[World Tax News] Australia introduces tax incentives for the digital games industry and more

Editorial Team – [2023] 148 taxmann.com 183 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. Australia announces ‘Digital Games Tax Offset’ to promote the digital games industry

The Australian Taxation Office (ATO) released a statement on 7th March 2023 regarding the impending legislation for the Digital Games Tax Offset (DGTO), which was initially announced as part of the Budget 2021-22.

As part of the Digital Economy Strategy, the Government announced that it would introduce a DGTO to strengthen the digital games industry in Australia, expand employment opportunities for digital and creative talent, enhance the industry’s international competitiveness, and make Australia an attractive destination for foreign investment.

The Digital Games Tax Offset is a refundable tax offset of an amount that is 30% of a Company’s qualifying Australian Development expenditure on:

(a) completing a new digital game;

(b) porting a completed digital game to a new platform; and

(c) ongoing development of completed digital games during an income year

The maximum amount of the offset that a company (or a group of connected or affiliated companies) can claim per income year is $20 million. This cap would be reached with eligible expenses of around $66.7 million.

To be eligible for the offset, the applicant must be a company that falls under one of two categories – an Australian tax resident or a foreign tax resident with a permanent establishment in Australia.

Source: Release dated 7th March 2023

2. Brazil enacted the law reducing withholding tax rates on travel-related cross-border payments

On 28th February 2023, Brazil enacted Law No. 14.537, which outlines a decrease in the withholding tax rate on cross-border payments related to travel made by Brazilian individuals to foreign individuals or legal entities that reside or are domiciled abroad.

The reduced tax rates are applied to various categories of payments, including those made for tourism, business, service, training trips, and official missions. These tax rates are as follows:

(a) 6% from 01-01-2023 to 31-12-2024;
(b) 7% from 01-01-2025 to 31-12-2025;
(c) 8% from 01-01-2026 to 31-12-2026; and
(d) 9% from 01-01-2027 to 31-12-2027.

This withholding tax is reduced from the current tax rate of 25%. Although the limit does not apply to operators and travel agencies, the application of the reduced rate is contingent on a general payment limit of BRL 20,000 per month.

Source: Law No. 14.537

3. Pakistan to implement Beneficial Ownership Rules

The Federal Board of Revenue (FBR), Pakistan, has released a notification regarding the new draft regulations for maintaining records related to beneficial owners.

The new provision concerning beneficial Ownership mandates each company and association of persons (AOP) to submit particulars of its beneficial owners electronically in the prescribed form and manner and keep them updated whenever any changes occur. The draft rules detail the implementation of these new obligations.

A beneficial owner is typically a natural person who directly or indirectly owns at least 25% of the company or exercises ultimate effective control through joint ownership arrangements or other similar cases.

A brief of draft provisions is outlined below:

(a) Registration
As per the newly proposed regulations, upon initial registration with the FBR, every company and AOP must electronically provide the particulars of their beneficial owners to the FBR through the FBR’s online system. The details should be submitted in BOF-01, as the draft rules prescribe.

All companies and AOPs registered with the FBR must electronically provide the particulars of their beneficial owners to the FBR through the FBR’s online system in the prescribed Form BOF-01 by 31st December 2023.

(b) Change in the ownership
The record of beneficial owners must be kept up to date, and any changes in the particulars of the beneficial owner, as specified in Form BOF-01, must be updated within 30 days from the date of the change electronically through the FBR’s online system.

(c) No change in the ownership
If there are no changes in the beneficial owners of the company or AOP during a tax year, a “Certificate of Confirmation for Beneficial Owner” shall be provided to confirm this fact. This certificate shall be submitted to the FBR along with the Income Tax return for that tax year in Form BOF-02 as prescribed by the rules and available through the FBR’s online system.

(d) Retention of records by Entity
The records of all beneficial owners for each company or AOP shall be kept for 10 years from the date when such beneficial owners no longer hold that position in the company or AOP, as applicable.

(e) Retention of records by FBR
The records of beneficial owners for all companies and AOPs registered with the FBR shall be retained by the FBR for 15 years from the date of deregistration of that company or AOP.

Source: Notification of Federal Board of Revenue