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Worldwide Tax News

Approved Changes (10)

Argentina

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Argentina Introduces Additional Tax on Foreign Currency Purchases

Argentina has published General Resolution 4815/2020 of 15 September 2020. The Resolution provides for a 35% tax in addition to the tax on foreign currency purchases (Impuesto Para una Argentina Inclusiva y Solidaria - PAIS tax), which was introduced by Law 27.541 on Social Solidarity and Productive Reactivation and regulated by General Resolution 4659/2020 (previous coverage). The reason for the additional tax is largely due to the economic impacts of the COVID-19 pandemic and the resulting tax policy measures that have led to a reduction in tax revenue. According to the Resolution, the fiscal efforts in response to COVID-19 should be shared by different economic sectors, including those that can purchase foreign currency and pay expenses in foreign currency, which "constitutes an indicator of taxable capacity".

The PAIS tax was introduced at a rate of 30% and is withheld on acquisitions of foreign currency and when a transaction is paid in Argentine pesos and requires the acquisition of foreign currency (an 8% rate applies for digital services subject to 21% VAT). The additional 35% tax introduced by General Resolution 4815/2020 applies to the same operations as the PAIS tax, with the same collection/withholding agent requirements.

However, several exemptions are provided by General Resolution 4815/2020, including with respect to:

  • Expenses related to health benefits, purchase of medicines, purchase of books in any format, and the use of educational platforms and software for educational purposes;
  • Expenses associated with research projects carried out by researchers who work in the sphere of the national State, provincial States, the Autonomous City of Buenos Aires and the municipalities, as well as the universities and institutions that are members of the Argentine university system; and
  • Acquisition abroad of equipment, materials, and other goods intended for firefighting and civil protection of the population by entities recognized in Law No. 25.054 and its amendments.

The additional 35% tax is essentially considered an advance on income tax and personal assets tax and if it exceeds the amount of income tax and personal assets tax to be paid, the excess may be refunded. Provisions are also made for a refund of the tax to persons who are not taxpayers of income tax or personal assets tax. Such persons are allowed to request a refund once the calendar year in which the tax was withheld is ended.

General Resolution 4815/2020 entered into force on 16 September 2020 and is effective from that date.

09-18-2020

Australia

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ATO Issues Large Business JobKeeper Compliance Update

The Australian Taxation Office (ATO) has issued a compliance update for large businesses in relation to the JobKeeper payment scheme that was introduced to support businesses significantly affected by COVID-19.

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Large business JobKeeper compliance update

We've been working closely with many large businesses to ensure they meet the eligibility requirements for JobKeeper payments and have found the majority of large businesses are doing the right thing.

All applications for JobKeeper payments are checked and we are undertaking a range of compliance activities to maintain the integrity of the program. Our compliance program aims to detect and deal with large businesses who have manipulated their projections or financial positions to access JobKeeper payments they aren't entitled to receive.

We've focused our attention on the aggregated turnover and decline in turnover tests. Consistent with the JobKeeper provisions, we focus on ensuring the assumptions used by employers to make projections are reasonable, not on their actual results.

We've found issues in businesses:

  • that are part of SGE groups and are incorrectly calculating their aggregated turnover (applying a 30% decline in turnover instead of the 50% decline in turnover)
  • applying for JobKeeper payments prior to their nomination period
  • projecting GST turnover at the economic group level rather than entity level
  • incorrectly calculating GST turnover, with common errors including excluding irregular GST turnover amounts or using general sales rather than GST turnover.

We've also seen businesses not keeping adequate records to support their JobKeeper enrolment. We encourage all large businesses to review our best practice governance for JobKeeper payments and improve their records where necessary.

We remain committed to supporting large businesses receiving JobKeeper. If you've made an honest mistake or are experiencing difficulties, we will help fix the error and assist you.

For further information contact your existing relationship manager, client engagement team or our Large Service Team.

If you're concerned that someone is doing the wrong thing related to any of the stimulus measures, including JobKeeper, you can tell us about it. We've established a confidential tip-off hotline available on 1800 060 062 as well as an online tip-off form.

