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Approved Changes (10)

Austria

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Austria Publishes Implementing Regulation for Digital Tax

Austria has published Regulation 378 in the 4 December 2019 edition of the Official Gazette on the implementation of the recently approved digital tax (previous coverage). The regulation provides that online advertisers subject to the digital tax are required to file annual returns electronically. The regulation also provides that the Ministry of Finance must provide an online digital procedure for the transmission of the annual returns for digital tax that must be made available on the Ministry of Finance website (https://www.bmf.gv.at) and that online advertisers must register via a web form made available on the same website. Lastly, for online advertisers that have no domicile, management, or permanent establishment in Austria or another EU/EEA Member State, a fiscal representative must be appointed for the purpose of the digital tax, who must also be an authorized agent and shall be responsible for filing the annual return.

The regulation enters into force on 1 January 2020. Fiscal representatives can be commissioned before 1 January 2020.

12-10-2019

Bulgaria

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Bulgaria Publishes Law on Amendments to the Corporate Income Tax Act

On 6 December 2019, Bulgaria published the Law on Amendments to the Corporate Income Tax Act in the Official Gazette, which includes several changes as part of the 2020 tax reforms. Some of the important aspects of the law include:

  • The implementation of the exit tax measures of the EU Anti-Tax Avoidance Directive (ATAD1), which includes:
    • where a taxpayer transfers assets outside Bulgaria or changes its tax domicile to another jurisdiction, the deemed gain that arises will be subject to exit tax;
    • the exit tax only applies in relation to transfers between parts of the same enterprise and does not apply to changes in the ownership of assets;
    • the exit tax does not apply where assets are returned to Bulgaria within 12 months, provided that transfer is related to the financing of securities, assets posted as collateral, or where the asset transfer takes place in order to meet prudential capital requirements or for the purpose of liquidity management; and
    • the exit tax may be deferred with the payment of installments over a period of five years where a transfer is made to an EU member state or an EEA member state with which Bulgaria has an agreement for mutual assistance;
  • The implementation of hybrid mismatch measures in line with ATAD2 to address deduction without inclusion mismatches and double deduction mismatches, which includes:
    • a primary rule that denies a deduction for costs incurred and payment made by a taxpayer if resulting in a hybrid mismatch;
    • a secondary safeguard rule that provides for the inclusion of income for a taxpayer receiving a payment, to the extent that the same is deducted in the jurisdiction of the payer; and
    • rules to address mismatches resulting from tax residence in more than one jurisdiction;
  • The amendment of the controlled foreign company (CFC) rules to clarify that the CFC rules will not apply for a CFC that:
    • is a foreign entity that is subject to alternative forms of taxation for its activity in the country where it is resident for tax purposes or in another country; or
    • is a place of business (permanent establishment) abroad that is subject to alternative forms of taxation for its activity;
  • An exemption from the requirement to prepare transfer pricing documentation if at least two of the following thresholds are not exceeded as of 31 December of the previous year:
    • Book value of assets – BGN 38 million
    • Net income from sales – BGN 76 million
    • Average number of staff for the reporting period - 250
  • The implementation of measures to comply with certain EU VAT rules and measures to reduce certain administrative burdens.

Note - Similar CFC and transfer pricing documentation measures were also included in the Law on Amendment and Supplementation of the Tax and Social Insurance Procedure Code published in August 2019 (previous coverage).

The Law generally enters into force on 1 January 2020.

12-10-2019

Curacao

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Curacao Individual Income Tax Brackets/Rates for 2020

Curacao has published the regulation on the individual income tax brackets and rates for 2020. The individual income tax brackets/rates are as follows with effective from 1 January 2020:

  • up to ANG 31,504 – 9.75%
  • ANG 31,504 up to 42,006 – 15.0%
  • ANG 42,006 up to 63,009 - 23.0%
  • ANG 63,009 up to 89,262 - 30.0%
  • ANG 89,262 up to 131,268 – 37.5%
  • over ANG 131,268 - 46.5%

The regulation also sets the basis discount (credit) for 2020, which is ANG 2,284, as well as other credits and allowances.

12-10-2019

Indonesia

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Indonesia Issues Regulations for Taxation of Foreign Digital/e-Commerce Companies

Indonesia reportedly issued regulations on 4 December that provide for the taxation of foreign digital/e-commerce companies with a significant presence in Indonesia. The regulations were approved on 25 November and apply with immediate effect.

The regulations include that all foreign companies that actively trade in goods or services electronically in Indonesia are treated as having a taxable physical presence in Indonesia and must appoint a representative to comply with all applicable tax obligations. Whether a foreign company has a taxable presence, however, depends on whether certain thresholds are met in terms of the amount of online traffic from Indonesia, the transactions amount in value or volume, and others. The specific thresholds are still to be provided. Companies with existing digital/e-commerce operations in Indonesia are reportedly given a two-year grace period to comply with the new regulations.

