Kitty Miv, Editor
12 January, 2022
As we find ourselves at the start of a new year, it makes sense to look at a few of the tax initiatives announced by governments already, starting with Bahrain and the Bahamas, where the initial focus this year has been on VAT.
The Bahraini authorities have enacted Law no. 33 of 2021 to double its value-added tax rate to 10 percent from January 1, 2022, following approval of this legislation in December.
The increase is intended to bolster Bahrain's financial position and eradicate a budget deficit by 2024. In raising its standard VAT rate, Bahrain is now the second member state of the Gulf Cooperation Council to stray from the standardized regime the six-party bloc had committed to jointly implement, which featured a five percent rate. Earlier, to fix strain on its finances also, Saudi Arabia trebled its rate to 15 percent.
In the Bahamas, meanwhile, the VAT rate cut from 12 percent to 10 percent was implemented as of January 1, with the Government issuing guidance on potential complications arising from the change.
The guidance provides that where there is an ongoing service contract, where the initial VAT rate charged was 12 percent, there will be a reduction in the VAT rate to 10 percent for services that have not been rendered by December 31, 2021. The guidelines further explain that where the service has been rendered prior to January 1, 2022, but payment has not been made, the 12 percent rate still applies.
The Bahamian authorities also explained that VAT on goods remains at 12 percent if an order was placed before January 1, 2022, even if the goods arrive after that date. The new rate of 10 percent is required to be charged on all goods sold on January 1, 2022 and thereafter. However, the guidance states "there will be a transition period of 90 days from the effective date whereby retailers will be allowed to change their shelf prices."
In Malta,international tax matters are on the agenda this year, in particular the development of transfer pricing rules.
Malta's Commissioner for Revenue has launched a consultation on the introduction of a transfer pricing regime and an advance pricing agreement regime. According to the Commissioner, the transfer pricing rules will require companies to demonstrate that their transactions with related parties are at arm's length, in line with prevailing internationally recognized principles.
The consultation, which will run until February 28, 2022, is seeking input in particular on the direction of Malta's tax policy in the area of transfer pricing, and on proposals included in the draft rules and potential alternatives. It is expected that final transfer pricing rules will be released in the final quarter of 2022, and would come into force with effect for financial years commencing on or after January 1, 2024.
Until next week!
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