Embed Size (px)
Citation preview
International Tax NewsEdition 87June 2020
www.pwc.com/its
Keeping up with the constant flow of international tax developments worldwide can be a real challenge for multinational companies. International Tax News is a monthly publication that offers updates and analysis on developments taking place around the world, authored by specialists in PwC’s global international tax network.
We hope that you will find this publication helpful, and look forward to your comments.
Welcome
Bernard Moens Global Leader International Tax Services Network T: +1 703 362 7644E: [email protected]
Featured articles
Responding to the potential business impacts of COVID-19 COVID-19 can cause potentially significant people,
social and economic implications for organisations.This link provides information on how you
can prepare your organisation and respond.
In this issue
Legislation Administrative Treaties
Legislation
Expanded concept of Significant Global Entity enacted
The definition of a Significant Global Entity (SGE) was broadened after legislation giving effect to the 2018-19 Federal Budget measure was enacted.
As part of the broadening of the definition, there is also the new concept of a Country-by-country Reporting Entity (CbCRE). The new rules, which apply to income years commencing on or after July 1, 2019, are particularly relevant for any groups of entities that would be required to consolidate for accounting purposes as a single group if the members of the group were assumed to be a listed company and were not affected by consolidation or materiality accounting exceptions.
Peter Collins
Sydney
T: +61 0 438 624 700E: [email protected]
David Earl
Melbourne
T: +61 0 403 416 958E: [email protected]
Jayde Thompson
Sydney
T: +61 0 403 678 059E: [email protected]
Australia
PwC observation:Affected entities should review their existing ownership and control structure as soon as possible, as the consequences of an entity becoming an SGE or a CbCRE are significant in terms of the additional compliance burdens and the cost of failing to determine status as an SGE correctly.
Hybrid mismatch rules refined
Recently, Australia introduced legislation that proposes amendments to its current hybrid mismatch rules. The measures seek to:
• clarify the operation of trust and partnership hybrid mismatch rules
• clarify the circumstances in which an entity is a deducting hybrid
• clarify the dual inclusion income rule’s operation
• clarify the operation of provisions referring to corresponding foreign hybrid mismatch rules
• clarify that, for the purpose of applying the hybrid mismatch rules, foreign income tax generally does not include foreign municipal or state taxes
• clarify that the hybrid mismatch rules apply to multiple entry consolidated (MEC) groups in the same way as tax consolidated groups
• ensure that the hybrid mismatch integrity rule can apply appropriately to financing arrangements designed to circumvent the operation of the hybrid mismatch rules, and
• where distributions made on Additional Tier 1 capital instruments give rise to a foreign income tax deduction, allow franking benefits on those distributions and include an amount equal to the amount of the deduction in the assessable income of the entity making the distribution.
Australia
PwC observation:The majority of the proposed amendments are retroactive and may be viewed as beneficial to taxpayers, as they clarify interpretative uncertainties and should reduce the compliance burden for a range of taxpayers.
Peter Collins
Sydney
T: +61 0 438 624 700E: [email protected]
David Earl
Melbourne
T: +61 0 403 416 958E: [email protected]
Jayde Thompson
Sydney
T: +61 0 403 678 059E: [email protected]
COVID-19 measures and CFC rules
COVID-19 support measures:
In response to the COVID-19 pandemic, Belgium recently proposed two new measures:
1. Loss carry-back: Belgian companies (and establishments) expecting (current year) tax losses for the assessment years 2020, 2021 or 2022 could carryback losses and offset them against taxable profits of the preceding taxable period ending between March 13, 2019 and December 31, 2020. The measure has certain conditions (such as excluding companies that distributed a dividend or executed a capital reduction, as well as companies with certain links to tax haven countries (direct shareholding or payments). Draft legislation has been approved.
2. Reconstitution reserve: Belgian companies (and establishments) would be able to recognize a tax-exempt reserve for FY 2021, 2022 and 2023 when they incurred an accounting operating loss during FY2020, up to a maximum of the loss amount loss (capped at 20M EUR), provided that certain conditions have been met. This draft legislation has not yet been approved.
Circular Letter Belgian CFC rules:
The CFC rules entered into force in Belgium as of FY2019, with the aim of taxing undistributed profits earned in or through low-tax foreign subsidiaries or permanent establishments in the hands of their Belgian controlling shareholders. To be characterized as a CFC, the Belgian corporate income tax (CIT) code requires the foreign entity fulfil the following three conditions (transactional approach): (i) be legally or economically, directly or indirectly, controlled (not de facto control); (ii) have undistributed profits arising from artificial arrangement(s) set up with the essential purpose of obtaining a tax advantage; and (iii) pay less than half of the CIT it would have paid if it was established in Belgium. The circular letter provides further explanations and clarifying examples on the regime’s application.