12-10-2019

Ireland

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Ireland Updates Guidance on Treatment of Capital Losses

Irish Revenue has published eBrief No. 202/19 on the update of guidance on the treatment of capital losses.

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Treatment of allowable losses for Capital Gains Tax (CGT) purposes

Tax and Duty Manual Part 19-02-05 has been updated to reflect the fact that a deduction in respect of an allowable loss can only arise when there is a chargeable gain against which that loss can be offset.

Examples are included in the manual to show how relief for allowable losses is given for CGT purposes.

12-10-2019

Jersey

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Jersey Publishes Regulations on Social Security Contributions for 2020

Jersey has published the Social Security (Amendment of Law No. 11) (Jersey) Regulations 2019, which provides for the social security contribution changes included as part of the budget proposals for 2020. Changes include:

  • an increase in the upper monthly earnings limit for both Class 1 and Class 2 contributions from JEP 12,500 to JEP 20,800;
  • an increase in Class 1 and Class 2 monthly contributions rates from 2.0% to 2.5% of employee earnings that exceed the standard monthly earning limit but do not exceed the upper monthly earnings limit; and
  • an increase in the Long-Term Care contribution rate from 1.0% to 1.5%.

The Regulations come into force on 1 January 2020.

12-10-2019

Malaysia

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Malaysia Public Ruling on Taxation of Foreign Fund Management Companies

On 3 December 2019, the Inland Revenue Board of Malaysia published Public Ruling No. 7/2019 on the taxation of foreign fund management companies, which are companies incorporated in Malaysia and licensed under the Capital Markets and Services Act 2007, the capital of which is more than 50% owned by foreign equity. Some of the main points of Public Ruling No. 7 include:

  • Where a foreign fund management company provides fund management services to both foreign investors and local investors, the income derived from the provision of such services to each of these categories of investors will be treated as arising from separate and distinct business sources;
  • The chargeable income from a source consisting of the provision of fund management services to foreign investors for a year of assessment is the statutory income from that source reduced by unabsorbed losses brought forward from earlier years from the same source;
  • The chargeable income derived from a source or sources other than the source consisting of the provision of fund management services to foreign investors for a year of assessment shall be the statutory income from that source or the aggregate of the statutory income from each of those sources, as the case may be, reduced by any deductions for brought forward losses and current year loss from other business sources (other than losses from the provision of fund management services to foreign investors);
  • The brought forward losses and the current year business loss from the provision of fund management services to foreign investors are not deductible against the income from the provision of fund management services to local investors and other sources of income of the fund. Similarly, brought forward losses and the current year business loss from the provision of fund management services to local investors and other business sources are not deductible against the income from the provision of fund management services to foreign investors;
  • For years of assessment up to 2020, the tax rates applicable to a foreign fund management company are as follows:
    • 10% if the shareholding of the company is 100% foreign and the investors are foreign
    • 10% if the shareholding of the company is at least 30% local equity and the investors are foreign; and
    • Prevailing domestic tax rates if the investors are local (current rate 24%);
  • From year of assessment 2021, the tax rates applicable to a foreign fund management company are as follows:
    • 24% if investors are foreign, regardless of shareholding percentage; and
    • Prevailing domestic tax rates if the investors are local (current rate 24%);
  • Foreign fund management companies that manage funds according to Syariah (Sharia - Islamic Finance) principles are exempt from the payment of income tax in respect of statutory income derived from a business of providing fund management services to both foreign and local investors up to year of assessment 2020.

Click the following link for the full text of Public Ruling No. 7/2019, which includes several examples.

12-10-2019

Poland

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Poland Repeals Hydrocarbon Tax

Poland has published the Law of 11 September 2019 on repealing the Hydrocarbon Tax Law and certain other amendments. The hydrocarbon tax was approved in August 2014 and was to apply from 1 January 2020 to profits from the exploration of shale gas and oil at varying rates based on the ratio of the taxpayer's income to qualified expenses. However, because there have been no real developments with respect to shale gas and oil in Poland, it was decided to repeal the tax before it was to take effect.

12-10-2019

Saudi Arabia

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Saudi Arabia Publishes Guidelines on Supplies of Services to Non-GCC Residents

Saudi Arabia's General Authority of Zakat and Tax (GAZT) has published new guidelines on Supplies of Services to Non-GCC Residents.

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The provision of services to persons residing outside of the GCC States (and transitionally, to all persons residing outside the KSA) is subject to special VAT rules. If the supply of services takes place in the KSA under place of supply rules but is supplied to a non-GCC resident, the supply is zero-rated. However, application of this zero-rate is limited in certain exceptions.