09-18-2020

Costa Rica

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Costa Rica Defers VAT on Construction Services by One Year

Costa Rica published Law No. 9887 in the Official Gazette on 16 September 2020. The Law is effective from the date of publication and provides a one-year exemption from the application of VAT on engineering, architecture, topography, and civil works construction services provided for registered projects in Costa Rica (construction services). Unlike the recent deferral for tourism services that essentially shifted the transitional implementation of VAT by one year to 1 July 2021, Law No. 9887 provides the following new transitional terms for construction services:

  • 100% exemption from VAT from the date following the effective date of the law (17 September 2020) until 31 August 2021
  • 4% VAT rate from 1 September 2021 to 31 August 2022; and
  • 8% VAT rate from 1 September 2022 to 31 August 2023.

It is also provided that the exemption and reduced rates will apply regardless of the date a project is registered. From 1 September 2023, the standard 13% VAT rate will apply.

09-18-2020

Cyprus

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Cyprus Updates Reference Rates for Notional Interest Deduction in 2020

The Cyprus Tax Department has issued a notice announcing the publication of updated reference rates for Bermuda, Denmark, Jordan, Portugal, and Switzerland, in respect of determining the notional interest deduction (NID) for new equity investments. Note that as per the notice, reference rates are increased by 3% to determine the NID rate, which is the prior rule. As from 1 January 2020, the rules are changed such that the reference rates are increased by 5%, which is noted on the reference rates webpage.

09-18-2020

Gibraltar

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Gibraltar Updates Method for Employers to Submit Annual Declaration

The Government of Gibraltar has issued a release announcing an update of the method to submit the annual declaration Form P8, which will no longer be accepted in paper form.

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Income Tax — P8 returns — 625/2020

September 16, 2020

As a result of the COVID-19 pandemic and following the Business Employee Assistance Terms ("BEAT") measures announced by HM Government of Gibraltar, the Income Tax Office has updated the method for submitting P8 returns for 2019/2020.

The 2019/2020 P8 'Employer's Annual Statement, Declaration And Certificate' paper based form will no longer be accepted given that it does not cater for the BEAT scheme that was introduced as a direct result of the COVID-19 pandemic.

In order to facilitate the reporting for 2019/2020, electronic and interactive versions of the P8 form are now available including relevant guidance notes. A service to upload completed forms (P8 Uploads) directly and securely through an online platform is available via the following link — https://tax.egov.gi/.

By using this facility, employers will be able to adequately report on all employees, irrespective if these have continued to be active or if they were made inactive, partly inactive or furloughed throughout any of the months in the period extending from 1 April to 30 June 2020. The Income Tax Office will exclusively accept P8 declarations in the new updated format.

Sincerest thanks and recognition are given to Mr Joseph Pitto of the Income Tax Office, who has been instrumental in pioneering this project in line with requirements as well as the team at HM Government of Gibraltar Information Technology & Logistics Department for their continued commitment, professionalism and support in ensuring that this project is a success.

For any enquiries, please contact p8returns@gibraltar.gov.gi.

09-18-2020

Guernsey

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Guernsey Awarding Social Security Contribution Credits for Employees Impacted by COVID-19

The Guernsey government has announced that the Revenue Service is Awarding Social Security Contribution Credits for Employees Impacted by COVID-19 in Guernsey and Alderney.

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Revenue Service award social security contribution credits for employees impacted by COVID-19

Wednesday 16 September 2020

Employed people in Guernsey and Alderney with gaps in their contribution record due to having reduced earnings in the lockdown period 25 March to 19 June will be awarded contribution credits and will not have to pay to plug the gaps.

This change will protect the employee's contribution record and their benefit entitlement, without the need to pay a voluntary contribution of £20.52 for any missing weeks.

Employees are eligible to be awarded a credit if they were employed at 25 March 2020 and were present in Guernsey for at least part of each week where they have a gap in their record during lockdown.

The Revenue Service has already identified over 1,200 customers eligible for the credit during the period of lockdown and credits have been awarded without the customer having to do anything. Any employed customers who have been asked to make a voluntary contribution for missing weeks who believes they would be eligible for a COVID-19 credit are asked to make contact with the employer team by email at schedules@gov.gg.

