geothermal energies. Tax credits for investment in battery storage and biogas. Tax credits for investments in nuclear energy, hydrogen energy coming from clean sources, biofuels, and technology that captures carbon from fossil fuel power plants. Bonuses for companies based on worker pay and the manufacture of steel, iron, and other components in the U.S. New tax credit rules make EV tax credit hard to get:3 EV must be made in North America. Eliminates credits for pricey EVs, i.e., Hummer EV, Lucid Air, and Tesla Model S and Model X. Lowers tax credit on new EVs with battery minerals sourced from countries other than the U.S.Business and Consumer Incentives Incentives to companies and consumers who make cleaner energy choices. Tax credits for residential clean energy costs including rooftop solar, heat pumps, and small wind energy systems. 30% credit through 2032—phases down after 2032. Electric vehicle tax credits of up to $7,500 on new EVs and $4,000 on used. Tax credit for energy efficiency in commercial buildings. Grants and loans to help companies reduce emissions of gas methane from oil and gas. Fees levied on producers with excess methane emissions. $27 billion toward additional incentives for clean energy technology. Some provisions of the Inflation Reduction Act of 2022 actually increase fossil fuel production on public lands.Use of Public Lands New requirements to hold lease sales that open up new oil and gas production.Affordable Care Act extensionThe legislation extends financial assistance to help people enrolled in ACA through 2025.

The Lithuanian State Tax Inspectorate announced that in response to the rising household heating and hot water supply prices and their toll on the Lithuanian residents, the Lithuanian government established a temporary VAT relief on these amenities. As a result of the most recent legislation, Lithuanian residents pay a VAT-exclusive amount for heating and hot water.

Based on the new provision, the VAT rate on hot water and heating is reduced from 9 % to 0 %, and the VAT loss is to be covered from funds from the national budget.

Even though the provision came in place on April 1, 2022, the reduced VAT rate has been applied from January 1, 2022, to April 30, 2022. Therefore, heating suppliers must amend the previous accounting records or cover the difference by reducing the amount charged in the upcoming month‘s bill. The 9 % VAT difference will be reimbursed once the heating energy providers submit the FR0766 v.2 to The Lithuanian State Tax Inspectorate.

Similar VAT relief measures have been initiated in the region, with Poland reducing VAT on electricity to 5 %, the VAT on natural gas to 0 %, and fuels to 8 % from the previous 23 % VAT

Amidst record inflation and the rise in energy prices, the Lithuanian Parliament is returning to February’s proposal to reduce the VAT rate on heating. If the proposal is accepted, the value-added tax on domestic heating will be reduced from the current 21 per cent to 5 per cent.

The proposed VAT cut would be applied to the prices of natural gas and liquefied petroleum gas used to heat households. Similar proposals are currently being discussed in other European countries as the growing energy prices, including a steep rise in the electricity prices, are threatening households as well as businesses.

If the government accepts the proposal, it might come in place already from 1 November 2022.

The main driver of the proposal is the rising inflation, which reached 22% in July – the highest inflation in Lithuania since the economic crisis in 2008. Together with the rising inflation, the country is facing supply chain issues and energy price increases. Lithuania has also become the first country in the EU to withdraw from Russian gas imports completely. This step was taken already in April 2022.

The Lithuanian government has already agreed to dedicate EUR 500mn to 1bn for energy subsidies, which would reach vulnerable households.

Previously, the Parliament has discussed but decided not to move on with cutting VAT on food, like some of the European countries, including Lithuania’s neighbour Poland, did.

Lithuanian Parliament has passed a project to change Bill No. XIVP-408 in order to apply a reduced VAT rate on non-prescription drugs and medical aids.

As of now, the standard 21% value added tax is applied to non-prescription drugs in Lithuania. It is suggested that the VAT rate should be cut to 5%. A reduced VAT is currently applied to prescription drugs and medical supplies covered by the Lithuanian government.

Lithuanian Parliament will consider the Bill later this year, and it should be adopted by December 31, 2022.

According to the initiators of this Bill, the changes should make medication more accessible, reduce patient discrimination and improve the state of public health as a result. The authors of the Bill highlight that currently, patients who are not eligible for prescription drugs yet but need medication have to buy the drugs at full price and pay a higher VAT in comparison to the prescription drugs.

The Bill has been being reviewed and amended since last year. It has also experienced pushback from several Members of Parliament due to expected budget losses related to the reduced VAT. Some Members of Parliament also argued that Lithuanians already buy too much medicine, which is linked to increased waste and irresponsible drug consumption.

The Lithuanian State Tax Inspectorate (STI) announces that as soon as the European Commission confirms the decision, Lithuania will apply 0 VAT on support for Ukraine.

