Worldwide Tax News
The Hong Kong Inland Revenue Department has published an FAQ on Country-by-Country (CbC) Reporting. The FAQ covers the following:
- Reporting Entity, including questions on determination of residence of the ultimate parent and dual residence issues and the appointment of a surrogate parent entity;
- Local Filing, including questions on the Mutual Assistance Convention (MAC) as an international (exchange) agreement, which takes effect for Hong Kong for accounting periods beginning on or after 1 January 2019, summarized as follows:
- where the ultimate parent is resident in a jurisdiction that is MAC jurisdiction but does not have a tax treaty or TIEA with Hong Kong, no local filing requirement applies for accounting periods beginning before 1 January 2019 because the MAC is not yet effective;
- where the ultimate parent is resident in a jurisdiction that is MAC jurisdiction and has a tax treaty or TIEA with Hong Kong, a local filing requirement will apply if the tax treaty or TIEA is in effect and allows for the automatic exchange of information, unless a bilateral agreement for the exchange of CbC reports has been entered into and is effective by the filing deadline;
- Filing Threshold, including questions on cases where the threshold is met in the preceding account period but not the current period, the inclusion of extraordinary income and gains from investment activities and the share of results of associated companies, joint ventures or partnerships, and determining if the threshold is met for periods shorter than 12 months;
- Notification, including questions on whether notification is required yearly (yes), and questions in relation to notifications made in Hong Kong before the ultimate parent or surrogate parent has notified its jurisdictions and changes in circumstances regarding local filing after notification is made;
- CbC Reporting Portal, including questions on authorized representatives vs service providers and persons authorized to operate an account under the Portal; and
- Penalty, which includes questions on whether each Hong Kong entity can be held liable for failing to submit a CbC report in the case of local filing requirement or for failing to submit notification if a designated entity fails to submit (yes) and whether penalties can be avoided/relieved by voluntarily amending incorrect notifications.
The OECD has published its report Taxing Energy Use 2019 - Using Taxes for Climate Action, which was announced in September.
Well-designed systems of energy taxation encourage citizens and investors to favour clean over polluting energy sources. In particular, fuel excise and carbon taxes are simple and cost-effective tools to curb dangerous climate change. Energy and carbon taxes also contribute to limiting health damage from local pollution. Taxing Energy Use (TEU) 2019 presents a snapshot of where countries stand in deploying energy and carbon taxes, tracks progress made, and makes actionable recommendations on how governments could do better. The report contains new and original data on energy and carbon taxes in OECD and G20 countries, and in international aviation and maritime transport.10-18-2019
Paraguay published Decree No. 2614 in the Official Gazette on 10 October 2019, which provides for a tax regularization regime. The regime includes that for outstanding taxes due for tax periods/years ending up to 31 December 2018, taxpayers may regularize their situation by paying 10% of the amount due, followed by monthly installments for up to 36 months without incurring any interest. The regime is available in respect of most taxes, including corporate income tax, personal income tax, and value added tax, but does not apply to taxes collected by withholding agents. The regime entered into force on 15 October 2019 and may be applied for up to 31 January 2020.10-18-2019
Poland Small Taxpayer Thresholds for Reduced Tax Rate, Simplified VAT, Investment Incentive, and Flat Tax Rates for 2020
Poland has set the thresholds for certain regimes for small taxpayers, including the reduced corporate tax rate, simplified VAT regime, investment incentive deduction, and flat tax rates as follows:
- The revenue threshold for treatment as a small taxpayer and eligible for the reduced corporate tax rate (9%) for 2020 is PLN 8.747 million, inclusive of VAT, in 2019;
- The supply threshold for the simplified VAT regime for small taxpayers is PLN 5.248 million for 2020;
- For small taxpayers and newly established businesses, the investment incentive deduction for fixed assets in asset groups 3 to 8 (except for passenger cars) is PLN 219,000 for 2020; and
- The simplified flat tax rate threshold for small businesses for 2020 is revenue of PLN 1,093,350 in 2019 - Businesses not exceeding that revenue amount (and startups) have the option to apply a flat tax rate of 20.0%, 17.0%, 12.5%, 8.5%, 5.5%, or 3.0% to business income depending on the activity type.
The thresholds for the reduced corporate tax rate, simplified VAT regime, investment incentive deduction, and flat tax rates are PLN equivalents of EUR 250,000, EUR 2.0 million, EUR 1.2 million, and EUR 50,000, respectively, as determined by an exchange rate specified by Poland's National Bank.
Note –The threshold for the reduced corporate tax rate is increased from EUR 1.2 million to EUR 2.0 million from 1 January 2020.10-18-2019
Ukraine's State Fiscal Service has published guidance letter 564/6/99-00-07-02-02-15/IPK of 3 October 2019 concerning the treatment of a cross-border sale of corporate rights (shares) as controlled. The letter notes that a certain transaction may be considered controlled if it affects the taxable income of a taxpayer, including business transactions with non-resident related parties and certain other cases. Further, the taxpayer's annual income must exceed UAH 150 million and its transactions with a particular related party must exceed UAH 10 million (both net of indirect taxes).