Belgium
Evi Geerts
PwC Belgium
T: +32 492 743970E: [email protected]
Tamara Geboers
PwC Belgium
T: +32 494 475312E: [email protected]
PwC observation:The COVID-19 support measures may significantly strengthen the solvability and liquidity position of Belgian companies. Additionally, multinational groups will need to monitor potential CFCs in their Belgian structure and consider the Belgian CIT return’s mandatory reporting requirements.
Cyprus Parliament approves NID tax law amendments
The Cyprus Parliament, on June 5, voted to amend certain Cyprus NID regime provisions. The amendments became law following their publication in the Cyprus Gazette on June 16. The annual NID rate amendments apply as of the start of the current tax year or calendar year (January 1, 2020). They include changes to the annual NID rate’s calculation and eliminate references to the Cyprus government bond’s yield as the minimum rate for the relevant portion of the NID rate calculation.
Other amendments relate to:
• capitalisation of reserves that existed prior to the NID regime’s 2015 introduction in Cyprus (applicable as of January 1, 2021) and
• the income tax law language regarding the annual NID amount cap.
Please see our PwC Insight for more information.
Cyprus
PwC observation:The amendments can be viewed as the final step for the Cyprus NID regime to receive official EU Code of Conduct approval, which will increase its appeal and competitiveness.
Eligible existing companies claiming NID should review their calculations for their 2020 annual NID amount in order to assess whether the amendments impact their annual NID amount within the upcoming July 31, 2020 deadline for submitting the 2020 provisional corporate income tax return and making the first 2020 provisional corporate income tax instalment payment.
Companies that did not follow the original policy intent of ‘matching’ as set forth in the relevant CTA Circular and did not cap their annual NID amount on the basis of the ‘matching’ concept may need to consider how their prior-year filing positions may be impacted. Such companies should have declared their non-compliance with the relevant Circular upon submitting their corporate income tax return to the CTA.
Marios Andreou
Nicosia, Cyprus
T: +357 22555266 E: [email protected]
Stelios Violaris
Nicosia, Cyprus
T: +357 22 555 300 E: [email protected]
Joanne Theodorides
Nicosia, Cyprus
T: +357 22553694 E: [email protected]
Dutch announce 2024 conditional withholding tax on dividend payments to ‘tax havens’
The Dutch government, on May 29, announced a new conditional withholding tax on dividend payments that is effective January 1, 2024. The conditional withholding tax on dividend payments is an addition to the recently passed conditional withholding tax on interest and royalty payments, effective January 1, 2021.
A distribution by a Dutch-resident entity (unless structured as a tax-exempt reduction of recognized capital, meeting certain conditions) is subject to 15% Dutch dividend withholding tax, unless the domestic dividend withholding tax exemption or a tax treaty reduction/exemption can be invoked. The Dutch government indicated in its announcement that dividend payments to low-tax jurisdictions are not always subject to Dutch dividend withholding tax. The announced conditional withholding tax targets dividend payments to jurisdictions with a corporate tax rate below 9% or to jurisdictions included on the EU’s blacklist of non-cooperative jurisdictions. This tax also is expected to apply where the Netherlands concluded a tax treaty with the relevant jurisdiction. At the same time, the current Dutch dividend withholding tax regime is anticipated to remain in place.
Please see our PwC Insight for more information.
Netherlands
PwC observation:Taxpayers should analyse any possible impact the conditional withholding tax on dividend payments may have on their business operations.
Regina van der Kuip
New York, United States
T: +1 475 333 9439E: [email protected]
Rinske Weustenenk
New York, United States
T: +1 347 597 2935E: [email protected]
Investment projects: New temporary tax benefits
Investment Law 16,906 and its regulatory decrees offer tax saving opportunities for companies investing in fixed assets. Projects promoted by the Executive Power receive significant tax benefits, based on a series of indicators that are measured in a matrix.
The main benefits include:
• 20% increase in the CIT exemption percentage (resulting from the matrix of indicators) for investment projects submitted between April 1, 2020 and March 31, 2021, provided at least 75% of the investment is executed before December 31, 2021.