Based on this provision, all goods and services supplied to beneficiaries of aid or relief for the victims of war or other disasters in Ukraine will be taxed at a 0% VAT rate. The relief will apply to purchases both in Lithuania and from the other EU Member States. Up until now, only imported disaster relief was VAT-exempt.

This relief measure aims to enable support organizations to buy more goods and services for relief purposes. The STI will announce the beginning of this relief measure as soon as the EC decision comes through.

When purchasing goods and services for victims of the war in Ukraine, the VAT payer will be required to submit a document proving the status of a beneficiary. The information on the beneficiaries will also be published on the STI‘s website. Furthermore, together with the beneficiary‘s status, the VAT payer will have to state the purpose of the use of the goods and services by providing a written confirmation that the goods and services will be used for the free distribution or free use of the disaster victims.

The amendment will be back-dated and applied from the beginning of the military aggression of the Russian Federation against Ukraine on 24 February 2022. VAT reimbursements will be available upon submitting credit VAT invoices for goods and services already supplied to victims of the war.

According to the STI, this Value Added Tax amendment was made possible by the changes to the European VAT directive, which allowed reduced VAT rates. The adjustments to the VAT directive were made in early April 2022.

The Lithuanian State Tax Inspectorate (STI) continues inspecting online content creators for tax evasion. Last year, it identified 17 high-risk individuals, which led to over €24k more taxes declared. Most recently, the STI found more than €200,000 in undeclared income after checking an influencer. As a result, the person was issued an administrative offence report and must return the taxes to the country’s budget.

Since 2019, the influencer has had four Instagram accounts, where he advertised the services of the virtual currency market analysis and promoted betting offers on future sporting events. In the statement of the STI, it is claimed that the person took videos and photographs of himself with cash allegedly won from betting or from the sale of virtual currencies and displayed a supposedly luxurious lifestyle.

The check revealed that the person registered his sole proprietorship in September 2021 and had not submitted an income tax return for 2019 and 2020, even though he received income from taxable activities during this period. After the check, the person has declared approx. €200.5k of taxable income from his economic activity and will pay almost €28.6k of taxes to the budget. Furthermore, the STI claims that from August 2021 onwards, the influencer exceeded the Lithuanian VAT threshold of €45k and failed to register and file the tax, accumulating almost €26.9 k of VAT payable.

Lithuanian Parlament rejected a proposed amendment to exempt food items from VAT. Earlier this year, a similar proposal to apply a reduced 9 per cent VAT rate on foodstuffs was also rejected. Currently, a reduced VAT rate in Lithuania is applied to catering and restaurant services. The existing reduction will be in place until the end of the year.

The proposals to reduce the VAT on foodstuffs were submitted after neighbouring Poland had agreed to implement a zero per cent VAT on food. The decision came in place in February 2022.

However, it seems Lithuania won’t follow in Poland’s footsteps and will continue implementing the standard VAT rate on food to retain the tax revenue. According to the estimates, applying zero VAT on foodstuffs could result in EUR 250 million loss in tax revenue. The Amendment's authors opposed the idea, claiming that reduced VAT could increase consumption and stabilize the incoming VAT volume.

Here is the proposed Amendment that was voted upon on June 23, 2022, in Lithuania:

Proposed change

Article 1 . Amendment of Article 19

Add the following point 4 to Article 19 (5):

” 4 ) foodstuffs. ”

The Amendment was returned to the initiators for refinement by another vote.

Some MEPs proposed that the VAT reduction should not apply to all food but only to the basket of essential products.

The Lithuanian State Tax Inspectorate (STI) has announced that over 39,000 taxpayers who have been included in the affected-by-COVID-19 list have already concluded more than 14,000 interest free tax– loan agreements with STI.

Lithuanian taxpayers, included into the list of affected-by-COVID-19 and having tax debts to STI accrued before August 31 2021, are eligible for interest–free set out of those debts up until December 31 2022. The deadline to apply for this incentive was August 31 2021. 15,000 applications have been received.

Taxpayers also have an option to extend the repayment of tax debts for a maximum period of 5 years, however, starting as of January 1 2023, unpaid tax debts will bear an interest of 0.01 % per day.

It is worth to mention that taxpayers, included into the list of affected-by-COVID-19, having tax debts to STI and not applied for the above incentive, are required to settle their tax debts in full not later than until 31 October 2021. As of November 1 2021 all unsettled tax debts will be charged with interests and enforced by STI.

Interests in some foreign accounts holding digital assets such as cryptocurrency would have to be disclosed to the Internal Revenue Service under a proposal put forth Monday by the U.S. Department of the Treasury.

The proposal outlined in Treasury's ''Green Book'' explanation of tax policies would impose a reporting mandate for foreign digital asset accounts under Internal Revenue Code Section 6038D(b).

The Mandate Would Apply To Taxpayers Who Have
More Than $50,000 In Cryptocurrency,
Financial Accounts And Other Assets Held Overseas.

