On January 13, 2020, Nigeria’s President signed into Law the 2019 Finance Bill, which introduces key changes to the country’s corporate tax regime.
The new law amends the provisions of the Companies Income Tax Act to curb base erosion and profit shifting (BEPS) and broaden the triggers for domestic taxation of income earned by non-resident companies in Nigeria through dependent agents and via online market platforms.
A general exemption from corporation tax is provided for small companies earning lower than NGN 25 million turnover in any tax year. However, such companies would have to deduct withholding tax on dividends distributed.
Corporate income tax for companies with revenues between NGN 25 million and NGN 100 million is reduced from 30 percent to 20 percent.
Large companies, i.e. companies with annual turnover greater than NGN 100 million, will continue to pay the standard corporate income tax rate of 30 percent.
Finally, the law introduces thin capitalization rules aimed at preventing profit shifting and potentially increasing tax revenues by restricting interest expense deduction to 30 percent of EBITDA, with any excess interest expense to be carried forward up to five years.
See Press Release and Finance Bill, 2019
On January 15, 2020, the Directorate General of Internal Taxes of the Dominican Republic issued Notice No. 8-2020, which sets out the transfer pricing reporting threshold for the year 2020.
The Notice sets the transfer pricing reporting threshold for 2020 at DOP 11,552,402. Accordingly, related party transactions not exceeding this threshold do not attract the country’s transfer pricing reporting requirements.
The threshold for 2019 was set at DOP 11,144,913.
See Notice No. 8-2020
On January 3, 2020, the Uruguayan tax authority (Dirección General Impositiva – DGI) issued Resolution No. 001/2020, which contains a consolidated list of 40 low or no tax countries and jurisdictions.
The list names the following countries and jurisdictions: Angola, Antigua and Barbuda, Ascension, Brunei, Christmas Islands, Cocos Island, Commonwealth of Dominica, Djibouti, Falkland Island, Fiji Islands, French Polynesia, Grenada, Guam, Guyana, Honduras, Jamaica, Jordan, Kiribati, Labuan, Liberia, Maldives Islands, Niue, Norfolk Island, Oman, Pacific Islands, Palau Island, Pitcairn Island, Puerto Rico, Kingdom of Tonga, Saint Helena Island, Saint Martin, Saint Pierre and Miquelon, Solomon Islands, Svalbard, Swaziland, Tokelau, Tristan da Cunha, Tuvalu, US Virgin Islands, and Yemen.
The Resolution came into force on January 1, 2020.
See Resolution No. 001/2020
On January 17, 2020, the Dutch Tax and Customs Administration published frequently asked questions (FAQs) setting out guidance on the application of the EU Directive on mandatory reporting of cross-border tax arrangements (DAC6).
The guidance notes that an intermediary should report a cross-border arrangement to the tax authority unless it has evidence to show that the transaction has been reported by another intermediary, or where the intermediary has a right of non-disclosure.
In case of relevant taxpayers, information must be reported in situations where there is no intermediary, or the intermediary has a right of non-disclosure, the guidance states.
The guidance reiterates the reporting triggers and deadlines as stipulated in the EU Directive.
The guidance notes that the tax authority would soon publish examples to clarify the meaning and application of the hallmarks as stipulated in the EU Directive.
See FAQs on DAC6
On January 9, 2020, the Romanian Finance Ministry published a draft Law to transpose the EU Directive concerning reporting of cross-border arrangements (DAC6) into Romanian domestic tax law.
The definitions of “cross-border arrangement,” “intermediary,” and “relevant taxpayer” stipulated in the draft Law are broadly in line with the Directive. Intermediaries are exempt from the reporting requirement in situations where professional secrecy privilege applies.
The reporting triggers for relevant taxpayers and intermediaries are broadly in line with the Directive.
The draft Law would enter into force on July 1, 2020. However, where the first step of a reportable arrangement is implemented on or after June 25, 2018, and prior to July 1, 2020, the required information would need to be submitted by August 31, 2020.
Non-compliance with the reporting obligation would attract a fine of up to RON 100,000.
See Draft Law
A new tax treaty between Albania and Saudi Arabia entered into force on December 1, 2019.
The tax treaty provides for a withholding tax rate of five percent for dividend payments.
The withholding tax rate is six percent for interest payments.
Royalty payments for the use of, or the right to use industrial, commercial or scientific equipment are subject to a withholding tax rate of five percent. The rate is eight percent in case of other kinds of royalty payments.
The tax treaty applies from January 1, 2020.
See Tax Treaty between Albania and Saudi Arabia (in Arabic)
On January 8, 2020, the governments of Japan and Morocco signed a tax treaty in Rabat, Morocco.
Under the treaty, dividend payments would be subject to a withholding tax rate of five percent if the beneficial owner holds at least ten percent of the voting power (in case of Japanese residents), or the capital of the company (in case of Moroccan residents). The rate is ten percent in all other cases.
Interest payments would be subject to a withholding tax rate of ten percent.
Royalty payments would be subject to a withholding tax rate of five percent of the gross amount of the royalties for the use of, or the right to use, industrial, commercial, or scientific equipment. The rate is ten percent in all other cases.
Gains from the alienation of shares representing at least fifty percent of the capital of a company may be taxed in the source country subjected to the maximum rate at the five percent. However, gains derived from changes of ownership that would directly result from a corporate reorganisation of that company or that alienator will be exempt from tax.
The treaty includes an article entitled Entitlement to Benefits, under which, a tax treaty benefit would be denied if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction.
