Jorge is a Transfer Pricing Partner at Kreston BSG. He has more than 15 years of experience in transfer pricing, valuation of companies, brands and patents. He is a member of the College of Economists as the head of the consulting vow where he has given different presentations to the members. He is also a Mexican-German Chamber of Commerce and Industry CAMEXA member. Has published several articles on issues focused on transfer pricing and economics in the main specialised magazines in the sector. He has been a speaker in forums of important universities such as UDLAP, IBERO, and Anahuac. He is also an economist who graduated from the Faculty of Economics of the Universidad Nacional Autónoma de México (UNAM) specialising in the Production Sector.
Transfer Pricing in the Mexican Hydrocarbons Revenue Law
November 30, 2023
The Mexican Hydrocarbons Revenue Law (LISH) has introduced significant provisions for Transfer Pricing in the wake of the Energy Reform. This article aims to elucidate the implications for companies involved in hydrocarbon exploration, drilling, and extraction, particularly in light of the increased private investment in this sector.
Understanding the dual scrutiny of Transfer Pricing compliance
Under the LISH, companies in the hydrocarbon sector face compliance scrutiny from both the Tax Administration System (SAT) and the National Hydrocarbons Commission (CNH). These entities oversee TP obligations through various articles in the LISH, placing a dual layer of regulatory oversight on companies in this field.
The evolution of Hydrocarbon exploration in Mexico
Post-Energy Reform, the hydrocarbon exploration landscape in Mexico has transformed. This section delves into the historical context, detailing how the opening up of the sector to private investment has led to significant changes in exploration activities, especially in the Gulf of Mexico.
The role of CNH and SENER in the post-reform era
Exploring the responsibilities and powers of the CNH and the Ministry of Energy (SENER) in the new regulatory environment. This includes overseeing exploration contracts, managing technical aspects, and ensuring compliance with Transfer Pricing provisions in the The Mexican Hydrocarbons Revenue Law.
Key Transfer Pricing provisions in the Hydrocarbons Revenue Law
A critical examination of the specific articles in the LISH that govern Transfer Pricing. This includes the application of the Comparable Uncontrolled Price Method (CUP) and other relevant methods for pricing, investment evaluations, and transactions with related parties.
Comparative analysis of the Mexican Hydrocarbons Revenue Lawand in Transfer Pricing application
An insightful comparison between the Mexican Hydrocarbons Revenue Law and the Income Tax Law (LISR) concerning Transfer Pricing, focusing on the application of the CUP method, the functional analysis required for its application, and the scenarios where alternative Transfer Pricing methods may be necessary.
Final thoughts on Transfer Pricing compliance in the Hydrocarbon Sector
Concluding with expert insights on the challenges and necessities of TP documentation in the hydrocarbon sector. Emphasizing the importance of robust functional analysis and the need for a comprehensive approach to TP method selection.
To speak to a Kreston Global Transfer Pricing expert in Mexico, please visit the Kreston Mexico website.
Carlos Sierra is an accomplished expert in tax planning, risk reduction, and financial consulting, boasting over 10 years of experience. Specialising in intelligent tax strategies, he helps clients navigate complex tax laws, minimising liabilities ethically and legally. His focus includes risk assessment and mitigation, ensuring accurate and timely tax filings. With a comprehensive skill set in financial consulting, Carlos aids business owners in financial optimisation and growth. He remains dedicated to staying informed about evolving tax regulations and economic trends, equipping clients with the latest insights for sound financial decisions.
Understanding the Mexican Federal Revenue Law 2024 update
November 29, 2023
Overview of the 2024 revenue projections
The Mexican Federal Revenue Law 2024 update by the Mexican Senate is now benefitting from the recently approved Federal Revenue Law for the fiscal year 2024, marking a significant increase in the country’s projected revenues. The total expected revenue for 2024 is 9.066 trillion pesos, a notable 9.36% increase from the previous year’s 8.29 trillion pesos. This section will delve into the specifics of these projections, including the breakdown of various revenue sources such as taxes, social security fees, and other contributions.