The proposal would cover any account housing digital assets maintained by a foreign digital asset exchange or asset service provider, and Treasury would be permitted to issue regulations expanding the scope of the accounts, according to the Green Book. The proposal would be effective for returns that have to be filed starting in 2023.

Section 6038D, created by the Foreign Account Tax Compliance Act, already requires reporting from anyone holding an interest in at least one specified foreign financial asset with a total value of at least $50,000, according to the Green Book. Treasury said in the Green Book that mandating people to specifically report offshore holdings of accounts with digital assets, subject to big penalties if they don't, is vital to curbing potential use of digital assets for tax avoidance.

''Tax Compliance And Enforcement With Respect To
Digital Assets Is A Rapidly Growing Problem,''
Treasury Said In The Green Book.

The Green Book also calls for increased reporting from financial institutions and digital asset brokers for purposes of exchanging information with foreign governments. Some financial institutions would have to report the account balance for all accounts housed at U.S. offices and held by foreign individuals, according to the Green Book.

Furthermore, if adopted and combined with existing law, the proposal would force brokers to report gross proceeds and other required details regarding sales of digital assets with respect to customers and substantial foreign owners in the case of some passive entities, the Green Book said.

That proposal would allow for the automatic exchange of information with other countries and provide Treasury with details on U.S. taxpayers who directly or through passive entities engage in digital asset transactions outside the country, according to the Green Book.

Treasury also wants to allow actively traded digital assets and derivatives or hedges of them to be marked to market if dealers or traders elect to under rules similar to those applying to actively traded commodities, the Green Book said.

The Green Book was released the same day President Joe Biden's administration released its budget proposal, which calls for raising the corporate tax rate to 28% and imposing a minimum tax rate of 20% on taxpayers whose incomes top $100 million.

The digital assets proposals in the Green Book together would raise about $11 billion, according to Treasury. In total, the Biden administration's budget is proposing $2.5 trillion in revenue increases.

FTA issued clarification on gold making charges

The Federal Tax Authority (FTA) in UAE has recently issued a public clarification – VATP029 on Gold Making Charges confirming that the suppliers of the gold jewellery are required to pay VAT on the making charges. This clarification only applies to gold and products consisting mostly of gold, that do not qualify for zero-rating. These goods are collectively referred to as “Gold Items”.

Public Clarification on Missing or deficient Excise Goods released

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published an Excise Tax Public Clarification (EXTP007) on Excise goods that are deficient or missing and the process for the destruction of Excise goods within a Designated Zone (DZ).

As per the clarification, the FTA needs to be notified of the deficiency or shortage within 30 days of discovering the deficiency through a declaration along with supporting documents. An approval from competent authority is also required to be provided in case of destruction of goods that were expired and can be destroyed only on sanction from the FTA.

The scenarios of deficiency, procedure for filing the Declaration and the requirements of supporting documents have been detailed in the clarification. It has also been clarified that there is no ability under the Executive Regulation for businesses to secure relief on products which have been subject to excise tax previously but are then considered as ‘wastage’.

FTA issued clarification regarding time limit for claiming refund of VAT by tourists

FTA in its Decision No. 4 of 2022 has decided that the operator of the Tax Refunds for Tourist Scheme shall set a one-year time limit for tourists to claim the refund of Value Added Tax through bank card or by cash, from the date of verification of the refund request.

Ministry of Economy released circular in connection with AML/CFT Compliance for Licensed Real estate brokers and agents

The UAE Ministry of Economy has on 24 June 2022 released Circular No. 05/2022 instructing all real estate brokers and agents to inter alia submit a ‘Real Estate Transaction Report’ (“REAR”) via the Financial Intelligence Unit’s (“FIU”) goAML platform in following circumstances:

Cash transaction equal to or exceeding AED 55,000

Method of payment is virtual asset

In case of funds used for transaction has been converted from a virtual asset.

Chilean Senate Approves Tax Treaties with United Arab Emirates, alongwith India and the Netherlands

On 8 June 2022, the Chilean Senate (upper house of Congress) approved the laws for the ratification of the pending tax treaties with the United Arab Emirates along with India and the Netherlands. The laws were approved by the Chamber of Deputies (lower house) on 3 March 2022.

The income tax treaty between Chile and the United Arab Emirates was signed on 31 December 2019. The treaty will enter into force once the ratification instruments are exchanged and will generally apply from 1 January of the year following its entry into force.

A judgment by the District Court in Tel-Aviv-Jaffa was published on the subject of an appeal by the Nawi Brothers Group Ltd. (hereinafter – The Company) against an assessment order, in which it was determined that the Company is not entitled to offset losses that had accumulated prior to its acquisition.

