Allan Domingo, CPA, US CMA’s Post

My client, a leading provider of renewable energy solutions specializing in solar panel manufacturing and distribution has a stronghold in their home market. They now seek to extend their reach strategically by establishing offshore subsidiaries and shifting the location of management and control in a tax planning exercise. My first meeting with the senior executives was premised on the precedent Naivas Limited v KRA(KENYA REVENUE AUTHORITY) - [the Commissioner of Domestic Taxes] set. The case examined the concept of tax residence and delved into the nuanced meaning of management control for ascertaining tax residency status. The case centred around the Naivas Group's corporate structure, with Gakiwawa Family Investments (GFI) holding a significant stake in Naivas International Limited (NIL) both domiciled in Mauritius. Subsequently, GFI sold a portion of its shares to Amethis, sparking a tax dispute. The Commissioner of Domestic Taxes imposed income tax on the proceeds from GFI's share sale, leading to a demand issued to Naivas Kenya Limited (NKL), GFI's subsidiary, as the tax representative. The key issues were: i) Whether GFI met the criteria for tax residency in Kenya and whether NKL had a connection to the transaction. ii) Whether NKL satisfied the specific requirements for its designation as GFI's tax representative Relying on the Income Tax Act and English law precedents, the Tribunal elucidated that the crux of tax residency lies in the location of management and control. It concluded that GFIs affairs were primarily directed from Kenya, rendering it a tax resident. Consequently, NKL bore responsibility for tax liabilities arising from the transaction. The Tribunal affirmed that NKL met the requisite criteria for its appointment as GFI's tax representative, citing section 15 of the TPA. This verdict holds significant implications for businesses employing offshore holding structures, particularly in Kenya. Subsidiaries face potential tax liabilities linked to their parent companies unless the latter can demonstrate independent existence and management in their respective jurisdictions. Consequently, prudent consideration of directors' location, business activities and management control becomes imperative in structuring offshore entities.

News: FG grants tax exemptions for oil and gas sector Determined to arrest the spate of divestments in the nation’s oil and gas sector, the Federal Government (FG) has announced a new fiscal regime with a wide range of tax exemptions in the industry. The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, said the fiscal incentives were aimed at revitalizing Nigeria’s oil and gas sector. The tax exemptions were contained in circulars titled: ‘Value Added Tax (VAT) Modification Order 2024’; and in the ‘Notice of Tax Incentives for Deep Offshore Oil & Gas Production’, which are in accordance with the Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024. The VAT Modification Order 2024 introduces exemptions on a range of key energy products and infrastructure including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment. In addition, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production provides new tax reliefs for deep offshore projects. The Minister said the concessions were expected to attract new and massive investments into the oil and gas and to revitalise the industry. He added that the measures were designed to lower the cost of living, bolster energy security, and accelerate Nigeria’s transition to cleaner energy sources. Mr. Edun expressed optimism that the initiative would reposition Nigeria’s deep offshore basin as a premier destination for global oil and gas investments. He said the reforms were part of a broader series of investment-driven policy initiatives of President Bola Tinubu, in line with Policy Directives 40-42. He added, “They reflect the administration’s strong commitment to fostering sustainable growth in the energy sector and enhancing Nigeria’s global competitiveness in oil and gas production. “With these bold initiatives, Nigeria is firmly on track to reclaim its position as a leader in the global oil and gas market. These fiscal incentives demonstrate the administration’s unwavering commitment to fostering sustainable growth, enhancing energy security, and driving economic prosperity for all Nigerians” #tax #nigeria #oilandgas #taxexemption #consultant