Key points of the Mexican Federal Revenue Law 2024 update
The Senate approved the Revenue Law for fiscal year 2024. The total amount of expected revenues for the next fiscal year is detailed as follows:
Projected revenues for 2024 are 9.066 trillion pesos. For fiscal year 2023, it was 8.29 trillion pesos, an increase of 9.36% by 2024. Federal participatory revenue is projected at 4.585 trillion pesos, compared to 4.44 trillion pesos in 2023.
Authorized to contract and exercise loans for a net domestic indebtedness of up to 1 trillion 990 billion pesos, and external indebtedness of up to 18 billion dollars.
Four trillion 942,030.3 million pesos corresponding to Taxes.
535,254.7 million pesos to Social Security Fees and Contributions.
36.5 million pesos to Improvements Contribution.
59 thousand 091.4 million pesos to Duties.
8 thousand 641.6 million pesos to Products.
193 thousand 877.0 million pesos to Utilizations.
One trillion 312 thousand 289.4 million pesos from Goods Sales Revenues, Services rendered and Other Revenue.
277,774.3 million pesos to Transfers, Allocations, Subsidies and Grants, as well as Pensions and Retirements.
One trillion 737,050.6 million pesos correspond to Revenues Derived from Financing.
Monthly surcharge rates are maintained at the same level as for 2023:
Extension: 0.98%.
Installments up to 12 months: 1.26%.
Partial payments from 12 to 24 months: 1.53%
Partial installments over 24 months and deferred term: 1.82%.
Monthly surcharge rate will continue to be 1.47% during 2024.
The income tax withholding rate on interest is increased from 0.15% to .50%.
Debt management and loan provisions
A crucial aspect of the new revenue law is the authorization to contract and exercise loans. The law permits a net domestic indebtedness of up to 1 trillion 990 billion pesos and an external indebtedness of up to 18 billion dollars. This section will discuss the implications of these debt allowances and their role in the overall fiscal strategy of the government.
Taxation changes and surcharge rates
One of the key highlights of the 2024 revenue law is the modification of tax structures and surcharge rates. Notably, the law maintains monthly surcharge rates at the same level as in 2023, with specific rates for extensions, installments, and deferred payments. Additionally, the income tax withholding rate on interest has seen an increase. This section will provide a detailed analysis of these changes and their potential impact on businesses and individuals.
Anticipated impact on the Mexican economy
While the Senate’s approval of the Federal Revenue Law is a crucial step, the final authorization from the Executive Branch remains pending. This section will discuss the potential economic implications of the new fiscal measures, focusing on how they might influence the national economy. It will also emphasize the importance of staying informed about the evolution of these measures and their practical impact.
Preparing for fiscal changes
Although the Senate’s approval represents a significant step forward, waiting for the final authorisation from the Executive Branch will be crucial for the implementation and effectiveness of these fiscal measures. Therefore, it is important to keep informed about their evolution and impact on the national economy.
If you would like more advice on the Mexican Federal Revenue law update, please contact the Kreston BSG team.
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Herbert M. Chain
Shareholder, Mayer Hoffman McCann P.C. Deputy Technical Director, Global Audit Group, Kreston Global
Herbert M. Chain is a highly experienced auditor and is a financial expert with over 45 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance. Herb is a member of MHM’s Audit Methodology Steering Committee.
As Kreston Global’s Director of Quality and Professional Standards, Jenny oversees the onboarding process of prospective member firms. She is in charge of the quality standards for all member firms and within that standard setting, works with members to identify priority areas for professional development and training. In addition, Jenny works with Kreston’s Quality Group to review standards across the network.
International Quality Management: The path to excellence in accounting networks
Embracing international Quality Management in accounting networks
Excellent international Quality Managementis a cornerstone for the success of global accounting networks, offering numerous benefits including enhanced efficiency, productivity, and a competitive edge. Establishing excellent International Quality Management is explored in a recent article by Jenny Reed, Director of Quality and Professional Standards at Kreston Global, and Herbert M. Chain, Director at CBIZ Marks Paneth and Shareholder at Mayer Hoffman McCann P.C., published in the International Accounting Bulletin. Read the full article here, or the summary below.
