viernes, 23 de febrero de 2018

CbC reporting requirements in Brazil for exchange relationships activated after 2017

A Brazilian constituent entity (BCE) that designated its foreign ultimate parent entity (UPE) as the country-by-country (CbC) reporting entity when filing its 2016 income tax return may be required to amend the return to file a CbC report within 60 days of 31 December 2017, in cases where the relevant bilateral exchange relationship with the UPE’s country of residence was not activated by 31 December 2017 (or is not effective for taxable periods beginning on or after 1 January 2016).

Source & more info: Deloitte

jueves, 22 de febrero de 2018

Belgium enacts corporate tax reform measures in phased approach

A corporate tax reform law enacted in Belgium on 25 December 2017 and published in the official gazette on 29 December includes measures that will reduce the corporate tax rate to 25% by taxable years that begin in 2020, increase the dividends received deduction (DRD) to 100%, revise the domestic permanent establishment (PE) rules, introduce group taxation and implement the EU anti-tax avoidance directive (ATAD) into Belgian law.

The reform will be phased in over a three-year period, with changes taking effect as from one of the following tax years:

  • 2019 tax years starting on or after 1 January 2018 (tax year 2019). (Tax year 2019 includes 2018 calendar year fiscal years, and fiscal years other than the calendar year that start on or after 1 January 2018 and end in 2019 (on or before 30 December 2019);
  • 2020 tax years starting on or after 1 January 2019 (tax year 2020); or
  • 2021 tax years starting on or after 1 January 2020 (tax year 2021).

Unless otherwise noted, the measures discussed in this article are effective as from tax year 2019.

Corporate tax rate

The corporate income tax rate (before applying the surtax) is reduced from 33% to 29%, and will be further reduced to 25% as from tax year 2021. The surcharge imposed on the adjusted corporate income tax liability also is reduced from 3% to 2%, and will be abolished as from tax year 2021.

Participation exemption

  • Dividends: The new law grants a 100% DRD for dividends received by a Belgian company from a domestic or foreign company (previously, 95% of such dividends was exempt from tax, with the remaining 5% subject to corporate tax at the normal rate). However, dividends qualifying for the DRD may not be (fully) deductible if the recipient company is in a loss position or if its available profits are insufficient. Excess DRD may be carried forward with no time limitation, but the amount of the carryforward that can be deducted in a given year may be limited under the new minimum tax base calculation (discussed below).

  • Capital gains: Before 1 January 2018, net gains derived from the disposal of shareholdings in other companies were exempt from Belgian tax if: (1) the “subject-to-tax” requirement for application of the DRD was met; and (2) the shares were held (with full ownership) for an uninterrupted period of at least one year. The new law introduces a third requirement for taxpayers to benefit from the exemption: shareholders now also must hold a participation of at least 10% or with an acquisition value of at least EUR 2.5 million (i.e. the same minimum holding requirement that already applies for the DRD). In addition, the 0.412% separate tax (including the relevant surcharge) that previously applied to the net amount of fully exempt capital gains on shares realized by large enterprises is abolished.

Withholding tax on dividends

 An exemption applies to dividends paid to qualifying shareholders established in a European Economic Area (EEA) member state or a country with which Belgium has concluded a tax treaty containing an information exchange clause, if the shareholder holds a participation in the Belgian payer company of less than 10% but with an acquisition value of at least EUR 2.5 million for an uninterrupted period of at least one year (previously, such dividends were subject to a reduced withholding tax of 1.6995%). This change is in response to the increase in the DRD from 95% to 100%.

Group taxation regime

As from tax year 2020, an optional, limited form of group taxation will be introduced in Belgium that will allow the transfer of tax losses within a “Belgian” group.

Under the new rules, tax losses may be contributed between related Belgian companies (or between a Belgian company and a PE of a related company in the EEA) that are members of a qualifying group to offset taxable profits of the group. The companies need to have been affiliated for at least a five-year period and must have at least 90% common direct ownership (i.e. parent companies and their 90% first-tier subsidiaries, and sister companies with a common 90% direct parent, are eligible). Certain types of companies (mainly companies benefitting from a special tax regime) are excluded from the regime.

