The same quality on new facilities

On Thursday, June 14, the new PKF Mexico offices were inaugurated in the City of Monterrey. The CP and MI Miguel Angel Trillo Villaseñor, Tax partner and Lic. and MDF Rodolfo Magallón Villarreal, partner of the legal area, cut the ribbon with employees, family and friends, together lead the PKF Firm of Accountants, Lawyers and Business Advisors in Monterrey City.

Mr. Miguel Angel Trillo, comments during the opening: "Our commitment is to know the turn to which companies belong and thus identify their specific needs, so that we can make accurate diagnoses and offer alternative solutions for each client."

For his part, Rodolfo Magallón said: "We are a multidisciplinary firm with specialists of great professional experience in each area, whose mission is to provide high-quality technical services and solutions that generate value to our customers."

 
We proudly present their new facilities:

We welcome you to the PKF Family. In Monterrey there is a team!

PKF South Africa chairpersons are traditionally elected from the managing partners of the PKF members in South Africa.

“The intention with the appointment is to bring in a chair that is independent from any one PKF firm, essentially to provide an outsider's perspective,” explains Vermaak. PKF’s focus in recent years has been re-establishing a credible national footprint, and the new chairman’s role is a more strategic one, looking to the future with an appropriate focus on enhanced risk management, quality and ethics.

Vermaak brings deep experience in the international context, having previous employment with PKF International, expertise he will contribute to the South African network to optimise the benefits of being members of PKF International.

PKF South Africa has experienced rapid growth in recent years. “With growth comes the need to reassess the way things are. Firms that have joined in the network provide a fresh perspective and I believe it is healthy to pause and ensure we are doing the right things. Our growth and new membership has resulted in greater critical mass, opened up new opportunities, introduced much-needed diversity - but has also increased resource requirements,” adds Vermaak.

“Our philosophy has been to get strong firms of the right size, rather than just putting multiple dots on a map. All the new PKF firms have been fully integrated into the national structures, and have adopted common methodologies, systems and values. All share a focus on owner-managed businesses, and nationally, we are present in key locations. This places PKF in a competitive position to serve a particular clientele all around the country. Shared training and quality assurance systems go a long way towards creating consistent client experiences wherever we are.”

Vermaak takes the helm at an undoubtedly trying time for the profession, a factor which requires the head of any leading accounting and audit firm to have one eye on the reputation of the broader profession as much as on his or her individual firm.

“In that context, my vision is to position PKF to be an obvious choice of business adviser to the owner-managed market, and to be a compelling choice as employer for talented and passionate people looking for opportunity to grow. We will continue doing those things PKF has always done well: selectively growing our presence; continuing enhancing national structures and systems. We need to better address the opportunities and real threats from technology, and to better leverage our joint experience in specialised areas and specific industries. While doing so, we need to work tirelessly to improve quality and exhibit faultless ethics. I would like to see PKF contributing to the efforts that are needed to restore faith in the profession in South Africa,” asserts Vermaak.

Shiodome Partners, a leading consulting and business service organization that supports business clients in achieving company objectives and financial success in the local and global marketplace, has joined the PKF International family of independent accounting firms.

For more information click here.

Shiodome Partners, a leading consulting and business service organisation that supports business clients in achieving company objectives and financial success in the local and global marketplace, has joined the PKF International family of independent accounting firms.

Shiodome Partners, based in Tokyo and Okinawa, has 5 partners and provides Business Consulting Services, BPO (Business Process Outsourcing), Financial Consulting Services and Business Support Solutions to both private and public companies across a range of variant sectors. Shiodome Partners  has a full services team with global experience. Their expert personnel include established and certified professionals from every sector of the business, financial and legal industries.

PKF International CEO, John Sim, said: "We are really pleased to welcome Shiodome Partners to the PKF family as we continue to expand and strengthen the PKF brand. Shiodome Partners fits well with our value proposition of Quality with Integrity, and also meets our strategic objective to recruit firms with significant practices that cover the main Japan commercial centres".​

Kengo Maekawa, Managing Partner of PKF Shiodome Partners, said "We are honoured to become a member of PKF International and we appreciate PKF giving us the opportunity to take our business to a higher level and expand into the international market. This is an important strategic move to provide global accounting support."

Shiodome Partners will rebrand as PKF Shiodome Partners with effect from 1 June 2018.​

AFC Benelux was established in 2006 and employs over 40 people in its two offices in Luxembourg City and Hobscheid. The firm has four partners and specialises in investment and wealth structuring for private companies as well as cross-border tax structures for international groups. Furthermore, the firm has a large client base of commercial, privately owned companies in Luxembourg where it provides a full range of accounting, tax, payroll and financial engineering services.

PKF Audit & Conseil is a new firm established early 2018 to provide assurance and related accounting services to its clients, supported by the partners, employees and resources of AFC Benelux.

Yves Mertz, founding partner of both AFC Benelux and PKF Audit & Conseil said: “We are proud to be part of the PKF Family. We look forward to working with members of PKF to develop our service offerings to the international financial services sector and broaden the expertise available to our Luxembourg clients.”

PKF International CEO, John Sim, said: "We are really pleased to welcome AFC Benelux and PKF Audit & Conseil to the PKF family as we continue to expand and strengthen the PKF brand. AFC Benelux fits well with our value proposition of Quality with Integrity, and also meets our strategic objective of developing services in the international wealth segment. Luxembourg is the second largest investment fund centre in the world and plays an important role in Europe for cross-border investments in both Real Estate and Private Equity. In AFC Benelux we found the right partners to assist PKF in broadening its international tax planning and wealth structuring services to individuals, family offices and corporate clients.”

PKF is now represented in Luxembourg by AFC Benelux, PKF Audit & Conseil as well as L’Alliance Révision who joined the PKF family earlier this year.

The process was highly commended by judges in the ‘Future of Legal Services Innovation – Private Practice’ category at the awards ceremony in London on 25 May.

Escalate has also been shortlisted for ‘Best collaboration initiative’ in The Lawyer Awards 2018. The winner of the category will be announced on Tuesday 26 June 2018.

The recognition that Escalate has gained in the legal industry follows its success at the British Accountancy Awards last October, where it was named ‘Innovation of the Year’.

Chris Clay, a founder of the Escalate process and partner at PKF Littlejohn, said: “It’s pleasing to see that commentators in the accountancy and legal professions are acknowledging the impact that Escalate is having on the dispute resolution market. We’re already helping businesses to recover more than £18 million that is currently locked up in commercial disputes, and we’re only just getting started.”

There are a number of tax incentives available to Small and Medium-sized Enterprises (“SMEs”), mainly regulated under the Special Tax Treatment Control Law (“STTCL”). We have looked at the definition of SME under the STTCL in the last month’s newsletter, and this month’s newsletter is a continuation from the last month, covering the tax incentives granted to those defined as SMEs under STTCL, such as tax reductions for SMEs, etc.

2. Main contents

(1) Tax reduction for SMEs

① Eligibility

SMEs engaged in certain types of business prescribed by the STTCL, such as manufacturing, wholesale and retail, construction, distribution, etc. (hereinafter referred to as “eligible business”) shall be eligible for the tax reduction.

② Calculation of the tax reduction amount

The tax reduction shall be calculated in accordance with the below formula until the tax year ending on or before December 31, 2020. Tax reduction rates for each type of eligible business are as shown in the below table.

Tax reduction = Tax liability * (taxable income (or base) arising from eligible business / taxable income (or base) arising from whole business) * reduction rate

* Small Enterprises refer to companies with an annual sales of no more than KRW 12 billion (differs among industries), and Medium Enterprises refer to SMEs which are not classified as Small Enterprises.

* Metropolitan area refers to Seoul, Incheon and Gyeongi-do.

③ Reduction limit

- If the number of regular employees in the current tax year decreased from the immediately preceding tax year: KRW 100 million subtracted by KRW 5 million per each decrease in regular employees (KRW 0 if negative)

- In all other cases: KRW 100 million

(2) Tax credits for investment by SMEs

If an SME invests in a machinery, etc. by the end of 2018, 3% of the investment amount shall be allowed as a tax credit against the corporate income tax liability determined in the year of investment. In case of an Enterprise of Middle Standing defined under the STTCL, 1 or 2% of the investment made in the same nature as above shall be allowed as a tax credit.

(3) Personal income tax reduction for new employees of SMEs

If a person aged between 15 and 29, a senior aged 60 or more, or a disabled person is employed by an SME by the end of 2018, that person shall be entitled to a 70% personal income tax reduction up to KRW 1.5 million annually for his/her employment income accruing up to the month in which 3 years have passed after the date of employment.

(4) Tax credits for social insurance contributions by SMEs

If the number of regular employees in the tax year ending on or before December 31, 2018 increased from the immediately preceding tax year, 50% (100% for youth employment, etc.) of the social security contributions (i.e. National Pension, Employment Insurance, etc.) borne by an SME shall be allowed as a credit against corporate income tax liability.

(5) Other tax incentives granted to SMEs

Other major tax incentives granted to SMEs are as follows:

- While a non-SME can deduct loss carryforwards against only 60%(70% in 2018) of the taxable income, an SME can deduct loss carryforwards against the entire taxable income.