Establishing a culture of quality
Leadership’s role in cultivating Quality: The success of Quality Management initiatives heavily relies on leadership’s commitment. This includes establishing a quality-oriented culture, setting high standards, and leading by example to ensure adherence to these standards across all levels.
The challenges in Quality Management
Navigating resistance and standardisation: Resistance to change is a common hurdle. Effective change management and the harmonisation of standard practices are critical for achieving consistency in service quality, especially in a network of independent firms.
Training and continuous improvement: Ongoing training and development are essential for upskilling professionals and fostering a culture of continuous learning and improvement.
Key Performance Indicators (KPIs): Implementing KPIs aids in measuring and enhancing quality across the network, encompassing both qualitative and quantitative aspects.
Client engagement and feedback: Establishing mechanisms for regular client interaction and feedback is pivotal for continuous improvement and maintaining high service standards.
Leveraging technology and automation: The integration of advanced technologies and automation tools is crucial for enhancing efficiency and service quality.
Monitoring and review processes: Regular assessments and peer reviews are vital for maintaining accountability and continual enhancement of quality standards.
Constraints in a global context
Dealing with diversity and resource allocation: Addressing the challenges posed by geographical and cultural diversity, and the unequal distribution of resources is essential for consistent quality management.
Compliance and regulatory challenges: Understanding and adapting to varied compliance requirements and regulatory frameworks is key to maintaining quality standards.
Technology maturity of firms: Bridging gaps in technological maturity among member firms is crucial for effective quality management.
Conclusion
In conclusion, the journey towards implementing a robust quality management system in a global network, while challenging, is vital for enhancing reputation, client satisfaction, and competitive positioning. With committed leadership and a collective approach, these challenges can be successfully navigated.
To speak to one of our team about international Quality Management, please get in touch.
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Kreston Pedabo celebrates 25 years with rebranding
November 28, 2023
Congratulations to Kreston Pedabo in Nigeria, that recently celebrated its 25 anniversary with an Anniversary Symposium. The event was celebrated with clients and attended by Kreston Global Chief Executive, Liza Robbins, virtually. Kreston Pedabo marked its 25th anniversary in November 2023 with a strategic rebranding to expand its international services. Comprising 10 partners and 150 staff across three Nigerian locations, Kreston Pedabo specialises in audit, tax compliance, financial advisory, and more.
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Kreston Brighture, China, November newsletter 2023
November 22, 2023
Kreston Global firm, Brighture, shares its expertise in its latest newsletter covering financial news and updates from China.
Fabio Mazzini is an Associate Partner at Studio TDL, with a solid background in corporate and tax consultancy for multinational operations. Registered with the Vigevano (PV) Register of Chartered Accountants since April 7, 2004, and as a Statutory Auditor from March 3, 2008, he offers knowledgeable assistance in both national and international taxation. His areas of expertise include direct and indirect taxes, tax litigation, financial and tax due diligence. Mazzini is skilled in conducting company appraisals and evaluations, particularly in the contexts of corporate reorganisations and acquisitions. He serves as an auditor and Statutory Auditor for notable Italian and international companies. Fluent in English and Spanish, his professional focus encompasses Accounting and Financial Statements, Management Control, and Corporate and Contractual consultancy, as well as guiding Extraordinary Operations.
Italy’s new Delegation Law to launch tax reform
November 16, 2023
Italy’s new tax Delegation Law is set to create a significant overhaul of the tax system following the introduction of the Delegation Law, Law no. 111, effective from 29 August 2023. The legislation, published on 14 August in the Official Gazette, outlines the framework for a comprehensive tax reform to be implemented by August 2025.
The law is structured across five titles encompassing 23 articles. It outlines the general principles and implementation schedule, delves into various tax categories including income tax, VAT, and IRAP, and addresses regional and local taxes as well as gaming.
Italy’s new tax Delegation Law – Article 7
Article 7 of the law brings VAT into sharp focus, signalling a shift towards greater alignment with European Union standards. Key amendments include redefining VAT bases to reflect EU terminology, particularly in the classification of goods and services. This realignment is expected to clarify definitions surrounding contracts, share transfers, and leasing arrangements.
