Amendments to the General Sales Tax
Amendments to the General Sales Tax Law and the Income Tax Law
Amendments to the General Sales Tax Law
The amendment added paragraph (3) to Article (3) reducing the Sales Tax rate on equipment and machines utilized in productive purposes to 5% from a previous 10%. Furthermore, paragraph (2) was added to Article (31) prescribing the refund of this tax upon the submission of the first sales tax return. The amendment signifies the government’s interest in providing incentives for investing in capital goods, which may positively reflect on production efficiency and capital formation.Amendments to the Income Tax Law
There are two main amendments in the Income Tax Law, as follows:- Article (27) of the Law was amended to allow the taxpayer to request the deduction of 30% of the equipment and machines costs as accelerated depreciation as long as utilized in production purposes whether new or used. This entitlement of deduction shall apply for only the first tax period within which these equipment and machines were utilized. This amendment abolishes the taxpayer’s mandatory obligation to deduct the above depreciation percentage.
The equipment and machines depreciation for that period shall be calculated as per Article (25) of the Law and after the deduction of the 30%. In case the accelerated depreciation is not requested, the depreciation rates provided in Articles (25) and (26) shall apply.
- Article 53 of the Law was also amended through adding two new subsections numbers (4) and (5) to the second paragraph.
The amendment resulted in considering the following actions as changes in the company’s legal form:
“(4) Acquiring 33% or more of shares or voting rights, whether by number or value in a resident company through a share swap in the possessing entity.
(5) Acquiring 33% or more of the assets and liabilities of a resident company through a share swap in the possessing resident entity”.
It is worth noting that the previous amendment to the Income Tax Law (through Law No. 53 of 2014)[4] had abolished subsections (4) and (5) from the mentioned article. The previous phrasing of these subsections was as follows:
“(4) Acquisition or purchase of 33% or more of shares or voting rights, whether by number or value in a resident company.
(5) Acquisition or purchase of 33% or more of the assets and liabilities of a resident company”.
The net effect of the above is that only acquisition by share swap shall be considered a change of legal form for the application of Article (53) of the Income Tax Law.
[1] Presidential Decree-Law No. 17/2015 amending certain provision of the General Sales Tax Law and the Income Tax Law among others, Official Gazette, Issue No. 11 (cont.), 12 March 2015. [2] Law No. 11/1991 on the General Sales Tax, Official Gazette, Issue 18 (cont. A), 2 May 1991. [3] Law No. 91/2005 on the Income Tax, Official Gazette, Issue No. 26 (cont.), 9 June 2005. [4] Presidential Decree-Law 53/2014 amending certain provisions of the Income Tax Law, Official Gazette, Issue No. 26 (bis) (A), 30 June 2014.Amendments to the General Sales Tax Law
The amendment added paragraph (3) to Article (3) reducing the Sales Tax rate on equipment and machines utilized in productive purposes to 5% from a previous 10%. Furthermore, paragraph (2) was added to Article (31) prescribing the refund of this tax upon the submission of the first sales tax return. The amendment signifies the government’s interest in providing incentives for investing in capital goods, which may positively reflect on production efficiency and capital formation.Amendments to the Income Tax Law
There are two main amendments in the Income Tax Law, as follows:- Article (27) of the Law was amended to allow the taxpayer to request the deduction of 30% of the equipment and machines costs as accelerated depreciation as long as utilized in production purposes whether new or used. This entitlement of deduction shall apply for only the first tax period within which these equipment and machines were utilized. This amendment abolishes the taxpayer’s mandatory obligation to deduct the above depreciation percentage.
The equipment and machines depreciation for that period shall be calculated as per Article (25) of the Law and after the deduction of the 30%. In case the accelerated depreciation is not requested, the depreciation rates provided in Articles (25) and (26) shall apply.
- Article 53 of the Law was also amended through adding two new subsections numbers (4) and (5) to the second paragraph.
The amendment resulted in considering the following actions as changes in the company’s legal form:
“(4) Acquiring 33% or more of shares or voting rights, whether by number or value in a resident company through a share swap in the possessing entity.
(5) Acquiring 33% or more of the assets and liabilities of a resident company through a share swap in the possessing resident entity”.
It is worth noting that the previous amendment to the Income Tax Law (through Law No. 53 of 2014)[4] had abolished subsections (4) and (5) from the mentioned article. The previous phrasing of these subsections was as follows:
“(4) Acquisition or purchase of 33% or more of shares or voting rights, whether by number or value in a resident company.
(5) Acquisition or purchase of 33% or more of the assets and liabilities of a resident company”.
The net effect of the above is that only acquisition by share swap shall be considered a change of legal form for the application of Article (53) of the Income Tax Law.
[1] Presidential Decree-Law No. 17/2015 amending certain provision of the General Sales Tax Law and the Income Tax Law among others, Official Gazette, Issue No. 11 (cont.), 12 March 2015. [2] Law No. 11/1991 on the General Sales Tax, Official Gazette, Issue 18 (cont. A), 2 May 1991. [3] Law No. 91/2005 on the Income Tax, Official Gazette, Issue No. 26 (cont.), 9 June 2005. [4] Presidential Decree-Law 53/2014 amending certain provisions of the Income Tax Law, Official Gazette, Issue No. 26 (bis) (A), 30 June 2014.