NEPAL TAXATION 2011-2012

Posted on November 29, 2011 by JPIA (Junior Philippine Institute of Accountants)

General companies/firms/industries- 25%
Special Industries- 20%
Banks and Financial Institutions- 30%
General Insurance Companies- 30%
Entities engaged in the business of petroleum products- 30%
Industries producing products with tobacco as basic raw material and industries producing liquors, beers and similar other products- 30%
Entities involved in operation of roads, bridges, tunnels (including cable-car), rope-way, sky bridge, after construction- 20%
Entities involve in operation of trolley bus & tram 20%
Cooperative Societies registered as per Cooperative Act 2048 and engaged in business other than tax exempt- 20%
Export Income of an entity with source in Nepal- 20%
Personal income tax rate in Nepal -1- 25%
Dividends – 15%
Interest – 10%
Royalties – 15%
Branch remittance tax – 10%
Value Added Tax – 13%
Social Security tax – 1% (For salaried tax payer earning Rs. 160,000 and above)

DOWNLOADABLE NEPAL TAXATION PDF FILES

PERSONAL INCOME TAX
Nepal individual income tax rates are progressive to 25%. Tax exemption limit is Rs.160,000 for individuals and Rs.200,000 for couples:
Tax rates for resident individuals
Income (Rs.) Tax Rate

0 – 160,000 – 1%
160,001 – 260,000 – 15% (+ Rs. 1,600)
Above Rs. 260,000 – 25% (+ Rs. 16,600)

Tax rates for Married (including widow & widower)

Income (Rs.) Tax Rate

0 – 200,000 – 1%
200,001 – 300,000 – 15% (+ Rs. 2,000)
Above Rs. 300,000 – 25% (+ Rs. 17,000)

Tax rates for Proprietorship Firm – single

Income (Rs.) – Tax Rate

0 – 160,000 – 0%
160,001 – 260,000 – 15%
Above Rs. 260,000 – 25% (20% for Export Income and Income from Special Industry) + Rs. 15,000

Tax rates for Proprietorship Firm – married

Income (Rs.) Tax Rate

0 – 200,000 0%
200,001 – 300,000 15%
Above Rs. 300,000 25% (20% for Export Income and Income from Special Industry) + Rs. 15,000

Having only Business Income with Annual Turnover up to Rs 20 Lacs and Annual Income up to Rs. 2 Lacs

In the Metropolitan or Sub Metropolitan Cities Rs. 5000
In the Municipalities Rs. 2500
In the rest of Nepal Rs. 1500

Tax Rate for Non Resident Natural Person: Taxable income of a non resident natural person shall be taxed at 25%.

Notes

Resident Disabled Individual shall get an additional 50% of Exemption Limit (i.e. 50% of Rs. 200,000 in case of couple & Rs. 160,000 in case of single).
Resident Woman, having only Remuneration Income, shall be entitled to a Tax Rebate of 10%.
Individual having Life Insurance Policy shall get an additional exemption from hid Taxable
Income to the extent of Rs. 20,000 or Premium Amount, whichever is lower. 4. Husband and Wife, having separate income source, are given option either to get assessed separately or jointly as family.
Annual Remote Area Allowance up to Rs. 30,000 is exempted from tax.
Employees working in Nepalese Mission abroad are allowed 75% exemption on Foreign Allowances.
There is no levy of any Additional Income Tax

Rebate on Tax Liability for Resident Female with only employment income – A female resident natural person having only remuneration income from employment shall be provided with a rebate of 10% on the tax liability on tax calculated as above.

Tax on Non Business Chargeable Assets – Gain from disposal of Non Business Chargeable Assets are taxed at 10% after taking into consideration exemption limit (i.e Rs.1,60,000 for individual and Rs.2,00,000 for couples). In case of land and buildings, if the disposed land & buildings has been owned for more than 5 years, tax rate of 5% shall apply.

Gain from Non Business Chargeable Assets includes

gain from sale of shares of companies,
gain from sale of land and building owned and resided for less than 10 years and disposed for more than Rs.50 lakhs.

Special Tax Rates for Natural Persons

Particulars Applicable Tax Rates

For incomes earned from operating special industries- 20% where 25% tax rate applies
For incomes earned from export business – 20% where 25% tax rate applies

Tax Deductions and Facilities for Resident Persons

Life Insurance Premium – While calculating taxable income, life Insurance premium paid by a resident natural person is deductible up to the limit of Rs 20,000.
Employees working in Diplomatic Agencies – 75% of foreign allowance is deducted from taxable income in case of an employee employed at diplomatic agencies of Nepal situated at foreign countries.
Incapacitated natural persons – In case of incapacitated natural persons, the minimum exemption limit (Rs.1,60,000 for individual and Rs.2,00,000 for couples) is increased by additional 50%.

Remote Area Benefit – In case of resident natural persons working in remote areas, minimum exemption limit shall be increased by Rs 30,000, Rs 24,000, Rs 18,000, Rs 12,000 or Rs 6,000 depending on remote area category of A, B, C, D and E prescribed in Income Tax Rules 2059.

Additional limit for pension income – If income of a resident natural person includes pension income, the taxable income is first reduced by additional 25% or pension amount included in income whichever is lower and then tax liability is calculated on balance income.

Tax Credits for Resident Persons

Medical Tax Credit – In case of approved medical expenses, medical tax credit is available to resident natural persons as deduction from tax liabilities. The limit prescribed is Rs.750 or 15% of Approved medical expense or actual approved medical expense incurred whichever is lower. Any unutilized expenses can be carried forward to next year.

Foreign Tax Credit – If foreign income is included in taxable income of a resident person, foreign tax credit for tax paid in foreign country in respect of that income. The foreign tax paid can either be deducted as expense or tax liability in Nepal can be reduced by such tax paid up to average rate of tax applicable in Nepal, depending on the option of tax payer.

CORPORATE INCOME TAX

The standard rate of corporate tax in Nepal is 25%. However, different entities are taxed at different rates:

Particulars / Tax Rate

Bank, Finance Company, General Insurance Company, Petroleum Entities: 30%
Cigarette, Tobacco, Beer and Alcohol Company: 30%
Special Industries & IT Industries: 20%
Entities engaged in construction & operation of Road, Bridge, Tunnel, Ropeway, Trolley Bus and Tram: 20%
Co-operative Institution registered under Co-operative Act, 2048 (other than co- operatives dealing in except dealers in Exempted Transaction): 20%
Entity wholly engaged in the (BOOT) projects conducted so as to build public infrastructure, own, operate and transfer it to the HMG & in power generation, transmission, or distribution: 20%
Non-resident person Providing Shipping, Air Transport or Telecommunications Services in Nepal: 5%
Private Limited Co., Limited Co., Partnership Firm not specifically mentioned above: 25%
Airline Services having office in and business in Nepal but not operating flights to and within Nepal: 2%
All Export Entities: 20%
Repatriation of income of a Foreign Permanent Establishment of a Non-Resident situated in Nepal: 10%

Reduced Tax Rates

Corporate Groups Applicable tax rate
Information Technology industries: 22.5%
Special Industries and Information Technology Industries providing direct employment to 300 or more Nepalese citizens during a period: 90% of applicable rate
Special Industries providing direct employment to 1200 or more Nepalese citizens during a period: 80% of applicable rate
Special Industries providing direct employment to more than 100 Nepalese citizens during a period 33% of which are women, incapacitated and dalits: 80% of applicable rate
Special Industries operating in very undeveloped area: 50% of applicable rate
Special Industries operating in undeveloped area: 70% of applicable rate
Special Industries operating in underdeveloped area: 75% of applicable rate
Industries established in Special Economic Zone of mountain district as specified by the government and hilly district: 0% for 10 years & 50% thereafter
Industries established in Special Economic Zone of other areas: 0% for 5 years and 50% thereafter (In case of dividend of such industries, dividend tax is exempt for first five years of operation and 50% concession is provided for dividend tax in next three years)
Income from foreign technology, management fee and royalty earned by foreign investor from industries established in special economic zone: 50% of applicable rate
Industries established in remote areas: 0% for 10 years
Information Technology based industries established at prescribed Information Technology park: 75% of Normal Rate
Licensed Industries engaged in production and distribution of electricity, if the production and distribution is completedby the end of Chaitra 2075: 100% exemption for first 7 years, 50% for next 3 years.