- If a loss is incurred in any given tax year, an SME is entitled to a refund up to the corporate income tax liability determined in the immediate preceding tax year.

- In calculating the deduction limit for entertainment expenses, a non-SME is entitled to deduct at least KRW 12 million per year, whereas an SME is allowed to deduct at least KRW 18 million per year.

- For a non-SME, the deadline for corporate income tax installment payment is within 1 month from the due date for payment of corporate income tax, but for an SME, the deadline is extended to 2 months from the due date.

3. Concluding remarks

As seen above, SMEs are given much more tax incentives than non-SMEs. In order to take advantage of such tax incentives exclusive to the SMEs, it is imperative that applicability and criteria for each tax incentive be reviewed thoroughly. Further, it is worthwhile to check whether certain “sunset provisions” discussed above would be extended in the future.

In addition, to prevent the abuse of tax incentives mentioned above, the Korean tax laws have in place certain devices that precludes duplicate application of tax incentives, and have adopted the alternative minimum tax scheme, among many others. Also, if the SME is engaged in both the eligible business and non-eligible business, it should also be taken into consideration that each type of business must keep a separate accounting record, made mandatory under the Korean tax law.

Africa is surrounded by the Indian Ocean, Atlantic Ocean, Mediterranean Sea, SuezCanal, the Red Sea and Sinai Peninsula. Africa has a total of 54 countries including Madagascar and various island groups. The African economy is diverse and due to the presence of natural resources and the world's youngest population, it has the potential to grow at a fast pace. South Africa and Egypt are the two richest countries in Africa. In relation to the rest of the world, Africa is largely responsible for the mining of rare metals and precious stones, the supply of oil, agricultural products, livestock and coffee.

To download the current 2017/2018 Africa Tax Guide click here.

The West Africa meeting, which took place in the first quarter of 2018, was well attended with 10 partners from four countries – Nigeria, Ghana, the Gambia and Liberia.

Discussions at the meeting focused on matters affecting the sub-region, including:

• Regional cooperation and integration
• Regional training and technical support
• Peer review
• Benchmarking
• Strategic plan (3 year: 2018 – 2020), and
• Business development strategies

The meeting also discussed the economies of the respective countries and its effects on business performance. Finally, there was training on IFRS 9, 15 and 16. We look forward to hearing back from the next meeting which is scheduled to take place in Nigeria in August.

Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions.

CLICK HERE  and obtein this interesting document. 

This was my 23rd Indaba and the first as the Director | Head of Africa for PKF hotelexperts. As a hotelier, turned consultant, this, at least I thought, was no longer my market. Why am I
saying this? Tour operators and agents don’t engage consultants who work in our field, but I was fortunate enough to meet some owners and investors who certainly do. In conversation with these it became apparent how strong the synergies are between PKF hotelexperts and the PKF audit and tax advisory firms and that we should certainly seek to work closer
together.

Back to Indaba. Derek Hanekom, the old/new minister of tourism, who opened the event said: "Tourism already contributes about 8% to Africa’s Gross Domestic Product and employs 6.5% of the workforce. In 2017, a record 62 million people visited Africa – an 8% year-on year growth. However, this is only five percent of global tourists. "All the countries on the continent, to varying degrees, have the potential for exponential growth,"

With these figures in mind and with the experience PKF hotelexperts have in more established markets I am certain that we will be able to add a lot more value to the real estate economy on the continent as it too looks at the many different and exciting models available to work with hospitality assets.

When speaking about hotels, many people immediately think of very expensive five-star hotels and lodges. I am of the opinion that the real growth for Africa will be seen through two to four star hotels. I also am certain and support the development of more brands from Africa for Africa.

With the economic growth across our continent, travelers will need accommodation simply to do business. The opening of the skies and more liberal airline policies this will go hand in hand for main but also secondary cities. There are currently more than 75’000 rooms in the pipeline, meaning that they are either under construction or at least signed to be built. According to the various brands, 34’000 are to be opened by the end of 2019. Yet, construction of about 4’000 had not even commenced by quarter one of 2018. This goes to show that there are many issues with regards to the development of hotels in Africa. With the security and timeous availability of funding being one of the more obvious one. These issues make the need for decent advice more apparent, as all too often the very basics are ignored and the assembly of a complete and professional team to carry out the task is neglected. This is where PKF hotelexperts come in with our offering of services ranging from a bankable feasibility, operator selection, performance management through to exit strategy advice.

As a proud part of the PKF International Network we want to explore the synergies within the network for the benefit of all.

Nils Heckscher,

PKF Hotelexperts

Director | Head of Africa

Octagon Chartered Accountants, based in Johannesburg has 11 partners and provides a full range of audit and assurance, accounting, tax and advisory services to both private and public companies across a large range of sectors.

PKF International CEO, John Sim, said: "We are really pleased to welcome Octagon to the PKF family as we continue to expand and strengthen the PKF brand. PKF Octagon shares our value proposition of quality with integrity, and by adding them to the network we meet our strategic objective of having a presence in every major economic centre in South Africa".

Clifford Livingstone, Managing P­­­­artner of the rebranded PKF Octagon, said “the firm will retain its independence and the primary change will be in its adoption of the PKF brand as well as becoming part of a highly respected international network, with technical and training expertise”.

Under the Korean tax law, Small and Medium-sized Enterprises (“SMEs”) are granted a number of tax incentives, which are mostly regulated under the Special Tax Treatment Control Law (the “STTCL”) . Thus, in order to determine whether the tax incentives for SMEs would apply to a Korean company, it is important to determine whether a company falls under the definition of an SME, as defined under the STTCL. This newsletter will look at the criteria defining whether a company is an SME and will continue onto the next month, which will cover the various tax incentives granted to such SMEs.

2. Major Contents

(1) SME Eligibility

To qualify as an SME under the STTCL, a Korean entity must fulfill all of the following criteria:

① Type of industry

The SME shall not carry out services in the nature of providing entertainment, etc. as its major line of business.

② Sales level

The level of annual sales shall not exceed the specific threshold established for a group of industry sectors. Below is the table illustrating the various groups of industry sectors and the corresponding annual sales threshold for each group of industry sectors.

* The Type of industry and Classification shown above are in accordance with the Korean Standard Industrial Classification published by the Head of the Statistics Korea under the Article 22 of the Statistics Law.

③ Independence

The practical separation of management and ownership does not fall under any of the following:

- A company which belongs to a conglomerate subject to restrictions on mutual investment, etc. under the Monopoly Regulation and Fair Trade Act.

- A company held by the largest shareholder whose total assets are at least KRW 500 billion (including a foreign company), directly or indirectly owning 30 percent or more of the total outstanding shares of the company.

- In case of a related company which controls or controlled by a company subject to external audit, a company whose average sales calculated according to the Framework Act on Small and Medium Enterprises exceeds the annual sales threshold specified on the above table.

(2) Grace period provided to SMEs

A company which no longer qualifies as an SME due to an increase in sales, etc. shall be considered an SME in the tax year in which such SME fails to qualify as an SME, and in 3 following tax years.

3. Conclusion

Since the applicability of tax incentives is dependent on whether the entity is considered an SME, it is worthwhile to determine whether a Korean entity would fulfill the conditions to qualify as an SME. A foreign-invested company should focus primarily on the following when determining whether the entity would be eligible to apply for the tax incentives available to SMEs.

- Accurate identification of the Korean entity’s main industry sector and the annual sales threshold for each type of industry

- Total assets of the entity’s direct and indirect shareholders

The Act on External Audit of Joint Stock Companies (hereinafter “Current Act on External Audit”) applicable to the companies subject to external audit in Korea has been wholly amended to The Act on External Audit of Joint Stock Companies, etc. (hereinafter “New Act on External Audit”) on October 31, 2017, scheduled to be effective from November 1, 2018. Further, the Amendments on Enforcement Decree of the Current Act on External Audit is anticipated to be introduced in April 2018, expected to be effective from November 1, 2018.

Below is a brief summary of major contents of the Amendments on Enforcement Decree of the New Act on External Audit, which is expected to be effective from the fiscal year commencing on or after 2018.

Major contents

1) Expansion of the companies subject to external audit

While the Current Act on External Audit is limited in that it only applies to Joint Stock Companies, (“Chu-sik hoesa” in Korean), the New Act on External Audit will expand the companies regulated under the Current Act on External Audit to Limited Companies (“yu-han hoesa” in Korean). Moreover, to reflect the companies’ economic substance, sales amount has been added as an additional basis upon which to determine whether a company would be subject to external audit, in addition to total assets and liabilities and the number of employees.

Meanwhile, based on the premise that countries that have adopted IFRS such as EU, Australia, etc. do not necessarily distinguish a limited company from a joint stock company, the New Act on External Audit will not make any distinction between the two types of companies and will therefore apply to both the Limited Company and the Joint Stock Company.