This Guideline is published by GAZT to provide guidance to taxpayers supplying services to Non-GCC Resident customers, and to any other affected persons in respect of how VAT should be applied in these cases. The Guideline has been issued following amendments to the relevant provisions in the Implementing Regulations to the KSA VAT Law. The Guideline is structured following the logical progression of the main considerations for applying the zero-rate to any supply:

  • Section 2 of this Guideline defines the key terms;
  • Section 3 of this Guideline briefly describes the place of supply rules applying to services;
  • Section 4 of this Guideline provides detail on the application of the zero-rate;
  • Section 5 of this Guideline details the exceptions to the zero-rate and when these apply.

A flowchart is included as an Appendix to depict how these concepts are applied to individual situations.

This Guideline solely serves as Guidance material, and does not include or purport to include all relevant information or legal provisions in relation to the issue of Rulings or other opinions by GAZT.

12-10-2019

United States

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U.S. Interest Rates on Overpaid and Underpaid Tax Unchanged for Q1 2020

The U.S. IRS has announced the interest rates for overpaid and underpaid tax for the calendar quarter beginning 1 January 2020, which are unchanged from the previous quarter. The rates are 5% for both overpayments and underpayments by individuals, and 4% and 5% for corporate overpayments and underpayments, respectively. The rate for corporate overpayments exceeding USD 10,000 in a tax period is 2.5% on the portion exceeding that amount, and the rate for large corporate underpayments exceeding USD 100,000 is 7%.

Revenue Ruling 2019-28, which includes the new interest rates and past rates, will be published in Internal Revenue Bulletin 2019-52 of 23 December 2019.

12-10-2019
Proposed Changes (1)

Iceland

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Iceland to Move Up Beneficial Ownership Registration Requirement for Previously Registered Entities

Iceland's parliament is considering a draft bill submitted on 4 December 2019 that amends the obligation of legal entities registered with the Trade Registry to register their beneficial ownership information. Iceland's beneficial ownership registration requirements were approved in June 2019, with beneficial ownership information on new legal entities required to be registered from 30 August 2019, while information of legal entities already registered with the Trade Registry provided a deferral to 1 June 2020. In order to avoid issues with the Financial Action Task Force, the draft bill will move up the deadline to register beneficial ownership information to 1 March 2020.

12-10-2019
Treaty Changes (2)

Cyprus-Egypt

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Update - New Tax Treaty between Cyprus and Egypt

The new income tax treaty between Cyprus and Egypt was signed on 8 October 2019. Once in force and effective, the new treaty will replace the 1993 tax treaty between the two countries.

Taxes Covered

The treaty covers Cyprus income tax, corporate income tax, the special contribution for the Defense of the Republic, and capital gains tax. It covers Egyptian tax on income of individuals, tax on profits of legal entities, and tax withheld at source.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends – 5% if the beneficial owner is a company that has directly held at least 20% of the paying company's capital throughout a 365-day period that includes the day of the payment of the dividend; otherwise, 10%
  • Interest – 10%
  • Royalties – 10%, with the specific provision that the term "royalties" does not include income for the use of, or the right to use ships or aircrafts

Article 10 (Dividends) also provides that profits attributed to a permanent establishment may be subject to an additional withholding tax when the profits are remitted to the head office, but the withholding tax may not exceed 5%.

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State;
  • Gains from the alienation of shares or comparable interests deriving, at any time during the 365 days preceding the alienation, more than 50% of their value directly or indirectly from immovable property situated in the other State; and
  • Gains, other than the above, from the alienation of shares, comparable interests, securities, or other rights representing the capital of a company which is a resident of the other State if the alienator, at any time during the 365 days preceding such alienation, held directly or indirectly at least 20%.

The provisions for the taxation of gains from the alienation of shares do not apply if the shares are listed on an approved stock exchange.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Offshore Activities

Article 22 (Offshore Activities) provides that a permanent establishment will be deemed constituted when an enterprise carries on offshore activities in connection with the exploration or exploitation of the seabed and subsoil and their natural resources situated in a Contracting State, if such activities are carried on for a period exceeding 30 days in the aggregate in any 12-month period. Substantially similar activities carried on by an associated enterprise in a Contracting State are considered in determining if the 30-day threshold is exceeded.

Article 22 also provides that gains derived by a resident of a Contracting State may be taxed by the other State if derived from the alienation of exploration or exploitation rights, property situated in the other State used in connection with exploration or exploitation, or shares deriving the greater part of their value directly or indirectly from such rights and property taken together.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entitlement to Benefits

Article 28 (Entitlement to Benefits) provides that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. The 1993 tax treaty between Cyprus and Egypt will terminate when the new treaty enters into force and will cease to have effect from the date the new treaty is effective.

12-10-2019

Hong Kong-Lithuania

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Tax Treaty between Hong Kong and Lithuania under Negotiation

According to an update from the Hong Kong Inland Revenue Department, officials from Hong Kong and Lithuania are holding the first round of negotiations for an income tax treaty on 9 to 13 December 2019. Any resulting treaty would be the first of its kind between the two jurisdictions and must be finalized, signed, and ratified before entering into force.

12-10-2019
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