Tax Rates for Non Residents

Particulars / Applicable Tax Rates

For incomes earned from operation of water transport, charter service or air transport or by operating a cable, radio, optical fiber or earth-satellite communication business from the transmission of news or information through the equipments installed in Nepal: 5%
For incomes earned from providing air transport, water transport or telecommunication services within the territory of Nepal: 2%
On repatriation of income by Foreign Permanent Establishment: 10%

Advance Income Tax

Income Tax for fiscal year should be paid in 3 installments as follows:

Instalment Time Period Amount

First Up to Mid-January (Poush end) 40%
Second Up to Mid- April (Chaitra end) 70%
Third Up to Mid-July (Ashadh end) 100%

Where an instalment of tax paid by a person is less than 80% of Tax Payable, interest shall be levied @ 10% for each month and part of month from the date of first installment on the amount to the excess of 80% of the instalment that would have paid over the installment paid.

The presumptive tax-payers need not require paying any advance tax as above. Further if the Tax Amount for the fiscal year is less than Rs 5000, installment is not required to be paid.

Carry Forward of Loss

Carry Forward of Loss from Business and Investment can be made up to 7 years.
Carry Forward of Loss can be made up to 12 years in case of Projects building, operating & transferring public infrastructure to the Nepal Government, Projects building Electricity Production House, generating & transmitting electricity and entities dealing in petroleum products under Nepal Petroleum Act, 2040.
Loss incurred in business or investment where assessee enjoys full / partial tax exemption cannot be carried forward.

Penalty for Non-Filing of Income Tax Return on Time

Non-Filing of Estimated Income Tax Return Income u/s 95 within due date shall attract penalty of Rs. 2000 per Return.
Non-Filing of Income Tax Return Income u/s 96 within due date shall attract penalty of @ 0.10% of Annual Turnover or Rs. 100 per month whichever is higher.

Tax Concession and Rebates

10 Years Tax Holiday from date of operation and 50% Tax Rebate thereafter to industries established in Special Economic Zone (SEZ) of Himalayan Districts and other prescribed Hilly District.
5 Years Tax Holiday from date of operation and 50% Tax Rebate thereafter to industries established in other Special Economic Zone (SEZ).
100% Rebate for first 5 Years from date of operation and then 50% Rebate for next 3 Years on dividend distributed by industries established in Special Economic Zone (SEZ).
50% Rebate on Income Tax on income from Foreign Technology or Management Consultancy or Royalty earned by foreign investors of industry established in SEZ.
10 Years Tax Holiday from date of operation to industries established in remote areas.
25% Tax Rebate to IT Industries established in prescribed Information Technology Park.
Entities having license for Electricity generation, transmission & distribution, if commences generation / generation & transmission / generation & distribution / generation, transmission & distribution of Hydro-electricity commercial manner by Chaitra end, 2075; such entities shall have Tax Holiday for a period of first 7 Years and 50% Tax Rebate thereafter for 3 Years, from date of such commencement of generation, transmission & distribution. Such facilities shall also be applicable for Electricity generated from Solar/Wind/Organic Materials.
However, entities already having started commercial production of electricity before Shrawan 01, 2066 shall be eligible for facility as prevalent at the time of obtaining license
50%, 30% & 25% Rebate on Income Tax for 10 Years including the year of operation to Special Industries operating in Highly Undeveloped, Undeveloped & Under-developed areas respectively.
10 % Rebate on Income Tax to Special Industries and IT Industries which provide direct employment to 300 Nepalese nationals throughout the year. [Earlier, it was 500 Nepalese].
20 % Rebate on Income Tax to Special Industries which provide direct employment to 1200 Nepalese nationals throughout the year.
20 % Rebate on Income Tax to Special Industries which provide direct employment to 100 Nepalese nationals including 33 percent women, dalits (the downtrodden) or the handicapped, throughout the year

Tax Deduction at Source (TDS) rates

Resident employer should withhold tax while making employment income payment with sources in Nepal to an employer as follows.

(Monthly TDS = Annual Tax calculated as per schedule 1 on annual employment income divided by 12)

Particulars / Tax Rates

On Interest, Royalty, Service Charge, Retirement Payment having source in Nepal, except mentioned otherwise: 15%
Payment made to resident person on Service Charge invoiced in VAT bill: 1.5%
On Nepal sourced Interest by Banks and financial institutions and/or listed companies to a natural person. Such payment should not be made in connection with operation of any business: 5%
On payment made by a resident person for rent having source in Nepal: 10%
On payment of gain from Investment Insurance: 5%
On payment of gain from retirement fund: 5%
On payment of commission by resident employer company to a non resident person: 5%
On payment of lease rental of aircraft: 10%
On payment of premium to non-resident insurance companies: 1.5%
On gain from transaction on commodity future market: 10%
On windfall gains except national and international level prizes as prescribed by Nepal Government: 25%

VALUE ADDED TAX

Standard rate of Value Added Tax in Nepal is 13%. Certain goods/services are exempt.

Entity having turnover of Rs.2.0 million or more is required to get registered with Valu Added Tax Office and 13% VAT shall be applicable to it.

Taxation for the imported cars and automobiles to the Philippines

Posted on July 15, 2011 by Denis

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TARIFF LAW AND DUTY RATES IN THE PHILIPPINES

Posted on June 26, 2011 by JPIA (Junior Philippine Institute of Accountants)

Types of duty:

Import Duty

All imported goods for consumption are subject to the payment of import duty prior to release of unless otherwise exempted in accordance with law by the Department of Finance. (7% of Electronics goods)

Value Added Tax (VAT)

All imported goods are also subject to the payment of VAT at the uniform rate of 12% of the total landed cost. Even if the shipment is duty free, it may still be subject to VAT.

Ad Valorem Tax

A few commodities, like passenger automobiles, jewelry, alcohol, tobacco, etc. may also be subject to the payment of Ad Valorem Tax aside from the import duty and VAT. The rate of Ad Valorem Tax depends on the make-up of the commodity such as the engine displacement cost in case of automobiles, or alcohol content in case of beverages.

Like VAT, Ad Valorem Tax is an internal revenue tax, the collection of which is delegated to the Bureau of Customs in so far as imported goods are concerned. Imported goods subject to Ad Valorem shall be covered by an Authority to Release Imported Goods (ATRIG) issued by the Bureau of Internal Revenue before they can be released from the port.

Rates of Duty

The rate of import duty varies depending on the commodity imported, ranging from 3 to 50%. The schedule of rates is listed under Section 104, Tariff and Customs Code of the Philippines (TCCP), as amended.

Under the unilateral tariff reduction programme, Section 104 has been modified and amended reducing the tariff structure of most commodities to its present level under Executive order (EO) 470; EO 189 which reduced the tariff on capital equipment, EO 204 on textile, textile articles and chemical inputs; and EO 264 which gradually reduces thetariff further to the uniform rate of 3% for raw materials and 10% for finished products by year 2003, and finally to a flat rate by year 2004.

Payment of Duties

Duty is paid will all the other taxes and charges due on the shipment prior to release of the goods for consumption. Payments are made through banks which are electronically connected to Customs. Under the automated On-line Release System(OLRS), when the fact of payment made through the banks are relayed to Customs, Customs in turn keys in such payment and lifts the hold status of the shipment allowing the port operator to release the goods to the importer or his representative.

Duty Concessions

Certain commodities are exempt from the payment of import duties upon compliance with formalities prescribed and approved by the Secretary of Finance. Section 105, TCCP governs what is termed as Conditionally-Free Importations. Other special laws also provide tax and duty-free treatment on certain importations.