However, certain investment vehicles that are established as limited companies shall not be subject to the New Act on External Audit. Such exclusion has been made on the basis that the Current Act on External Audit excludes investment companies established as joint stock companies regulated under Financial Investment Services and Capital Markets Act, Corporate Restructuring Vehicles regulated under Corporate Restructuring Vehicle Act, etc. from being subject to audit. Similarly, the Amendments on Enforcement Decree of Current Act on External Audit further expands the audit exemptions to investment limited companies or investment purpose companies (Joint Stock or Limited Company) regulated under Financial Investment Services and Capital Markets Act, and Special Purpose Vehicles (Limited Company) regulated under the Asset Backed Securitization Act, on the grounds that each type of companies are regulated under its respective regulations.

2) Appointment of Auditors

Listed companies and large-scale non-listed companies whose total assets exceed KRW 100 billion and whose representative directors own at least 50% of the issued shares shall be free to appoint their auditors for 6 years, and shall appoint an auditor designated by the Securities and Futures Commission for 3 years thereafter.

On the other hand, companies that have not undergone Inspection from the Securities and Futures Commission within the past 6 years shall be considered an exception to being subject to external audit. Also, companies with unqualified opinion on either the Audit or Review of the Internal Accounting Control System for the preceding 3 years that have committed to a change of the auditor after the 6-year grace period may opt to undergo an Inspection of the Securities and Futures Commission. Until the end of such Inspection, the appointment of an auditor may be deferred, and provided that there is no violation of the accounting standards, the company will not be subject to the appointment of an auditor for the next 6 years after the end of the Inspection.

3) Strengthening of the Responsibility borne by the Company for its Accounting Treatments

By minimizing the uncertainties in accounting treatments through applying prescribed procedures and methods, the regulations that govern the internal accounting control system, which secures transparency and consistency of accounting, are expected to be strengthened.

Specifically for listed companies, the certification for the operations of the internal accounting control system required from the external auditors has been raised from a review to an audit. Accordingly, based on its total asset, the listed company shall be subject to audit on its internal accounting control system starting progressively from 2019. If a company is not proactive in its attempt to enhance its internal accounting control system and is uncooperative to auditors in providing requested information, the auditors may terminate their engagement with such company. Moreover, the amendment also requires a listed company to adopt internal accounting control system of its consolidated entities and consequently, the non-listed subsidiaries of a listed company shall also be required to maintain and operate internal accounting control system, starting progressively from 2022.

Furthermore, the person responsible for reporting the internal accounting control system has been changed from the in-charge person to the representative director of the listed company. The internal accounting control system is also required to be reported in the annual general meeting of shareholders.

4) Others

The parent entity who has adopted the Korean Accounting Standards normally excludes its subsidiary who is not subject to external audit in its consolidation, but this is troublesome in that it is difficult to track abnormal intercompany transactions between the parent and the subsidiary. Consequently, the amendments have been made in a way that even if the parent has adopted the Korean Accounting Standards, the parent must consolidate its subsidiary who is not subject to external audit, just as it would under the K-IFRS.

Conclusion

Following the amendments of the Current Act on External Audit and related Enforcement Decree, there will be a number of changes made to the external audit environment. In case of Limited Companies, they should be careful not to be assessed a penalty and be forcefully designated an auditor by not following the amended regulations. Thus, in order to prevent such disadvantages and sanctions resulting from incorrect interpretations of the amended regulations, it is highly recommended to seek an accounting expert’s advice.

Santiago, Chile.- Last Wednesday, April 11 took place the Forensic Audit Seminar at Neruda Hotel. It was organized by PKF Chile and Universidad de Concepción. The topics addressed by each of the speakers were as follows:

• Mr. Jorge Badillo (President of the Latin American Federation of Internal Auditors - FLAI): Method for the Detection of Financial Crimes.
• Ms. Angélica Céspedes (Director of the Chilean Association of Corporate Compliance and Ethics A.G.): ISO 37.001 and other prevention mechanisms.
• Mr. Tomás Kosh (Financial Analysis Unit - Head of Inspection and Compliance Division): Corruption and Money Laundering.

The Seminar had a great response, more than 150 attendants from different sectors and government entities.  At the end of the activity, there was a panel discussion led by Mr. Héctor Osorio, Partner of PKF Chile, where attendants had an active exchange with speakers.

Picture 1: Rafael Romero (PKF Chile´s Partner), Víctor Alarcón (Universidad de Concepción) and Héctor Osorio (PKF Chile´s Partner).

Picture 2: Panel discussion.

Picture 3: ISO 37.001 and other prevention mechanisms presentation.

Generally, executives, unlike employees, have decision-making power over corporate activities. Therefore, the tax law has various restrictions on the recognition of executive-related expenses. For example, expenses incurred without a due process or legitimate reason by an executive with a decision-making right are not allowed as deductible for Korean tax purpose.

2. Main Contents

(1) Definition of Executives

According to Article 42 (1) of the Enforcement Decree of the Korean Corporation Tax Act, executives are referred to as persons engaging in the following duties:

1. All members of the board of directors, such as the chairperson, president, vice president, chief director, director representative, managing director and executive director of such domestic corporation and a liquidator;
2. A managing staff member or director of a limited partnership, joint-stock company, and limited-liability company;
3. The executive partner of a limited liability company
4. An Auditor
5. Other persons engaged in the duties similar to those specified in items ① through ④

The executives stipulated in ① through ④ above are the ones that must be registered under the company pursuant to the Korean Commercial Code. The ⑤ above is not an executive listed in the registration or articles of incorporation, but is the one who participates actively in management and actively participates in decision-making and execution of overall management or exercises a right to monitor accounting and other work-related matters. That is, regardless of being registered or member of the board of directors, if one engages in the foregoing duties, he or she will be deemed as an executive for Korean tax purpose.

(2) Remuneration of Executives

The remuneration paid to executives is the amount of salary, exclusive of bonuses and severance payment, paid by the corporation in exchange for its work and services in accordance with the delegated relationship, including salary, allowance, payment in kind, and other economic benefits. As a rule, these remunerations are deductible for tax purpose unless payment at issue is made by the appropriation of earnings.

However, even though the ceiling of the remuneration of executives is not determined per Korean tax law, pursuant to Article 388 of the Korean Commercial Code, as the ceiling of the remuneration for executives is supposed to be determined by resolution of the general meeting of shareholders in case it is not articulated in the articles of incorporation, any excess amount over the prescribed limit per either articles of incorporation or resolution of the general meeting of shareholders shall not be regarded as deductible for tax purpose.

In addition, in the event that the amount of remuneration paid to an executive is deemed unreasonably high for the compensation in light of the description of the job undertaken by the executive, the excess amount deemed unreasonable shall not be deductible for tax purpose. The criteria for judging whether the remuneration of executives is appropriate is as follows:

1. Whether or not it is a reasonable amount in light of the contents of the duties performed by the executive;
2. The level of the payment to the executives of comparable peer group (with comparable business size and within similar industry);
3. The level of the payment made to the employees of the same company;
4. Whether it is a significant and material amount in the light of the company's performance and scale

 (3) Bonus of Executives

Pursuant to the Korean Corporation Tax Act, the bonuses paid under the payment standard determined by the Articles of Incorporation, General Meeting of Shareholders, General Meeting of Partners, or the resolution of the Board of Directors are allowed as tax deductible. The main authoritative interpretations relating to the foregoing are as follows:

ㆍ Even if the amount of the executive's salary ceiling is specified at the general meeting of shareholders, if the payment standard for bonus is not specified but a company still pays bonuses to its executives, then such payment of bonus shall not be allowed as tax deductible.

ㆍ If a corporation determines the salary payment standard for executives, inclusive of bonuses, in such a way that it only includes the total salary ceiling for all executives by the resolution of the general meeting of shareholders, and if the bonus payment ratio being applied to employees is adopted when actually paying the bonus to the executives, then the bonus paid may be regarded as a deductible bonus for tax purpose as it is in accordance with the foregoing salary payment standard, which is inclusive of bonus.

The bonus paid by the corporation to the executives through appropriation of earnings shall not be allowed as deductible, except for the specific cases such as performance bonus paid by treasury shares through employee stock ownership association.

(4) Other Employee Fringe Benefits and Expenses of Executives

Any reasonable amount of fringe benefits and other expenses of executives, in light of social norm and customary practice of society, is deducted for corporate tax purpose (Same with the standard applicable to employees)

(5) Severance Payment of Executives

Severance payment made to an executive as a result of the termination of his or her service, is allowed as deductible to the extent that: 

1. the amount determined by the Articles of Incorporation if the amount to be paid as severance payment, inclusive of any severance bonus, is set forth in the Articles of Incorporation;
2. In cases other than ①, Total annual salary x 1/10 x years of service

Even though the phrase “the amount is set forth in the Articles of Incorporation” above means that the direct amount is prescribed for each executives in the Articles of Incorporation, the cases where the criteria for calculating the severance payment of executives are described in the Articles of Incorporation are also included. If there is separate severance payment standard delegated by articles of incorporation, the amount above means the amount in accordance with such severance payment standard. Actually, severance payment made to executives whose service has yet to be terminated should actually be deemed as loan to such executives till the date of termination, which is not related to his/her duty at the company, and, therefore, deemed interest revenue should be recognized by the company for Korean tax purpose. For reference, executives do not qualify as employees under the Labor Standards Act, and therefore, except for certain cases, any interim settlement of severance payment to executives shall be deemed as loan to such executives, which is unrelated to his or her service.