• Computation of 150% for investments executed between April 1, 2020 and January 31, 2021 for the purpose of establishing the amount of CIT. This benefit applies both to new and pre-existing projects.
The temporary benefits are cumulative between April 1, 2020 and March 31, 2021. For those years, companies with promoted investment projects may opt to suspend the CIT exemption benefit for one year under certain conditions.
Uruguay
PwC observation:The investments that companies are currently carrying out or planning to execute in the near future may qualify for additional/ extended benefits.
Patricia Marques
Montevideo, Uruguay
T: +598 2916 0463E: [email protected]
Eliana Sartori
Montevideo, Uruguay
T: +598 2916 0463E: [email protected]
Carolina Techera
Montevideo, Uruguay
T: +598 2916 0463E: [email protected]
Uruguay has taken additional actions in response to the COVID-19 pandemic
• Through Resolution 898/020, Uruguayan tax authorities established for CEDE and NO CEDE taxpayers, a payment facility regime to pay their advanced payments obligations of April and May. When amounts on sales, services and other income of the previous fiscal year exceeds 6M Index Units, no payment facility is granted. Also, Personal Income Tax on resident individual (IRPF) taxpayers that render services in a non-dependency relationship can pay their March and April advanced payment obligations together with the advanced payments of May and June, which are due in July. Small companies can pay their April obligations in six instalments without interest beginning in July.
• The Commission for the Enforcement of the Investment Law (COMAP) issued Circular No. 01/2020, which allows companies to not use the established rates affected by the pandemic during the fiscal years ending between April 1, 2020 and March 31, 2021, or consider all of the rates established in the same period taking into account the average calculation of all or part of the months of the period mentioned before. Also, COMAP issued Circular No. 02/2020, which establishes that requests for an extension for completing the investment will be processed only if it is duly funded.
• Effective May 1, 2020, the Uruguayan Congress suspended for one year the tax credit generated by the sale of livestock for agribusiness owners. The amount corresponding to the suspended tax credit will be transferred to the ‘Solidary COVID-19 Fund’ created by Law No. 19,874.
• Through Decree 137/020, temporary admission operations with terms expiring between January 1 and December 31, 2020 are extended for an 18-month period.
Uruguay
PwC observation:The measures aim to assist companies and workers in dealing with the transitory crisis caused by COVID-19.
Patricia Marques
Montevideo, Uruguay
T: +598 2916 0463E: [email protected]
Eliana Sartori
Montevideo, Uruguay
T: +598 2916 0463E: [email protected]
Carolina Techera
Montevideo, Uruguay
T: +598 2916 0463E: [email protected]
Administrative
Taxpayer Alert on foreign investment into Australia
The ATO released Taxpayer Alert TA 2020/2 on mischaracterised arrangements and schemes connected with foreign investment into Australian entities.
The ATO is reviewing arrangements that typically display the following features:
• The Australian resident entities are unable to obtain capital from traditional external debt finance sources on normal terms.
• The foreign investor either already participates in the management, control or capital of the Australian entity at the time of investment, or starts to participate in the management, control or capital as part of the investment.
• The investment has features inconsistent with vanilla debt or equity investments. The investment may provide the foreign investor with direct exposure to the economic return from a particular business or assets exploited therein (whether ongoing profit or a gain on disposal).
• The ATO’s concerns include, among other things, structuring to avoid Australian tax or obtain a tax deduction in Australia, failure to comply with interest or dividend withholding tax obligations, characterisation of debt/ equity interests, transfer pricing, access to tax treaty benefits, general anti-avoidance rules and avoiding Foreign Investment Review Board disclosure requirements.
Australia
PwC observation:Taxpayers should review, assess and contemplate restructuring their foreign investments into Australia that display any of the described features and where there are tax benefits arising from the arrangements.
Peter Collins
Sydney
T: +61 0 438 624 700E: [email protected]
David Earl
Melbourne
T: +61 0 403 416 958E: [email protected]
Jayde Thompson
Melbourne
T: +61 0 403 678 059E: [email protected]
Tax treatment of digital currency
The Inland Revenue Authority of Singapore (IRAS), on April 17, 2020, published the e-tax guide ‘Income Tax Treatment of Digital Tokens’ which sets out the income tax treatment of transactions involving digital tokens. In particular, the e-tax guide discusses the tax treatment for digital tokens as well as the tax treatment for initial coin offerings (ICOs).