PE rules

New rules on the recapture of PE losses will apply as from tax year 2021. Currently, tax losses of a PE located in a tax treaty country may be deducted from the Belgian taxable base, subject to recapture when the loss is deducted in the foreign country. Under the new rules, losses of a foreign PE will be deductible in Belgium only if the losses are considered “final” and are incurred by the Belgian company through a PE located in the EEA.

Foreign losses generally will be considered final when the Belgian company definitively terminates its activities carried out abroad through the foreign PE without having obtained any deduction for the losses in the EEA member state where the PE is located. An anti-abuse rule will apply where the company resumes its activities in the EEA member state within a three-year period.

Also effective as from tax year 2021, the Belgian definition of a PE will be revised to modify the exception for “independent agents” to bring it in line with the 2017 version of the OECD model tax convention and the OECD BEPS recommendations.


The law will implement the EU ATAD 1 and 2 into Belgian tax law as from tax year 2020, i.e. the EBITDA interest limitation rules, the controlled foreign company rules, the exit tax and the anti-hybrid measures.

Other measures

The law includes various other measures aimed at broadening the taxable base and increasing compliance of corporations, including:

  • Revisions to the notional interest deduction rules that limit the calculation of the deduction to incremental equity (instead of total qualifying equity);
  • The introduction of a minimum corporate income tax charge for companies with taxable income over EUR 1 million after certain deductions. For these companies, certain deductions and carryforwards, including the tax loss carryforward, the notional interest deduction and the DRD carryforward, may be deducted only up to 70% of taxable income exceeding EUR 1 million, with tax due on the remaining 30% (the minimum taxable base);
  • The limitation of deductions of provisions for risks and charges;
  • Increased disallowed expenses as from tax year 2021; and
  • The imposition of higher monetary penalties for companies that do not make sufficient advance tax payments.

Source: Deloitte

miércoles, 21 de febrero de 2018

Draft transfer pricing legislation comes to Hong Kong

On December 29, 2017, a draft bill to implement key actions arising from the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) agenda was gazetted (Inland Revenue (Amendment) (No.6) Bill 2017). 

The extensive consultation exercise foreshadowed that the draft bill would include significant changes to codify transfer pricing, introduce country-by-country (CbC) reporting and Master File and Local File transfer pricing documentation, expand the Advance Pricing Agreement (APA) regime, and introduce a stringent penalty regime with potential civil and criminal sanctions.

At the same time, the draft bill also includes some unexpected elements:

  • The length of the bill — at 162 pages, it is the largest tax amendment bill that Hong Kong has seen — and its complexity are surprising.
  • The bill goes significantly beyond the BEPS minimum standards (and the scope of the consultation) and fully adopts the OECD’s BEPS action items on permanent establishment (PE) thresholds; in contrast, a large number of other jurisdictions opted out of at least some of these rules.  This likely will have a knock-on effect on the separate amendment bill to introduce the BEPS multilateral agreement expected in mid-2018.
  • The bill introduces a strict approach to determining ‘the’ arm’s-length price, which places a significant burden of proof on the taxpayer, and makes the Inland Revenue Department (IRD) assessor the sole arbiter of whether the profit or loss in the return is correct.  This approach does not appear to fully recognize that there legitimately may be a range of possible arm’s-length prices.

Source & more info: PwC

martes, 20 de febrero de 2018

Italian Law no. 205 (the 2018 Financial Bill, or ‘the Bill’), published in the Official Gazette on December 29, 2017, contains important tax provisions regarding the digital economy and international tax.