As such, if the taxpayer's income exceeds UAH 150 million and the value of the share transaction with a related non-resident exceeds UAH 10 million (as determined based on the arm's length principle), then the share transaction is deemed controlled and must be reported in the annual controlled transactions report. This also applies for share transactions with residents of tax havens and those with specified legal forms set through resolutions from the Ukraine Cabinet (blacklists), as well as share transactions through a non-resident commission agent.10-18-2019
On 17 October 2019, British Prime Minister Boris Johnson came to a new agreement with EU leaders on Brexit, which if approved in the UK parliament by 19 October, would see the UK leave the EU on 31 October 2019 with a deal. However, if the new agreement is not approved, the Prime Minister is required, by law (previous coverage), to seek a further extension. It is not certain that EU leaders would agree, but it is reportedly likely an extension would be granted.10-18-2019
The U.S. Social Security Administration has published the OASDI and SSI Program Rates & Limits for 2020. For both employers and employees, the rate for the Social Security portion (OASDI) remains 6.20%, and the rate for the Medicare portion remains 1.45%. For the self-employed, the OASDI rate remains 12.4% and the Medicare rate remains 2.9%. The taxable earnings cap for OASDI is increased from USD 132,900 to USD 137,700. No cap applies for Medicare.10-18-2019
On 13 October 2019, Algeria's Council of Ministers approved the draft Finance Bill for 2020, which has been sent to parliament for consideration and approval. The tax-related measures are largely focused on the promotion of investment and the development of businesses, which includes:
- Introducing tax incentives for start-ups operating in the field of innovation and new technologies, including profit tax and value added tax exemptions during the launch and development phase;
- Creating four types of national economic zones which will serve as start-up incubators and provide financial and tax incentives for other areas of investment; and
- Abolishing the 51%/49% rule for foreign investment in Algeria, particularly for non-strategic sectors.
Further details of the measures will be published once available.10-18-2019
On 15 October 2019, Italy's Council of Ministers approved the draft Budget Law for 2020 and a related Law Decree for urgent tax measures. Key measures reportedly include the extension of tax credits for expenses incurred for the improvement and refurbishment of immovable property and for employee training expenses, as well as certain incentives, including the increased depreciation incentives for qualifying asset investments. In addition, amendments will be made for the implementation of the digital services tax from 1 January 2020 and to avoid triggering the safeguard clause that provides for automatic VAT rate increases unless budget targets are met.10-18-2019
On 14 October 2019, Luxembourg's Ministry of Finance presented the Budget Bill for 2020 in parliament. One of the main measures of the bill is that all tax rulings issued before 1 January 2015 will be considered null and void with effect from the end of the 2019 tax year (generally 31 December 2019). The reason for this is to resolve discrepancies with the tax ruling procedure introduced from 1 January 2015, which limits the validity or rulings to five years. For taxpayers whose tax rulings will become null and void, a new ruling can be applied for in accordance with current procedures. Other measures of the bill include the extension of the 15% income tax credit for previously unemployed individuals to 31 December 2021 and the extension of the super reduced VAT rate of 3% to services provided by writers, composers, and performers to align with EU VAT directives.10-18-2019
Malta's Ministry of Finance has published the Budget for 2020, which was presented on 14 October 2019. The tax-related measures of the Budget are mainly focused on individual taxation and include a reduced income tax rate of 15% on income from the first 100 hours of overtime for employees with basic pay not exceeding EUR 20,000 annually that are not in management positions. A reduced 15% stamp tax rate is also introduced on profits up to 100,000 from the transfer of property and the stamp duty exemption threshold for first-time homebuyers is increased from EUR 150,000 to EUR 175,000.
Other measures include the introduction of a value added tax (VAT) exemption on education services and education related research, vocational training, distance learning, and institutes recognized for providing such services. And lastly, certain incentives are introduced, including an Innovation Aid for SMEs scheme that provides a tax credit for companies engaged in the agriculture and fisheries sectors, a Malta Enterprise incentive and financial assistance for companies replacing old machinery with new, environmentally friendly machinery, and a start-up tax credit for incorporation or relocation of private companies to the island of Gozo.10-18-2019
According to a 14 October 2019 update from Estonia's Ministry of Finance, Estonia and Qatar concluded negotiations with the initialing of an income tax treaty on 29 August 2019. The treaty will be the first of its kind between the two countries and must be signed and ratified before entering into force. Details of the treaty will be published once available.10-18-2019
On 14 October 2019, the Kyrgyzstan Parliament Committee on Budget and Finance approved the signature of a draft income tax treaty with the Netherlands. The treaty must be signed and ratified before entering into force and will be the first of its kind directly between the two countries. The treaty between the Netherlands and the former Soviet Union had applied in respect of Kyrgyzstan but was terminated.10-18-2019