Tax treatment for digital tokens
The e-tax guide focuses on three types of digital tokens, namely payment tokens, utility tokens and security tokens. A transaction involving the use of payment tokens is viewed as a barter trade, and the recipient of the tokens is taxed on the value of the underlying goods provided or services performed. Likewise, the value of any allowable deduction will be based on the value of the underlying goods purchased or services received. Change in fair value from appreciation or depreciation in value will not be taxable or deductible as the gain or loss is not realized. The actual gain or loss tax treatment on disposal depends on whether the token is considered a capital or revenue asset to the holder.
Where a person acquires a utility token to exchange goods or services to be provided in the future, the amount incurred to purchase the token will be treated as a prepayment. Subject to tax deduction rules, a deduction may be allowed for the amount incurred at the point the token is used to exchange for the goods or services.
Generally, security tokens are treated as debt or equity, depending on the rights and obligations the token creates. Interest or dividends that the holder receives (depending on whether the token is characterized as debt or equity) will be treated based on general tax principles. Tax treatment of the gain or loss on disposal depends on whether the token is considered a capital or revenue asset to the holder.
Tax treatment for ICOs
From the issuer’s perspective, the tax treatment of ICO proceeds depends on the rights and functions of the tokens issued to the investors. Proceeds from the issuance of security tokens are akin to proceeds from the issuance of a debt or equity instrument and are thus capital in nature and not taxable. As the proceeds from the issuance of utility tokens generally will be regarded as deferred revenue, the timing of taxation is based on when the performance obligation is fulfilled (i.e., when the services are performed or goods are delivered).
Proceeds from the issuance of payment tokens may be taxable depending on specific facts and circumstances (though acknowledged to be uncommon). An example provided in the e-tax guide is where the ICO company conducts a trade in payment tokens and the tokens are treated as its trading stock. In that case, the proceeds from the payment tokens issuance will be taxable at the point of issuance.
Please see our PwC Insight for more information.
Singapore
PwC observation:With the increasing popularity of digital tokens, the IRAS tax rules clarification is welcomed. However, practical challenges remain, for example, valuation of digital assets. Businesses will need to maintain proper records supporting a reasonable and verifiable exchange rate and consistently apply it each year. Nonetheless, the e-tax guide’s release is timely as it is just a few months after the Singapore Monetary Authority introduced new payment legislation and also sought consultation on the proposed regulatory approach under the Securities and Futures Act for derivatives contracts that reference payment tokens (such as Bitcoin) as underlying assets. The IRAS guidance is thus in line with the government’s continued efforts to boost Singapore’s position as a dynamic international financial hub and a centre for digital innovation.
Chris Woo
Singapore
T: +65 9118 0811E: [email protected]
Paul Lau
Singapore
T: +65 8869 8717E: [email protected]
Tay Lek Tan
Sydney
T: +65 9179 2725E: [email protected]
Singapore’s Fortitude Budget 2020
Deputy Prime Minister (DPM) and Finance Minister Heng Swee Keat, on May 26, 2020, delivered a S$33 billion Fortitude Budget – his fourth budget in less than four months – to support businesses and households as Singapore prepares to gradually re-open the economy, guided by public health considerations. Together with the past three budgets this year, a total of S$92.9 billion (19.2% of the GDP) has been dedicated to support the Singapore economy and its people during the COVID-19 pandemic.
In addition to the Jobs Support Scheme’s enhancements and new measures to assist small and medium enterprises (SMEs) with rental cost, the DPM underlined the importance of business transformation through digitalization and workforce upskilling and reskilling to seize opportunities through a package of initiatives.
The Fortitude Budget contains a number of measures to support businesses and to encourage them to transform, including those relating to digital adoption and workforce reskilling and upskilling.
To help businesses digitize during these challenging times, S$500 million has been allocated to support the digital transformation of businesses. These measures build on initiatives in the three earlier budgets announced since February 2020.
Besides encouraging digital adoption, the government aims to create 40,000 job opportunities, with 15,000 jobs in the public sector and 25,000 jobs in the private sector. In addition, 25,000 traineeship positions will be created to help job seekers gain relevant industry experience. Further, a new SGUnited skills programme will expand training capacity for about 30,000 job seekers this year.
These practical programmes will provide significant support for many across sectors affected by the pandemic. The combination of expanding job opportunities across public and private sectors will give those workers that risk losing their jobs a chance to upskill with a potential end-job in mind, i.e. relevant upskilling.
Please see our PwC Insight for more information.