VALUING YOUR PRODUCTS

Valuation for Customs purposes is based on the Fair Market Value of the Philippines (FMV), a system peculiar to the Philippines. The basic principle of the FMV is that the dutiable value of an imported article is the cost of SAME, LIKE, SIMILAR articles as bought and sold or offered for sale freely in the usual wholesale quantities. In the ordinary course of trade on the date of exportation or where there is none on such date, then on the date nearest to the date of exportation in the following principal markets in the descending order of preference:

Exporting country;
Country of manufacture or origin

When the dutiable value of the article cannot be ascertained in accordance with the preceding parameter or where there exists a reasonable doubt as to the cost, then the same shall be ascertained as follows:

SGS-CRF (Societe Generale de Surveillence-Clean Report of Findings);
Published value;
Domestic wholesale price of such or similar article in Manila or other principal markets in the Philippines.

CLEARING IMPORTS

General information:

Imported goods coming to the Philippines by air and sea are required to be manifested by the carrier. Upon arrival of the carrier, an inward foreign manifest must be submitted to Customs. There are four major steps involved in the processing of import documents:

Documentation;
Examination and appraisal;
Pre-liquidation and payment; and
Release of goods from the customs zone

Documentation

Philippines Customs introduces Formal and Informal Entry. Goods imported for commercial purposes where dutiable value of which is less than USD 500, personal or household effects not in commercial quantity being brought into the Philippines in passenger’s baggage and mail for personal use will be cleared on Informal Entry. Other shipments will be cleared through a Formal Entry.

A separate form for Formal and Informal Entry are applied which must also be completed with the bill of lading, packing list, commercial invoice.

All imported goods are required to undergo pre-shipment inspection (PSI) which will be conducted by the government contracted inspection company in the port of exportation. The goods must also be covered by a Clean Report of Findings (CRF), issued following the PSI, and that should be attached to the entry.

Customs Duty

Types of duty that are applicable in the Philippines:

Import Duty
Value Added Tax (VAT)
Ad Valorem Tax

CLEARING EXPORTS

General information:

Goods for importation may be declared by exporters or their authorized agents and they must complete an Export Declaration (ED) form which can be obtained from any Authorized Agent Bank (AAB) of the Banko Sentral ng Pilipinas (BPS). The price disclosed on the ED shall be the fair market value of the current market price of the goods exported on the date of sale.

Documentation

ED should be accompanied with the following documents:

Commercial invoice
Packing list

In the case of goods classified under regulated exportation, clearance of goods will be issued by the concerned government agency.

GOODS WITH PROHIBITIONS, CONTROLS, AND RESTRICTIONS

These are commodities which are not allowed for importation under existing laws:

Dynamite, gunpowder, ammunition and other explosives, fire-arms and weapons of war, and parts thereof, except when authorized by law;
Written or printed articles in any form containing any matter advocating or inciting treason, or rebellion, insurrection, sedition or subversion against the government of the Philippines, or forcible resistance to any law of the Philippines;
Written or printed articles, negatives or cinematographic film, photographs, engravings, lithographs, objects, paintings, drawings or other representation of an obscene or immoral character;
Articles, instruments, drugs, substances designed, intended or adapted for producing unlawful abortion, or any printed matter which advertises or describes or gives directly or indirectly information regarding where, how or by whom unlawful abortion is produced;
Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical devices used in gambling;
Lottery and sweepstakes tickets except those authorized by the Philippines government, advertisement thereof, and lists of drawings therein;
Any article manufactured in whole or in part of gold, silver or other precious metals or alloys thereof;
Any adulterated or misbranded articles of food or drug;
Marijuana, opium or any other narcotics or synthetic drugs;
Opium pipes and parts thereof, of whatever material; and
All other articles or part thereof, the importation of which is prohibited by law or rules and regulation issued by competent authority (as amended by Presidential Decree no. 34).

Other prohibited importations:

Onions, potatoes, garlic and cabbages, except for seeding purposes; Republic Act (RA) no. 296
Coffee (RA no. 2712)
Used clothing and rags (RA no. 4653)
Toy guns (Letter of Instruction no. 1264)

TEMPORARY ADMISSION

In the Philippines, temporary imports are among those referred to as Conditionally-Free importations wherein certain articles for specific purposes may be allowed to be imported without payment of duties but upon posting of a bond equivalent to 150% of the ascertained taxes and duties due conditioned for the re-exportation thereof within a specified period or the payment of taxes and duties as ascertained.

Temporary imports which may be availed of by filling an application to this effect with the Department of Finance cover the following:

Articles brought for repair, processing or reconditioning to be re-exported upon completion of the repair, processing or reconditioning within six-months from acceptance of the entry.
Personal and household effects and vehicles belonging th foreign consultants and experts hired by and/or rendering service to the government, and their staff of personnel and families accompanying them or arriving within a reasonable time, in quantities and of the kind necessary and suitable to the profession, rank or position of the person importing them, which shall be re-exported within six months after the expiration of their term of contract, extendable by another six months on meritious grounds.
Articles used exclusively for public entertainment, and for public display or exhibition or competition for prizes, and devices for projecting pictures and parts and appurtenances which shall be re-exported within six months from acceptance of the Entry.
Articles brought by foreign film procedures directly and exclusively used for making or recording motion picture films on location in the Philippines which shall be re-exported within six months from acceptance of entry, extendable by another six months.

ATA Carnet

The Philippines has taken steps to accede the ATA Carnet Convention. Along this line, the Tenth Congress of the Philippines is Senate Bill no. 1380 proposes to amend among others Section 105 of the Tariff and Customs Code of the Philippines by reducing the bond requirement for the temporary release of conditionally-free shipments from the present 150% to not more than 100% of the ascertained taxes and duties.

OBTAINING REFUNDS/DRAWBACKS ON YOUR DUTY PAYMENT

All imported fuel used by vessels in foreign and coastwise trade are subject to refund or tax credit up to 99% of the duty paid upon such fuel. Petroleum oils, oils obtained from bituminous minerals, and crude oils used to generate electric power or the manufacture of city gas are subject to refund or tax credit up to 50%.

Exported articles locally manufactured or produced from imported materials in whole or in part are also subject to refund or tax credit up to 99% of the duty paid on the imported materials so used, including the packaging and labeling thereof provided that there are no locally available substitutes for the imported materials used.

Provided further that the manufactured articles are exported within one (1) year from the importation of the materials used and that the claim for refund or tax credit shall be made within on (1) year from the exportation of the manufactured articles.

Section 106 of TCCP governs claims for duty drawbacks.

LICENSES/BONDED WAREHOUSES

Articles made in whole or in part of imported materials may be manufactured in bonded warehouse without the payment of duty on the imported materials used in the manufacture of such article, including the containers, brands and labels used in placing it in condition for exportation, if the manufactured product is exported within nine (9) months, extendable by another three (3) months on meritorious grounds, from the date of transfer or conveyance of the imported materials into the manufacturing bonded warehouse.

The imported materials shall however be covered with a warehousing bond which may be liquidated upon the exportation of the manufactured products.

The Collector of Customs subject to the approval of the Commissioner of Customs may allow the establishment of manufacturing bonded warehouse which shall be under the supervision of a designated Customs officer. Before commencing business, the operator of the manufacturing bonded warehouse shall file a list of all articles, intended to be manufactured in such warehouse and state the formula of manufacture, including the names and quantities of the ingredients therein. He also files a satisfactory bond for the faithful observance of all laws and regulations governing its operations aside from the warehousing bond put up for the imported materials.

The Collector of Customs keeps an account of all articles entered into the bonded warehouse. A sworn monthly return, verified by the Customs officer assigned thereat, shall be made by the manufacturer containing details for exportation within the prescribed period, as well as the wastage shall also be subject to the corresponding duties.