VAT implications
In a move to modernise the VAT system, the law also revises exemptions, potentially expanding VAT liability in the real estate and financial sectors. VAT rates are set for a rationalisation process, aligning with EU criteria and potentially easing the burden on socially essential goods and services. A notable change in the VAT landscape is the introduction of more flexible deduction mechanisms. This aligns Italy with EU VAT guidelines and offers businesses a tailored approach to deductions, depending on the usage of goods and services in taxable transactions.
Customs updates
The law doesn’t overlook customs procedures. Article 11 proposes a digital and streamlined future for customs, enhancing efficiency in coordination, checks, and procedural aspects. This includes a comprehensive reorganisation of liquidation, assessment, and collection processes. While the Delegation Law sets out the blueprint for reform, its full impact will unfold as specific regulations and measures are introduced. At present, no new VAT rules have come into effect, but the stage is set for significant changes.
Tax efficiencies
As Italy embarks on this ambitious reform, the business community and individuals alike await the practical implications. The reform promises a more integrated and efficient tax system, in line with EU standards, but it also brings a period of adjustment and adaptation.
Read the full analysis in Italian and English here.
If you would like to get in touch with one of our tax experts in Italy, please get in touch, or contact Studio TDL directly.
Len leads the VAT team and brings a wealth of experience and a practical approach to provide user-friendly VAT advice and get the best solutions for his clients.
Len helps his clients navigate UK and global VAT systems to ensure they know what to expect, get it right, and above all know they are in good hands so they can focus on their priorities and achieve their goals.
Over many years’ experience, first as a VAT inspector at HMRC, and leading VAT teams at large accounting firms in Scotland and the South West, he has advised clients in most sectors, with specialisms including Education, particularly FE Colleges, International Trade, Cross-border transactions, Group Structures, Property, Partial Exemption, and of course dealing with HMRC.
Understanding VAT implications on UK residential property
November 14, 2023
Understanding the VAT implications on UK residential property and the impact of interim rental for new residential properties, including strategies for VAT recovery, HMRC’s adjustment policy, and alternative approaches, is essential for investors with portfolios in the UK.
Recovering VAT on UK residential property development
When housing developers construct or convert properties for sale, they can generally recover VAT incurred on development costs. This includes VAT on land or property purchases and associated legal and professional fees, which can represent significant amounts.
VAT implications on UK residential properties carrying out interim rental
Interim rental of these properties, prior to sale, can change their VAT status from zero-rated sales to exempt rentals. This shift can potentially lead to a clawback of recovered VAT to HM Revenue and Customs (HMRC).
HMRC’s Fair Adjustment Policy
In response to market slowdowns, like in 2008, HMRC introduced a policy allowing a fair and reasonable VAT adjustment. This policy, aimed at reflecting both the temporary exempt use and intended sale, can lead to reduced VAT clawbacks or no adjustment, depending on specific factors such as the rental period and projected sales value.
Alternative strategies: Sales to group companies
Another strategy is selling new residential properties to a group company before renting them out. This approach can secure VAT recovery on development costs by ensuring a zero-rated first sale, though it must be weighed against other commercial, legal, and tax considerations, including Stamp Duty Land Tax (SDLT) and Corporation Tax.
Darshil Surana is a seasoned professional and Partner at O. P. Rathi & Co., where he has been instrumental in driving business process improvements and implementing strategic digital transformations since April 2023. With a diverse skill set that includes internal audits, information technology, and management accounting, Darshil is known for his expertise in financial advisory and analytics across Ahmedabad’s dynamic market.
Before his current role, Darshil was the Proprietor of Darshil Surana & Associates, a testament to his entrepreneurial spirit and his proficiency in strategic planning, financial analysis, and comprehensive taxation. His background also includes pivotal roles in Intech Systems, where as SBU Head and Delivery Head, he led cross-functional teams and managed the strategic business unit performance for MS Dynamics NAV/BC.
Darshil’s ascent from a Functional Consultant to a Project Manager reflects his exceptional leadership and project management skills. His early career foundations were laid at CA Pradeepkumar H. Shah & Co., where he honed his accounting and auditing abilities during his articleship. Darshil Surana’s career is a blend of robust professional experiences and a deep understanding of the intricacies of financial and business strategies.