Background

At the beginning of the year 2011, the Nawi Brothers acquired a shell type stock exchange company (by way of a private allocation of 85.5% against the injection of an amount of NIS 47 million into that company), which was ''clean'' (i.e., without assets or liabilities whose operations had been discontinued about half a year beforehand) which had approximately NIS 153 million of accumulated losses at the end of 2010 (approximately NIS 44 million in business losses carried forward and approximately NIS 109 million in real capital losses on securities carried forward) and new activity and profitability were transferred from a private company that they owned, in the field of deferred notes (''the discounting of checks''). In the years 2011 – 2013, all of the accumulated losses were offset against the Company's chargeable income from the discounting of checks.

The assessing officer based himself on a claim of artificiality, and using the special authority that is afforded to him within the framework of the general anti-abuse rules, he reclassified the transaction and determined that the accumulated losses (brought forward) cannot be offset within the framework of the Company's activity in the field of the discounting of checks.

It should be mentioned that after the assessment was issued under an order, a partial assessment agreement was signed with the assessing officer for the years 2011 to 2013 pursuant to which the offsetting of the real loss on securities (in an amount of approximately NIS 109 million) from the Company's chargeable income was cancelled, apparently because of the fact that they had not been offset from the Company's capital gains (which did not exist in those years) pursuant to the provisions of the Ordinance, but rather from the chargeable business income .

As a rule, the Court determined that on grounds of the principle of justice in the imposition of tax, the legislator permitted the offsetting of losses against profits from different businesses owned by the same assessee (an individual or a company), however, ''the watershed line in the implementation of this principle is that on the sale of control in a company to new shareholders, who have the ability to direct its operations and who have an economic interest in it''. And therefore, the Court went further and emphasized regarding the acquisition of a company with accumulated losses: ''…that the principle that prohibits the purchase of losses that have been incurred (indirectly) by other shareholders, only applies where there is no fundamental commercial ground for the acquisition of the control in the company and the transfer of new profitable activity into it. In other words, ''the baby will not be thrown out with the bathwater'' in every case, because'' in light of this, there is nothing in the fact that the new controlling interests did not incur the losses that have accumulated in the company from the economic perspective and there is nothing in the fact that there is not necessarily a connection between the previous activity and the new activity that has been entered into it, in and of itself, that is necessarily enough to prevent the offsetting of the losses''.

And therefore, the Court determined that: only in a case in which the control is sold in a company, without a fundamental commercial ground, apart from the desire to utilize the losses, distort the balance in the direction of the principal of the prohibition of the purchase of losses that have been incurred by the previous shareholders''.

The Court went further and stated that it had indeed already been determined in a previous judgment that not every purchase of a stock exchange shell with losses is an artificial transaction and that one should even view the ''public visibility'' that is associated with a stock exchange shell as being a sort of ''commercial ground'' and in the appropriate circumstances, even a fundamental one. However, the Court determined that every case is to be determined on its own merits and in particular the issue of what the fundamental commercial ground that formed the basis for the acquisition of the specific stock exchange shell was.

The Court determined, that in order to negate a claim of artificiality of a transaction, one needs to weigh up the commercial ground and the fiscal ground therein, and to show that (at least at the level of a reasonable expectation) the transaction is accompanied by a fundamental commercial ground (where the burden of objective proof is placed upon the assessing officer), and at the same time it must also be shown that the importance of the fiscal ground in the transaction (i.e. the tax shield that is inherent in offsetting the accumulated losses, where the burden of subjective proof is placed on the assessee) is of a less fundamental level, and all this is to be measured and examined at the time of the execution of the transaction and not retrospectively.

And in brief, when operating the anti-abuse rules, the assessing officer has to be the first in order and to show that the transaction would not have been executed were it not for the tax advantage (the fiscal ground) and only if he succeeds in doing so is the burden on the assessee to prove (subjectively) that the transaction would not have been executed were it not for the commercial- economic ground therein.

Regarding the fiscal ground (the tax asset that is inherent in the losses), the Court adopted the assessing officer's figures, in the formula for the calculation (the level of the accumulated losses, the corporate income tax rate, the withholding rate in the Company – and all this as was seen at the time of the acquisition!), and reached the conclusion that its level was estimated at approximately NIS 34 million (as compared with just NIS 9 million, as claimed by the Company), which the Nawi brothers hoped for and expected and which constituted a fundamental ground from their perspective at the time of the acquisition of the Company.

Regarding the commercial ground in a transaction and its real fundamental nature, the Company claimed and the Court agreed to this and went further that its activity in the field of discounting checks through a stock exchange company afforded that activity, which generally suffers from a negative image (the grey market), appropriate ''public visibility'', and numerous additional tangible commercial advantages, such as: an influencing customers to use the services of a supervised and audited public company, entrance to the Stock Exchange whilst turning ''a new page'' without exposing past results, the ability to raise credit from the banks with reduced guarantees, the ability to recruit credit from the capital market and increase the sources of financing, the ability to realize holdings readily and at high values and all this whilst retaining effective control in the Company. Furthermore, the entry into the Stock Exchange with an existing stock exchange shell reduces the Company's time-lines, efforts and costs significantly – which achieves the existence of the commercial ground.