The Committee for Employment & Social Security approved the changes and its President, Deputy Michelle Le Clerc, said:

"We know this year has been very difficult for many employees, bringing unexpected and unprecedented disruption to their working lives. We wanted to ensure those Revenue Service customers did not see deficiencies in their contribution records, where their employer was temporarily unable to provide them with paid work, or furloughed them at a reduced rate. This is why we are awarding customers contribution credits during the period of lockdown, to protect their benefit entitlement."

09-18-2020

Ireland

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Irish Revenue Providing Pay and File Deadline Extension for Individual ROS Customers

Irish Revenue has issued eBrief No. 174/20 regarding a pay and file deadline extension to 10 December 2020 for individual ROS customers filing the income tax return and self-assessment for 2019 (Form 11) and the capital acquisitions tax return (IT38). Both the payment and filing must be completed online through ROS for the extension to apply.

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Revenue eBrief No. 174/20

Extension of Pay & File Deadline for ROS Customers

In recognition of the challenges being experienced by businesses and tax practitioners arising from the COVID-19 crisis, Revenue today (17 September 2020) announced a four week further extension to the Pay & File deadline for self-assessment income tax customers and for customers liable to Capital Acquisitions Tax (CAT).

For customers who file their 2019 Form 11 return and make the appropriate payment through ROS for:

  • Preliminary Tax for 2020
  • Income Tax balance due for 2019

the due date is now extended from 12 November to Thursday, 10 December 2020.

Revenue has also extended the due date for beneficiaries who received gifts or inheritances with valuation dates in the year ended 31 August 2020. Such beneficiaries now have until 10 December 2020 to make a Capital Acquisitions Tax (CAT) return and the appropriate payment through ROS.

In order to qualify for the extension, customers must both pay and file through ROS. Where only one of these actions is completed through ROS, the extension does not apply and the required date to submit both returns and payments is no later than 31 October 2020.

There is no change to the deadline of 31 October 2020 for taxpayers who file on paper rather than online through ROS.

09-18-2020

Paraguay

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Paraguay Provides Additional Interest Exemptions for Exceptional Tax Payment Regime

Paraguay published Decree 4011 in the Official Gazette on 10 September 2020, which amends Decree 3966 of 24 August 2020. Decree 3966 provided for the introduction of an exceptional regime for the payment of outstanding tax debts (previous coverage). The amendments made by Decree 4011 provide for a reduction in certain interest rates under the exceptional regime as follows:

  • a reduction in the interest rate from 9% to 0% for debts accepted by the taxpayer in the framework of a tax audit or administrative appeal, which may be applied for up to 30 January 2021; and
  • a reduction in the interest rate from 1.4% to 0% for debts and surcharges self-assessed by taxpayers, which may be applied for up to 30 November 2020.

It is also clarified that the exceptional regime does not apply to tax debts resulting from amended returns, to debts corresponding to withholding taxes by withholding agents, or to debts approved by courts before the entry into force of the regime.

09-18-2020

United Kingdom

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The UK Publishes Regulations Setting Interest Rates for Over- and Under-Paid Digital Services Tax

The UK has published the Taxes (Interest Rate) (Amendment No. 2) Regulations 2020, which were made on 15 September 2020 and will come into force on 14 October 2020. The regulations set interest rates on over- and under-paid Digital Services Tax (DST) liabilities from taxpayers, which is meant to encourage compliance with making payments on time by ensuring that equity exists between on-time payments and early and late payments.

The applicable rates are as follows:

  • The interest rate applicable when there is an underpayment of the DST liability will be the reference rate plus 2.5%.
  • The interest rate applicable to the payment of a DST liability paid before its required due date will be the reference rate less 0.25%, or an interest rate of 0.5% if greater.
  • The interest rate applicable to the repayment of a DST liability that is overpaid on or after its required due date will be the reference rate less 1%, or an interest rate of 0.5% if greater.

In all cases, the reference rate is the official bank rate as determined by the most recent meeting of the Monetary Policy Committee of the Bank of England. Based on the current reference rate of 0.1%, the interest rates are initially set at 2.6% for underpayment, 0.5% for payment before the due date, and 0.5% for overpayment on or after the due date.

Click the following link for a tax information and impact note on the interest rates published by UK HMRC.