India’s Digital Personal Data Protection Act, 2023 (DPDP Act)
November 3, 2023
The Digital Personal Data Protection Act, 2023 (DPDP Act) was passed in India on 11th August 2023. The Act seeks to protect the personal data and privacy of Individuals in this digital world. This is a landmark legislation which can empower individuals and the State to ensure data privacy. The Act lays out a framework to ensure the utilisation of data for appropriate and designated purposes and avoid misuse. Darshil Surana at Kreston OPR Advisors explains.
Definitions of The Digital Personal Data Protection Act
The Act emphasises on “Protection of Digital Personal Data”. Hence, any person’s data in the digital world needs to be safeguarded by those responsible for collecting, storing, and processing them. First, let us try to understand some definitions under section 2 of the Act:
Data – “a representation of information, facts, concepts, opinions or instructions in a manner suitable for communication, interpretation or processing by human beings or by automated means” – Section 2(h).
Personal Data – “any data about an individual who is identifiable by or in relation to such data” – Section 2(t).
Digital Personal Data – “personal data in digital form” – Section 2(n)
The first set of definitions are quite simple. Data, personal data and digital personal data have been explicitly defined so as to remove any confusion and ambiguity. It is noteworthy that data has been extensively defined to mean “… suitable for communication, interpretation or processing by human beings or by automated means”. Hence, whether data are handled by human intelligence or artificial intelligence, they will both be covered by the Act. Some examples of digital personal data are: • KYC records such as PAN, Aadhaar, Driving License etc. • Contact details such as e-mail address, phone numbers, etc. • Social media user IDs and profiles. • Audio – Visual identification of individuals such as CCTV footage, webcam images, photos and videos on social media etc. • Biometrics such as fingerprints, iris scans, face recognition, etc.
Data Principal – “the individual to whom the personal data relates and where such individual is— (i) a child, includes the parents or lawful guardian of such a child; (ii) a person with a disability, includes her lawful guardian, acting on her behalf”
Section 2(j).
Data Fiduciary – “any person who alone or in conjunction with other persons determines the purpose and means of processing of personal data” – Section 2(i).
Data Processor – “any person who processes personal data on behalf of a Data Fiduciary” – Section 2(k).
The Data Principal
The next set of definitions are important. They lay the foundation for the data protection framework. The individual to whom the data pertains is called ‘Data Principal’. It is the Data Principal who is at the centre of the Act. ‘Data Fiduciary’ would mean the person who would collect, store, process the data either in own capacity or together with ‘Data Processor’. Both these terms have been defined widely. Let us understand the definitions through couple of examples:
Illustration 1: A Limited is a stock exchange broker and Ms. X wishes to open a Demat account with them. A Limited collects her Name, Address, Contact No., PAN and Aadhaar and utilizes services of B Limited, which is a Data Repository, to verify the KYC. Here, Ms. X is the Data Principal, A Limited is Data Fiduciary and B Limited is Data Processor.
Illustration 2: Ms. X runs a music academy whereby she teaches classical music. Baby Y (aged 10 years) is one of her students. Ms. X collect’s Baby Y’s Name, Address and Contact details for her records. Here, Baby Y and her parents are Data Principal and Ms. X is Data Fiduciary.
Processing – “in relation to personal data, means a wholly or partly automated operation or set of operations performed on digital personal data, and includes operations such as collection, recording, organisation, structuring, storage, adaptation, retrieval, use, alignment or combination, indexing, sharing, disclosure by transmission, dissemination or otherwise making available, restriction, erasure or destruction” – Section 2(x).
Data processing engulfs all modes and methods right from data collection to data destruction. Any activity conducted in between by utilizing data will be covered in the definition of Processing. It’ll also include facial recognition or voice recognition software and tools used to identify individuals.
Applying the Digital Personal Data Protection Act
The Digital Personal Data Protection Act applies to the processing of digital personal data within the territory of India where the personal data is collected – in digital form; or in non-digital form and digitised subsequently. It also applies to processing of digital personal data outside the territory of India, if such processing is in connection with any activity related to offering of goods or services to Data Principals within the territory of India.