Despite the aforesaid, and for the purpose of the examination of the commercial ground and the fundamental nature thereof, and even in the comparison to the fiscal ground, the Court went into the depths of the business decisions made by the Company and its controlling interests, which they saw at the time of the acquisition, and it examined the commercial grounds regarding the management of the check discounting activity in a public company (with accumulated losses) as compared with a private company (without losses for offsetting), what the commercial ground was in the entry to the Stock Exchange by means of a stock exchange shell by comparison with the alternative paths (such as: the acquisition of a listed public company, an initial offering of a private company and etcetera) and finally the Court also asked whether the Nawi Brothers made a commercial investigation of the acquisition of other stock exchange shells that were available at that time (for example, without losses or with smaller losses).

The Court reached the conclusion that in real time (at the time that the transaction was executed) the Nawi Brothers expected that they would achieve larger profits (regarding the offsetting of the losses), they did not expect to recruit equity in the first years (the issuance of the bonds only took place 4 years later) and also that: ''in order to prove the existence of ''a fundamental commercial ground'' in the acquisition of the specific shell, the Nawi Brothers had to prove that they took reasonable efforts to try to find additional shells, that did not have losses or which had lower losses, and that it would have been possible to purchase them in that same unique business structure''. Hence, the result that the Court arrived as was that the acquisition of the Company was made for a fundamental fiscal ground of the utilization of the accumulated losses and therefore it was artificial.

In our opinion, the economic weighing up that the Court conducted in this case is a comparison between chalk and cheese. How is it possible to compare between a kilogram and a kilometre? The fiscal ground can be measured exactly and (relatively) easily in money terms, whereas the commercial ground and the fundamental nature thereof are examined and measured by a test involving common sense in accordance with economic, commercial, business and moral criteria, market regulations and etcetera- how can we make a real examination of which of the foundations overrules the other? How many further rulings will be written in order to find the magical formula for this unknown? Therefore, maybe this is the place and this is the time to call in the legislator, out of an approach supporting tax stability and to set clear and absolute tax directives for situations in which a company cannot offset accumulated losses.

We would like to start the 2022 series of our articles from short review of main tax features that should be taken into consideration by every foreign consultant or foreign businessman who works with Russia.

Tax reporting period is started

End of winter and spring is period when Russian companies and individuals are liable to submit their financial statements and tax returns

All Russian tax residents are liable to submit the following forms not later than April 30:

CFC reporting

Russian legal entities and individuals who own or control CFC are liable to submit the following forms:

CFC notification on control in respect of CFC and ownership structure; deadline is 30 of April (failure to file a notification leads penalty – 5800 EUR)
CFC financial statements in respect of 2020 with audit opinion if there is no DTT between Russia and country of CFC; deadline is 30 of April (failure to file a notification leads penalty – 11 600 EUR)
Notification about any changes in the structure of CFC ownership, deadline is 3 months from corresponding change (failure to file a notification leads penalty – 580 EUR)

Please note that the Russian CFC rules treat as CFC not only legal entities but also trusts and foundations

Personal income tax reporting

Individuals who are recognized as tax resident upon the end of 2021 are liable to submit personal income tax return reflecting all foreign and Russian income including CFC income. Deadline is 30 of April (failure to file a tax return leads penalty – 30% of amount due; unpaying tax leads to penalty – 20% / 40% of amount due)

VAT on electronic services

Non-Russian company which provides software, multimedia contents or online services to the Russian clients (individuals or legal entities) should be registered in Russian tax authorities and pay Russian VAT at the rate 20%. This VAT is deductible by the Russian customers – legal entities.

Our team is able to help with tax registration at the Russian tax authorities and with submission of VAT tax returns.

Russian tax benefits for IT companies

Russia provides tax benefits for IT companies:

CIT – 3% instead of 20% (general CIT rate), 1% in some regions

Social contribution tax: 7,6% of gross salary

For small companies: full VAT exemption, CIT 6% from gross income or 15% from net income

Condition to apply tax benefits: average number of employees should be not less than 7 persons

Notice on Temporary Suspension of Export and Re-export of wheat and wheat flour

The export or re-export of wheat and wheat flour originating from the Republic of India, which was imported after May 13, 2022 has been temporarily banned vide Customs Notice No. (06/2022) issued on 30/06/2022.

Companies wishing to export / re-export wheat and wheat flour must submit a request to the Ministry of Economy to obtain permission to export outside the UAE along with supporting documents to verify the origin of the shipment.

The permit is valid for only 30 days from issuance and must be submitted to Dubai Customs via electronic clearance systems.

