South Korea announced hefty tax reductions for semiconductor manufacture this week, while Dubai lifted its alcohol sales tax in advance of corporate tax reform.
On Tuesday, January 3, the Korean government announced tax reductions for the semiconductor industry. Companies who invest in domestic manufacturing can claim a tax deduction of up to 25%, depending on the size of the company.
Large businesses may be eligible for a 15% tax credit on investments in manufacturing facilities, up from 8% in the original proposal. Small and medium-sized firms can receive a 25% capital expenditure tax credit.
In 2024, this might save taxpayers more than 3.6 trillion won ($2.8 billion). However, the proposal will need to be approved by parliament, and the ruling People Power Party does not have a majority. The idea could be derailed by the opposition Democratic Party.
South Korea is the world's largest producer of memory chips, with Korean firms Samsung and SK Hynix controlling 70% of the global market. However, the country is facing increased competition as China, Japan, and Taiwan provide larger tax breaks for chip manufacturing.
Perhaps the most significant threat comes from the United States, where the Biden administration authorised tax breaks and subsidies in August 2022. As the globe faces a shortage of semiconductor chips, competition will only heat up.
Dubai has suspended the alcohol charge in anticipation of the increased corporation tax rate.
On January 1, the Emirate of Dubai stopped the 30% duty on alcohol sales, months before the implementation of corporation tax.
Dubai has increasingly relaxed laws in order to make the city more appealing to foreign professionals and tourists. The 30% tax on alcohol sales will be deferred for a year as a trial period, and the fee for obtaining a liquor licence will be eliminated.
Meanwhile, the UAE government anticipates that the loss of tax revenue would be mitigated by the June implementation of a federal corporate tax scheme. The new system will levy a 9% tax on corporate income, which may shortly be enhanced to meet the UAE's OECD pledge to a minimum rate of 15%.
As a tourism destination, the UAE is facing increasing competition from Saudi Arabia and Qatar. All three Gulf states are attempting to diversify their economies, in part by increasing tourism and recruiting investment in new industries.
The UK tax discount for crypto-assets takes effect.
On Sunday, January 1, the UK tax exemption for overseas investors acquiring crypto-assets through British investment brokers went into force.
Prime Minister Rishi Sunak announced the tax exemption as part of ambitions to expand on the UK's reputation for financial services and transform the country into a bitcoin investment centre.
To encourage tax compliance among crypto investors, HM Revenue and Customs launched its crypto tax guidance in February 2022. When purchasing or selling crypto-assets, UK residents must pay capital gains tax, as well as income tax when receiving bitcoin payments.
Meanwhile, a bitcoin mining enterprise would be subject to business income taxes, whilst a hobbyist engaging in small-scale mining would be required to declare their revenues for income tax purposes.
As a result of this tax exemption, overseas crypto investors no longer need to be concerned about the tax implications of hiring a UK-based investment manager.
By fLEXI tEAM