The federal government has introduced tax reliefs for deep offshore oil and gas projects in the country as well as VAT exclusion on LPG, CNG, diesel and others. The Ministry of Finance disclosed this via its official handle on X stating that the fiscal incentives were aimed at boosting investments in the oil and gas sector. The orders from the Ministry are titled; Value Added Tax (VAT) Modification Order 2024 and Notice of Tax Incentives for Deep Offshore Oil & Gas Production, in accordance with the Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024. The VAT Modification Order 2024 exempts key energy products like Diesel, LPG, CNG, and clean energy infrastructure, such as electric vehicles and clean cooking equipment, from VAT. According to the Ministry, these exemptions aim to reduce living costs, improve energy security, and support Nigeria’s shift to cleaner energy. The Notice of Tax Incentives for Deep Offshore Oil & Gas Production introduces new tax reliefs to attract global investments to Nigeria’s deep offshore projects. The statement from the Ministry noted that the tax reliefs are Part of President Bola Ahmed Tinubu’s broader policy reforms and measures which aim to boost the energy sector and strengthen Nigeria’s global competitiveness in oil and gas. What the Federal government is saying “The Honourable Minister of Finance and Coordinating Minister of the Economy Mr. Wale Edun has unveiled two major fiscal incentives aimed at revitalizing Nigeria’s oil and gas sector:”  Value Added Tax (VAT) Modification Order 2024 ”Notice of Tax Incentives for Deep Offshore Oil & Gas Production, in accordance with the Oil & Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024.” “The VAT Modification Order 2024 introduces exemptions on a range of key energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.” “These measures are designed to lower the cost of living, bolster energy security, and accelerate Nigeria’s transition to cleaner energy sources.” 

#Comprehensive Position Paper: Aligning Fiscal Incentives to Revitalize Nigeria's Oil and Gas Sector Background studies The Federal Government of Nigeria has introduced new fiscal incentives to revitalize the oil and gas sector ¹. These incentives include the VAT Modification Order 2024, which aims to lower the cost of living and bolster energy security by exempting key energy products and infrastructure like diesel, feedgas, LPG, CNG, LNG, and clean cooking equipment from tax ¹. Additionally, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production provides tax relief for deep offshore projects to position Nigeria as a premier destination for global oil and gas investments ¹. These initiatives aim to attract $10 billion in investment and revitalize the oil and gas industry's contribution to the Nigerian economy ² ³. Executive Summary: This comprehensive position paper outlines the Federal Government of Nigeria's new fiscal incentives aimed at revitalizing the oil and gas sector. The paper provides an in-depth analysis of the VAT Modification Order 2024 and the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, highlighting their potential impact on the sector and the economy. I. Introduction - Overview of Nigeria's oil and gas sector - Challenges facing the sector - Importance of fiscal incentives in addressing these challenges II. VAT Modification Order 2024 - Analysis of the order's key provisions - Impact on the oil and gas sector - Benefits for the economy III. Notice of Tax Incentives for Deep Offshore Oil & Gas Production - Analysis of the notice's key provisions - Impact on deep offshore production - Benefits for the economy IV. Rationale for Fiscal Incentives - Importance of the oil and gas sector to Nigeria's economy - Challenges facing the sector - Role of fiscal incentives in addressing these challenges V. Strategic intent - Implement the VAT Modification Order 2024 and Notice of Tax Incentives for Deep Offshore Oil & Gas Production - Monitor and evaluate the effectiveness of these initiatives - Consider additional fiscal incentives to support the oil and gas sector VI. Strategic line of action - Recap of the importance of fiscal incentives in revitalizing Nigeria's oil and gas sector - Call to action for stakeholders to support the implementation of these initiatives Conclusions This position paper analyses the potential impact of aforementioned initiatives on the sector and the economy, and provides strategic line of actions for immediate implementation and evaluation.which has potency to improve our oil revenue over long time that will guarantee prosperity for all

