Costa Rica - List of non-cooperative jurisdictions for tax purposes published
On 25 September 2019, Resolution Nº DGT-R-55-2019 was published establishing the list of non-cooperative jurisdictions. The consequence of a being included on the list is that any expense incurred in these jurisdictions will be treated as non-deductible expenses for Costa Rican income tax purposes.
According to the Resolution, the following jurisdictions are non-cooperative: Bosnia and Herzegovina; French Polynesia; Guadalupe; Iraq; Kyrgyzstan; Maldives; Martinique; Montenegro; Norfolk Island; North Korea; North Macedonia; Oman; Réunion Island; Saint Pierre and Miquelon; Timor-Leste; United States Virgin Islands; Uzbekistan; and Wallis and Futuna.
The Resolution will enter into force on 1 October 2019.
Ecuador – Capital gains taxation rules amended
On 3 September 2019, Resolution No. NAC-DGERCGC19-00000042 was published in the Official Gazette amending the withholding tax rates at source on local payments.
The Resolution repeals the following withholding tax rates:
(i) 0.2% on capital gains derived by resident companies from the alienation of shares traded in the Ecuadorian Stock Exchange market; and
(ii) 5% and 25% on capital gains derived by non-resident companies from the alienation of shares or any other representative capital rights.
In addition, the Resolution establishes the following withholding tax rates:
(i) 1% on capital gains derived by resident and non-resident companies from the alienation of shares or any other rights allowing the exploration, exploitation, license or alike of resident companies that are not quoted in stock exchanges in Ecuador; and
(ii) 10% on capital gains derived by resident and non-resident individuals and companies from the alienation of shares or any other rights allowing the exploration, exploitation, license or alike of resident companies quoted in stock exchanges in Ecuador.
The Resolution entered into force on the date of its publication in the Official Gazette. However, the relevant amendments will be effective as from 1 November 2019.
ANTI TAX AVOIDANCE
Qatar amended rules for Country-by-country reporting
The Ministry of Finance recently issued Decision No. 16 of 2019 repealing and replacing Decision No. 21 of 2018 on CbC reporting. The Decision introduced the following changes.
Ultimate Parent Entities (UPEs) of MNE groups with a total annual revenue of at least QAR 3bn that are resident in Qatar for tax purposes are now required to file the CbC report with the the General Tax Authority (GTA) using the template OECD's BEPS Action 13 Final Report. The report must be submitted within 12 months from the end of the reporting fiscal year.
Resident UPEs in Qatar for tax purposes are required to submit a notification to the GTA that they are the UPE of the MNE group to which they belong no later than the last day of the reporting fiscal year.
Iceland deposited instrument of ratification for the Multilateral Convention (MLI)
On 26 September 2019, Iceland became the 33rd country to deposit its instrument of ratification for the MLI. The convention will enter into force in respect of Iceland on 1 January 2020. As from this date, Icelands's treaties with Belgium, Canada, France, Georgia, India, Ireland, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Russia, the Slovak Republic, Slovenia, Switzerland, Ukraine, the United Kingdom will be affected by the MLI.
Iceland submitted its MLI position at the time of signature listing its reservations and notifications and including 35 tax treaties that it wished to be covered by the MLI.
United Arab Emirates - MLI entered into force
On 1 September 2019, the MLI entered into force in respect of the United Arab Emirates. The United Arab Emirates included the 114 tax treaties that it wished to be covered by the MLI. In the case of the United Arab Emirates, this means that the treaties with the following countries will now be affected by the MLI: Finland, France, Ireland, Japan, Jersey, Lithuania, Luxembourg, Malta, the Netherlands, New Zealand, Poland, Serbia, Singapore, Slovenia and United Kingdom.
Portugal - Legislation implementing Anti-Tax Avoidance Directive is adopted
On 3 May 2019, Law 32/2019, which transposes the EU ATAD into domestic law, was gazetted. The main changes are the following.
(i) Interest limitation rule
Portugal applies an interest limitation rule under which the taxpayer is allowed to deduct its net financing expenses up to: 30% of the tax EBITDA or EUR 1 million. The Law introduces in-depth definitions of "financing expenses" and "net financing expenses", and their computation/interaction with the concept of tax EBITDA in order to comply with ATAD's provisions.
(ii) CFC rules
New criteria to define a "CFC" based on its effective tax rate are introduced: A "CFC" is considered any non-resident entity whose effective tax rate is below 50% of the tax that would be due in Portugal.
Cyprus- Legislation implementing Anti-Tax Avoidance Directive is adopted
On 5 April 2019, the parliament adopted a law implementing the Anti-Tax Avoidance Directive (2016). Rules are applied from 1 January 2019.
(i) Interest deductibility limitation rule
The interest limitation rule limits the otherwise deductible exceeding borrowing costs up to 30% of EBITDA. Safe-harbour threshold is EUR 3 million. Exceeding borrowing costs may be carried forward to future tax years for up to 5 years.
(ii) CFC rule
The CFC rule provides that the undistributed income of a CFC resulting from non-genuine arrangements must be included and taxed at the level of the Cyprus controlling entity. An entity is regarded as a CFC if it is an exempt foreign permanent establishment (PE) or a foreign company in which a Cyprus tax resident company holds, directly or indirectly, more than 50% of the share capital, voting rights or profit distributions, and whose actual corporate tax burden is lower than 50% of the tax that would have been charged on the company or PE under the applicable Cyprus corporate tax system.
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