Spring 2004-09 New amendments to International Banking Center Act
New amendments to International Banking Center Act
Law No. 13 of January 8, 2004, and Law No. 58 of February 6, 2004, both amended the International Banking Center Act.
International banking entities may be organized either as a unit within a banking corporation, or as a separate entity. Neither used to pay tax on its income. The January amendment limited the exempt status to the latter type-IBEs that are corporations on their own. IBEs that are units within a bank are now taxed on their income at the bank rate if their net income exceeds 20% of the net income of the whole bank (including the IBE).
IBEs that operate as units or subsidiaries of exempt entities continue to be exempt from taxation.
Until June 30, 2004, the taxation threshold will be 40% instead of 20%, reducing to 30% on July 1, 2004, until June 30, 2005. The 20% will kick in on July 1, 2005.
The January law raised many questions, particularly from banks whose tax years start on January 1. So it was refined by the February amendment, which set forth the following taxation thresholds applicable to said IBEs:
40% for any tax year that commences after June 30, 2003, and before July 1, 2004, and
30% for any tax year that commences after June 30, 2004, and before July 1, 2005.
In the case of IBEs whose tax year is not the calendar year, the schedule is the following: for any tax year that commences after June 30, 2003, and before July 1, 2004, the average of:
the number of months of said tax year prior to January 1, 2004, at 100%, and
the number of months of said tax year from January 1, 2004, onward, at 40%.
The taxation thresholds applicable to calendar year IBEs will also apply to non-calendar year IBEs for all years after December 31, 2003.
© 2004 Goldman Antonetti