The treaty would come into force after both countries complete their necessary domestic procedures.
See Tax Treaty between Japan and Morocco
On December 19, 2019, Liechtenstein ratified the OECD’s Multilateral Instrument to tackle base erosion and profit shifting (BEPS).
Liechtenstein intends to cover 14 of its tax treaties under the BEPS MLI.
For Liechtenstein, the BEPS MLI will enter into force on April 1, 2020.
Till date, a total of 38 countries have ratified the BEPS MLI.
On December 23, 2019, Colombia’s tax authority, the National Directorate of Taxes and Customs, issued Decree No. 2345, which sets out key transfer pricing documentation deadlines.
The Decree provides that the deadline for filing informative transfer pricing returns and local files is July 7-July 21, 2020.
The deadline for filing country-by-country reports and master files is December 10-23, 2020.
See Decree No. 2345
Croatia – Lower tax rate for certain companies
According to the changes adopted on 29 November 2019 the companies with annual revenues of less than HRK 7,5 million (currently HRK 3 million) are taxable at the corporate tax rate of 12%. Amendments are effective from from 1 January 2020.
France - Finance Bill for 2020 adopted by parliament
On 19 December 2019, the parliament adopted the Finance Bill for 2020. According to the bill, the corporate income tax rate will be reduced from 33% to 31%. Previously 33% corporate tax rate was applicable for companies with revenues higher than EUR 250 million.
Greece - Tax Reform Bill gazetted
On 5 December 2019, the Tax Reform Bill was adopted by the parliament. The following changes were implemented:
• The corporate income tax rate was reduced from 28% to 24% starting from FY2019.
• Dividend withholding tax was reduced from 10% to 5% (for dividends distribution in 2020).
• The participation exemption provisions are extended to include capital gains. Capital gains are exempt from corporate income tax at the level of Greek resident entities, provided that company hold at least 10% and shareholding lasted for at least 36 months.
Malaysia Labuan – increased tax rate for certain companies
On 18 December 2019, the Senate passed the Labuan Business Activity Tax Bill 2019. According to the amendments, a Labuan entity which does not comply with the substantial activity requirements will be taxed at the rate of 24% of its chargeable profits for that year of assessment.
Netherlands – Tax plan 2020 was adopted
On 12 December 2019, the Tax Plan 2020 was gazetted. The main amendments are the following.
ANTI TAX AVOIDANCE
BEPS Action 13: OECD releases further guidance on CbC reporting
On 23 December 2019, the OECD/G20 Inclusive Framework on BEPS issued additional interpretative guidance on the implementation of CbC reporting. The Guidance provides tax administrations and multinational enterprises with additional instructions on the implementation of the CbC reporting rules.
Qatar - transfer pricing documentation requirements were implemented
New rules impose reqirements to file a master file and a local file according to the OECD guidance, provided that the gross amount of revenues of the resident entity exceeds a certain threshold to be determined by a decision of the General Tax Authority. At least one of the related parties should be resident outside Qatar. The deadline for submitting the local and master files is the same as that for filing the tax return.
Greece – Tax amendments for 2020 proposed
On 7 October 2019, a bill amending the tax legislation was submitted for public consultation. The main amendments are set out below.
On 8 November 2019, the General Authority of Zakat and Tax (GAZT) issued a decision amending the Zakat regulations. The amendment focuses on a new estimation method for Zakat calculation. As per the amendment, the Zakat base, annual sales and Zakat will be calculated as provided below.
(i) The Zakat base will be the higher of the following amounts:
The approved estimation method is applicable only to Zakat payers that have no legal obligation to maintain regular accounting records for their Zakat returns submitted after 31 December 2019.
Slovenia - Corporate tax rate was increased
In the Official Gazette of 5 November 2019, amendments to the Corporate Income Tax Law were gazetted. The amendments will apply as of 1 January 2020. The amendments include increasing general tax rate from 19% to 20%.
ANTI TAX AVOIDANCE
Denmark - New CFC rules are proposed
On 6 November 2019, the Ministry of Taxation presented its law proposal transposing into the Danish legislation the CFC rules in line with the EU ATAD Directive 2016/1164.
The adjustments to the existing CFC rules are based on ATAD Model A. The Danish government aims to achieve a balance that ensures a robust Danish tax base but at the same time reduces the economic and administrative consequences for ordinary businesses. This has resulted in the proposed amendments to the CFC rules having a very broad scope. The key features of the amendments are as follows:
Nigeria - Interest limitation rules are proposed
On 6 November 2019, the Finance Bill for 2019, which had been presented to the National Assembly by the President on 8 October 2019, was presented for a second reading. Bill introduces the BEPS Action 4 recommendation on interest limitation. The maximum interest expense deduction allowable is 30% of EBITDA. If approved the rules will apply from 1 January 2020.
Treaty between Luxembourg and Lithuania – MFN clause on royalties activated
On 22 November 2019, the Luxembourg administration for direct taxes published a press release announcing that the conditions for the activation of the most-favoured-nation (MFN) clause contained in the Protocol to the Lithuania - Luxembourg Income and Capital Tax Treaty had been met. The MFN clause applies as from 1 January 2019. The MFN clause modifies the wording of article 12, paragraphs 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 the remuneration of any kind paid for the use or the concession of the use of a copyright in a literary, artistic or scientific work, cinematographic films or patent, trade mark, design or model, plan, formula or process secret and for information relating to experience acquired in the industrial, commercial or scientific field."
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.
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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