If the Data Principal’s data are breached even outside India, the Act would still apply if the goods/services were procured by the Data Principal within India. Hence, the Act has expanded the scope of applicability and is not limited within the boundaries of India.
Illustration: Ms. X is a programmer based in Pune and does freelancing work through a Portal (registered in the USA) that acts as an aggregator for service providers and service receivers and for that purpose gathers data such as name, address, contact information, bank details, credit card details etc. In this case, the Portal would be covered by the provisions of the Act in case of a breach of the digital personal data of Ms. X.
However, this Act would not apply if the personal data were processed by an individual for personal purposes and the data were made available by the Data Principal or by any other person under obligation of law.
Obligations of Data Fiduciary
Consent – The Act lays various obligations on the Data Fiduciary for the manner in which data should be processed and protection of the same. The first and foremost obligation is to obtain ‘Consent’ from the Data Principal. According to section 6 of the Act, the consent given by the Data Principal should be ‘free, specific, informed, unconditional and unambiguous with a clear affirmative action’. It further specifies that the ‘consent shall signify an agreement to the processing of personal data for specified purpose and limited to such personal data as is necessary for such specified purpose’. This means that even if the data principal has given consent to relevant and irrelevant data, the consent would be limited to the relevant data only and the data fiduciary would be liable for breach of obligation for the irrelevant data. Illustration: Ms. X registered as a buyer on an eCommerce portal. The eCommerce portal asked for her mobile number, address and her phone contact list. Ms. X gives her consent to both. However, the phone contact list is not necessary for supplying her goods/services. Hence her consent will be limited to her mobile number and address for the purpose of availing goods/services from the eCommerce Portal, though she may have explicitly consented to provide a contact list as well. Thus, if the data fiduciary processes data for which consent is not obtained or is deemed to be not obtained as per provisions of the Act, they shall be liable for breach of their obligations.
Further, every request made to Data Principal by the data fiduciary shall be accompanied by or preceded by a notice informing the data principal about: • The personal data and purpose for which it is to be processed. • How the data principal can withdraw the consent and file for grievance redressal. • How the data principal may make a complaint to the Data Protection Board of India. If the consent contains anything which infringes the provisions of the Act or rules made thereunder, the consent shall be invalid to the extent of such infringement.
Illustration: X, an individual, buys an insurance policy using the mobile app or website of Y, an insurer. She gives to Y her consent for (i) the processing of her personal data by Y for the purpose of issuing the policy, and (ii) waiving her right to file a complaint to the Data Protection Board of India. Part (ii) of the consent, relating to waiver of her right to file a complaint, shall be invalid. The data principal also has the right to withdraw consent for the personal data for which a valid consent was granted earlier. On withdrawal of the consent, the data fiduciary will have to get the data erased from its database and ensure that they are not used for processing anymore.
Certain Legitimate Use of Personal Data – The data fiduciary may process personal data of data principal for certain legitimate purposes such as: a. Where the data principal has voluntarily provided personal data and has not explicitly indicated non-consent to such data. b. Data requested by the State for the purposes of any law for the time being in force. c. Compliance with judgment or decree d. Responding to a medical emergency involving threat to life or immediate threat to the health of data principal of any other individual e. Taking measures to provide medical treatment or health services f. Taking measures to provide safety to any individual during a disaster or breakdown of public order. g. For the purposes of employment or those related to safeguarding the employer from loss or liability, such as prevention of corporate espionage, maintenance of confidentiality of trade secrets, intellectual property, classified information or provision of any service or benefit sought by a Data Principal who is an employee.
General Obligations of Data Fiduciary – Data fiduciary has certain obligations to be followed to comply with the Act: a. The data fiduciary shall be responsible for complying with the provisions of the Act irrespective of the failure of the data principal to carry out duties under the Act. b. Data fiduciary may engage a data processor only under a valid contract. c. Ensure completeness, accuracy and consistency of data. d. Implement appropriate technical measures to ensure effective observance of provisions of the Act. e. Shall have reasonable security safeguards to protect personal data in its possession or control including data which is processed in its own capacity or by data processor. f. Intimate the Data Protection Board of India in the event of a personal data breach. g. Shall erase and cause the data processor to erase personal data on withdrawal of consent by data principal or the specified purpose if no longer being served.