Amendment of Decision No. 3 of 2021

The Federal Tax Authority has amended Decision No. 3 of 2021 and released updated Decision No. 3 of 2022 on Implementing the marking of tobacco and tobacco products scheme.

This update specifies prevention of supply, transfer, storage or possession of cigarettes, electrically heated cigarettes and water pipe tobacco in the State (Local Market, Arrival and Departure Terminals) using marks with the old design from 31 December 2023.

Democratic Republic of the Congo Approves Pending Tax Treaty with the UAE

On 8 July 2022, the Cabinet of the Democratic Republic of the Congo approved the ratification of the pending income tax treaty with the United Arab Emirates.

UAE to introduce new gold import rules

The UAE will introduce a new set of regulations on gold imports in line with international rules that seek to thwart money laundering and the financing of terrorism and illegal organisations.

The Regulations, drafted in accordance with OECD guidance on gold imports will come into effect from January 2023. They have been drafted in accordance with guidance from the Organisation for Economic Co-operation and Development (OECD) and its corresponding protocol for gold.

Dubai issues decree to regulate the grant of ‘Musataha’ rights on use of commercial lands

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, has issued Decree No. (23) of 2022 regulating the grant of ‘Musataha’ rights on commercial lands in Dubai.

The Decree regulates the use of commercial lands in Dubai by granting the right of ‘Musataha’ to develop real estate projects.

As per the Decree, the ‘Musataha’ agreement creates a real property right that entitles its holder to construct a building or invest in, mortgage, lease, sell, or purchase a plot of land belonging to a third party for a period of up to 35 years with an extension upto max of 50 years.

The holder of the agreement has to abide by a number of rules and regulations.

The UAE to Introduce Fines for Failure to Comply with the Emiratisation Quota

From January 2023, private sector companies with more than 50 employees that do not reach the Emiratisation quota will be subject to fines.

The penalties and incentives shall be based on the size of the establishment and extent of meeting Emiratisation criteria.

UAE and France sign Comprehensive Strategic Energy Partnership

On July 19, 2022, His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates and Ruler of Abu Dhabi signed two agreements in Paris.

The first, a Comprehensive Strategic Energy Partnership (CSEP), which focuses on enhancing energy security, energy affordability, decarbonisation and climate action, ahead of the COP28. The 28th session of the Conference of the Parties (COP28) is set to take place in the UAE in 2023, and

The second is a strategic partnership agreement between Abu Dhabi National Oil Company (ADNOC) and TotalEnergies to explore new opportunities for growth across the energy value chain.

Goods supplied in a designated zone & connected shipping or delivery services in the UAE

The Federal Tax Authority (‘FTA’) has issued a Public Clarification (VATP027) - Goods Supplied in a Designated Zone and Connected Shipping or Delivery Services on 30 October 2021.

This latest Public Clarification aims to:

Avoid potential double taxation on goods supplied from a designated zone to the UAE mainland; and provide registration relief to non-resident suppliers who also ship or deliver these goods.

VAT Public Clarification on Mobile Phones, Data Packages and Airtime Made Available to Employees for Business Use

A business is entitled to recover input tax in respect of Phones, Airtime, and Packages acquired if these costs are incurred to make taxable supplies and specific requirements as to the name, documented policy, tax invoice etc. are met.

Amendment of Tax Procedures law.

The UAE Cabinet has issued Federal Decree-Law No. 28 of 2021 (16 September 2021), amending Federal Decree-Law on Tax Procedures No. 7 of 2017 (11 June 2017) (The Federal Decree-Law on Tax Procedures). The amendments are effective from 1 November 2021.

Major points are as follows.

Any decisions issued before effective date shall follow old tax procedures law.

The time limits for filing reconsideration applications, objections before the Federal Tax Authorities (FTA), Tax Dispute Resolution Committee (TDRC), and appeals before Competent Courts have been increased from 20 to 40 business days.

An alternate mechanism for filing objections and appeals to be prescribed for federal and local government entities in tax disputes for which the Cabinet shall – according to a suggestion by the Minister – issue a respective decision.

Increase in the time limits for filing tax applications/objections and softening the requirement to pre-deposit only tax amounts for filing objections before TDRC and 50% of penalties at the time of appeal before the Competent Courts

Annual Economic Substance Regulation(‘ESR’) Reporting and Country by Country Reporting

Entities conducting relevant activity & earning income from the relevant activity (provided not an exempted licensee) needs to submit the ESR Report by 31st Dec 2021 for FY ended 31st Dec 2020. For Entities conducting relevant activity for FY ended 30th June 2021 needs to be submit ESR notification by 31st Dec 2021.

Country by Country Reporting is required to be done by Ultimate Parent Entity of the MNE Group whose Tax residence is in the UAE. Reporting needs to be done by 31st Dec 2021 for the Fiscal year ended 31st Dec 2020.

