[World Tax News] Iceland Proposing Per-Kilometre Fees for Electric Cars Due to Declining Govt. Revenue and More

Editorial Team – [2023] 155 taxmann.com 260 (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. Iceland proposing per-kilometre fees for Electric Cars due to declining Govt. revenue

Iceland has planned to present legislation implementing a kilometre-based fee system for using clean energy and plug-in hybrid vehicles on the road network.

The increase in the number of eco-friendly and fuel-efficient cars has led to the Government’s tax revenue from vehicles, and fuel has declined significantly. It will continue to decline in the coming years if nothing is done.

Along with that development, there has been a growing inequality in the current charging system between those who use the transport infrastructure. At the same time, there is an ongoing need for and plans to build and maintain the road system. That need will at least decrease in the foreseeable future with the growing population, growth in tourism and associated traffic. This development needs to be responded to, and a new, simpler, more transparent and sustainable fee collection system must be implemented.

It is planned to present a bill on a mileage fee for the use of clean energy vehicles (i.e. electric and hydrogen vehicles) on the one hand and plug-in hybrid vehicles (cars and vans) on the other as of January 1, 2024.

Source: Consultation Paper on Plans for a bill for a law on mileage charges for the use of vehicles

2. Hong Kong proposes Bill to refine Foreign-Sourced Income Exemption Regime in Relation to Capital Gains

The Hong Kong Inland Revenue Department has introduced the Inland Revenue (Amendment) (Taxation on Foreign-sourced Disposal Gains) Bill 2023. This Bill will modify Hong Kong’s recently implemented Foreign-Sourced Income Exemption (FSIE) regime.

Effective January 1, 2023, the new FSIE regime grants tax exemptions on specific foreign-sourced passive income received in Hong Kong by relevant multinational enterprise (MNE) entities, provided they meet specific exemption criteria, including economic substance requirements.

Regarding capital gains, the FSIE regime covers foreign-sourced disposal gains related to shares or equity interests. The scope is set to broaden, extending the economic substance requirements of the FSIE regime to foreign-sourced disposal gains concerning assets beyond shares or equity interests, irrespective of their financial or non-financial nature.

Under the refined FSIE regime, exemption and relief will continue to be provided to minimize the compliance burden of the affected MNE entities. Foreign-sourced non-intellectual property (IP) disposal gains will be exempt from tax if the MNE entity has adequate economic substance in Hong Kong. For foreign-sourced IP disposal gains, the extent of the tax exemption will be determined by the nexus approach promulgated by the Organisation for Economic Co-operation and Development (OECD).

In addition, double taxation relief will continue to be available under the refined FSIE regime to mitigate possible double taxation. The Government will continue to provide business-facilitating measures, including simplified reporting procedures, availability of advance rulings, administrative guidance, and technical support from the Inland Revenue Department to facilitate tax compliance, reduce compliance burden, enhance tax certainty and ensure tax transparency.

The Bill is scheduled for introduction in the Legislative Council on October 18, 2023. Pending approval, the refined regime is expected to be applicable starting January 1, 2024.

Source: Press Release

3. UAE Federal Tax Authority releases Corporate Tax Guide for Non-Resident Persons

The UAE Federal Tax Authority (FTA) presented the Corporate Tax Guide for Non-Resident Persons on October 9, 2023. This guide offers general guidance to natural and legal persons not classified as resident persons for corporate tax purposes and who derive income from the UAE. It assists them in comprehending their potential tax obligations in the UAE as non-resident entities. The guide offers a comprehensive overview of:

• Definition of a Non-Resident Person
• What income of a Non-Resident Person is subject to Corporate Tax in the UAE?
• Other UAE Corporate Tax requirements for a NonResident Person
• Provisions of Permanent Establishment

Source: Corporate Tax Guide for Non-Resident Persons – CTGNRP1, dated October 9 2023