09-18-2020

United States

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U.S. IRS Reminds Taxpayers and Practitioners of Expedited Letter Ruling Procedures

The U.S. IRS has issued a release to remind taxpayers and tax practitioners of the procedures for requesting expedited handling of requests for letter rulings in light of the COVID-19 pandemic.

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IRS reminds taxpayers and practitioners of expedited letter ruling procedures

IR-2020-212, September 16, 2020

WASHINGTON — The Internal Revenue Service continues to look for ways to assist taxpayers affected by the COVID-19 pandemic. As part of that effort, the IRS reminds taxpayers and tax practitioners of the procedures for requesting expedited handling of requests for letter rulings under Rev. Proc. 2020-1, 2020-1 I.R.B. 1 (January 2, 2020).

As set forth in Rev. Proc. 2020-1, the IRS ordinarily processes requests for letter rulings in the order that they were received. A taxpayer with a compelling need to have a request processed more quickly may request expedited handling. The request for expedited handling must be made in writing, preferably in a separate letter submitted with the letter ruling request. Requests for expedited handling are granted at the discretion of the IRS and typically involve a factor outside of the taxpayer's control that creates a real business need to obtain a letter ruling before a certain date in order to avoid serious business consequences. Requests for expedited handling should be submitted as promptly as possible after the taxpayer has become aware of the deadline or compelling business need.

The COVID-19 pandemic is a factor outside of the taxpayer's control that can support a request for expedited handling under Rev. Proc. 2020-1. As a result, and consistent with Executive Order 13924 of May 19, 2020, taxpayers are encouraged to seek expedited handling if they face a compelling need related to COVID-19. Such requests will be handled as provided in Rev. Proc. 2020-1.

More information on the procedures for requesting expedited handling is provided in Section 7.02(4) of Rev. Proc. 2020-1. In addition, Rev. Proc. 2020-29, 2020-21 I.R.B. 859 (May 18, 2020), sets forth procedures for the electronic submission of letter ruling requests.

09-18-2020
Proposed Changes (3)

European Union

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EU 2020 State of the Union Address Delivered

European Commission President Ursula von der Leyen delivered the 2020 State of the Union Address on 16 September. With respect to taxation, one of the main points of the address concerns digital taxation, with President von der Leyen stating that "We will spare no effort to reach agreement in the framework of OECD and G20. But let there be no doubt: should an agreement fall short of a fair tax system that provides long-term sustainable revenues, Europe will come forward with a proposal early next year."

In addition to the topic of digital taxation, President von der Leyen also noted that energy taxation will be reformed as part of the European Green Deal, which includes a proposed increase in 2030 target for emission reduction to at least 55%. President von der Leyen also addressed relations with the U.S., including that Europe is ready to build a new transatlantic agenda to strengthen the EU-U.S. bilateral partnership on trade, tech, and taxation.

Click the following links for the full text of the address and highlights published by the European Commission with links to further information.

09-18-2020

Ireland

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Ireland's Department of Finance Announces Budget 2021 Strategy

Ireland's Department of Finance has issued a release announcing the strategy for the Budget 2021, which was discussed and agreed to by the government on 15 September. During the discussions it was confirmed that the Budget will be based on the following assumptions:

  • from the beginning of next year, bilateral trade between the UK and the EU will be on World Trade Organisation terms;
  • that, in the absence of a vaccine, the economy – and broader society – must co-exist with the virus.

Further, it was agreed that:

  • Broad-based increases in taxation would be counter-productive at this stage of the cycle;
  • As set out in the Programme for Government, in Budget 2021 there will be no change to income tax credits or bands;
  • Budget 2021 will prioritise a continued response to the COVID-19 crisis rather than 'normal' budgetary adjustments;
  • Preserving and maintaining existing levels of service will be the priority;
  • As per the Programme for Government, the sectoral priorities will be Health, Housing, and Climate change; and
  • As set out in the Programme for Government, a 'Recovery Fund' will be established and we will provide the details and mechanics of this on Budget day. This Fund will be needed to ensure continued support for the economy. Decisions with respect to the Fund will be made across the year.

Budget 2021 is scheduled to be published on 13 October 2020.