Singapore
PwC observation:In an environment where change is the only constant, transformation is central to business survival and profitability. Trade and travel disruptions brought about by COVID-19 have highlighted the importance of agility and innovation, as businesses move from ‘just-in-time’ integrated supply chains to ‘just-in-case’ stockpiling and diversification.
While businesses accelerate their digitalization journey, it is critical they keep in mind that change is not only about technology. The mindset of embracing change and acquiring skills is as, or even more, important for successful business reinvention. Change management of stakeholders from employees, suppliers to customers should therefore not be overlooked.
Chris Woo
Singapore
T: +65 9118 0811E: [email protected]
Paul Lau
Singapore
T: +65 8869 8717E: [email protected]
Tay Lek Tan
Sydney
T: +65 9179 2725E: [email protected]
The Fourth Protocol to the Mainland and Macao tax treaty entered into force
Mainland and Macao signed the Fourth Protocol to the Mainland-Macao tax treaty on November 28, 2019. In May 2020, China’s State Taxation Administration (STA) issued STA Public Notice 2020 No.11 to announce that the Fourth Protocol to the Mainland-Macao tax treaty entered into force on May14, 2020. Article 6 in the protocol applies to income paid on or after May 14, 2020, and other articles apply to income derived on or after January 1, 2021. Important features of the Fourth Protocol include:
• Tax authorities of China and Macao shall endeavour to determine the tax residency status of a person by mutual agreement by taking into account its place of effective management, the place where it is incorporated, or otherwise constituted
• Introduction of a stricter definition for Agency PE by widening the scope to those that habitually play the principal role leading to the conclusion of contracts
• Addition of a new ‘Government Investment’ article to the Mainland-Macao tax treaty that exempts taxation of income derived from funds for livelihood projects in which the government invests
• Addition of a new ‘principal purposes test’ article, under which a Mainland-Macao tax treaty benefit shall not be granted if obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit.
China
Treaties
PwC observation:The Fourth Protocol puts forward more stringent requirements on anti-treaty abuse, and shows China’s intention to place the treaty in line with other tax treaties concluded or re-negotiated by China in recent years. Enterprises and individuals conducting cross-border business in the Mainland and Macao should comply with new changes in international tax practice to mitigate cross-border tax risks and enhance tax compliance. Additionally, the relevant tax benefit provided by the newly added ‘Government Investment‘ article can facilitate the development of funds for livelihood projects.
Long Ma
China
T: +86 10 6533 3103E: [email protected]
Glossary
Acronym Definition
ATAD Anti-Tax Avoidance Directive
ATO Australian Tax Office
BEPS Base Erosion and Profit Shifting
CbCRE Country by Country Reporting Entity
CFC controlled foreign corporation
CIT corporate income tax
COMAP Commission for the Enforcement of the Investment Law
DAC6 EU Council Directive 2018/822/EU on cross-border tax arrangements
DDT Dividend Distribution Tax
DST digital services tax
DTT double tax treaty
EBITDA Earnings before interest, tax, depreciation and amortization
EU European Union
Acronym Definition
ICO initial coin offerings
IRAS Inland Revenue Authority of Singapore
LOB Limitation on benefits
MEC multiple entry consolidated
MNC Multinational corporation
NID Notional Interest Deduction
NOL net operating loss
PE permanent establishment
OECD Organisation for Economic Co-operation and Development
R&D Research & Development
SGE Significant Global Entity
VAT value added tax
WHT withholding tax
For your global contact and more information on PwC’s international tax services, please contact:
Bernard Moens Global Leader International Tax Services Network
T: +1 703 362 7644 E: [email protected]
Geoff JacobiInternational Tax Services
T: +1 202 262 7652E: [email protected]
www.pwc.com/its
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with over 276,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
© 2020 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
Mitie Design RITM3260585 (07/20).
Contact us
![1. Napoleonic Wars Q1806 Berlin Decrees [“Continental System”] Q1806 Britain issued the “Orders in Council.” Q1807 Milan Decrees Q1808-1811](https://img.pdfslide.us/doc/110x75/56649e935503460f94b98cb8/1-napoleonic-wars-q1806-berlin-decrees-continental-system-q1806.jpg)
![Ch. 12 Execution of Decrees - Delhi High Court · 2011. 4. 18. · CHAPTER 12 Ch. 12 Execution of Decrees Part A] Part A GENERAL 1. References—The Law relating to execution of decrees](https://img.pdfslide.us/doc/110x75/6122cb75773b0c14866814ce/ch-12-execution-of-decrees-delhi-high-2011-4-18-chapter-12-ch-12-execution.jpg)
