Ecovis in the Czech Republic

US corporate tax rate increase: What companies must expect in the future

09.08.2022

On 28 March 2022, the US Treasury Department issued “General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals.” This is President Biden’s second “Green Book” detailing the administration’s tax policy proposals. The most important proposal for companies is the possible increase in the corporate tax rate from 21% to 28%.

The tax provisions of the FY23 budget are intended to create a fairer domestic tax code while ensuring that corporations and high-income individuals “pay their fair share.” The budget reiterates the Biden administration’s commitment to the OECD’s Pillar Two proposal. It also requests a total of USD 14.1 billion in funding for the IRS, including investments in IRS tax enforcement, to increase tax compliance.

The increase in the corporate tax rate in the USA and the consequences for companies

The proposal suggests an increase in the corporate tax rate from 21% to 28% for taxable years beginning after 31 December 2022. This increase would have implications in the case of GILTI (Global Intangible Low Taxed Income) tax exposure. GILTI remains the primary method used by the US to subject low-taxed income of US-controlled foreign entities to immediate US tax.

The referenced foreign tax rate for US corporate shareholders to be protected from GILTI tax is 13.125% under current law. Under the proposed changes, the referenced GILTI rate would increase to approximately 20%. This rate increase would also affect the “GILTI high tax exemption.” Thus, if the foreign effective corporate income tax rate measured (on a qualified business unit basis) exceeds 90% of the US corporate rate, that business unit can be completely excluded in computing GILTI exposure.

The corporate tax rate in the USA is set to rise. You can discuss the consequences for your company with us.

Kristina Albarella, CPA, Marcum LLP*, New York, USA

The “GILTI high tax rate” would now be 25.2% instead of 18.9%, measured on a qualified business unit basis. US multinational corporations would therefore need higher effective foreign tax rates to avoid GILTI or meet the high tax exception.

These Green Book increases would increase the tax cost of engaging in taxable corporate transactions while simultaneously increasing the economic value of tax attributes that are tied to the corporate rate, such as net operating losses (NOLs) and disallowed interest carryforwards, explain the Marcum* experts.

US taxpayers should consider strategies to accelerate recognition of income and built-in gains into 2022 and defer otherwise deductible costs and expenses into 2023 or beyond.

The final bill that is passed can often look very different than the original proposal as it works its way through Congress and the relevant committees.

For further information please contact:

Kristina Albarella, CPA, Marcum LLP, New York, USA
Email: kristina.albarella@marcumllp.com

*Marcum LLP is the exclusive associated partner of ECOVIS International for accounting, tax and audit in the United States of America.

Malaysia Digital Economy Corporation: SME Digitalisation Grant available

28.07.2022

Companies in Malaysia can receive a government subsidy of 50 percent, up to a maximum of MYR 5,000, to digitalise their business processes. Interested companies can apply until 17 February 2025. The experts at Ecovis in Kuala Lumpur know who is eligible and how the application process works.

The SME Digitalisation Grant is an initiative by the Malaysia Digital Economy Corporation (MDEC) to encourage SMEs to adopt digitalisation in their business operations. Through this initiative, the government will provide companies with a 50% matching grant, up to MYR 5,000 (approx. EUR 1,100) for the subscription of digital services that will enhance their productivity and competitiveness.

Which digitalisation projects does the MDEC support?

There are several areas of digitalisation services available, including:

• Procurement
• Enterprise resource planning (ERP) / accounting and taxation
• E-commerce
• Remote working

The scheme is worth MYR 500 million over 5 years and is limited to the first 100,000 SMEs. As part of the lead agency’s three strategic framework pillars – digital jobs, digital businesses and digital investments – the MDEC aims to empower companies to take full advantage of digitalisation and automation to supplement their business.

Together we can apply for digitalisation funding for your company.