 3. Implications

Any expenses paid to executives shall be allowed as deductible to a limited extent compared to expenses paid to employees as set forth above, and the summary of deductibility of executive-related expenses is as follows:

The agreements were to hand the accounting records of the BOC, sports associations and Bahrain-based GCC Sport Organising Committees to PKF Al Bassam & Al Nemer. Auditing company Talal Abu Ghazaleh has been assigned to check on the accounts.

BOC general secretary Abdulrahman Askar was in attendance to sign both accounts, which were attended by Majed Haleem of PKF Al Bassam & Al Nemer, and Talal Abu Ghazaleh & Co. senior audit manager Hani Da’asan.

Askar said the agreements were in accordance with the financial and administrative regulations being enforced at the Olympic Committee. They were put up for public tender and the most appropriate bids were selected based on their reputation in the field of competence.

Askar said he looks forward to these two agreements as they will contribute to ensuring the smooth operation of all of the procedures, data and financial flows in accordance with the Financial Regulations of the Bahrain Olympic Committee and the sports federations.

On their part, Halim and Da’asan expressed their gratitude and appreciation to the Bahrain Olympic Committee and wished their partnerships to be fruitful, and help the committee in conducting its financial procedures in accordance with the financial regulations.

For more information click here.

Thida & Partners Limited, a leading accounting and advisory firm, has joined the PKF International family of independent accounting firms.

Thida & Partners Limited, based in Yangon, has 2 partners, provides a full range of assurance, tax and advisory services to both private and public companies across a range of sectors. The firm specialise in manufacturing, power plant and mining industries. It has a full service team with global experience. This addition expands the PKF network’s presence to cover South East Asia.

PKF International CEO, John Sim, said: "We are really pleased to welcome Thida & Partners Limited to the PKF family as we continue to expand and strengthen the PKF brand. Thida & Partners Limited fits well with our value proposition of Quality with Integrity, and also meets our strategic objective of global coverage with quality firms".

Says Thida Cho Win: “I am honored that our firm has been accepted as the newest member of PKF International. PKF is a respected and widely recognised brand in global accountancy and this key strategic move reflects the growing importance of supporting our clients as they expand internationally. There is significant need for support in these service areas, providing an opportunity for growth and to enhance services throughout Myanmar and internationally. I look forward to a highly productive relationship in the coming years.”

“Henry’s broad range of experience and technical expertise is an invaluable cog in unlocking and enhancing the value we create with our services that is vital for the Firm’s continued growth and future success.” said David Leong, Managing Partner in PKF Hong Kong, “The Firm appreciates all of Henry’s contributions and, together, look forward to building a stronger dedicated team of tax professionals to take on the rapidly evolving marketplace.”

Henry joined the Firm as senior tax manager in 2016 and has spent the majority of his career servicing clients in the Hong Kong and China markets, including publicly-listed companies, multinational organisations, and foreign enterprises intending to invest or do business in the Greater China region. He brings to the table a breadth of professional skillsets that will serve to further drive our “Global Reach, Local Touch” service mantra.

The appointment of Henry will complement the Firm’s existing capabilities to deliver solutions to our clients, our business and the wider economy. Henry will work closely with David Cho, Head of Tax Department in PKF Hong Kong, utilising their collective expertise for the continued growth of PKF’s tax practice in Hong Kong and China.

BWF is located approximately 30 miles east of Londonderry in Northern Ireland. Since February 2016, when ERG acquired BWF, ERG and TCI have worked together to construct, commission and accredit the largest distinct wind farm in Northern Ireland with a capacity of 47.5MW. The wind farm, which was fully commissioned in February 2018, is accredited to receive 0.9 ROCs per MWh.

As lead advisers for the transaction, Richard Harris and Andy Thornhill from PKF Francis Clark, worked closely with ERG and TCI to approach the market and manage offers from a number of potential equity and debt providers. Throughout an efficient 3 month disposal process, offers from the leading parties were developed to the point where Greencoat were ultimately selected as the preferred party.

Wes Dickson, Finance Director of TCI “We have a long established successful relationship with the PKF team who provided TCI and ERG with comprehensive and timely advice in preparation for and throughout this important disposal process. Continuity of a senior, trusted advisory team throughout the transaction ensured we secured engagement with key investors in the market, leading to the delivery of a market leading result which exceeded our expectations.”

Richard Harris at PKF Francis Clark commented, ” We were delighted to work with ERG and TCI to bring this high quality asset to market and conclude a deal which crystallises the value from years of hard work for their respective teams. Market developments such as the transition to I-SEM in Northern Ireland and Brexit created challenges that were successfully mitigated in ensuring a clean and good value transaction for all parties.”

The acquisition was funded by UKW’s revolving credit facility (£100 million) plus an increase in UKW’s term debt facility with Commonwealth Bank of Australia (£50 million) plus reinvestment of portfolio cash (approximately £13 million). The new tranche under the term debt facility has a term of 7 years. Following the acquisition, UKW’s total borrowings amount to £415 million (£150 million under the term debt facility plus £265 million under the revolving credit facility), equivalent to 27% of Gross Asset Value (gearing limit 40%).

Andy Killick, Partner and Head of Corporate Finance at PKF Francis Clark added, “The successful disposal of Brockaghboy Wind Farm at a market leading price illustrates the benefit of working with PKF’s award winning corporate finance team. The process benefited from our global network of investors but also the local onshore wind and Northern Ireland sector expertise of the transaction team, to ensure a fantastic result for our client.”

The formation of a PKF China Desk in Duisburg in the recent years has already led to the successful development of a country focus area. In order to provide comprehensive services to Russian investors planning to invest in Germany or already having done so, a PKF Russia & CIS (Commonwealth of Independent States) Desk was set up in Duisburg as a second country focus area. It aims to support not only Russian companies but also investors from the former independent constituent republics of the Soviet Union.

PKF Russia & CIS Desk supports companies and individuals from Russia and CIS on their way to Germany and advises clients on complex transactions as well as on individual issues. Due to the presence of native speakers operating in different fields and the professional expertise of our country desk, we can offer a wide range of best possible professional, linguistic and cultural services for our clients.

For any questions or comments, please contact Christian Müller-Kemler or Anastasia Suslova.  

Where: Casa Piedra - Santiago – Chile

When: October 29, 2018 

 For more information and pre inscription form, you can use the following link: https://www.sanfins.cl/ 

Trust in the right people. Trust in us!

Av. Providencia 1760, Of. 603, Floor 6

Santiago, Chile

Tel.: +562 2650 4300

pkfchile@pkfchile.cl

www.pkfchile.cl 

Overview

 In a workplace setting, holidays and leaves are essential in that they grant employees their rightful rest and provide employees the basic necessities as human beings. On that note, holidays and leaves in Korea can generally be divided into two categories: 1) statutory holidays and leaves in which the conditions and effect of the use of holidays and leaves are strictly regulated under the law; and 2) contractual holidays and leaves in which the employer and the employees agree on the terms of the use of holidays and leaves. The statutory holidays and leaves consist of weekly holidays, annual leaves, maternity leaves, menstruation leaves, etc., while the contractual holidays refer to public holidays, annual company foundation day, summer vacation, congratulatory and condolence leaves, etc.

Main Contents

 (1) Weekly holidays

 An employer should grant an employee who has worked all of his/her weekly working days a weekly holiday with pay at least once a week. Such weekly holiday does not necessarily have to fall on a Sunday, but the employer has to pay an additional 50% of the standard wage rate if the employee works on the weekly holiday.

 (2) Annual leave

An employer should grant an employee who has worked at least 80% of his/her working days within a year 15 days of annual leave with pay. An employee who has worked for three years or longer shall be granted an additional day in paid leave on the fourth year, and shall add an additional day every two years thereafter. The number of annual leave with pay however shall not be more than 25 days.

An employer should grant annual leave with pay on a date designated by the employee and shall pay the employee the standard wage rate as specified under the employment regulations. However, in case where granting the annual leave on a date designated by the employee causes significant lapse in the employer’s business operations, the employer has the right to make changes to the date of the employee’s annual leave.

Moreover, if the employee does not use the annual leave until it expires despite the employer’s conscious efforts to encourage the employee’s use of annual leave, then the employer is not obligated to compensate for such unused leave.

 (3) Maternity leave

An employer shall grant a pregnant employee 90 days of maternity leave with pay. As the aforementioned ‘90 days’ refers to 90 calendar days, weekends and other kinds of holidays that fall during the 90-day period must be taken into account when counting the 90 days. Moreover, if a pregnant employee uses more than 45 days of her prenatal period as maternity leave, she may use up to 45 days as maternity leave in the post-natal period. The employer shall pay the employee’s wages for the first 60 days of the leave period, while the employment insurance fund will be responsible for the employee’s wages for the remaining 30 days. The days in excess of 90 days of maternity leave may be granted without pay at the employer’s discretion.