Source & more info: PwC

lunes, 19 de febrero de 2018

Country-by-Country reporting local filing obligation confirmed for certain Canadian taxpayers

The Canada Revenue Agency (CRA) recently confirmed that a Canadian taxpayer must file a 2016 country-by-country (CbC) report as a constituent entity (CE) in Canada — even if a CbC report is filed by the group’s ultimate parent entity (UPE) or surrogate parent entity (SPE) in another jurisdiction — in all cases where (1) Canada does not have an activated exchange agreement with the jurisdiction of the UPE or SPE by December 31, 2017, or (2) has an activated agreement but it is not in effect for fiscal years beginning January 1, 2016 (FY2016). There are only 39 countries that had such a qualified exchange agreement effective for FY 2016. This situation thus affects Multinational Enterprises (MNE) from many countries that have Canadian subsidiaries in their group, including Brazil, China, Israel, Russia, and Switzerland.

Source: PwC

jueves, 15 de febrero de 2018

Romania: Country-by-Country report and notification templates approved

On December 11, 2017, the electronic versions of the country-by-country (CbC) report and CbC report notification templates were published by the Romanian National Agency for Fiscal Administration. 

Previously, on November 14, 2017, the National Agency published Order no. 3049/2017, which approved the CbC report and CbC report notification templates, as well as the procedure for their submission. However, in the absence of the above-mentioned electronic templates, submission of the CbC reports technically was not possible.

Source & more info: PwC

miércoles, 14 de febrero de 2018

Changes to the Peruvian Income Tax Law regulations regarding Country-by-Country Reporting

On November 17, 2017, the Supreme Decree No. 333-2017-EF was issued modifying the Peruvian Income Tax Law (PITL) Regulation in order to adapt it to the PITL’s new transfer pricing formal obligations (Local File, Master File, and Country-by-Country (CbC) Report Informative Returns), which were introduced at the end of 2016. The changes, which took effect November 18, 2017, include the following:

  • Definition of some concepts, particularly Group and Multinational Group. 
  • Requirement to submit the CbC Report Informative Return.
  • Minimum information to be included in the Local File, Master File, and CbC Report Informative Returns.
  • Update of the formal obligation (Local File) that must be delivered by taxpayers subscribed to an APA.
Source & more info: PwC

martes, 13 de febrero de 2018

Peru: MFN clause in tax treaty with Mexico applies

On 21 November 2017, the Peruvian tax administration (SUNAT) announced that the most-favored nation (MFN) clause in the Peru-Mexico tax treaty applies as from 1 January 2015. The MFN clause was triggered by Peru’s treaties with Korea (ROK) and Switzerland, which provide for more favorable withholding tax rates on dividends and interest, respectively, that came into effect as from 1 January 2015.
The SUNAT has confirmed that the maximum withholding tax rates on dividends and interest of the Peru-Mexico treaty are amended as follows for payments by a Peruvian taxpayer to a beneficiary resident in Mexico:
  • Dividends: The maximum general withholding tax rate is reduced to 10% in accordance with the rate provided in the Peru-Korea (ROK) treaty. Previously, the 10% rate applied only to dividends paid to a company that held directly or indirectly at least 25% of the voting rights of the payer company; otherwise, the rate was 15%.
  • Interest: A 10% withholding tax rate applies to interest incurred on financing obtained to acquire industrial, commercial or scientific equipment or on a bank loan, in accordance with the rate provided in the Peru-Switzerland treaty; otherwise, the rate remains at 15%.
Tax withheld since 1 January 2015 in accordance with the previous higher tax rates under the treaty now is subject to refund by the SUNAT. To obtain the repayment, the taxpayer must submit a refund request to the SUNAT, which will have 45 business days to process the claim.
The Mexican tax authorities also have confirmed the application of the reduced rates for payments by a Mexican taxpayer to a beneficiary resident in Peru. 

