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| News: BRAZIL INTRODUCES THIN CAPITALISATION RULES AND AMENDS TRANSFER PRICING LEGISLATION |
| Brazilian tax legislation has been significantly amended to include, for the first time, thin capitalisation rules. Provisional Measure (Medida Provisória – MP) No. 472, of December 15, 2009 (PM 472) is primarily designed to determine how much of interest paid on corporate debt is deductible for tax purposes in order to prevent Brazilian companies from becoming undercapitalised as a result of use of excessive indebtedness. Until recently, there were no rules on thin capitalisation in Brazil and this prevented foreign companies from using intercompany loans instead of direct equity investments in order to transfer funds to finance the activities of their Brazilian subsidiaries. The rules introduce two tests which must be satisfied for interest paid or credited by a Brazilian entity to a related party not resident or domiciled in a jurisdiction with a favourable tax regime to be deducted for income tax purposes: (i) The interest expense must be viewed as necessary for the activities of the local entity and the amount of debt granted by the related party must not exceed twice the amount of its participation in the net equity of the Brazilian entity. (ii) A 2:1 ratio must not be exceeded in either a debt or equity test. Interest paid or credited by a Brazilian entity to an individual or legal entity (whether or not a related party) is subject to a similar test and is only deductible where the activity is viewed as necessary and the amount of debt does not exceed 30% of the Brazilian entity’s net equity. If under a debt or equity test the 30% of net equity threshold is exceeded for the total amount of debts domiciled in jurisdictions with favourable tax regimes, excess interest will not be deductible for Brazilian income tax purposes. The Brazilian Executive Branch has also announced changes to transfer pricing rules by provisional measure (PM 478). The resale price less profit method (PRL) for import transactions has been revoked and replaced by the sale price less profit method (PVL). The PVL method is defined as the weighted average sales prices in the country of the imported goods services or rights, calculated based on a specific methodology established in the new legislation minus a single profit margin of 35%. The provisional measures came into force on 1 January 2010 for corporate income tax purposes, but will only be valid regarding the social contribution on net profits 90 days after the publication in the Official Gazette of the Union (Diário Oficial da União – DOU), which happened on December 16, 2009. |
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| News: MAURITIUS CHANGES LISTING REGULATIONS TO ATTRACT GLOBAL FUNDS |
Mauritius has made significant changes to its regulations governing the listing of investment schemes in a bid to boost it financial sector and attract global funds and investment schemes seeking investment opportunities in Africa. |
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| News: DUBAI DISCOVERS NEW OFFSHORE OIL FIELD |
| Dubai has announced the discovery of a new oilfield which could provide a new source of income helping all sectors in the Emirate move forward and boost development. The oilfield, located east of the Rashid oilfield is expected to help boost Dubai’s electric output to 10,000 megawatts in 2010, from the current 7,500 megawatts according to an official statement. Unlike Abu Dhabi, the UAE’s largest emirate and holder of almost all of the country’s oil reserves, Dubai has little hydrocarbon reserves of it own, current oil reserves are around 4 billion barrels. Recent years have seen the Emirate invest billions of dollars in diversifying its economy by establishing itself as a regional financial, tourism and logistics hub to make up for the lack of oil revenue. The new field, which has been called al-Jalila after a daughter of Dubai ruler Sheikh Mohammad bin Rashed al-Maktoum is expected to significantly increase the production of crude oil in the emirate and could serve to relieve recent debt woes. |
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