Nevertheless, 90-days’ worth of pay during maternity leave may be entirely paid by the employment insurance fund, provided that the employer meets the conditions to qualify as a “Company Eligible for Preferential Support”.

 (4) Menstruation leave

An employer shall grant a female employee one day of menstruation leave per month upon her request. Menstruation leave may be unpaid.

 (5) Childcare leave

An employer should grant childcare leave, if an employee requests for a period of leave to nurture a child aged eight or under, or a child who is in his/her 2^nd grade or below in an elementary school. The duration of childcare leave should not be more than one year and be included in the employee’s period of continuous service.

An employer should neither dismiss nor treat the employee on childcare leave in an unfair manner on account of taking childcare leave. The employer also should not dismiss the worker during the childcare leave period. At the end of the leave period, the employer should reinstate the employee in the same position he/she occupied prior to the leave or any other position that pays the same level of wages as the position he/she held before the leave.

 (6) Labor Day

The Labor Day, May 1^st, should be granted to workers by law as the statutory holidays.

Conclusion

An employer is responsible for ensuring that the employees are granted holidays and leaves as specified under the related laws. Inclusive of such employer’s responsibility, the conditions of employment must be determined on an equal footing between the employer and the employee, and according to the employees’ free will. The conditions of employment so determined must surpass those of the statutory labor standards, and if the conditions of employment fail to meet the statutory labor standards, they shall not be effective even if they have been decided by the employee’s free will.

All in all, given that the determination of the conditions of employment may require a review from the legal perspective, it is highly recommended to seek a legal expert’s advice.

The process of filing tax base and tax liability thereof to a relevant tax office often involves errors such as mistakes or omissions due to the highly diversified transactions and the complexity of tax law. In this regard, Korean taxpayers are allowed to correct such errors by virtue of filing an amended return or a claim for rectification pursuant to the Basic Law for National Taxes.

Main Contents

(1) Amended Return (returns with increased tax liability)

Those taxpayers who timely filed their tax returns by the statutory deadline, which is within three months from their fiscal year-end, are entitled to filing an amended tax return and allowed reasons for filing it shall be as follows:

1. When the amount of tax base and tax liability thereof stated in the original tax return filed falls short of the amount that should have been declared had the taxpayer properly complied with the relevant tax law.  

2. When the amount of negative tax base (net tax loss) and tax refund thereof stated in the original tax return filed exceed the amount that should have been declared had the taxpayer properly complied with the relevant tax law.

3. Apart from (1) and (2) above, if an incomplete declaration was made due to the reasons prescribed in the presidential decree such as omissions in the process of book to tax adjustment or omissions by withholding agent/obligor in the process of settlement. (exclusive of cases where taxpayers are able to file a claim for rectification)

Those taxpayers who wish to file an amended return should prepare and submit a revised tax base declaration form within the statute of limitation, which is generally 5 years.

(2) Claim for Rectification (returns with decreased tax liability)

Those taxpayers who timely filed their tax returns by the statutory deadline, which is within three months from their fiscal year-end, are entitled to filing a claim for rectification and allowed reasons for filing it shall be as follows:

1. When the amount of tax base and tax liability thereof stated in the original tax return filed exceeds the amount that should have been declared had the taxpayer properly complied with the relevant tax law and therefore accurately filed the original return

2. When the amount of negative tax base (net tax loss) and tax refund thereof stated in the original tax return filed falls short of the amount that should have been declared had the taxpayer properly complied with the relevant tax law and therefore accurately filed the original return

Those taxpayers who wish to file a claim for rectification should prepare and submit a rectification claim form within 5 years from the statutory deadline for the original tax return (in case the extended deadline is granted, such extended deadline) and the head of tax office to which such claim is filed should notify the result of his review to the taxpayer within 2 months from the date the claim is filed.  

Implications

As for the amended tax return, there will be no case where tax liability amount is reduced as it should be filed when tax base and tax liability thereof are expected to increase. That said, depending on the timing of filing the amended tax return, there will be some abatement in penalties such as penalty for under-reporting of tax liability or penalty for over-reporting of tax refund, except for the case where an amended tax return is filed in anticipation of additional assessment by tax authorities.

1. In case an amended return is filed within 6 months from the statutory deadline: 50%

2. In case an amended return is filed after 6 months but within 12 months from the statutory deadline: 20%

3. In case an amended return is filed after 12 months but within 24 months from the statutory deadline: 10%

On the other hand, a claim for rectification has a bearing on the protection of the taxpayer's rights and interests and cannot be exercised when the allowed filing period stated above expires. Therefore, if it is found that there is a mistake or omission in the tax base and tax liability of already filed return for any prior years, it would be desirable to promptly discuss with tax experts to correct it.

• New tax regulation establishes controls for non-profit entities

There is a clear interest of the National Government, headed by the Tax Administration to know the details of its operations and maintain greater control over the entities belonging to the special tax regime.

In Colombia there are two regimes in the income tax, the generality is the ordinary regime that taxes 33%, and the special regime that pays the tax at 20%, and in exceptional cases for this regime, when the annual surpluses are reinvested in development of activities of its corporate purpose, will be exempt from tax gain.

This second regime can be accessed by non-profit entities that comply with all the requirements contemplated in the new regulations that apply as of January 1, 2017.

The Non-Profit Entities - ESAL in Colombia, are taxpayers of the income tax and to be considered of the special tax regime these corporations must:

 i) Develop designated meritorious activities in education, health, culture, science and technology, or activities to protect the environment.

(ii) That said activities are of general interest and that the community has access to it,

(iii) That their contributions are not reimbursed or their surpluses are distributed directly or indirectly at any time.

Entities that intend to be qualified in the Special Tax Regime, must register via WEB in the application provided by the Tax Directorate and send the required documentation that supports their membership to this regime, likewise they must update it annually within the first three months of every year. Not sending the information or not updating it within the established deadlines will be one of the causes to exclude these entities from the special regime.

•  As of the taxable year 2017, taxpayers of the Income Tax obliged to keep accounts with income of more than USD $ 523,000 must submit the fiscal conciliation report.

The fiscal conciliation will have full evidentiary value and must be retained for the term of finality of the income tax return, that is, 3 years.

Colombia adopted in the recent tax reform (2016), an interrelation between accounting information under international standards and tax information.

Thus, a new formal obligation is born to maintain a system of control or conciliation whereby the taxpayers of the income tax who keep accounts must register the differences that arise between the application of the normative technical accounting frameworks and the provisions of the National Statute Tax.

The fiscal conciliation must contain the information of all the accounting items and the fiscal bases as well as the differences that arise between them both at the level of detail and at the level of the report. The first is an autonomous taxpayer control that, as its name indicates, explains each difference, and the second is a consolidated report that becomes an annex to the income tax return.

Around 1,000 companies enter the Awards each year, making it widely acknowledged as the most comprehensive research into employee engagement across the UK.

Places in the rankings are determined by results of an extensive staff survey measuring seven key areas including Leadership; Personal Growth; Team; and Giving Something Back alongside a review of pay, benefits and work-life balance. Ranked 64th in the small-sized business category, PKF-FPM attained the maximum 3 Stars accreditation for ‘extraordinary’ levels of engagement. PKF-FPM were the only independent Northern Ireland firm to be recognised in their category.

The glittering Awards Gala Ceremony, hosted by I’m a Celebrity – Get me out of Here! Now! T.V. presenter, Mark Durden-Smith, took place on Wednesday evening 21 February 2018 at Battersea Evolution, Battersea Park in London. PKF-FPM Staff Director Teresa Campbell and Managing Director Feargal McCormack received the prestigious award on behalf of PKF-FPM Accountants.

On taking their place in this year’s Sunday Times Top 100 rankings, PKF-FPM founder and Managing Director, Feargal McCormack, stated that he was “humbled and overjoyed for the recognition of the collective PKF-FPM team”. He added “Our goal is to foster a culture that supports greatness, we strive to attract and retain the brightest and best and to inspire and develop the emerging leaders of tomorrow. PKF-FPM has been successful in managing talent and developing a strong client focused business team, to ensure excellence in service delivery at all levels.”

A very excited Staff Director Teresa Campbell added: “inclusion in The Sunday Times 2018 Top 100 Best Small Companies to work for in the UK, means that PKF-FPM Accountants has now been recognised and acknowledged as an exemplar employer in a variety of national Awards for the fourth successive year.”

The Sunday Times Top 100 accolade, when combined with the recent successes at the British Accountancy Awards 2017 – Mid-Tier Firm of the Year, Overall Firm of the Year at the Irish Accountancy Awards 2017 and The Irish News Workplace and Employment Awards 2017 Managing Talent Award, provide PKF-FPM with the opportunity to celebrate a quadruple crown of significant wins in the past 12 months.