Source: Deloitte

lunes, 12 de febrero de 2018

Latvia updates tax haven list

The Cabinet of Ministers approved regulations on 7 November 2017 that update the list of low-tax or no-tax jurisdictions and territories that are considered tax havens for Latvian tax purposes. The regulations will become effective on 1 January 2018, and the new list will apply as from that date.
Latvian domestic tax law contains special anti-tax avoidance rules relating to tax havens, which provide for tax withholding or tax base increases for transactions carried out with persons located in tax haven jurisdictions.
The new list includes the following 25 jurisdictions/territories:
  • Antigua and Barbuda 
  • Grenada 
  • Macao 
  • Tahiti
  • Bahamas 
  • Guam 
  • Maldives 
  • Tonga
  • Bahrain 
  • Jamaica 
  • New Caledonia 
  • US Virgin Islands
  • Brunei 
  • Jordan 
  • St. Helena 
  • Vanuatu
  • Djibouti 
  • Kenya 
  • St. Pierre et Miquelon 
  • Venezuela
  • Dominica 
  • Liberia 
  • São Tomé and Príncipe 
  • Zanzibar
  • Ecuador 

Source & more info: Deloitte

domingo, 11 de febrero de 2018

UK's benefial owners registry moves forward

The government confirmed on 24 January 2018 that it intends to introduce legislation by summer 2019 to establish a public register of beneficial owners of overseas companies that own or buy UK property (commercial or residential real estate), as well as companies that participate in UK government procurement. The purpose of the register, which is expected to go live early in 2021, is to achieve greater transparency around foreign entities that engage in these activities.
Source: Deloitte 

sábado, 10 de febrero de 2018

Lithuania approves reduced tax rate for royalty income

As from 1 January 2018, profits derived from the use of intangible assets (e.g. copyrighted computer programs or patented inventions) generated through R&D activities are subject to a reduced corporate income tax rate of 5% (rather than the standard 15% rate). A specific method must be used for calculating such profits, and additional requirements apply.
Source: Deloitte

viernes, 9 de febrero de 2018

Dbriefs Bytes - 9 February 2018

Italy proposes tax on digital activities approved by upper house of parliament

On 30 November 2017, Italy’s upper house of parliament approved the budget law for fiscal year 2018. The bill, now under discussion in the lower house, includes two measures that would significantly affect companies engaging in digital/web-based activities in Italy. Specifically, an equalization tax would be introduced on certain digital transactions and the domestic definition of a permanent establishment (PE) would be revised.
These measures follow the issuance of a political statement signed on 11 September 2017 by the finance ministers of France, Germany, Italy and Spain (“Joint Initiative on the taxation of companies operating in the digital economy”) in which the four EU member states indicate that they will introduce unilateral measures to tax the digital economy if the EU does not expeditiously move forward in a coordinated manner, and the European Commission’s communication on the digital economy released on 21 September 2017 (“A Fair and Efficient Tax System in the European Union for the Digital Single Market”).

Source & more info: Deloitte

jueves, 8 de febrero de 2018

Spanish Tax Agency releases 2018 Tax and Customs Control Plan

On January 8, 2018, the Spanish Tax Agency published the general guidelines of the 2018 Tax and Customs Control Plan through the Official Bulletin of the State, with a specific focus on efforts to avoid tax evasion.

The general guidelines are based on four main pillars: (i) tax and customs fraud prevention through access to increased information; (ii) enhanced investigations of tax and customs fraud through new data analytic and technology tools; (iii) focused mechanisms to control tax and customs fraud in the collection phase; and (iv) increased collaboration between the Spanish Tax Agency and regional tax administrations.

Source & more info: pwc

Australia's exposure draft legislation addresses hybrid mismatch arrangements

On 24 November 2017, the Australian government released exposure draft legislation (ED) and an explanatory
memorandum addressing hybrid mismatch arrangements. The ED follows announcements in the 2016-17 and 2017-18 budgets that the government would implement the rules developed under action 2 of the OECD BEPS project, taking into account the recommendations of Australia’s Board of Taxation (BOT). The ED proposals, which are subject to consultation, are aimed at eliminating double nontaxation benefits arising from differences in the tax treatment of an entity or instrument under the tax laws of two or more jurisdictions.
In broad terms, a hybrid mismatch would arise under the proposed rules where a payment gives rise to:

  • A “deduction/non-inclusion” mismatch (i.e. a tax deduction for a payment is allowed in the payer’s jurisdiction but the payment is not subject to tax in the recipient’s jurisdiction); or
  • A “double deduction” mismatch (i.e. a tax deduction is available for the same payment in two jurisdictions).

