[World Tax News] Benefit arising to employee charging his car at the office is tax-free and more

Editorial Team

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. Sweden publishes 2023 Budget proposals

The Ministry of Finance, Sweden, issued the budget proposals for 2023 on 8th November 2022. The Sweden government has proposed the following key changes to Income-tax law:

(a) Temporary tax exemption to employee on benefit arising on charging car at workplace

Where an employee is allowed to charge his car at the workplace for free, it is treated as a ‘benefit’ in his hand and accordingly taxed.

To facilitate the transition to a fossil-free vehicle fleet and favor work trips with rechargeable cars, a temporary exemption from tax is proposed to be introduced on ‘benefit’ arising to an employee while charging an electric car at the workplace. It will be effective from 01-06-2023 till 30-06-2026.

(b) Lower tax on individual of the age of 65 years or more

The Government has proposed to enhance the employment tax deduction for elderly people who are 65 or more. The enhanced tax deduction is proposed to apply to individuals with annual income up to SEK (Swedish krona) of 1.8 million. It will be available in the following manner:

• Tax reduction would be 22% of annual income for those having annual income upto SEK 100,000 per year.
• For earnings that are more than SEK 100,000 but not exceeding SEK 300,000, the tax reduction is SEK 15,000 plus 7% of the annual income.
• For earnings that exceed SEK 300,000 but do not exceed SEK 600,000, the tax reduction is SEK 36,000.
• Tax deduction remains unchanged where the annual income is higher than SEK 600,000 but up to SEK 1,800,000, i.e., 3% of the annual income plus SEK 30,000.

(c) Reduction of employer contributions for people working in R&D

At present, companies can obtain a deduction of 10 per cent of the contribution made for employees working in research or development. However, the total deduction for all employees working in research or development cannot exceed SEK 600,000 per month.

To promote research & development, the maximum total deduction in respect of contributions made for employees working in research or development is increased from SEK 600,000 to SEK 1.5 million per month.

(d) Enhanced tax reduction for the installation of solar cells

The subsidy rate for the tax reduction for the installation of solar cells is to be increased from 15% to 20%. This proposal would come into force from 01-01-2023 and apply to installations made after 31-12-2022.

Source: Budget Bill 2023

2. Hong Kong publishes draft legislation on revised Foreign Sourced Income Exemption Regime

The Inland Revenue Department of Hong Kong has published the draft Legislation for implementing the revised Foreign-Sourced Income Exemption (FSIE) for passive income.

The Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Bill 2022 was introduced to provide relief against double taxation in respect of certain foreign-sourced income.

Specified foreign-sourced income means any of the following income arising in or derived from a territory outside Hong Kong:

• Interest
• Dividend
• disposal gain from the sale of equity interests in an entity (disposal gain)
• intellectual property (IP) income

However, it does not include any interest, dividend, or disposal gain derived by a regulated financial entity.

Specified foreign-sourced income received in Hong Kong will not be brought into charge to tax if the multinational entity meets the exception requirements for the specified incomes. The exception requirements are as follows:

This new regime will apply to an entity that is part of Multinational Enterprise groups (MNE) and carrying business in Hong Kong SAR. An MNE entity that benefits from the existing preferential tax regimes of Hong Kong will be regarded as an excluded entity and excluded from the scope of the new FSIE regime.

Sources: Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Bill 2022 Guidance Note

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