Feargal and Teresa were joined at the London Awards Ceremony by PKF-FPM HR Manager Ciara McFerran and Caroline Preston, PKF-FPM Business Development Manager. ​

www.pkfuruguay.com.uy

We also launched the LinkedIn institutional page of PKF Uruguay where you can access basic information about the Firm and the profiles of our professionals. You can follow us to be aware of the updates by entering the following link:

https://uy.linkedin.com/company/pkf-uruguay

Finally, we launched the institutional Facebook page of PKF Uruguay to keep in touch in a more relaxed way. You can see the publications, photos and videos and "like" by entering:

https://www.facebook.com/PKFuruguay/

We invite you to visit it!

PKF Uruguay

Auditores - Asesores de Negocios

Tel. (598) 2902 0597 - Fax. (598) 2902 3642

Colonia 993 P. 4 - CP 11.100 - Montevideo - Uruguay

www.pkfuruguay.com.uy

As Insurance markets globally are undergoing a radical change with the introduction of regulatory requirements such as IFRS and Solvency II, there is a growing demand for technical expertise to address these requirements.

Jabran Noor, who is a Fellow of Society of Actuaries, USA and Fellow of Institute of Actuaries, UK has recently joined as Director within the Riyadh office. He will be focusing on actuarial work within the region and beyond. He brings with him over 19 years of experience working as an actuary with companies in Australia, Bahrain, United Arab Emirates and Pakistan. He has worked with companies such as Munich Re and Milliman.

The actuarial practice will be able to offer services in the following areas: 

• Loss reserving and validation of reserving models
• Review of actuarial calculations
• Review of technical documents
• Financial business modelling
• Actuarial calculations under IAS 19
• IFRS 17 implementation
• Regulatory compliance
• Risk Analysis and Enterprise Risk Management (ERM)
• Data analytics and predictive modeling

PKF AlBassam & Co will engage in discussions with other PKF member firms on how to efficiently leverage the actuarial expertise within the PKF brand.

“Nikki, Ryan, and Chris have all contributed greatly to PKF Texas, and we are proud of their achievements,” said Kenneth Guidry, CPA, President, “These are important milestones in their respective careers and for the firm’s consistent success.”

Homratsamy has spent the majority of her career serving clients in the middle market, including a number of closely-held and publicly-traded companies in a variety of industries including manufacturing and distribution, oilfield services, and technology. She joined the firm in 2010.

Istre has extensive experience in providing external audit services to domestic and international businesses in the areas of real estate, manufacturing and energy services for both the public and private sector.He joined PKF Texas as an Associate in 2000.

Hatten’s experience includes audit and financial consulting for publicly owned and privately held businesses. Areas of industry concentration include power generation, oilfield service, midstream energy, hospitality, manufacturing and software development companies. He joined the firm in 2006.

Hutchinson and Bloodgood has prior experience with the PKF network and saw great value from this relationship. The firm works with many multinational clients and the alliance with PKF International will enable HBLLP to better support these clients.

Richard Preciado, Managing Partner, explained, “We are committed to producing quality work by going the extra mile to achieve great results for our clients. We have seen significant growth over the years with an increasing number of international clients. PKF is a respected and widely recognized brand in global accountancy and together we will be able to better serve these clients. We’re excited to be part of such an important global firm.”

John Sim, CEO of PKF International, added: “We are delighted that Hutchinson and Bloodgood LLP will continue to be a part of PKF in North America. They are a highly respected accounting firm with numerous international clients. They are just the type of firm we want as part of our practice. They are dynamic and ambitious with an emphasis on quality.”

Preciado concluded: “This union meets our strategic objective of global coverage with quality firms. We share a strong focus on people and clients. It is a great fit for us.”

L’Alliance Révision, incorporated in 1994, is regulated by the Luxembourg Financial Regulator (CSSF) and the Institute of Auditors (IRE). It has a team of qualified multilingual staff from diverse multicultural backgrounds and delivers a high level of accounting and consulting services to its clients both at a local and international level.

L'Alliance Révision, based in Luxembourg, has three partners and provides assurance and tax compliance services for both private and public companies across a range of financial and commercial sectors. The firm was previously a member of Primeglobal. This addition expands the PKF network’s presence to cover all Benelux countries.

PKF International CEO, John Sim, said: "We are really pleased to welcome L'Alliance Révision to the PKF International network as we continue to expand and strengthen the PKF brand. L'Alliance Révision fits well with our value proposition of Quality with Integrity, and also meets our strategic objective to recruit firms with significant practices that cover the main Luxembourg commercial centre".

Bishen Jacmohone, the Partner of L'Alliance Révision explains “It is clear that by becoming a member of the PKF International Family, we have made the right choice in designing a path towards expansion. We share the business model of passion, teamwork, clarity and integrity. This is a great fit and a bright future”.

L'Alliance Révision will rebrand as PKF L’Alliance Révision during 2018.  

Accountants Hold Transfer Pricing Workshop

Tuesday, January 30^th and Wednesday, January 31, 2018 Liberian accountants in public practice and their clients gathered at the Monrovia City Hall, 9 AM to 5 PM each day for a Transfer Pricing Training Workshop. The workshop has been organized by PKF Liberia (a leading firm of Certified Public Accountants in Liberia) in collaboration with PKF Kenya. The two expert facilitators of the workshop were Mr. James Mulili, Director for Taxation at PKF Kenya and Mr. John Magu, Senior Manager for Taxation, also at PKF Kenya. Senior level representatives of the Liberia Revenue Authority (LRA) were present at the sessions of the Transfer Pricing (TP) workshop.

What is Transfer Pricing (TP)?

Transfer Pricing is a trending taxation issue worldwide. It has to do with prices that multinational enterprises (MNEs) charge for goods and services delivered to their subsidiaries and associates in other countries. How such goods and services are priced between members of the same multinational enterprise can have a significant effect on taxes that are paid by either the seller or the buyer. One variation of such Transfer Pricing practices is that a member company of a multinational located in a country with zero taxation (e.g. Dubai or Saudi Arabia) or in a country with low taxation regime (e.g., Cayman Island, Ireland, Mauritius, etc.) sells goods and/or services in a country where enterprise profits are taxed.

The item sold to the member company in a country with a high taxation regime may be deliberately priced significantly higher than would obtain if the receiving company had bought the items in question (goods and/or services) from an unrelated party.  When this is done, the group of companies, taken as a whole, benefits in two ways. Firstly, the revenue of the seller is either not taxed at all (e.g., in Dubai, Saudi Arabia, etc.); or is taxed at a low rate (e.g., in Cayman Island, Ireland, Mauritius, etc.) Secondly, because the price at which the item is sold to the buyer is high enough to depress the taxable profits of the buyer to a lower level than would otherwise apply if the same or a comparable product were obtained from an unrelated party. Alternatively, a seller in a high tax country may sell goods or services at a lower rate than would apply if the same or similar transaction were between unrelated parties. Either way, practically the same profit shifting between or among group members is achieved.

This type of product pricing within the same multinational group that has subsidiaries in various countries all over the world is what is technically referred to as Transfer Pricing.  It refers to how goods and services are priced between related parties, i.e., between a buyer located, say, in Liberia that is a member of the group of companies, from a seller in another country that is also a member of the same group of companies. Many multinationals adopt and follow Transfer Pricing practices that are fair and above board. However, there are also many others that adopt and follow Transfer Pricing practices whose sole or principal purpose is aimed at shifting taxable profits from countries with less favorable tax regimes to those with more favorable regimes.  Where this occurs, it has the tendency to undermine the revenue collection efforts of developing economies like Liberia.

In recent times the Organization for Economic Cooperation and Development (OECD) has spearheaded an international movement to effectively deal with unfair Transfer Pricing practices. Towards that end the OECD has over the years, particularly since 2003, developed a series of guidelines to help developing economies deal effectively with harmful Transfer Pricing practices that are technically referred to as tax Base Erosion and Profit Shifting (BEPS) Action Plans. 

On November 11, 2016, under an official Gazette of the Government of Liberia of that date, the Liberia Revenue Authority (LRA) promulgated the Liberia Income Tax Transfer Pricing Regulations 2016. The regulations came into effect on July 01, 2016. It is, in effect, Liberia’s tax law on Transfer Pricing (TP) practices. Upon issuance of that Regulation, the Liberia Revenue Authority (LRA) has joined other tax administrators around the world, particularly in developing economies in efforts to tackle TP practices that erode the tax base of developing economies such as Liberia. However, the Regulation mentioned above is new to affected taxpayers in Liberia. This is where PKF Liberia has stepped in. PKF Kenya has had a vast experience in Transfer Pricing (TP), not only in Kenya but also in much of Eastern and Southern Africa. In consequence, PKF Kenya has emerged as a Transfer Pricing expert and authority in Africa. It is on that basis that PKF Liberia has collaborated with PKF Kenya in spearheading the Transfer Pricing workshop earlier referred to. With initial back‑office support provided by PKF Kenya, PKF Liberia will be happy to provide Transfer Pricing tax filing and Transfer Pricing Policy development services to affected taxpayers in Liberia. These two tax filing documents are required by the LRA Regulation earlier referred to above.

PKF Liberia and PKF Kenya are member firms of PKF International, a global association of firms of professional accountants with 440 offices situated in five continents in over 150 countries around the world. The PKF International network is ranked among the top ten networks of professional accountants in the world.