UN Tax Committee Proposes New Article for Income from Certain Natural Resources in UN Model On 19-22 March 2024, the United Nations Committee of Experts on International Cooperation in Tax Matters (UN Tax Committee) released a working paper titled “The Treatment of Income Arising from Extractives and Other Natural Resources” (E/C.18/2024/CRP.14). In this document, discussed during its 28th session, the UN Tax Committee proposes to introduce a new Article 5A and related Commentary into the UN Model Tax Convention (UN Model) concerning taxation of income from certain natural resource activities. The proposal builds upon the work of both the Subcommittees on Extractive Industries and the UN Model Double Taxation Convention. It follows a working paper (E/C.18/2023/CRP.38) submitted for discussion at the 27th session of the UN Tax Committee. The introduction of the new Article 5A in the UN Model, expected in 2025, will mark a significant shift, broadening the taxing rights of the state in which natural resources are located. Notably, the new article provides that, notwithstanding the provisions of Articles 5, 8, and 14 of the UN Tax Convention relating to the existence of a permanent establishment (PE) or fixed base, a resident of a Contracting State carrying on activities in the other Contracting State concerning the exploration or exploitation of natural resources in that other State is deemed to have a PE or a fixed base therein. In practical terms, Article 5A provides specific nexus tests for income from certain natural resource activities, effectively superseding the ordinary PE and fixed base provisions. More in detail, the proposal stipulates that natural resource activities can be taxed by the source state if they are carried out for a period or periods not exceeding 30 days in the aggregate in any 12 months commencing or ending in the fiscal year concerned.   The new article also includes an anti-avoidance provision in paragraph 3, which prevents the artificial splitting of activities between related parties. Paragraph 4 lays down the scope of the provision. It clarifies that the term “natural resources” means resources such as fish, hydrocarbons, minerals, pearls, solar power, wind power, hydropower, geothermal power, and similar sources of renewable energy. The term “exploration for, or exploitation of natural resources” instead relates to activities carried on in connection with (i) the exploration or exploitation of the natural resources, (ii) the decommissioning and abandonment of facilities used in connection with the above activities, and (iii) the restoration and rehabilitation of the land or other site used in connection with the above activities. #UN #NaturalResources Stay ahead in the tax landscape with our Newsletter: https://lnkd.in/ggkgvAfb. Get the latest GCC tax updates directly to your inbox!

The Imperative of Carbon Tax Legislation and Policy in Nigeria Climate change poses a significant threat to Nigeria's economic development, human health, and environmental sustainability. As a major emitter of greenhouse gases, Nigeria has a crucial role to play in reducing its carbon footprint. One effective strategy to achieve this is by enacting carbon tax legislation and policy. It is very important to note that Nigeria is the highest Carbon emitter in Africa,and it's shocking to find out that there are no Carbon Legislation's in the country. Examples of Successful Carbon Tax Implementation - Sweden introduced a carbon tax in 1991, which has contributed to a 23% reduction in emissions since 1990. - British Columbia, Canada, implemented a carbon tax in 2008, resulting in a 10% reduction in emissions. - South Africa introduced a carbon tax in 2019, expected to reduce emissions by 33% by 2030. Benefits of Carbon Tax Legislation and Policy - Encourages reduction of greenhouse gas emissions, contributing to global efforts to combat climate change. - Generates revenue for the government, which can be used to fund clean energy projects and support low-carbon initiatives. - Promotes sustainable development and economic growth by encouraging investment in clean energy technologies. - Enhances Nigeria's international reputation and compliance with global climate agreements. In Conclusion, enacting carbon tax legislation and policy in Nigeria is crucial for reducing greenhouse gas emissions, promoting sustainable development, and contributing to global efforts to combat climate change. Examples of successful implementation in countries like Sweden, British Columbia, and South Africa demonstrate the effectiveness of carbon tax in reducing emissions and generating revenue. Supported by legal authorities, Nigeria should prioritize the enactment of carbon tax legislation and policy to ensure a sustainable future for generations to come.

Strategic Tax Updates for Green Investments in Cyprus: A Deep Dive into the 2024 Amendments   The 2024 amendments to the Cyprus Income Tax Law have ushered in crucial incentives for adopting green technology. Effective January 1, 2023, these amendments provide a new deduction for expenses related to energy efficiency studies and significantly increase Wear and Tear (W&T) rates for capital expenses on certain environment-friendly assets. Here are the specifics:   New Deductions: Businesses can now deduct expenses for energy efficiency studies conducted by accredited consultants or inspectors. This is particularly beneficial for companies investing in improving their building's energy utilization.   Enhanced W&T Rates: The law introduces increased depreciation rates to promote investments in sustainable technologies. For instance:     - A 7% rate for enhancements like thermal insulation of buildings.   - A 20% rate applies to more substantial upgrades such as the installation of solar net billing systems or thermal insulation for hot water pipes.   - A high 33⅓% rate benefits investments in new electric vehicles and related charging infrastructure.   These fiscal incentives are designed not only to reduce tax liability but also to lower the operational costs by encouraging energy conservation and the adoption of renewable energy. They reflect Cyprus’s commitment to environmental sustainability and offer a compelling financial case for companies to invest in eco-friendly assets.   Business leaders should consider these changes closely to optimize potential savings and align their investment strategies with these new tax benefits. At Savva & Associates, we pride ourselves on our deep understanding of the evolving tax landscape and our ability to tailor strategies that align with both local and global business needs. Our approach is grounded in a commitment to professionalism, thoroughness, and a proactive attitude towards tax planning and compliance. We invite you to reach out and discuss how our strategic insights and bespoke services can help optimize your business investments in environmentally sustainable technologies. Let us help you navigate the complexities of tax incentives to enhance your company’s financial and environmental goals.