A mismatch covered by the proposed rules would be “neutralized,” either by the disallowance of a deduction or the inclusion of an amount in assessable income.

Source: Deloitte

miércoles, 7 de febrero de 2018

Argentina Proposes tax reform, would introduce most significant changes in decades

The executive branch of Argentina’s federal government submitted a bill to Congress on 15 November 2017 that would significantly reform the country’s tax system. The bill includes changes that would affect the taxation of both residents and nonresidents, and would lower the corporate tax rate on undistributed profits from 35% to 25% by 2020. The reform has a number of goals, including encouraging investment, promoting the development of the economy, making Argentina globally competitive, facilitating quality employment, increasing fairness in the tax system and reducing tax evasion. While the bill is still a work in progress and the effective date is uncertain until the law is approved, the main
changes relevant to corporations are expected to affect the following areas:

  • The current 35% corporate income tax rate would be reduced to 30%, and then to 25% by 2020.
  • A withholding tax on dividends paid by an Argentine entity to a nonresident or a resident individual would be imposed at a rate of 7% for 2018 and 2019, increasing to 13% as from 2020, so that the overall income tax burden on distributed profits would reach about 35%.
  • The equalization tax would be eliminated for income generated as from 2018. This tax currently applies to dividends paid to a resident or nonresident that exceed the Argentine payer company’s accumulated taxable income, after certain adjustments.
  • The imposition of tax on capital gains on the sale of shares of Argentine companies derived by nonresidents as from 23 September 2013 would be retroactively affirmed. Although such transactions have been subject to tax as from that date, the tax authorities did not issue rules on how the tax should be paid where both the purchaser and the seller are nonresidents until 18 July 2017, so it is likely that some transactions escaped taxation. A resolution issued on 20 July 2017 suspended the effective date of the rules for 180 days, reportedly due to concerns relating to transactions carried out on a stock exchange. The bill would provide a tax exemption for shares traded on a stock exchange as from 23 September 2013 if the broker did not apply the applicable withholding tax.
  • An exemption would be introduced for capital gains derived by nonresidents on the sale of publicly traded shares or certificates of deposit for such securities (i.e. ADRs). The exemption for interest and capital gains from public and corporate bonds, financial trusts with a public offering and certain mutual funds with a public offering would be retained.
  • The taxation of certain digital content at a 17.5% rate (the effective withholding tax rate that applies to certain royalties paid to a nonresident) would be clarified.
  • Indirect sales of certain Argentine assets (shares of Argentine entities, Argentine permanent establishments (PEs) and other assets such as real estate located in Argentina) that are carried out through the sale of shares or other participations in a nonresident entity would become subject to tax.
  • The thin capitalization rules would be replaced by rules limiting the deductibility of interest on loans with related companies to 30% of taxable EBITDA (earnings before interest, taxes, depreciation and amortization). (Currently, only certain related-party interest is subject to the thin capitalization rules, based on a 2:1 debt-to-equity ratio.) Certain exceptions would apply in the case of highly leveraged economic groups. The deductibility of foreign exchange losses also would be limited by the new rules.
  • The current tax transparency rules would be replaced by broader rules that would be triggered in more situations, and certain transactions would result in “deemed dividends.”
  • A definition of a PE would be introduced (currently, the concept of a PE exists, but without a specific definition). In addition, a limited “force of attraction” rule would be introduced that could subject certain revenue of the head office of a PE to tax in Argentina, but a deduction for expenses incurred by the head office would be allowed.
  • Changes would be made to the transfer pricing rules to introduce a new definition of related parties, expand the scope of the rules to apply to transactions with low-tax jurisdictions in addition to transactions with noncooperative jurisdictions, and modify the “sixth” transfer pricing method (a variation of the comparable uncontrolled price method that currently must be used in certain cases).
  • The tax on financial transactions that is levied on debits and credits to current accounts, at a rate of 0.6% per transaction, gradually would become 100% creditable against the income tax.
  • Digital content (i.e. music, videos, etc.) provided by nonresidents would become subject to VAT.
  • A portion of an employee’s monthly salary would be exempt from the employer’s social security contribution. A unified employer contribution rate of 19% would apply (instead of the current rates that range between 23% and 27%), but the portion of the contribution currently creditable against the VAT would be eliminated. These modifications would be implemented gradually and would be fully in force as from 2022.
  • An advance pricing agreement mechanism would be introduced to provide certainty in transactions with related companies.
  • A mutual agreement procedure would be introduced to handle the resolution of disputes relating to the application of tax treaties. 

