France - Finance Bill 2020
On 27 September 2019, the government presented the Finance Bill for 2020. The corporate income tax reduction path for companies with an annual turnover of EUR 250 million or higher is proposed as follows:
India - Taxation Laws (Amendment) Ordinance 2019 – announced During a press conference on 20 September 2019, the Finance Minister announced that the Taxation Laws (Amendment) Ordinance 2019 has been brought in to make certain amendments in the Income-tax Act.
With effect from fiscal year (FY) 2019-20, domestic companies are provided with an option to pay income tax at 22% provided that they will not avail any exemption/incentive. The effective tax rate is 25.17% inclusive of surcharge and cess.
ANTI TAX AVOIDANCE
El Salvador - list of countries and territories with preferential tax regimes for 2020 – published
Guide N. DG-001/2019 was issued by the tax authorities on 18 September 2019 which includes a list of countries and territories considered to be tax havens or territories with preferential tax regimes.
The payments made from El Salvador to entities domiciled in the listed countries are to be taxed with 25% withholding tax. However, certain exceptions apply, e.g. for payments made to persons located in countries with which El Salvador has a tax treaty or a convention on mutual assistance and technical cooperation between tax authorities, etc.
Norway - Black lists of jurisdictions for CFC purposes updated
On 26 September 2019, the updated variant of blacklisted jurisdictions was published. A black list apply for the determination of when to apply CFC taxation, i.e. to decide what countries fit the definition of having a low tax level. The new lists are effective from 1 January 2020. According to the amendments, Hong Kong, Oman and Serbia have been removed from the black list.
United States - Corrections issued for regulations issued on GILTI and FTC
The US Treasury Department and the US Internal Revenue Service (IRS) have issued a document (C2-2019-12437) to correct the final and temporary regulations (TD 9866) concerning global intangible low-taxed income (GILTI) under section 951A of the US Internal Revenue Code (IRC), the foreign tax credit (FTC), the treatment of domestic partnerships for purposes of determining the subpart F income of a partner, and the treatment of income of a controlled foreign corporation (CFC) subject to a high rate of foreign tax under IRC section 951A.
Treaty between Finland and Lithuania – MFN clause on royalties activated
On 10 September 2019, the Finnish tax authorities published Statement No. 67/2019, announcing that the conditions for the activation of the most favoured nation (MFN) clause contained in article 12(7) of the Finland - Lithuania Income and Capital Tax Treaty (1993) have been met.
The MFN clause applies as of 1 January 2019. The MFN clause modifies the wording of article 12 paragraph 2 and 3 as follows:
”Royalties shall not be taxable in the contracting state in which they arise. The term "royalties" as used in this article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any copyright and patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience."
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.