CLEARANCE FOR PASSENGER

Articles brought in by Filipinos and visitors alike, whether in accompanied or non-accompanied baggage arriving within reasonable time, consisting of used personal effects in non-commercial quantity are not subject to taxes and duties. Other duty-free items are wine and spirits not exceeding two bottles, tobacco and cigarettes not exceeding 200 sticks, cosmetics and perfumery not exceeding one bottle.

BALIK BAYAN FILIPINOS (OFW)

FREE TAXES AND DUTIES

Returning Filipinos known as Balikbayan, those who have stayed abroad for more than a year, may in addition bring in duty-free used electric or electronic appliances, one of each kind.

Mongolia Taxation 2011

Posted on June 2, 2011 by DSAMCO

Mongolia Taxation 2011

Corporate Income Tax Rate 10 to 25% (N1)

Capital Gains Tax Rate 2%

Branch Tax Rate (N3)

Withholding Tax Rate

Dividends 20%

Interest 20%

Royalties 10%

Net Operating Losses (Years)

Carryforward 2 Years

Carryback N/A

Personal Income Tax Rate 10%

Social Security Tax Rate

Immovable Property Tax

Windfall Profit Tax

Tax System for Corporate Income and Gains.

Tax System - The National Tax Administration is comprised of the State administrative body which is in charge of taxation, tax agencies and offices of capital city, province, district; and tax branches of soum and state tax inspectors.

Direct and indirect taxation – All taxes are subdivided into direct and indirect ones. VAT and excise tax are recognized as indirect taxes.

Principal Taxes –

Taxes on corporate income (including branch profits tax, withholding tax and capital gainstax)
Personal Income Tax
Social Insurance Tax
Value-added Tax
Excise Tax
Immovable Property Tax
Windfall Profits Tax

Taxation Legislative Framework - The main laws with regard to taxation are those governing the above together with laws governing specific types of activity:

Law on Foreign Investment
Law on Minerals

A wide ranging review was conducted in 2006, with many of the above being re-drafted, and further amendments were made in 2008, 2009 and continue to be made in 2010. Despite this progress the legislation remains in its infancy and complicated issues may well not be dealt with clearly.

Obtaining advice on the interpretation, implementation and practice of the tax authorities is vital as well as ensuring that the most recent legislation is being considered.

Income Taxation

Mongolian Corporate income tax rate uses progressive rate.

10% Tax rate – for income up to MNT 3,000,000,000 or Approximately $ 2 Million US Dollar
25% Tax rate - for income in excess of MNT 3,000,000,000

The Economic Entity Income Tax law governs the taxation of profits of:

Mongolian economic entities;
Foreign economic entities that have their headquarters in Mongolia;
Foreign economic entities that conduct business through a permanent establishment in Mongolia
Foreign economic entities that earn income in Mongolia other than via the above.

Taxable income = aggregate annual income (-) less allowable deductions

20% repatriation tax for foreign entities operating through a permanent establishment in Mongolia, but may reduce depending on Double Tax Treaty. This applies to both natural persons and legal entities.

Taxable income falls under the following three categories:

Income from activities which includes:

a) Business activities

b) Sale of shares and securities

c) Gains on foreign currency exchange rates

Income from property which includes:

a) Rental

b) Royalties

c) Dividends

d) Interest

Income from the sale of property (both immovable and movable except for shares and securities)

Certain types of income are taxed at different tax rates

Dividends – 10%
Royalties – 10%
Interest – 10%
Gambling, betting games and lotteries – 40%
Sale of immovable property (gross) -2%
Sales of rights – 30%

Tax incentives

Tax incentives or benefits are available to the agriculture and mining industries. Foreign investors may obtain similar benefits where they meet minimum investment levels.

Tax treaties - Mongolia has currently concluded Double Tax Treaties with 30 countries and 3 which are pending.

Countries with Double Tax Treaties (DTT) with Mongolia

Domestic tax law in Mongolia – 15% Dividends, 15% Interest & 10% Royalties

People’s Republic of China - 5% Dividends, 10% Interest & 10% Royalties
Republic of Korea – 5% Dividends, 5% Interest & 10% Royalties
Germany – 5 – 10% Dividends, 10% Interest & 10% Royalties
India – 15% Dividends, 15% Interest & 15% Royalties
Vietnam - 10% Dividends, 10% Interest & 10% Royalties
6. Russian Federation – 10% Dividends, 10% Interest & Royalties varies with national laws
Turkey – 10% Dividends, 10% Interest & 10% Royalties
France - 5 – 15% Dividends, 10% Interest & 5% Royalties
United Kingdom – 5 – 15% Dividends, 10% Interest & 5% Royalties
Czech Republic – 10% Dividends, 10% Interest & 10% Royalties
Hungary - 5% Dividends, 10% Interest & 5% Royalties
Belgium – 50 – 15% Dividends, 10% Interest & 5% Royalties
Poland - 10% Dividends, 10% Interest & 5% Royalties
Malaysia - 10% Dividends, 10% Interest & 10% Royalties
Kazakhstan - 10% Dividends, 10% Interest & 10% Royalties
Indonesia – 10% Dividends, 10% Interest & 10% Royalties
Kuwait -
Egypt - 15% Dividends, 15% Interest & 15% Royalties
Luxembourg – 5 – 15% Dividends, 10% Interest & 10% Royalties
Romania – 10% Dividends, 10% Interest & 10% Royalties
Uzbekistan – 10% Dividends, 10% Interest & 10% Royalties
Bulgaria – 10% Dividends, 10% Interest & 10% Royalties
Ukraine – 15% Dividends, 15% Interest & 10% Royalties
Switzerland – 5 – 15% Dividends, 10% Interest & 5% Royalties
Belarus – 10% Dividends, 10% Interest & 10% Royalties
Kyrgyz Republic – 10% Dividends, 10% Interest & 10% Royalties
Canada – 5 – 15% Dividends, 10% Interest & 5 – 10% Royalties
United Arab Emirates – 0% Dividends, 0% Interest & 0% Royalties
Italy - 5 – 15% Dividends, 10% Interest & 5% Royalties
Singapore - 15% Dividends, 10% Interest & 5% Royalties
the Netherlands – 15% Dividends, 10% Interest & 5% Royalties
North Korea -
Austria -

Tax Assessments – Tax reports, once submitted, are subject to an administrative check to ensure that they comply with the requirements for completing the report. A technical review of the tax position taken and the underlying documentation forms part of the tax audit. Upon the conclusion of an audit the tax authorities will issue and act setting out their findings.

Withholding Tax – Mongolian entities are required to withhold tax on dividends, royalties to economic entities resident in Mongolia and just on royalties to individuals as dividends are exempt from taxation for individuals until 2013. In both cases the rate is 10%. Withholding tax is applied to gains on the sale of immovable property at 2%.

Non-residents with no presence in Mongolia are subject to 20% withholding tax on Mongolian source income. This covers the following types:

Dividends;
Certain types of loan interest;
Royalties;
Rental;
Management and administrative expenses;
Income goods, work or services provided in Mongolia.

Tax Audits

A tax inspector is empowered to examine financial documents connected with the payment of taxes and ask or explanations. The official can temporarily seize documents which are evidence of tax avoidance and copy them.

Penalties

Interest, calculated on a daily basis for the period between the due date and for payment and the actual payment date, and penalties are imposed on late payment of taxes. Flat rate penalties also exist for the failure to comply with various administrative requirements.

Tax Rulings

Rulings can be obtained from the tax authorities.

Arbitration & Appeals

Where a taxpayer objects to a decision of the tax inspector, the legal department of the tax administration will investigate the dispute and give an opinion. In case the dispute cannot be resolved by the legal department, the case is reviewed by the Tax. Dispute Council consisting of 6 persons and is chaired by the head of the Revenue Department of the Ministry of Finance. If the taxpayer disagrees with the resolutions of the Council, the case can be taken to the General Court..