Personal Data of Children – The data fiduciary shall: a. Obtain verifiable consent of the parent/legal guardian of a child before processing any personal data. b. Not undertake tracking or behavioural monitoring of children or targeted advertisements directed at children.
Rights and duties of Data Principal
The data principal has been accorded various rights and privileges under the Act in order to maintain the privacy of their personal digital data. They are also duty-bound to comply with the provisions of the Act.
Rights of Data Principal: a. Right to access information about personal data: The data principal has the right to obtain a summary of personal data which are processed by the data fiduciary. b. Data principal has to right to amend the personal data or get them erased by withdrawing consent under the Act. c. In case of breach by a Data Fiduciary, the data principal will have the right of grievance redressal through the data fiduciary as well as the Data Protection Board of India.
Duties of Data Principal: a. Comply with the provisions of the Act. b. Not to impersonate another person while providing personal data for a specific purpose. c. Not to suppress material information while providing personal data for any document, unique identifier, proof of identity or proof of address issued by the State or any of its instrumentalities. d. Not to register false or frivolous grievance or complaint e. Furnish information which is verifiable and authentic. Penalties for Breach of Provisions of the Act The Act has stringent provisions for compliance by the data fiduciaries. It also has severe penalties for breach of provisions of the Act. Let us take a look at some of the penalties levied by the Act: Sr. No. Breach Penalty 1 Breach in observing the obligation of the Data Fiduciary to take reasonable security safeguards to prevent a personal data breach under sub-section (5) of section 8 May extend to INR 250 Crores. 2 Breach in observing the obligation to give the Board or affected Data Principal notice of a personal data breach under sub-section (6) of section 8. May extend to INR 200 Crores. 3 Breach in observance of additional obligations in relation to children under section 9 May extend to INR 200 Crores. 4 Breach in observance of additional obligations of Significant Data Fiduciary under section 10. May extend to INR 150 Crores. 5 Breach of any other provision of this Act or the rules made thereunder. May extend to INR 50 Crores.
As you can see, the penalty can range from INR 50 Crore to INR 250 Crores depending on the type of breach. This calls for all organizations falling under the definition of data fiduciary or data processor to take measures to address compliance to the Act and its rules in a timely manner. It is expected that the Government will provide a transition period to allow the implementation of measures to ensure compliance.
Conclusion
The organisations should proactively get a Data Protection Impact Assessment done and get an inventory of measures to be adopted. These may cover the following areas:
Design Consent Mechanisms.
Adopt IT / IS and Cyber Security measures.
Appoint appropriate compliance officers within the organization.
Design data storage, data archival, data purging policies and tools to implement the same. Individuals should also educate themselves about the Act and know their rights and privileges. They have exposed huge amounts of data online to multiple portals. This Act empowers them to take control of how their data might be utilised and protected.
If you would like to learn more about The Digital Personal Data Protection Act in India, please get in touch.
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Meera Rajah
Partner (VAT & Duty) and Head of South East Asia Business at James Cowper Kreston
Meera Rajah heads up James Cowper Kreston’s VAT services and leads their expansion into South East Asia. She has developed extensive technical knowledge over more than 20 years specialising in VAT and adopts a practical approach that has successfully argued against HMRC to achieve substantial VAT savings and compensation for clients.
Her experience is comprehensive, encompassing business restructuring (mergers and acquisitions), VAT cost reduction strategies, international cross-border supply chains, partial exemption methods, land and property transactions, film production, charities, and VAT planning and mitigation. Additionally, Meera assists businesses in disputes with HMRC, drawing on her years of valuable experience from previous roles within the organisation. Her background with HM Revenue and Customs has equipped her with a range of skills and expertise in inspections and negotiations, greatly benefiting her clients.
Understanding VAT compliance in the UK: Realreed and a tale of caution
A recent High Court ruling serves as a stark reminder to businesses that they cannot take previous HMRC VAT enquiries or inspections as a conclusive assurance of their VAT compliance. Meera Rajah, a leading expert in VAT services at James Cowper Kreston, sheds light on this pivotal decision and its implications for businesses. Read her full article here or the summary below.
