Tax Incentives and Economic Zones
- Italy: Converted into law the tax credit for investments in simplified logistics zones, offering up to 40% credit for qualifying assets from 8 May 2024 until 15 November 2024.
- Mexico: Introduced tax incentives for investments in Progreso I and Mérida I industrial welfare zones in Yucatán, including 100% income tax credit for three years, 50% for the next three years (up to 90% with employment conditions), and immediate 100% deduction of new fixed assets for six years.
- Pakistan: Agreed to phase out incentives to Special Economic Zones as part of IMF agreement.
Global Minimum Tax Implementation Progresses
- Austria: Approved Tax Amendment Act 2024, incorporating latest OECD guidance on temporary safe harbor rules for Pillar 2.
- Portugal: Launched public consultation on draft bill for Pillar 2 implementation, with IIR and QDMTT to apply from 1 January 2024, and UTPR from 1 January 2025.
- Turkey: Submitted tax reform legislation including Pillar 2 measures, to apply from 1 January 2024. Also introduces 10% minimum tax on domestic companies and 30% corporate tax rate for public-private projects.
- Belgium: Published Royal Decree on advance payments for Pillar 2 minimum tax, effective 1 September 2024.
VAT and Indirect Tax Reforms
- Austria: Increased VAT exemption threshold for small businesses from EUR 35,000 to EUR 42,000 and extended exemption to businesses in other EU states with total EU turnover not exceeding EUR 100,000.
- Brazil: Chamber of Deputies approved draft law capping combined CBS and IBS rate at 26.5%.
- Finland: Launched consultation on moving 10% reduced VAT rate supplies to 14% rate, including passenger transport, accommodation, and sports services. Proposes 14% rate for menstrual protection, incontinence protection, and children’s diapers.
- Venezuela: Extended 90% VAT and customs duty exemption on over 1,500 imported goods to 31 August 2024.
Digital Economy and Financial Transaction Taxation
- Paraguay: Introduced Shopping Tourism Regime (RTC) with 10% VAT on 12.5% of goods value and 1% advance corporate income tax on customs value for qualifying companies selling to tourists.
- Hungary: Increased financial transaction tax from 0.3% to 0.45% (max HUF 20,000 per transaction) and cash withdrawal tax from 0.6% to 0.9%, effective 1 August 2024. Additional 0.45% tax (max HUF 20,000) from 1 October 2024.
- Venezuela: Reduced financial transactions tax to 0% for certain “special taxpayers” transactions, previously 2%. 3% rate on foreign currency transactions remains.
Insights:
The ongoing implementation of the Global Minimum Tax across various jurisdictions highlights the complexities of adapting international standards to diverse local tax systems. The staggered implementation dates for different rules (e.g., IIR, QDMTT, UTPR) in countries like Portugal and Turkey reflect the challenges in coordinating this major shift in international taxation.
There’s a noticeable trend of countries using targeted tax incentives to stimulate economic growth in specific regions or sectors, as seen in Italy’s logistics zones and Mexico’s industrial welfare zones. However, Pakistan’s agreement to phase out Special Economic Zone incentives suggests a potential shift away from this approach in some developing economies, possibly due to international pressure or fiscal constraints.
VAT reforms are focusing on simplification for small businesses and harmonization with EU standards, as evidenced by Austria’s changes. Brazil’s major indirect tax reform, with its rate cap, represents a significant shift in its complex tax system and could have far-reaching economic implications.
The digital economy continues to pose challenges for tax systems, with countries like Paraguay introducing special regimes for e-commerce related activities. Meanwhile, adjustments to financial transaction taxes in countries like Hungary and Venezuela demonstrate the ongoing importance of this revenue source for some jurisdictions.