Deductibility of Expenses

General Expenses. Expenses mostly associated with the earning of aggregate annual income are deductible for corporate income tax purposes (provided that they are properly documented).
Interest Expenses. Interest paid to third parties is deductible. Interest paid to related parties is subject to a 3:1 debt to equity restriction. Further restrictions apply to interest on loans made from a Mongolian individual who controls the entity.

Depreciation.

Depreciation, for tax purposes, is calculated using the straight line method over the useful economic life of the asset. This depends upon the nature of the asset, ranging from 3 years for IT equipment to 40 years for buildings and constructions.

Disallowable expenses. Generally expenses need to be specifically stated as deductible so there are not many expenses stated as specifically disallowable. However the following have been:

Finance lease payments;
Fines and penalties;
Expenses incurred for earning exempt income;
Expenses not documented by the taxpayer;
Payments from which tax is not withheld but required to be withheld;

In the case of branches of foreign legal entities, two further specific items are not deductible:

Expenses incurred outside the territory of Mongolia;
Management and administrative expenses not related to earning the income.

Related Party Transactions

In general, transactions are valued for tax purposes at fair market value. Where transactions take place between related parties above or below this that tax authorities have the right to alter the value used onto an arms length basis.

The CIT Law of Mongolia specifies and determines related parties as follows:

If a party holds at least 20% of the common stock of another party;
If a party has the right to receive at least 20% of dividends or distributions; or
If a party has the right to appoint at least 20% of management or otherwise able to determine its policies.

Foreign Exchange

Income and expenditure in foreign currencies should be translated in MNT on the date of the transaction. Realized gains and losses from foreign currency exchange rates are taxable and deductible.

Losses

Losses can be carried forward for up to two years and use of such losses is restricted to 50% of the taxable profit in any year.

Tax Computations

Taxpayers should submit quarterly and annual returns to the tax authorities by the 20th of the month following the end of each quarter and 10th February for the annual return.

Based on these, the tax authorities issue monthly / quarterly payment schedules and payments must be made by the 25th of each month.

In practice the Mongolian tax authorities allow concessions as follows:

A company with annual taxable income of less than MNT 500,000 may pay tax on a quarterly basis;
Where total tax paid exceeds the tax liability, the excess can be credited against other taxes due, credited against future tax payments. It may also in theory be refunded; practice here is less clear and consistent.

Withholding taxes must be paid within 7 to 10 days of the underlying payment (depending upon the nature of the payment) and taxpayers should prepare quarterly and annual returns for submission to the tax authorities by the 20th of the month following the end of each quarter and 10th February for the annual return.

Other Taxes

Excise Tax

Excise tax is levied on goods manufactured in or imported into Mongolia such as tobacco, alcohol, gasoline and diesel fuel and passenger vehicles. Excise tax is also imposed on the physical units of special purpose technical devices and equipments used for betting games and gambling, and activities of individuals and legal entities that conduct such activities.

Immovable Property Tax

An immovable property tax is levied at 0.6% of the value of the immovable property. For tax purposes, the value used is the value registered with the government registration authority. If the property is unregistered, the insured value is used. In the absence of either a registered or insured value, the accounting value is used.

Stamp duty

Stamp duties are imposed on the following under the Law of Mongolia on State Stamp Duties:

Monitoring of and decisions on matters of legal status by a court of law;
Registration of business entities and organizations;
Permission to register business entities with foreign investment and allowing persons to be employed with representative offices of foreign organizations;
Permission to carry out services and carry out production which requires special permission or expertise;
Grant of certification for copyright, patent or trademarks;
Registration of copyrights;
Granting of permission to carry out activities in respect of securities and registration of securities, and foar authorization to issue and register securities;
Other services.

The amount of duty varies according to the type of services involved.

Customs duty

A flat customs tariff of 5% applies in respect of goods imported into Mongolia. Certain equipments imported by small and medium size enterprises (“SME”), are exempt from Customs tariff.

Export duties apply to certain exported goods such as waste iron, aluminum, copper, brass and indentured cashmere.

Windfall profits tax

A windfall profits tax is imposed on the marginal prices of gold and copper ore and concentrate when they exceed a certain base price. The tax is levied at the rate of 68% on gold and copper profits when they reach USD 850 per ounce and USD 2,600 per ton respectively. The windfall profits tax is to be annulled from 1 January 2011.

Branch versus Subsidiary

There is not a significant tax difference operating via a branch or subsidiary where double tax treaty protection is available. Both suffer the same rates of domestic taxation and suffer 20% WHT on the payment of a dividend or 20% Branch Profits Tax on the repatriation of profits. These may be reduced by the application of the relevant Double Tax Treaty.

In the absence of such protection, there are two items of expenditure that are specifically not deductible for branches when computing taxable income:

Expenses incurred outside the territory of Mongolia;
Management and administrative expenses not related to earning the income.

Group Taxation

There are no rules permitting grouping for tax purposes in Mongolia.

Special Taxation Regimes

Foreign Investment

A foreign investor investing certain amounts may apply for a stability agreement to govern their investment, providing stable tax conditions for a fixed term. Currently an investment of up to USD 20m will permit a 10 year term and a USD 50m investment a 15 year term.

Mining

A mining stability agreement covers tax stability and other business rights. The minimum investment refers to the amount invested in the first five years of the project and will provide stability for a fixed term as follows:

USD 5m for ten years;
USD 10m for fifteen years; and
USD 30m for thirty years.

All exploration costs should be capitalized and then amortized on a straight line basis over the first five years following the commencement of production. License acquisition costs are amortized over the life of the license.

Losses can be carried forward for 4 to 8 years depending upon the exact nature of the business and up the whole taxable profit may be offset in a year.

TAXATION OF INDIVIDUALS

Territoriality and Residence

A permanent resident taxpayer of Mongolia is subject to tax on his/her world-wide income. A non-resident taxpayer of Mongolia is subject to tax on the income earned in the territory of Mongolia in a tax year.

A permanent resident taxpayer of Mongolia is:

An individual with a residence in Mongolia;
An individual who resides in Mongolia for 183 or more days in a tax year.

A non-resident taxpayer of Mongolia is:

An individual who has no residence in Mongolia and has not resided in Mongolia for 183 or more days in a tax year.

Related parties defined as the following:

The parent, child, grandparent, grandson or granddaughter of the taxpayer;
The brother or sister of the taxpayer, or a child of a brother or sister;
The spouse of the taxpayer, or a parent, child, brother or sister of that spouse;
A legal entity under the control of the taxpayer or the individuals mentioned above.

Gross income

Employee Gross Income

All direct and indirect income received through employment or related activities during a calendar year. This includes both taxed and untaxed income at the source of payment.

Dividends and interest income are exempt until 1 January 2013.

Capital gains and investment income

Gross income from sale of immovable property is taxed at a rate of 2%. Income from sale of movable property including securities is taxed at a rate of 10%.

Dividends and interest income earned by individuals is generally subject to tax at the rate of 10%, withheld at source.

Deductions

Business Deductions

There are no business deductions allowed for employees. An individual may claim business deductions if registered as an entrepreneur.

Social insurance charges are deductible for PIT purposes.

Non-business expenses

There are no deductions for nonbusiness expenses.

Personal Allowances

The most notable allowance is a general deduction based on the minimum monthly wage of 84,000 Mongolian Tugrik (“MNT”) per annum (approx. USD 56).

Tax Credits

A credit is available for individuals who have suffered tax in other countries under the terms of a Double Tax Treaty. Tax credits are also available for agricultural production and educational fees.

Other Taxes

Social Security Taxes

Citizens of Mongolia, foreign citizens and stateless persons employed on a contract basis by all types of economic entities, organizations, government servants, religious or other organizations and foreign economic entities carrying out activities in Mongolia are subject to the following compulsory insurance:

Pension insurance (employer: 7% employee: 7%);
Benefit insurance (employer: 0.50 %; employee: 0.50%);
Health insurance (employer: 2%; employee: 2%);
Industrial accident and occupational disease insurance (employer: 1% to 3%);
Unemployment insurance (employer: 0.50%; employee: 0.50%).