The misconception about HMRC enquiries and VAT compliance in the UK
It’s a common but erroneous belief that an HMRC enquiry, especially one that concludes without an assessment or explicit ruling, validates the accuracy of past VAT returns. However, as Meera points out through the example of Realreed Ltd, such assumptions can lead to significant misinterpretations of a business’s VAT position.
Realreed Ltd’s Case: A misunderstood VAT exemption
Over 22 years, Realreed Ltd underwent five HMRC VAT enquiries, all while mistakenly declaring certain income as VAT exempt when it should have been standard-rated. The business believed these enquiries had established a “legitimate expectation” of their VAT practices, only to be corrected by the High Court’s rigorous analysis.
The High Court’s stance on HMRC inspections and VAT liability
The High Court’s review of HMRC’s case reports and notes revealed that no formal decision regarding the VAT liability had been given. This judgment emphasises that businesses cannot presume inspections as endorsements of their VAT return accuracy and must instead ensure they independently verify their VAT treatment.
The responsibility of accurate VAT returns rests with the businesses
The court’s decision underlines the ultimate responsibility businesses hold for the accurate submission of VAT returns. Meera Rajah’s examination of the case highlights the need for companies to maintain vigilance over their VAT affairs and seek expert guidance to navigate the complexities of VAT legislation.
To grasp the full extent of this High Court decision and its implications for your business, read the complete article by Meera Rajah. It’s an essential read for those looking to ensure their VAT compliance is beyond reproach. If you would like support with your VAT obligations in the UK, please get in touch.
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Meera Rajah
Partner (VAT & Duty) and Head of South East Asia Business at James Cowper Kreston
Meera Rajah heads up James Cowper Kreston’s VAT services and leads their expansion into South East Asia. She has developed extensive technical knowledge over more than 20 years specialising in VAT and adopts a practical approach that has successfully argued against HMRC to achieve substantial VAT savings and compensation for clients.
Her experience is comprehensive, encompassing business restructuring (mergers and acquisitions), VAT cost reduction strategies, international cross-border supply chains, partial exemption methods, land and property transactions, film production, charities, and VAT planning and mitigation. Additionally, Meera assists businesses in disputes with HMRC, drawing on her years of valuable experience from previous roles within the organisation. Her background with HM Revenue and Customs has equipped her with a range of skills and expertise in inspections and negotiations, greatly benefiting her clients.
Labour’s plan to remove VAT exemption from independent school fees
The UK’s Labour Party has proposed the removal of VAT exemption from independent school fees. This potential update is examined in a recent article by Meera Rajah, partner at James Cowper Kreston. Read the full article here, or the summary below.
Labour’s proposal to remove VAT exemption from school fees
The Labour Party, aiming for office in the next general election, plans to withdraw the ‘eligible body’ status from independent schools, which would consequently subject school fees to the standard VAT rate. This change could see an increase in fees, although not necessarily by the full 20%, due to improved VAT recovery on costs for schools.
Impact on independent schools and fee structures
Independent schools currently face significant restrictions on VAT recovery, which would be alleviated should this proposal come into effect, potentially reducing net school costs. However, the implementation of these changes could be as far off as 2026 or later, and schools are advised to prepare for this possible shift.
Strategic financial planning for schools after the lifting of VAT exemption from school fees
The article also explores strategic financial planning in anticipation of these changes, such as the timing of fee payments. Prepayment options may offer a method to circumvent immediate VAT charges, providing a compelling incentive for parents.
The complexities of VAT recovery for educational institutions
The ramifications of the proposal extend beyond fee adjustments, with the possibility of increased VAT recovery from major capital expenditures, thanks to the Capital Goods Scheme. It’s a nuanced forecast that requires careful consideration by school leaders, who must remain vigilant for updates and guidance on the matter.
Preparing for potential changes in UK VAT legislation
The full implications of the Labour Party’s potential policy shift, including the calculated £1.7 billion in additional tax revenues and improved VAT recovery for schools, are detailed in the full article. Independent schools and stakeholders are encouraged to read the complete analysis at James Cowper Kreston’s website to prepare for the potential financial landscape ahead
If you would like to talk to someone about the tax on independent school fees, please get in touch.
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