Lim Hoey Ling, Director Business Process Outsourcing, ECOVIS MALAYSIA BPO SDN BHD, Kuala Lumpur, Malaysia

Criteria for the funding application and required documentation

SMEs which meet the following criteria are eligible and encouraged to apply:

• Must be at least 60% Malaysian-owned
• Must be registered under the relevant Malaysian laws and classified as an SME
• Must have been in operation for at least one (1) year
• SMEs which have been in operation for one (1) year are required to have an annual minimum sales turnover of MYR 100,000 for the first year
• SMEs which have been in operation for two (2) years or more are required to have a minimum sales turnover of MYR 50,000 for the preceding two (2) consecutive years

Documents required for the application:

• Completed SME Digitalisation Grant application form
• A copy of the identification card or passport of the director(s) / partner(s) / proprietor(s) of the SME / applicant appointed by the co-op, whichever is applicable
• A copy of the business registration licenses (CTC required)
• A full set of audited financial statement for 2020, with the company stamp and signature on every page, including the cover page OR the latest continuous management account from the latest audited accounts with company stamp and signature OR bank statements for the last two (2) months (with company stamp and signature, CTC not required)
• Company profile
• Invoice/billing details (with company stamp and signature, CTC not required)
• Service agreement (service order form) from an authorised vendor listed by the MDEC (with company stamp and signature, CTC not required)
• Additional information and documents as and when required by the bank

The COVID-19 pandemic has highlighted the importance of managing uncertainty and the growing need for businesses to digitalise their services. In time, those who fail to adapt may find themselves unable to compete. As Malaysia is now on the road to recovery from the pandemic, it is a critical time for SMEs to leverage on technology to increase their productivity and ensure business continuity.

For further information please contact:

Lim Hoey Ling, Director Business Process Outsourcing, ECOVIS MALAYSIA BPO SDN BHD, Kuala Lumpur, Malaysia
Email: hoeyling.lim@ecovis.com.my

International sanctions on Russia and Belarus: Legal requirements and risk management

13.07.2022

The obligations imposed by the European Union’s (EU) restrictive measures (sanctions) are binding for EU nationals or persons located in or doing business in the EU. Fines may be imposed by EU Member States for non-compliance or breaches.

The sanctions encompass making funds or economic resources available, directly or indirectly, to sanctioned persons and participating, knowingly and intentionally, in activities whose object or effect is, directly or indirectly, to circumvent the relevant prohibitions

Screening against publicly available sanctions lists

Companies involved in international trade are often familiar with economic sanctions, for example restrictions on the import, export, re-export, transit, etc. of dual-use goods, military equipment, services, and technology. However, it is useful to bear in mind that international sanctions may also apply to the parties to the transaction, such as natural or legal persons and their beneficial owners.

Companies should therefore regularly screen their customers and partners and their beneficial owners against the latest version of the consolidated list of individuals, groups and entities subject to EU financial sanctions and be aware that sanctions may also apply to non-listed persons that are owned or controlled by, or act for the benefit of, or at the direction of sanctioned persons.

Although United States (US) sanctions are not legally binding on all non-US persons, their impact is extraterritorial, global, and multifaceted. Thus, we also recommend screening customers, partners, and their beneficial owners against the US Office of Foreign Assets Control (OFAC) sanctions list.

We can support you in preparing the documents for financial transactions.

Inga Karulaitytė, Head of FinTech Group, Attorney at Law, Partner, ECOVIS ProventusLaw, Vilnius, Lithuania

Advice on financial transactions

The sanctions on Russia and Belarus mean that certain financial transactions are subject to enhanced scrutiny by financial institutions. This may result in transactions taking longer to be processed. Thus, in addition to the above-mentioned screening, the advisers from ECOVIS ProventusLaw also recommend the following:

• Companies should be prepared to provide financial institutions with additional documentation (including information on the beneficial owners of the partner and/or customer) to validate their financial operations.
• Payments should include complete and accurate information in the payment instructions. For example, payments against an invoice should include not only the invoice number but also the ultimate user and the type of goods, destination, and other relevant information.
• Sanctions risks should be assessed not only in relation to the supply of goods or services but also in relation to counterparties and the flow of funds to avoid invertedly becoming part of sanctions evasion. This should be done before entering into any business relationship.

For further information please contact:

Inga Karulaitytė, Head of FinTech Group, Attorney at Law, Partner, ECOVIS ProventusLaw, Vilnius, Lithuania
Email: inga.karulaityte@ecovisproventuslaw.com