Our House of Representatives have voted a serious of amendments in our tax regime as published in the Government Gazette on 6 July 2012 ,with effect as from 1st January 2012.
Intellectual property rights
In order to avoid uncertainties, the definition of patent rights and intellectual property (IP) rights has been amended to be in line with the definition in the Patent Rights Law of 1998, the Intellectual Property Law of 1976 and the Law regarding Trademarks so as all types of IPs will be covered by this new tax law.
A key parameter of the new law is an 80% exemption on the net profit from the exploitation of such intangible assets ,after deducting all direct expenses related to the generation of income. Similarly, any profit earned on the disposal of such intangibles will also benefit from the 80 % exception rule.
There is a 20% capital allowances rate applicable on the cost of acquisition of such intangible assets.
No interest expense restriction will apply in cases where shares are acquired directly or indirectly in a wholly owned subsidiary provided that this subsidiary does not own any assets not used in the business. If this subsidiary does own assets that are not used in the business, the restriction of interest will only correspond to the percentage of assets not used in the business.
This new tax treatment of interest restriction, is effective in respect of interest incurred on borrowings used for the acquisition of shares acquired on or after 1 January 2012
Group relief provisions
Currently for group relief a company is considered to be part of the same group for group relief purposes if it is a member of that group for the whole tax year
- With the amended law, for the cases where a company has been set-up by its parent company during the year, then this company will be deemed to be a member of this group for group relief purposes for that same year