Posted in the New Democrat Newspaper 1 February 2018

On December 19, 2017, the first amended tax law of the new government was promulgated. In the following, we will take a look at the amended tax laws, the major amendments to the Corporate Tax Law, Income Tax Law and Law for Coordination of International Tax Affairs.

Main Contents

Establishment of the new tax bracket applicable to the highest level of tax base (Article 55 (1) of the Corporate Tax Law of Korea (the “CTLK”))

The CTLK amended on December 19, 2017 (the "Amended CTLK"), has raised the highest tax rate applicable to the tax base higher than KRW 300 billion from 22% to 25% to levy more taxes on conglomerates. These amendments will be effective for the fiscal year beginning on or after January 1, 2018.

(*) 10% of corporate tax shall be additionally levied as local income tax

Decrease the limit of loss carryforward (Article 13 of the CTLK)

The domestic corporation, excluding SMEs or the corporations that are implementing the reorganization plan, can deduct the loss carryforward with the applicable limit calculated by multiplying the tax profit by a fixed rate determined by law. Under the Amended CTLK, the deductible limit has been reduced from the previous limit of 80% to 70% in the fiscal year beginning on or after January 1, 2018 and to 60% in the following years.

Adjustment of deductible limit of corporate vehicle-related expenses (Article 27-2 of CTLK)

Under the CTLK, the deduction limit for depreciation on corporate vehicle is KRW 8 million per year. However, the amended CTLK requires that the above amount be pro-rated on a monthly basis according to the retention period (the number of months), taking into account the equity between the vehicle that has been kept throughout the year and the vehicle that has been held for a certain period of time during the year (For example, the deductible depreciation limit for a vehicle that has been held only for 6 months shall be KRW 4 million). These amendments will be effective for the tax returns to be filed on or after January 1, 2018.

Addition of employment succession clause to the requirements for the qualified merger and division transactions (Article 44 (2) and Article 46 (2) of the CTLK)

In order to defer taxation on corporate capital gains arising from the merger and division of corporations, it is necessary to satisfy the following conditions: (1) business operation period requirements, (2) permanent equity requirements, and (3) business continuity requirements. The amended CTLK adds the succession of employment condition to the foregoing requirements. That is, a merger corporation should take over more than 80% of its employees as of one month prior to the date of merger and division registration and maintain this number till the end of the fiscal year. In addition, the above employment succession requirements are included in the follow-up (post-merger) management regulations. The amendment will be effective for merger or division transactions taking place from January 1, 2018 onwards.

Adjustment of the highest marginal tax rate for Individual income tax (Article 55 (1) of Individual Income Tax of Korea (the “IITK”))

The IITK amended by Law No. 15225 dated December 19, 2017 (the "Amended IITK") adjusted the income tax rate to improve taxation equality and income redistribution. The amendment will be applicable to incomes generated from 1 January 2018 onwards.

(*) 10% of individual income tax shall be additionally levied as local income tax

Strengthening taxation on capital gains incurred by major shareholders as a result of stock transfer (Article 104 (1) of the Income Tax Act)

Under the IITK, a capital gain tax of 20% (22% when including local income tax) is applied to capital gains derived from the transfer of shares held by major shareholders. However, in order to strengthen taxation on high-income or high-net-worth individuals, the Amended IITK newly introduces the capital gain tax base of more than KRW 300 million and this will entail the raise in the corresponding tax rate from 20% (22% when including local income tax) to 25% (27.5% when including local income tax). The amendment will be applicable to transfers taking place on and after January 1, 2018, but for the transfer of shares of SMEs, the amendment will be applied to all applicable transactions on and after January 1, 2019. For reference, shares other than those of SMEs owned by major shareholders for less than one year shall still be subject to a 30% tax rate (33% when including local income tax) under the Amended IITK.

Increase in withholding tax rate on income of dispatched workers belonging to a foreign corporation (Article 156-7 of the IITK)

Under the IITK, a domestic corporation that employs workers belonging to a corporation domiciled in foreign countries shall withhold 17% (18.7% when including local income tax) of the compensation being paid to the foreign corporation for the service of such employee. For reference, the withholding obligation only applies to domestic corporations which satisfy the requirements such as the total amount of salaries paid to foreign corporations, the level of sales, the level of total assets, and required industry stipulated in the Enforcement Decree of the IITK. The Amended IITK raised the withholding tax rate on dispatched workers from 17% (18.7% when including local income tax) to 19% (20.9% when including local income tax).The amendment will be applicable to service transactions taking place on and after July 1^st 2018.

Adoption of BEPS Action 4: Limiting Base Erosion Involving Interest Deductions and Other Financial Payments into Korea tax law (Article 15-2 and Article 16 of Law for Coordination of International Tax Affairs (the “LCITA”))

The Amended LCITA, which was amended by Law No. 15221 dated December 19, 2017, stipulates that if the net interest expense for the amount borrowed by a domestic corporation from its foreign affiliates exceeds 30% of the adjusted income amount (the amount of income before subtracting the depreciation cost and the net interest expense), the excess amount is not deductible for the Korean tax purpose so as to prevent multinational corporations from avoiding tax by excessively deducting interest costs, which is exactly what Action 4 of OECD BEPS states. The amendment will be effective for the fiscal year beginning on or after January 1, 2019.

For reference, the interest expense on borrowed money from foreign affiliates is also subject to the thin capitalization pursuant to Article 14 of the LCITA (see our newsletter in July 2017). If both thin cap and the foregoing deduction limit are applicable, whichever produces larger amount of non-deductible amount shall apply.

In order to liquidate a foreign invested company in Korea, liquidation procedures stipulated under the Commercial Law, Tax Laws and Foreign Exchange Transaction Regulations must be strictly followed. The liquidation procedures would normally take 3 to 4 months, provided that there are no hiccups during the course of receivable collection and realization of assets into cash. Below you will find a brief look at the liquidation procedures for foreign invested companies in Korea.

Major Liquidation procedures

(1) Shareholders’(or Members’) resolution for dissolution

To place a foreign-invested company into liquidation, a Shareholders’(or Members’) resolution for dissolution must be passed first and foremost. Once the resolution has been passed, the foreign-invested company is required to register the dissolution of the company with the relevant registry office having jurisdiction over the head office within 2 weeks (or 3 weeks for branch offices, if applicable).

(2) Appointment of a liquidator and notice to creditors

A foreign-invested company must appoint a liquidator after the resolution for dissolution has been passed. Following the appointment of the liquidator, the foreign-invested company is then required to register the appointment of the liquidator with the relevant registry office and complete the registration requirements for the appointment of the liquidator.

Within 2 months from the appointment, the liquidator is ordered to set a specific period that lasts 2 or more months (“Covered Period”). During such Covered Period, the liquidator issues public notices to the creditors about their claims against the foreign invested company and makes the creditors aware that if they fail to claim within the Covered Period, their claims against the company shall no longer be included in the liquidation. The liquidator issues the notices no less than twice in a newspaper designated under the articles of association of the foreign invested company. Meanwhile, any known creditors must be placed in priority, and even in case such creditors do not make any claims within the Covered Period, their claims shall not be removed from the liquidation.

(3) Filing of the closure of business

A foreign-invested company must report its closure of business no later than the actual date of the closure and return the company’s business registration certificate to its jurisdictional district tax office.

(4) Receivable collection and realization of assets into cash / Debt repayment

During the Covered Period, the liquidator must collect the receivables and liquidate the assets into cash. Once the Covered Period lapses, debts owed to the creditors who claimed against the foreign invested company and the known creditors must be repaid.

 (5) Tax compliance requirements for dissolution and liquidation

A foreign-invested company is required to fulfill following tax compliance requirements in regards to the dissolution and liquidation.

(*) In case that the end of a tax year falls between the day immediately following the date of dissolution registration and the date in which the liquidation value is finalized, the foreign invested company is required to file tax returns for each of the following periods: (i) Period from the day immediately following the date of dissolution registration until the end of the tax year; and (2) the period from the beginning of the following tax year until the date in which the liquidation value is finalized.

(6) The completion of liquidation and cancellation of the foreign invested company registration

As soon as the foreign invested company fulfills its financial obligations and arrive at the final liquidation value, the liquidator is required to seek approval on the Statement of the Settlement of Accounts by submitting it to the Shareholders’(or Members’) meeting. Once the approval is obtained, the foreign invested company must register the completion of liquidation within 2 weeks from the date of approval with the relevant registry office.

Once the liquidator proves that the liquidation is complete and all tax liabilities have been settled by submitting audit reports and tax clearance certificates to a designated foreign exchange bank, the foreign invested company can distribute proceeds from remaining assets to the foreign investor. As a last step, the foreign invested company cancels its foreign invested company registration with the designated foreign exchange bank and returns the Certificate of Registration of a Foreign Invested Company, and completes all requisite liquidation procedures in Korea.