Nigerian Government Introduces VAT Exemptions and New Tax Incentives to Boost Energy Sector and Support Small Businesses The Federal Government has announced VAT exemptions on several energy products, including diesel, liquefied natural gas (LNG), Compressed Natural Gas (CNG), and electric vehicles, as part of efforts to reduce costs for consumers. This initiative, detailed by Finance Minister Wale Edun, aims to lower living expenses, improve energy security, and facilitate Nigeria's transition to cleaner energy sources. Additionally, new tax relief measures for deep offshore oil and gas projects have been introduced, highlighting the government's commitment to enhancing investment in the sector. In related news, the Federal Government has published regulations on Withholding Tax (WHT), set to take effect on January 1, 2025. Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, announced that these regulations will provide reduced rates and exemptions for many businesses, particularly SMEs with annual revenues under N25 million. The new framework allows for early adoption starting July 1, 2024, providing relief to businesses rather than imposing new burdens, and aligns with previous recommendations to exempt small businesses, manufacturers, and farmers from withholding tax.

The Finnish Government has published an initiative to introduce a Finnish tax incentive for large-scale green industry projects as part of the General Government Fiscal Plan for 2025–2028. Based on current information, the tax incentive will be a fixed-term scheme to support new investments in the green industry, such as battery, hydrogen, and green steel projects, that are decided upon and approved for the scheme by 31 December 2025.   Further details of the criteria and application of the new tax incentive will be published by the legislator, but initially the amount of the tax incentive would be 20% of the total value of the investment and up to EUR 150 million per eligible project.   In addition to the detailed criteria on eligible projects and details on the tax incentive determination method, it also remains to be seen how broad a sector of the green energy industry the eventual tax incentive will cover. For example, it is still unclear whether the incentive’s green industry concept will also include wind and solar power production in addition to the initial list mentioning battery, hydrogen, and green steel projects.   Hannes Snellman will be following the advancing of the new tax incentive for large scale green industry projects, and our experts from the Tax and Real Assets Practices are happy to discuss opportunities to apply the new tax incentive scheme on contemplated green industry projects. Maria Landtman Klaus Metsä-Simola Katja Perätalo Tapio Teräkivi Harri Vehviläinen Heikki Vesikansa #taxincentive #greenindustry

Nigeria Exempts 63 Items from VAT in 2024 Fiscal Reforms Nigeria's government has exempted 63 items from Value-Added Tax (VAT) under the 2024 fiscal reforms, including electric vehicles, gas processing equipment, and biofuel components. This initiative, led by the Presidential Committee on Fiscal Policy, aims to reduce industry costs, promote cleaner energy, and boost the country’s economic recovery efforts.In a significant move towards fiscal reform, the Nigerian government has exempted 63 items from Value-Added Tax (VAT) under the "Value Added Tax (Modification) Order, 2024," issued on September 3. This reform was announced by Taiwo Oyedele, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, via a post on X (formerly Twitter).The VAT exemptions are part of a broader plan to support key industries, including the oil and gas sectors. These measures, alongside tax reliefs for deep offshore oil and gas production, were introduced to boost the country’s economic recovery efforts, according to Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy.Among the VAT-exempt items are electric vehicles, CNG (Compressed Natural Gas) and LPG (Liquefied Petroleum Gas) dual-fuel vehicles, various components for gas and LNG (Liquefied Natural Gas) processing, as well as equipment and chemicals critical to biofuel production.The government’s fiscal reforms also include the retroactive exemption of some items like Automotive Gas Oil (AGO), effective from October 1, 2023. The move is aimed at reducing the operational costs for industries and promoting cleaner, energy-efficient technologies in Nigeria.Below is a summary of the VAT-exempt items: Electric vehicles and related parts CNG trucks Gas water heaters Biogas digesters LPG/CNG conversion kits Cryogenic storage tanks LNG-related chemicals, and more. These exemptions are designed to reduce the tax burden on industries, encourage sustainable practices, and stimulate local manufacturing. Source link https://lnkd.in/dD6uRiQq