New UAE Labour Law coming into force on 2 February 2022

The Ministry of Human Resources & Emiratisation (“MOHRE”) has announced an overhaul to the labour laws in the UAE. The new UAE Labour Law (Federal Decree Law No. 33 of 2021) (“New Law”), which will come into effect as of 2 February 2022 (“Effective Date”), seeks to address changes in the work environment, align UAE labour relations with international best practices, and recognise the need for atypical and/or flexible working structures.

The New Law will replace Federal Law No. 8 of 1980, as amended (“Current Law”) in its entirety, and it is the most significant amendment to UAE labour legislation since the Current Law’s enactment.

VAT Public Clarification on Mobile Phones, Data Packages and Airtime Made Available to Employees for Business Use

The UAE Federal Tax Authority (“FTA”) published a new VAT Public Clarification (VATP028) to provide guidance on the input VAT recoverability related to mobile phones, airtime, and data packages that are made available to employees for business use by their employers.

The Public Clarification inter-alia clarifies that a business is entitled to recover input VAT from mobile phone usage if these costs are incurred to make taxable supplies and all the following conditions are met:

The business is registered for VAT and has purchased Phones, Airtime, and Packages in its own name (Not in Employees name)
The business has a detailed documented policy which clearly states that the Phones, Airtime, and Packages may only be used for business purposes, and shall also specify the consequences of any personal use.
The business regularly monitors the use of Airtime and Packages and retains explanation for the variances
The business takes action against employees using Phones, Airtime, and Packages for personal use.
The business shall obtain and maintain the tax invoice received from supplier against their services

United Arab Emirates – Niger Tax Treaty comes into effect:

The 2018 Tax treaty between UAE and Niger entered into force on 18 August 2021 and will apply as from 1 January 2022. When in effect, the treaty provides that dividends and interest will be taxable only in the state of residence of the recipient. A 10% rate will apply to royalties.



UAE issues new Federal Electronic Transactions and Trust Services Law



The UAE has issued Federal Decree by Law No. 46 of 2021 on Electronic Transactions and Trust Services (“Law”). It introduces legal concepts into UAE law that are similar to the European eIDAS Regulation to promote legal certainty in electronic interactions.

The Law provides a new means for regulating Electronic Identification Systems and Trust Services.

Electronic identification allows businesses and consumers to identify and authenticate who they are. Under the Law, The Telecommunications and Digital Government Regulatory Authority (‘TDRA’) is to issue the rules, procedures and standards related to the electronic identification systems, verification procedures and digital ID, after coordination with concerned bodies.

Trust Services are electronic services which aim to improve the confidence of citizens and businesses in the security and certainty of electronic transactions.

The Law repeals the existing Federal Law No. 1 of 2006 concerning e-transactions and e-commerce (“Old Law”) as of 2 January 2022. However, there is a 12-month grace period which allows those subject to the Law to ensure that they are compliant.

Federal Decree No. 32 of 2021 concerning Commercial Companies comes into force from 02 January 2022



The United Arab Emirates government published the Federal Decree No.32 of 2021 concerning Commercial Companies (CCL 2021) which comes into force from 02 January 2022, on which date the Federal Decree Law No. 2 of 2015 and its amendments (CCL 2020) will be repealed.

The CCL 2021 incorporates changes that will affect (in a positive way) the present operations of companies, and investors that wish to establish business presence in the UAE.

Companies incorporated at the date of commencement of the CCL i.e. January 2022, will be permitted a period of 12 months from that date to amend their memorandum and articles of associations, such that they are not inconsistent with the provisions of the CCL 2021. Failure to do so can result in a company’s liquidation and exposure to fines that may be prescribed by Cabinet in this regard.

VAT Public Clarification on Mobile Phones, Data Packages and Airtime Made Available to Employees for Business Use

The UAE Federal Tax Authority (“FTA”) published a new VAT Public Clarification (VATP028) to provide guidance on the input VAT recoverability related to mobile phones, airtime, and data packages that are made available to employees for business use by their employers.

The Public Clarification inter-alia clarifies that a business is entitled to recover input VAT from mobile phone usage if these costs are incurred to make taxable supplies and all the following conditions are met:

The business is registered for VAT and has purchased Phones, Airtime, and Packages in its own name (Not in Employees name)
The business has a detailed documented policy which clearly states that the Phones, Airtime, and Packages may only be used for business purposes, and shall also specify the consequences of any personal use.
The business regularly monitors the use of Airtime and Packages and retains explanation for the variances
The business takes action against employees using Phones, Airtime, and Packages for personal use.
The business shall obtain and maintain the tax invoice received from supplier against their services

United Arab Emirates – Niger Tax Treaty comes into effect:

The 2018 Tax treaty between UAE and Niger entered into force on 18 August 2021 and will apply as from 1 January 2022. When in effect, the treaty provides that dividends and interest will be taxable only in the state of residence of the recipient. A 10% rate will apply to royalties.