Employees charges are capped at MNT108,000 per month (USD 80). Employer charges are not capped. These charges are deductible for PIT purposes.

Obligatory Pension Contributions

Included in Social Security Taxes.

Wealth Tax

There is no wealth tax in Mongolia.

Local Taxes

There are no additional local taxes on income.

Tax Administration for PIT (Personal Income Tax)

Assessment

The following types of income are subject to withholding tax:

Employment income;
Interest;
Royalties; and
Dividends.

Please note that dividends and interest are exempt from taxation including withholding tax until 1 January 2013.

Returns

A withholder shall submit a monthly report of tax withheld by the 20th of the first month of the following quarter and year-to-date tax report by February 15 of the following year to the corresponding tax authority.

Income not covered by the above should be reported on an annual tax return to be submitted to the tax authorities by 15th February following the end of the tax year.

Payment of Tax

Tax withheld should be paid to the tax authorities by the 10th of the following month. Tax on other income should be paid by the 15th of the first month of the following quarter.

Tax Rates for Individual

Employment income – 10%
Business & Professional income – 10%
Income from property, i.e. dividends, royalty, interest, capital gain from sales of securities/stocks – 10%
Sales of immovable property (Gross) – 2%
Income from scientific, literacy artistic work, inventions, product – 5%
Designs and useful designs (Gross) – 5%
Income from sports competitions, art – 5%
Performances, and similar income (Gross) – 5%
Income from betting games, gambling & lotteries – 40%

VALUE ADDED TAX (VAT)

Value Added Tax at the rate of 10% is imposed on the supply of taxable goods and services in Mongolia, and on imports into Mongolia. Taxpayers are required to register for Mongolian VAT purposes when their taxable turnover exceeds 10 million MNT (USD 7K). Taxpayers may also voluntarily register when their taxable turnover reaches 8 million MNT (USD 5.6K) or if they have invested more than USD2m in Mongolia.

Scope of VAT

VAT is levied on the following in Mongolia:

Work performed and services rendered in Mongolia;

Goods sold in Mongolia;
Goods imported into Mongolia to be sold or used; and
Goods exported from Mongolia for use or consumption outside Mongolia.

The provision of services also includes the following:

To provide electricity, heat, gas, water, sewer, postal, communications, and other services;
To lease goods or allow one to possess or use them in other forms;
To rent out rooms in hotels or similar places or allow one to possess or use them in other forms;
To rent out rooms in houses or buildings or allow one to possess or use them in other forms;
To lease immovable and movable property other than houses and buildings or allow one to possess or use them in other forms;
To transfer, lease, or sell innovations, product designs, useful designs, copyrighted works, trademarks, know-how, and information on assets;
To issue lotteries, operate quizzes or gambling or provide intermediary services;
To pay off debts by performing work or providing services;
The performance of work or provision of services from a non-resident to a resident; and
To pay interest and fines to others due to misconduct.

The sale of goods also includes the following:

Sale of right to conduct economic activity;
Retention of assets upon the termination of trade;
Settlement of a debt with goods; and
Sale by a non-resident to resident.

Zero-Rating (VAT)

The following are zero-rated for VAT purposes:

Export sales of goods;
International transportation services;
Services provided outside Mongolia;
Services provided to a foreign citizen or legal entity not present in the territory of Mongolia during the provision of services (including tax-exempt services);
Services provided to domestic or international aircrafts conducting international flights;
State medals and coins produced domestically;
Export of finalized mining products.

Exempt Supplies

The following goods shall be exempted from value-added tax:

Passengers personal items in amounts approved and permitted by the customs authority for tax-free entry;
Goods imported for the use of foreign diplomatic missions or their officials residing in the territory of Mongolia on a permanent basis;
Humanitarian and non-repayable aid goods;
Custom appliances for developmentally challenged persons;
Weapons and special equipments imported for armed forces, police, and state security and judicial enforcement agencies;
Civil aviation aircrafts and spare parts;
Income from sale of an apartment and its part used for residential purposes;
Equipments, materials, raw materials, spare parts, gasoline and diesel fuel imported for the purpose of oil exploration, extraction, and use under a product-sharing agreement entered with government in the oil industry;
Blood, blood products, and organs for medical treatment purposes;
Gaseous fuel and its containers, equipments, custom machinery, mechanisms, tools, and spare parts;
Mongolian currencies printed in foreign countries by orders;
Gold sold;
Newspaper sold;
Products resulting from scientific research
Mining products other than those zero rated;
Certain types of loans.

The following services shall be exempted from value-added tax:

Currency exchange operations;
Banking transactions;
Insurance and property registration;
Transactions in stocks and securities;
Loans;
Transactions concerning issuance and transfer of interest for placement of monetary assets of social and health insurance funds;
Residential accommodation;
Educational services;
Health services;
Services of religious organizations;
State services;
Public transport;
Some services to tourists;

Goods, work, or services transferred free of charge or used for personal purposes other than for production shall not be exempted from value

Taxable Amount

VATable Supplies

In general, the taxable amount is the fair market value of the goods sold, work performed or services provided. For imported goods, this should include customs duty, excise tax and other such taxes to the customs value of the goods. There are a number of methods for establishing the customs value; transportation, insurance and any commission or royalty amounts are included.

Taxpayers should account for VAT on goods, work or service obtained from non-resident.

Transactions in a foreign currency are translated into MNT at the rate applying on the tax date of the transaction.

VAT Offset

VAT on paid for goods, work or services can be offset against VAT payable to the budget; this must be substantiated by documentary evidence.

Pro-rating is required where VAT is incurred partially for exempt and partially VATable purposes.

VAT Calculation and VAT Offset Carry-Forward

The VAT liability of a taxpayer is calculated as output VAT (i.e., VAT charged by a taxpayer) less input VAT (i.e., VAT paid by a taxpayer to its suppliers) in a reporting period.

The excess of input VAT over output VAT may generally be carried forward against future VAT liabilities or offset against other tax liabilities. In practice refunds are difficult to obtain, although the rules do prescribe a procedure for refunds under certain conditions.

Non-Deductible Input VAT

Value-added tax paid in the course of import or purchase of the following goods, work or services shall not be credited against total value-added taxes due by a buyer:

Automobiles and its components and spare parts;
Goods or services purchased for personal or employee uses.
Goods, works, or services imported or purchased for specific production purposes.

VAT Incentives

A number of VAT exemptions have been introduced outside of the law on VAT. These are targeted at specific industries as well as specific projects which have been funded by international institutions (such as the World Bank) or foreign governments.

VAT Simplification

Group reporting for VAT is possible.

VAT Compliance

VAT is accounted for on a monthly basis and paid by the 10th of the following month. Returns must be submitted by the 15th of the month and records should be kept for 6 years.

Top 10 Things You Should Know About Surety Bond

Posted on March 20, 2011 by JPIA (Junior Philippine Institute of Accountants)

Making the right choice to mitigate and manage risk on construction projects and selecting the most fiscally responsible option to ensure timely project completion are imperative to a successful project – and a sound business. Gambling on a contractor or subcontractor whose level of commitment is uncertain or who could become bankrupt halfway through the job can be an economically devastating decision. Surety bonds offer the optimal solution: providing financial security and construction assurance by assuring project owners that contractors will perform the work and pay specified subcontractors, laborers, and material suppliers.