09-18-2020

Russia

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Russia Considering Increased Taxation of Mining, Oil, and Tobacco Companies to Fund Budget Shortfalls

According to recent reports, the Russian government is considering measures that would increase the taxation of certain mining, oil, and tobacco companies in order to fund budget shortfalls. With regard to mining and oil, potential measures include tripling the mineral extraction tax (MET) on metals and fertilizer producers and the removal of the MET zero-rate for high-viscosity oil from 2021. With regard to tobacco, potential measures include an increase in excise taxes on cigarettes by 20%. Combined, the measures are expected to increase annual tax revenue by an estimated RUB 340 billion per year.

09-18-2020
Treaty Changes (3)

Belgium-France-Luxembourg

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Belgium Publishes Synthesized Texts of Tax Treaties with France and Luxembourg as Impacted by the BEPS MLI

Belgium's Ministry of Finance has published the synthesized texts of the tax treaties with France and Luxembourg as impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI applies for the treaties as follows:

1964 Belgium-France Tax Treaty - MLI applies:

  • with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2020;
  • with respect to all other taxes, for taxes levied with respect to taxable periods beginning on or after 1 April 2020.

Notwithstanding the above, Article 16 (Mutual Agreement Procedure) of the MLI has effect with respect to the treaty for a case presented to the competent authority of a Contracting State on or after 1 October 2019, except for cases that were not eligible to be presented as of that date under the treaty prior to its modification by the MLI, without regard to the taxable period to which the case relates. Further, the provisions of Part VI (Arbitration) of the MLI have effect with respect to the treaty for cases presented to the competent authority of a Contracting State on or after 1 October 2019.

1970 Belgium-Luxembourg Tax Treaty - MLI applies:

  • with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2020;
  • with respect to all other taxes, for taxes levied with respect to taxable periods beginning on or after 1 April 2020.

Notwithstanding the above, Article 16 (Mutual Agreement Procedure) of the MLI has effect with respect to the treaty for a case presented to the competent authority of a Contracting State on or after 1 October 2019, except for cases that were not eligible to be presented as of that date under the treaty prior to its modification by the MLI, without regard to the taxable period to which the case relates. Further, the provisions of Part VI (Arbitration) of the MLI have effect with respect to the treaty for cases presented to the competent authority of a Contracting State on or after 1 October 2019.

09-18-2020

Cyprus-United States

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Cyprus Publishes Notice on Expected Effective Date of CbC Exchange with the U.S. and Local Filing Obligations

The Cyprus Tax Department has published a notice dated 4 September 2020 on the expected effective date of Country-by-Country (CbC) report exchange with the United States and local filing obligations.

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Clarification Bilateral Agreement between Cyprus and the United States

The Cyprus Tax Department informs all legal entities and their representatives that the bilateral Competent Authority Arrangement (CAA) for the exchange of Country-by-Country (CbC Reports) between Cyprus and the United States of America which is currently under negotiation, is expected to be effective for Reporting Fiscal Years starting on or after 1 January 2020. Consequently, in the case where the Ultimate Parent Entity of a Multinational Group of Enterprises (MNE) is tax resident in the United States of America, the secondary filing mechanism should be triggered for Reporting Fiscal Years starting on or after 1 January 2019 and before 1 January 2020.

For example, a local filing obligation should still arise in Cyprus in respect of an MNE Group's CbC report for Reporting Fiscal Year ending on 31 December 2019, even if a CbC Report has or will be submitted in the United States of America.

Additionally, in the cases where notifications for reporting fiscal years starting on or after 1 January 2019 and before 1 January 2020 have been filed in Cyprus by Cypriot Constituent Entities of MNE Groups which are affected by this announcement, such notifications must be revised (if required) in accordance with this announcement. If such notifications are revised by 31 December 2020, no penalties will be imposed for the Reporting Fiscal Year starting on or after 1 January 2019 and before 1 January 2020.

Our website will be updated on a regular basis with the latest information ( http://www.mof.gov.cy/tax).

09-18-2020

Romania-Malta

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Romania Authorizes Negotiation of Amending Protocol to Tax Treaty with Malta

The Romanian government has reportedly authorized the negotiation and signing of an amending protocol to the 1995 income tax treaty with Malta that will increase the withholding tax rate on dividends and interest to 15% (currently, 5%). The protocol would be the first to amend the treaty and must be finalized, signed, and ratified before entering into force.

09-18-2020
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