UAE issues new Federal Electronic Transactions and Trust Services Law

The UAE has issued Federal Decree by Law No. 46 of 2021 on Electronic Transactions and Trust Services (“Law”). It introduces legal concepts into UAE law that are similar to the European eIDAS Regulation to promote legal certainty in electronic interactions.

The Law provides a new means for regulating Electronic Identification Systems and Trust Services.

Electronic identification allows businesses and consumers to identify and authenticate who they are. Under the Law, The Telecommunications and Digital Government Regulatory Authority (‘TDRA’) is to issue the rules, procedures and standards related to the electronic identification systems, verification procedures and digital ID, after coordination with concerned bodies.

Trust Services are electronic services which aim to improve the confidence of citizens and businesses in the security and certainty of electronic transactions.

The Law repeals the existing Federal Law No. 1 of 2006 concerning e-transactions and e-commerce (“Old Law”) as of 2 January 2022. However, there is a 12-month grace period which allows those subject to the Law to ensure that they are compliant.

Federal Decree No. 32 of 2021 concerning Commercial Companies comes into force from 02 January 2022

The United Arab Emirates government published the Federal Decree No.32 of 2021 concerning Commercial Companies (CCL 2021) which comes into force from 02 January 2022, on which date the Federal Decree Law No. 2 of 2015 and its amendments (CCL 2020) will be repealed.

The CCL 2021 incorporates changes that will affect (in a positive way) the present operations of companies, and investors that wish to establish business presence in the UAE.

Companies incorporated at the date of commencement of the CCL i.e. January 2022, will be permitted a period of 12 months from that date to amend their memorandum and articles of associations, such that they are not inconsistent with the provisions of the CCL 2021. Failure to do so can result in a company’s liquidation and exposure to fines that may be prescribed by Cabinet in this regard.

According to Private Wealth, Private Trust Companies are state-chartered organizations that provide fiduciary services to members of a family. It can only do business with the family, not outsiders. They are a unique option available to wealthy families to help them address key issues and challenges of intergenerational wealth transfer.

The private trust company is established to serve as a trustee and is limited to one family. It enables the wealthy family to put all the trust assets together in one structure.

According to Vince Annable, CEO and Founder of VFO Advisory Group and author of The Household Endowment Model: Wealth Planning for Affluent Families,

“With A Growing Number Of States Enacting Legislation Supportive Of Private Trust Companies, They Are
Gaining In Popularity Among Wealthy Families.

These entities usually provide these families with wealth planning and family governance at a level otherwise unavailable.”

While single-family offices and private trust companies are distinct entities, the private trust company can fill some of the roles of a family office such as investment management and administrative services including record keeping. The relationship between single-family offices and private trust companies is set by the wealthy family. For example, the two entities can operate independently where the private trust company obtains back-office services from the single-family office through a service contract.

The private trust company’s board of directors is composed of trusted professionals of different ages and tenures who have a very solid understanding of the interests and concerns of the wealthy family. This approach produces a form of “institutional memory” that better ensures the ongoing agenda of the wealthy family is addressed.

“With A Private Trust Company, The Family Usually Has Extensive Flexibility And Control Over Decision Making,”

says Homer Smith, Executive Director of the Integrated Family Office Practice and Founder of Konvergent Wealth Partners. “For example, the wealthy family can choose who is on the board of the private trust company and how voting on important matters works.”

When there are meaningful family-owned assets in trusts such as privately held business interests, there is a strong likelihood of the decisions that are made to be more attuned to the wealthy family’s interests at the time. Additionally, when the board includes different technical specialists (e.g., lawyers, accountants, wealth managers), they are likely to make better decisions because of their familiarity with the wealthy family and the specific assets.

Many times, family members are on the investment committee of the private trust company. This gives them influence over the ways the family monies are allocated. This level of involvement is often significantly greater than the level of possible involvement with traditional trustees. If the single-family office is managing the monies in the trusts, the wealthy family is still very much involved in the process.

Privacy is also enhanced as the wealthy family can often control the flow of information. The people chosen to be on the board, for instance, are all loyal to the wealthy family. According to Aaron Yen, Senior Partner, Ascendent LLP, “For non-US citizens, the privacy issues surrounding private trust companies can be particularly attractive. They can be effective in bringing assets into the United States while maintaining a high level of privacy.”

While there are substantial benefits of private trust companies to wealthy families, they are a long-term commitment. Sometimes family members take on certain responsibilities. Also, many times, trusted professionals are brought in to assist. Like single-family offices, private trust companies are family businesses. Consequently, avoiding potentially dipterous complications requires a succession plan. It is usually wise to address succession within the private trust company when it is established.