A surety bond is a three-party agreement where the surety company assures the obligee (owner) that the principal (contractor) will perform a contract. Surety bonds used in construction are called contract surety bonds.
There are three primary types of contract surety bonds. The bid bond provides financial assurance that the bid has been submitted in good faith and that the contractor intends to enter the contract at the price bid and provide the required performance and payment bonds. The performance bond protects the owner from financial loss should the contractor fail to perform the contract in accordance with its terms and conditions. The payment bond assures that the contractor will pay certain workers, subcontractors, and materials suppliers.
Most surety companies are subsidiaries or divisions of insurance companies, and both surety bonds and traditional insurance policies are risk transfer mechanisms regulated by state insurance departments. However, traditional insurance is designed to compensate the insured against unforeseen adverse events. The policy premium is actuarially determined based on aggregate premiums earned versus expected losses. Surety companies operate on a different business model. Surety is designed to prevent loss. The surety prequalifies the contractor based on financial strength and construction expertise. Since the bond is underwritten with little expectation of loss, the premium is primarily a fee for prequalification services.
Since 1893, the U.S. Government has required contractors on federal public works contracts to obtain surety bonds to guarantee they will perform such contracts and pay certain subcontractors and suppliers. This law is known as the Miller Act (40 U.S.C. Section 3131 to 3134), and requires a contractor on a federal project to post two bonds on contracts exceeding $100,000: a performance bond and a labor and material payment bond. A corporate surety company issuing these bonds must be listed as a qualified surety on the Treasury List. Also, almost all 50 states, the District of Columbia, Puerto Rico, and most local jurisdictions have enacted similar legislation requiring surety bonds on public works. These generally are referred to as “Little Miller Acts.” Owners of private construction also manage risk by requiring surety bonds.
Construction is a risky business. Of 853,000 contractors in business in 2002 only 610,000 were still in business in 2004 – a 28.5% failure rate. Surety bonds offer assurance that the contractor is capable of completing the contract on time, within budget, and according to specifications. Specifying bonds not only reduces the likelihood of default, but with a surety bond, the owner has the peace of mind that a sound risk transfer mechanism is in place. The burden of construction risk is shifted from the owner to the surety company.
Surety bond premiums vary from one surety to another, but can range from 0.5% to 3% of the contract amount, depending on the size, type, and duration of the project and the contractor. Typically, there is no direct charge for a bid bond. In many cases, performance bonds incorporate payment bonds and maintenance bonds.
The surety company’s rigorous prequalification of the contractor protects the project owner and offers assurance to the lender, architect, and everyone else involved with the project that the contractor is able to translate the project’s plans into a finished project. Surety companies and surety bond producers have been evaluating contractor and subcontractor performance for more than a century. Their expertise, experience, and objectivity in prequalifying contractors is one of a bond’s most valuable attributes. Before issuing a bond, the surety company must be fully satisfied, among other criteria, that the contractor has:

good references and reputation;
the ability to meet current and future obligations;
experience matching the contract requirements;
the necessary equipment to do the work or the ability to obtain it;
the financial strength to support the desired work program;
an excellent credit history; and
an established bank relationship and line of credit.

Contractor default is an unfortunate, and sometimes unavoidable, circumstance. In the event of contractor failure, the owner must formally declare the contractor in default. The surety conducts an impartial investigation prior to settling any claim. This protects the contractor’s legal recourse in the event that the owner improperly declares the contractor in default. When there is a proper default, the surety’s options often are spelled out in the bond. These options may include the right to re-bid the job for completion, bring in a replacement contractor, provide financial and/or technical assistance to the existing contractor, or pay the penal sum of the bond. Evidence of owners being shielded from risk is evidenced by surety companies having paid more than $10 billion due to contractor failure on bonded projects since 1992, according to The Surety & Fidelity Association of America, Washington, DC. In 2005, the surety industry paid $108 million in losses on private construction and more than $1.3 billion since 1995.
When bonds are specified in the contract documents, it is the contractor’s responsibility to obtain them. The contractor generally includes the bond premium amount in the bid and the premium generally is payable upon execution of the bond. If the contract amount changes, the premium will be adjusted for the change in contract price. Contract surety bonds are a wise investment – providing qualified contractors and protecting public owners, private owners, and prime contractors from the potentially devastating expense of contractor and subcontractor failure.
After analyzing the risks involved with a construction project, consider how surety bonds protect against those risks. Owners, lenders, taxpayers, contractors, and subcontractors are protected because:

The contractor has undergone a rigorous prequalification process and is judged capable of fulfilling the obligations of the contract;
Contractors are more likely to complete bonded projects than non-bonded projects since the surety company may require personal or corporate indemnity from the contractor;
Subcontractors have no need to file mechanics’ liens on private projects when a payment bond is in place;
Bonding capacity can help a contractor or subcontractor grow by increasing project opportunities and providing the benefits of assistance and advice of the surety bond producer and underwriter;
Surety companies may prevent default by offering technical, financial, or management assistance to a contractor; and
The surety company fulfills the contract in the event of contractor default.

Strengthening the Philippines – Israel friendship set in stone anew

Posted on March 20, 2011 by DSAMCO

The Philippines Flag - Israel Flag for 2011 Phillippines - Israel Friedship Day by: Denis Somoso

The Philippines was the first Asian country to officially recognize Israel as a state.

The Philippines and Israel. In an unparalleled “gesture of humanity” on the eve of World War II, the Philippines opened its door to 1,200 Jews fleeing the horrors of the Holocaust. Decades later, Israel has welcomed 40,000 Filipinos, many of whom take care of wartime survivors.

On March 14, the friendship between Manila and Jerusalem was cemented further with the unveiling of a marker that honored the part the Philippines played in saving many Jews from persecution and for being the first Asian country to recognize Israel as a state.

“These gestures of humanity are unparalleled in the history of the Philippines and the friendship of Jews and Filipinos is very much alive and vibrant today,” Ambassador Petronila Garcia said during the ceremony at Boys Town Jerusalem (BTJ) in Israel.

Garcia joined BTJ’s dean, Rabbi Moshe Linchner, and the honorary chair of the BTJ Foundation of America, Josh Weston, at the unveiling of the Philippine marker.

The marker recognizes the late President Manuel L. Quezon, among other individuals, and the Filipino people for denouncing the persecution of Jews and “opening the doors” to them just before the outbreak of World War II, the Department of Foreign Affairs (DFA) said.

At the ceremony, Linchner and Weston presented the Jan Zwartendijk Award for Humanitarian Ethics and Values to Quezon. Garcia received the award on behalf of the late president.

In her speech, delivered partly in Hebrew, Garcia thanked BTJ officials and the project facilitators and noted that the marker also “represents mutual commitment to educate the young generations of Jews and Filipinos about this magnanimity and gestures of humanity, as well the great friendship long after World War II.”

She noted that Israel has repaid the Philippines’ kindness, as in recent years it “has opened its doors to 40,000 overseas Filipino workers who now take care of the survivors of the Holocaust and World War II.”
In 1938, Filipinos rallied in Manila to denounce the persecution of Jews in Germany. Shortly after, Quezon offered 10,000 visas to European Jews. But only 1,200 visas were eventually issued as the war broke out.
In 1940, President Quezon supported the construction of a housing community in Marikina and donated a portion of his estate as farmland for the refugees.

During the war, both Jewish refugees and Filipinos survived the street battles in Manila. A few Jews reportedly joined the United States forces in the country.

In 1947, three years after Quezon’s death, the Philippines stood by the Jews as the country “delivered the most crucial and deciding vote” for the United Nations resolution creating the state of Israel, the DFA said.
The Philippines was the first Asian country to officially recognize Israel as a state.

The marker is located in the Jan Zwartendijk Memorial Garden, named after the non-Jewish Dutch diplomat who also came to the rescue of the Jews by giving them visas so they could leave Europe.

The DFA said this was the second recognition of its kind—the first was the Philippine Open Doors Monument inaugurated in June 2009 at the Holocaust Memorial Park in Rishon LeZion, outside Tel Aviv.

“The history of friendship between Jews and Filipinos during the Holocaust and World War II was left untold for many years until the publication of the book entitled ‘Escape to Manila’ authored by the late Frank Ephraim, along with the chronicles and testimonies of Max Weissler,” the DFA said.