Conclusion

In order to be able to remit the liquidation proceeds after the liquidation of the foreign invested company, all liquidation procedures must be performed within the deadline. Therefore, should the foreign invested company decide to be liquidated in Korea, it is absolutely necessary to seek a legal and tax expert’s advice on the detailed liquidation procedures and other matters pertaining to the liquidation procedures.

The newly added all-Thai team are led by 3 Partners – all ex-management of one of the Big 4 - with nearly 100 years of combined experience, and adds another highly skilled team of Assurance professionals to PKF in Thailand. It also further deepens our commitment to work together to help build the accounting profession in Thailand given their contribution to the local accounting community.

The 3 new Senior Executives joining us in Assurance are Arjan Supot Singhasaneh as Senior Advisor and Partners Pornchai Paingpornpen and Pitinan Lilamethwat. In addition to these new members of our experienced Management team, we are also also proud to announce the promotion of Sawinee Sawanont to Partner in PKF Audit.

All our new executives come from long and distinguished careers in one of the Big 4 and they also work in the furthering the accounting profession in Thailand though policy and education. For example, Arjan Supot is also the Chairman of Auditing Profession Committee at Thailand’s Federation of Accounting Professionals and Khun Pornchai and Khun Pitinan are well-known university lecturers and instructors. We could not be prouder that they have chosen to join our team and help us focus even more deeply on the needs of our Thai clients and the accounting community in Thailand.”

Arjan Supot has commented “Our team of professionals at PKF Fidelity Audit have more than 130 years’ of combined experience in Auditing Thai companies gained through deep knowledge of key industries. Our clients are some of the largest names in the business-world in Thailand with relationships going back over decades with the senior management of those companies. We believe that in joining PKF our current and future clients will have access to even broader services as well deep international experience and can further extend our work for the accounting community in Thailand.”

PKF offers its hundreds of Thai and international clients in Thailand a broad range of services including Assurance, Taxation, Business Solutions, Advisory and Corporate Finance. PKF is focused on providing exemplary quality of services crafted to our client’s needs with strong personal relationships between them and our senior leadership.​

Khun Sawinee of PKF Audit concluded “Our experienced team have been serving the Audit needs of our international clients for many years and we have built an impressive list of blue-chip international credentials. With the addition of PKF Fidelity Audit to our Audit delivery capabilities we will increase the skills and depth of experience available to our international clients as well as provide further opportunities for development for our staff.”

As Insurance markets globally are undergoing a radical change with the introduction of regulatory requirements such as IFRS and Solvency II, there is a growing demand for technical expertise to address these requirements.

Jabran Noor, who is a Fellow of Society of Actuaries, USA and Fellow of Institute of Actuaries, UK has recently joined as Director within the Riyadh office. He will be focusing on actuarial work within the region and beyond. He brings with him over 19 years of experience working as an actuary with companies in Australia, Bahrain, United Arab Emirates and Pakistan. He has worked with companies such as Munich Re and Milliman. 

The actuarial practice will be able to offer services in the following areas: 

• Loss reserving and validation of reserving models
• Review of actuarial calculations
• Review of technical documents
• Financial business modelling
• Actuarial calculations under IAS 19
• IFRS 17 implementation
• Regulatory compliance
• Risk Analysis and Enterprise Risk Management (ERM)
• Data analytics and predictive modeling

For more information click here.

For more information click here.

Our new business line “Tax & Legal” offers the following services:  

Ø  Corporate Tax and Legal Advice Services

Ø  Legal Aspects of Compliance or Tax Compliance

Ø  Tax and Legal Advice to Individuals or Families

Ø  Corporate Legal Advice

Ø  Tax Defenses 

Each day our team works with motivation and commitment to provide high quality Audit, Accounting, Taxation, Corporate Finance, Tax & Legal and Payroll Outsourcing services. 

We have a portfolio of over 200 clients in different sectors such as: Retail, Education, Mining, Agriculture, Non-profit, Shipping, Insurance, Hotels, Banks, Real State and others. PKF Chile is registered with the following entities: 

• Superintendence of Securities and Insurance – Register N°012.
• Superintendence of Banks and Financial Institutions - Register N°009.
• Incorporated in the Database of the Inter-American Development Bank (IDB) as an eligible Independent Auditing Firm.
• Public Company Accounting Oversight Board (PCAOB).

Trust in the right people. Trust in us!

Av. Providencia 1760, Of. 603, Floor 6 -Santiago, Chile

Tel.: +562 2650 4300

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“MPS|CPA is a top Chicago area accounting firm and respected business advisor and our goal in joining together is to provide increased depth and expertise to our clients, while maintaining the high levels of service they have come to expect” said David J. Nissen, Managing Partner at PKF Mueller.

“Additionally, our firms benefit from a broader geographic reach in the Chicago area. MPS|CPA 's offices in Burr Ridge and Orland Park complement our locations in Elgin and Chicago.”

PKF Frazier & Deeter in Atlanta, USA, is a nationally ranked top 60 CPA firm, and is pleased to announce that five members of the firm have been named to Partner.

Ashley Babinchak, Patrick Crouch, Gina Gondron, Robert Soares and Sasan Zamani were each elected to Partner. Babinchak, Crouch and Soares have become partners in the firm’s Audit Practice. Gondron is a partner in the Process, Risk & Governance Practice and Zamani is the newest partner in the Tax Practice.

“We are proud of our new generation of partners, all of whom live up to our firm’s promise of investing in relationships to make a difference,” said Seth McDaniel, Managing Partner of PKF Frazier & Deeter. “It is also exciting to see the first time in the history of the firm that the majority of our new partners are in offices other than our headquarters.”

The PKF Attest guide for professional athletes is a simple guide that contains information, reflections, experiences and advice about losses in the assets of many athletes.

Iñigo Ábrego, one of the three authors of the manual states, “elite athletes end up losing throughout their sporting life no less than a third of their fortune earned. Fortune that should enable them to have a second or more quiet working life at a level comparable to that enjoyed in their "glory years". "

The publication has the collaboration of a score of players and elite ex-players. It is called 'PKF Attest Guide for professional athletes', but it has a more suggestive subtitle: 'and how not to lose half of the gains made along the way'. Throughout just 100 pages and with easy-to-read short chapters, the guide breaks down most of the fiscal aspects that can worry players, including separation or divorce.

The prologue of the guide is written by Iago Aspas and Álvaro Domínguez. The Real Club Celta de Vigo striker says he has rejected many proposals to start a business with promises of high profitability but recalls that several colleagues have committed to an investment after a meal or dinner which has cost them dearly.

But there are many more athletes, such as Raúl García, Escudero, Arribas or Miguel Torres, who have contributed their experiences for the preparation of the manual and are involved in the project. Adrián López even states that "the PKF-ATTEST guide is the leading book that every athlete should have on their bedside table".  Ándrés Fernández emphasizes that "money is not the most important thing in this life, but nobody should lose a single euro in useless matters". And Fran Rico recommends "not investing in something you do not understand".

If you are an elite athlete do not hesitate to expand your information with this guide at http://guiapkfattest.com where you will find, among others, the testimonies of the elite footballers.

For more information please contact Maria Gonzalez Elejalde at maria.gonzalez@pkf-attest.es, +34 94 424 30 24.

"PKF Zambia Accountants and Business Advisors has refurbished the Linda Farm for the Blind Community School in Livingstone. The organisation, which operates in Southern as well as Lusaka and Copperbelt Provinces, also cleaned surrounding areas of the farm, painted the school and planted an orchard garden on the premises. PKF Zambia Accountants and Business Advisors Managing Partner Anthony Ranjan said his organisation, which had 120 staff in three provinces, had allocated more than K100,000 in 2017 to conduct Corporate Social Responsibility (CSR) projects in selected communities that included Linda Farm for the Blind. “All the staff and management usually do community work annually as part of CSR to support community and our environment where we operate from,” he said. He said his company had already carried our CSR activities in Ndola and Lusaka office this year.

He said the aim of the company was to support projects which would directly benefit the communities. Mr Ranjan said his organisation was part of the community and it wanted to appreciate the communities. “We brought professional people to overhaul the whole building and repair the cracks including painting,” he said. Last year, the company picked on Maramba Old People’s Home, but this year, it decided to promote the educations of vulnerable pupils at the farm for the blind. Mr Ranjan said although the Government was doing its part to provide essential services to the public, it was also important for the private sector to supplement Government efforts in improving the lives of citizens. Zambia Agency for People Living with Disabilities (ZAPD) District Coordinator Kennedy Mwewa thanked PKF Zambia for the gesture.

Mr Mwewa, whose organisation owns the farm, said the school was donated by ZAPD partners from abroad. “Construction works for the school were not correctly done initially by the first contractors and this is why there are a lot of cracks,” he said.

He explained that owing to the problems pertaining to the poor work done by the initial contractor, ZAPD wrote to PKF Zambia last week and the company responded.

He thanked PKF for responding to help the institution at short notice. Although the school has 90 pupils, it only has three classrooms and therefore, needed more desks from cooperating partners. Linda Farm for the Blind Community School teacher Catherine Mutinta urged the business community to help expand the school. “The school is only from baby class to Grade One. We need more classrooms and teachers as well as teachers houses,” Ms Mutinta said."