Source: Deloitte

martes, 6 de febrero de 2018

Mexico launches special economic zones

Decrees published in Mexico’s federal official gazette on 29 September 2017 officially launched three special economic
zones (SEZs) in the country: Lázaro Cárdenas-La Unión, Puerto Chiapas and Coatzacoalcos. The SEZs, which apply as from 30 September 2017, provide for preferential income tax, VAT, and customs duty treatment for companies operating in the zones.
A law enacted in 2016 created the SEZ regime, but individual decrees were required to officially launch them. The SEZs aim to stimulate growth, reduce poverty, facilitate the supply of basic services and attract investment to economically underdeveloped or depressed areas. Mexican companies or state-owned entities that obtain permission to become “integral administrators” and Mexican or nonresident entities and individuals that receive authorization from the Ministry of Finance to be qualified SEZ “investors” and that carry out qualifying “economic productive activities” in
an SEZ qualify for the incentives.
Integral administrators and investors will be granted a 100% reduction of corporate income tax otherwise due on income earned within the SEZ for the first 10 fiscal years from the date  authorization for integral
administrator/investor status is granted. A 50% income tax reduction will be granted on income earned within the SEZ during the subsequent five years. (However, foreign tax credits applied to reduce tax on SEZ income also will be subject to the same 100% or 50% reduction, as applicable.)
To be eligible for the income tax benefit, qualifying integral administrators and investors must maintain at least the same number of insured employees registered under the mandatory regime with the Mexican social security authorities in all fiscal years in which the tax reduction is applied, and the employees must provide their services exclusively within the SEZ.
Taxpayers opting to apply Mexico’s integration tax regime are not eligible for the income tax reduction on SEZ income.
However, companies with an IMMEX (maquiladora) authorization can apply the SEZ benefits provided other benefits available to maquiladoras under the Income Tax Law are not applied.

Source & more info: Deloitte

lunes, 5 de febrero de 2018

Significant tax change with widespread impact fast becoming reality in New Zealand

The anticipated changes to New Zealand’s tax regime for cross-border relationships and transactions are fast becoming a reality. New Zealand’s new Government recently introduced a tax bill to Parliament proposing to:

  • tighten the transfer pricing regime;
  • move the way that related-party debt is priced away from normal arm’s-length principles;
  • make it more likely that groups with a physical presence in New Zealand will be taxable here on sales revenue;
  • eliminate tax advantages arising from hybrid mismatches;
  • further restrict interest deductibility under the thin capitalisation regime; and
  • give Inland Revenue more power to investigate large multinationals. 

If enacted as proposed, most of the new rules could take effect as early as July 1, 2018 or, in the case of the new deemed permanent establishment rules, from the enactment date, which could be earlier.

Source & more info: PwC

viernes, 2 de febrero de 2018

Draft Italian 2018 Finance Bill contains unilateral measures to deal with digital economy challenges

The Italian Senate issued a new version of the 2018 Finance Bill (Draft) on November 30, 2017. The Draft contains important tax provisions, such as those relating to (i) taxation of the so-called ‘digital economy’ and (ii) registration tax in the context of the sale of Italian companies’ shares. The Draft is subject to modification and final approval by the two houses of Parliament. The impact of the measures can be determined once the final version of the bill is introduced.
Source & more info: PwC