Government measures to end exchange rate volatility in Turkiye
The Turkish government is seeking a way to end exchange rate volatility. As a result, a new package was announced on 21 December 2021 which promises significant tax advantages. Natural persons and corporations are able to benefit from this regulation.
For institutions that convert the foreign currencies in their balance sheets into Turkish lira deposit accounts with a maturity of at least three months before the end of 2022, the interest, dividends and other gains from this transaction are exempt from corporate tax upon maturity.
In addition to tax advantages, banks can provide lower interest and higher limit loans to companies benefiting from this regulation. With these measures, the Turkish government hoped to bring the volatility of the exchange rate under control without increasing interest rates and keep economic activity going in Turkiye.
The Turkish government's measures to stabilise the economy are taking effect. Uğur Kaan Bora, CPA, ECOVİS DİPLOMAT Denetim ve Yeminli Mali Müşavirlik A.Ş., Izmir, Turkiye
The measures are working
As of mid-2022, it seems that the Turkish government has achieved its goal. By the end of May, total currency deposits had reached TRY 904.1 billion. As a result, companies benefiting from this regulation may receive significant reductions in corporate tax. In addition, the measures have slowed depreciation of the Turkish lira. However, high inflation and exchange rate volatility remain the biggest challenges facing the Turkish Economy.
New procedure for requesting foreign currency
The government has also introduced a new practice to reduce demand for foreign currency. With this instrument, known as Revenue Indexed Bonds, investors’ returns will be indexed to the revenue share of public economic enterprises transferred to the budget.
For further information please contact:
Uğur Kaan Bora, CPA, ECOVİS DİPLOMAT Denetim ve Yeminli Mali Müşavirlik A.Ş., Izmir, Turkiye
In recent years, due to the progess in technology, Vietnam has become a leading market for foreign investors in the field of e-commerce. The country is now passing and amending regulations regarding tax obligations for e-commerce activities, particularly concerning cross-border e-commerce of Overseas Suppliers who don’t have permanent establishments in Vietnam.
Overseas Suppliers without permanent establishments in Vietnam carrying out E-commerce, digital platform-based business, and other services to organizations and individuals in Vietnam (hereinafter referred to as “Overseas Suppliers”) earning income from Vietnam are subject to tax payment and must fulfill tax obligations, as prescribed under the laws of Vietnam.
On 21 March 2022, to support Overseas Suppliers in fulfilling their tax obligations in Vietnam, the General Department of Taxation announced the official operation of the Online Portal for Overseas Suppliers, so that tax registration, declaration, and payment could be conducted via the website https://etaxvn.gdt.gov.vn.
Overseas Suppliers shall exercise directly, or authorize tax agencies or organizations that are operating under Vietnamese law, to apply for taxpayer registration and to declare and pay tax in Vietnam.
If Overseas Suppliers have not registered, declared, and made a payment for applicable tax when earning income in Vietnam:
If the payment is made by an individual, the commercial banks or payment service providers shall deduct and pay tax on behalf of the Overseas Suppliers on each product and service paid for.
öIf the payment is made by an organization, the organization shall declare, deduct, and pay tax on behalf of the overseas supplier in accordance with the regulations on withholding tax.
Tax authorities shall coordinate with competent authorities to take measures for handling such tax obligations in accordance with Vietnamese law, monitoring any failure to comply with the required tax obligations. In addition, tax authorities in Vietnam can cooperate with their overseas counterparts, exchanging information and urging overseas suppliers to declare, pay tax, and collect tax liabilities from Overseas Suppliers.
The above policy shows that initially, cross-border e-commerce activities in Vietnam have been strictly controlled under the provisions of Vietnamese law. To support overseas suppliers doing business in Vietnam, ECOVIS Vietnam Law provides tax consulting services and assists in applying for taxpayer registration, declaration, and tax payment, to ensure compliance and minimize any potential violations.
German supply chain due diligence act: EU Directive and German law in comparison
In future, large companies in Germany will have to carry out a careful risk analysis to determine whether violations of human rights or environmental standards have occurred in the past or are to be expected in the future. This is the core aspect of the Supply Chain Due Diligence Act (LkSG), which will come into effect on 1 January 2023. Companies failing to implement the law will face fines.
Which companies are affected by the supply chain act
From 1 January 2023, the act will initially apply only to large companies with more than 3,000 employees in Germany, whose administrative headquarters or statutory seat is in Germany. According to an explanatory memorandum on the act, this currently affects approximately 500 companies. From 2024, the threshold will drop to 1,000 employees which will affect will approximately 3000 companies.
The EU Commission’s proposals go further
On 23 February 2022, the European Commission adopted a proposal for a Directive on Corporate Sustainability Due Diligence. The proposal aims to foster sustainable and responsible corporate behaviour throughout global value chains.
1 January 2023
1 January 2024
Large companies with 3000+ employees, with admin headquarters or statutory seat in Germany
Applies to: main business areas and immediate suppliers
Large companies with 1000+ employees, with admin headquarters or statutory seat in Germany
Implementation within two years of becoming law.
2 years later
Limited Liability companies with 500+ employees and more than EUR 150 million net turnover
Applies to: All business areas and entire value chain
Other limited liability companies with 250+ employees and more than EUR 40 million net turnover
The proposal will be presented to the European Parliament/Council for approval. Once adopted, Member States will have two years to incorporate the Directive into national law and communicate the relevant texts to the Commission.
With our multidisciplinary teams, we can help you implement compliance rules and introduce risk management. Yven Heine, Head of Sustainability, iAP Independent Consulting + Audit Professionals – an Ecovis company – Berlin, Germany
Differences between the two regulations
The EU Supply Chain Directive is aimed at harmonising regulation European-wide. Important differences include:
For now, the German LkSG is content with a policy statement, while the EU Directive sees corporate sustainability due diligence as an integral part of corporate policy and requires company management to take human rights, climate change and ecological consequences into account in all decisions.
Under the German LkSG, companies are only required to report through their own website, while under the EU Directive, companies will need to publicly communicate the due diligence obligations carried out.
The German LkSG is satisfied with risk management that has been put in place, while the EU Supply Chain Directive provides for the establishment of a comprehensive compliance management system. In addition, due diligence processes are to be set up and monitored.
What it means for companies
The Board must name a ‘Human Rights’ delegate and set out a strategy
More work for internal legal departments as international suppliers may be subject to different laws and regulations to follow
Supervision will be through agencies such as the Federal Office for Economic Affairs and Export Control
Things to look out for
The whistleblowing directive will also come into play
Be aware of the CPI (Corruption Perception Index)
The increased focus on supplier management (direct vs indirect suppliers) and HR departments
The work plan has 6 phases, including onboarding requirements for suppliers to due diligence and checks, reviews and controls.
Affected companies should prepare as soon as possible. Instead of only complying with the minimum requirements of the German LkSG, we recommend that companies start implementing a long-term strategy which already takes into account the EU Directive.
For further information please contact:
Yven Heine, Head of Sustainability, iAP Independent Consulting + Audit Professionals – an Ecovis company – Berlin, Germany