Weissler and Ephraim arrived in the Philippines as young refugees from Germany during the war.

Taxation Guide for Tunisia

Posted on March 9, 2011 by JPIA (Junior Philippine Institute of Accountants)

Update 2010

Personal Income Tax (P.I.T)

Taxable Persons

Any natural person having a usual residence in Tunisia is liable to the P.I.T .Non-resident individuals are also subject to income tax in case the income originates from Tunisian source.

The categories of taxable incomes :

Industrial and commercial profits
incomes from a foreign source if they have not been subject to tax in the country of origin.

profits from non-commercial professions
farms and fisheries profits
salaries, wages, pensions and life annuities
securities and movable assets incomes
land income

Determination of the net profit for companies

The net profit is determined on the basis of a statement in accordance with generally accepted accounting standards and after the deduction of all expenses and professional charges, particularly :
the straight line, the reducing balance and accelerated depreciation methods.
provision for bad debts, provision for total depreciation and provision for the depreciation of shares listed on the stock exchange, and this, within the limit of 30% of taxable profits.
gifts and grants within the limit of 2% of the turnover.

Determination of net profit for other categories of income.

Net income is determined after a flat-rate deduction of :

* 10% on salaries and wages ;
* 25% on pensions and life annuities, this rate has increased to 80% for pensions and life annuities from a foreign source and this under certain conditions ;

* 30% for land income and profits of non-commercial professions determined on a lump sum basis.

Tax Exemptions

remuneration of foreign diplomatic and consular agents, subject to reciprocity principle;
compensation payments for a corporeal harm;
dividends;
deposit interests and securities in foreign currencies or in convertible dinars;
interests of home saving accounts entitling depositor to cheap mortgage; interest from savings accounts opened with the National Saving Bank of Tunisia or any banks, as well as the bonds’ incomes under certain conditions.

Common deductions to all income categories

Acceptable deductions under certain conditions :

Premiums accruing to life insurances contracts ;
abatements for dependent and family status (married taxpayer, dependent children, and dependent relative);
500 DT additional deductions for employees who are paid either the Minimum Industrial Guaranteed Wage or the Minimum Agriculture Guaranteed Wage.
reinvested incomes in the company’s share subscribed capital under the conditions established by the legislation governing the tax benefits.

P.I.T Tariffs

Taxable income brackets ( in Dinar TND )
0 – 1,500 ……………… 0%
1,501 – 5,000 ……………… 15%
5,001 – 10,000 ……………… 20%
10,001 – 20,000 ……………… 25%
20,001 – 50,000 ……………… 30%
Superior than 50.000 ……………… 35%

Flat-rate taxation system

There is a flat-rate taxation system applied under certain conditions to the little businesses whose annual turnover doesn’t exceed 30.000 DT. This turnover is increased to 100.000D for individuals subject to the flat-rate system and who opt for the payment of an annual amount of 1.500D.

Corporate Income Tax (C.I.T)

Subject to certain exemptions, the C.I.T. is owed in particular to :

* capital corporations and similar ones established in Tunisia
* cooperatives, profit-making public cooperations with a non-administrative nature
* Foreign companies not established in Tunisia deriving incomes from a Tunisian source

Determination of the taxable profit

The taxable profit is determined on the basis of a statement in accordance with generally accepted accounting standards and after the deduction of all expenses and professional charges as for sole proprietorships subject to what follows :

provisions for bad debts are deductible within the limit of 100% of the taxable profit until 31 of December 2009 or in an indeterminate time period as the case may be for; banks, leasing institutions and factoring companies;
provisions for depreciation of stocks and social shares are fully deductible from the taxable profit or up to 50% until 31 December 2009 as the case may be for the venture capital trusts;
profits reinvested within the corporation are deductible within the limits and conditions established by the law governing tax incentives;
losses could be deferred to the profits of the following four years;

the deferred depreciations are postponed for an undetermined time period.

Corporate Tax Tariffs

General rate: 30%

reduced rate: 10% applicable to handicraft, agricultural and fishing industries. Particular rate applicable to certain companies: 35% (financial, telecommunications, insurance, on the oil production scale, refining, transportation and on the wholesale distribution scale …). Terms of payment of P.I.T and the C.I.T

The P.I.T and C.T are levied by : withholding tax (fees, rents, securities, salaries, markets, amounts equal to or superior than 1000D paid by the State, local authorities and public companies or institutions or 5000D paid by legal entities and natural persons subject to the effective regime, 3 first instalments each equal to 30% of the amount of the previous tax year and payable during the 6th, 9th and 12th month,
an advance levy of 10% for the import of a list of consumption products;
and by an annual regularization, withheld tax is discharging for individuals who are not established or domiciled in Tunisia.
the Withheld tax and advance levy are deductible from first instalments and the final tax. Withholding tax is discharging for individuals non-established or resident in Tunisia.

THE VALUE ADDED TAX

Goods and services are subject to VAT :

VAT Exemptions includes books, newspapers, periodicals, milk, bread, couscous, vegetable oil, international air transport, maritime transport, debit interests on banks…

Taxable base at imports : value of all fees at customs, duties and taxes included with the exception of the VAT, for liable persons. values determined above plus a 25% of the sum for non-liable persons and importers of products set by Decree No. 2003-477 of 3 March 2003.
In the internal system: in general it is the price of goods, works or services, all fees, duties and taxes included with the exception of the VAT .

Good imports,
industrial and handicraft production,
services,
wholesale trade, other than food products, medicines and pharmaceuticals products,
retail trade where the total annual turnover is equal to or superior than 100.000D with the exception of food products, medicines and pharmaceutical products and products subject to an administrative approval of prices,

The VAT rate

6% for fertilizers, handicrafts, medical services, canned foods, compound feed for livestock …
12% for computers, computer services, hotel sector, catering, equipments not manufactured locally, 4 horsepower cars.
18% general rate applicable to products and services not subject to a different rate.

VAT refund

generally the VAT paid on inputs is deductible from the VAT levied on the monthly turnover.
The potential credit is entirely refundable under the following conditions :

monthly for : Export operations, upgrade investments, withheld tax, sales in suspension.
creation investments of VAT credits that appear on submitted returns as of 3 consecutive months.
Investments to upgrade the VAT credits that appear on submitted returns of 6 consecutive months.
On a quarterly basis for the VAT credit originating from other operations, which appear on submitted returns of the 6 consecutive months with an advance payment of 15% of the total amount of credit without prior verification. The rate of the advance is increased to 35% for companies whose accounts are legally reviewed by an independent auditor.

Consumption tax

consumption tax is applicable to the following goods in particular;

Wines
beers
alcohol and alcoholic beverages,
tobacco,
Fuel ,
Private cars.

There are two types of rates that could be applicable to consumption tax;
ad valorem rates ranging from 10% to 683%
Fixed rates (fuel, alcohol and wine).

REGISTRATION DUTIES
Certain documents are subject to registration duties

sales of real estate’s ;
sales of businesses ;
gifts and inheritances ;
company’s acts ;
Judgments and rulings.

OTHER TAXES

1. Taxes on wages paid by the company

Vocational training tax at a rate of 1% of gross wage bill for the manufacturing industries and at a rate of 2% for other industries.
The contribution to the employees’ housing promotion fund for employees at a rate of 1% of the gross wage bill, and to be levied from all public or private employers

Taxes for the benefit of local authorities

The tax on institutions holding an industrial, commercial or professional nature (TLA) at a rate of 0.2% of the local gross turnover with a peak of 100.000D and a minimum equal to the tax on constructed buildings.
Tax on hotel businesses at a rate of 2% of the turnover.
Tax on constructed buildings calculated at a rate of 2% of the reference price for a constructed square meter for each building category x the covered surface at rates ranging from 8% to 14%.
The tax on idle land calculated based on the market value of the land at a rate of 0.3%.
In the absence of market value, tax is estimated per square meter according to a progressive fee taking into account the density of urban areas defined by the urban development plan.

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