Worldwide Tax News
The Guernsey Revenue Service recently published an updated version of the Guidelines for requesting Mutual Agreement Procedure (MAP) assistance in Guernsey, which is dated May 2019. The updated version includes two main additions to clarify MAP requests under a tax treaty (DTA) that does not allow a taxpayer to make requests to either competent authority, and MAP requests covering multiple years.
With respect to MAP requests under a DTA that does not allow a taxpayer to make requests to either competent authority:
For the avoidance of doubt, where a DTA has not currently been modified to enable a taxpayer to make a MAP request to either competent authority, then on receipt of such a MAP request, the Guernsey Competent Authority will consider the MAP request on its own merits. If the Guernsey Competent Authority does not consider the MAP request to be justified the Guernsey Competent Authority will implement bilateral notification process with the Competent Authority of the other party which will allow the other party to provide its views on the case. This notification process will utilise the spontaneous exchange of information provisions contained in each of Guernsey’s DTAs. The information exchanged will be the minimum information necessary to enable the Competent Authority of the other party to identify the taxpayer, together with a summary of details identified in the MAP request, in order to enable the competent authority in the other party to give consideration to the matter in hand.
With respect to MAP requests covering multiple years:
For the avoidance of doubt, the Guernsey Competent Authority recognises that, in certain cases, a MAP request in respect of a specific adjustment to income may present recurring issues which will also be relevant in previous or subsequent tax years for which the relevant tax return has been submitted. It is, therefore, possible, in such cases and after an initial tax assessment, for a taxpayer to make a MAP request covering multiple years (with the same recurring issues), where the relevant facts and circumstances are the same. A MAP request of this nature does, however, remain subject to the time limits provided in the relevant DTA, which in most cases is three years.
Latvia Amends Corporate and Value Added Tax Payment Deadlines and Provides Additional Tax Relief for Donations
Latvia has published two laws for Amendments to the Value Added Tax (VAT) Act and Amendments to the Corporate Income Tax (CIT) Act in the 12 June 2019 edition of the Official Gazette. The amendments change the deadline for withholding tax, CIT, and VAT payments/returns from 20 days after the respective tax period to 23 days after the period. The changes apply from 1 January 2021.
The amendments to the CIT Act also provide an increased CIT deduction for donations to a public benefit organization for reporting years beginning in 2020, 2021, and 2022. This includes that taxpayers may opt to reduce the CIT calculated on dividends by 85% of qualified donations made (up from 75%), but not exceeding 30% of the calculated CIT amount (up from 20%). This is one of three options in relation to deductions for donations contained in the CIT Act.
On 7 June 2019, the Myanmar Union Parliament enacted the Tax Administration Law (Law No. 20), including a number of reform measures. Some of the key measures of the law are as follows:
- An advance ruling system is introduced to provide guidelines to taxpayers on the interpretation of tax laws, which will be binding on both the taxpayer that requested the ruling and the Internal Revenue Department (IRD);
- An anti-avoidance provision is introduced, which empowers the IRD to disregard transactions that are either deemed fraudulent or created to avoid taxation, and to assess tax based on the actual economic substance and value of the transactions;
- The time period to maintain documentation (receipts, invoices, financial statements, books of accounts, etc.) is extended from three years to seven years, which must be kept in Myanmar or English language;
- The statute of limitations to raise an assessment is extended from three years to six years following the year of assessment (year after income year), which may be extended to twelve years in cases of fraud or incomplete information;
- A new tax appeals process is provided, which includes the following:
- If a taxpayer disagrees with an assessment, an application for reconsideration must be made with the Director General of IRD within 30 days of receiving the assessment order, otherwise, the assessment is considered final;
- If a taxpayer disagrees with the decision of the Director General of IRD, an appeal can be filed with the Tax Tribunal or Revenue Appellate Tribunal within 90 days of receiving the decision, or if a decision has not been given with 90 days of the application, an appeal can be filed within 30 days, i.e., within 120 days of the initial application for reconsideration (further appeals can be made with the Supreme Court);
- New rules on the tax liability of shareholders following liquidation of a company are introduced, including that shareholders may be held liable for unpaid taxes of a company equal to an amount up to the value of any amounts received in cash or assets within one year prior to the liquidation, unless a tax clearance certificate has been issued for the company;
- New rules on refunds of excess tax paid are provided, including that after offsetting any claimable amount, any assessed tax, interest, or penalty paid will be offset as an advance tax within the next 12 months, after which any excess amount can be refunded to the taxpayer within six years after the end of the relevant year including interest calculated from the date the refund is determined until the refund is made (interest rates to be issued);
- An Interest penalty on unpaid taxes is introduced that is calculated from the date the tax was due until the tax is paid and is in addition to other penalties (interest rates to be issued).
Further to the new interest penalty, other tax-related penalties are also set out in the Tax Administration Law:
- Failing to maintain records or documentation:
- MMK 5,000 per day of failure if the tax due does not exceed MMK 500,000;
- MMK 50,000 per day of failure if the tax due does not exceed MMK 5 million; and
- MMK 100,000 per day of failure if the tax due exceeds MMK 5 million;
- Failing to provide requested information - MMK 500,000;
- Providing incorrect information - MMK 250,000;
- Failing to submit tax returns or other returns by prescribed deadlines - the higher of 5% of the tax due plus 1% per month or MMK 100,000;
- Failing to pay tax by prescribed deadlines - 10% of the tax due;
- Underpaying tax in the case of fraud:
- 25% of the underpaid tax due if the underpaid amount does not exceed 50% of the actual amount due or MMK 100 million; and
- 75% of the underpaid tax due if the underpaid amount exceeds 50% of the actual amount due or MMK 100 million;
- Additional penalties for hindering tax administration, such as failing to provide information, failing to meet with tax authorities, providing incorrect documentation, etc. - MMK 250,000 and/or imprisonment for up to one year;
- Additional penalties for tax evasion - the higher of MMK 250,000 or 100% of the tax evaded and/or imprisonment for up to seven years.
The Tax Administration Law generally applies from 1 October 2019.
In addition to the Tax Administration Law, the IRD has also announced that all enterprises will be required to follow Myanmar's new fiscal year with effect from 1 October 2019. The new fiscal year runs from 1 October to 30 September and was first made mandatory for banks and financial institutions and state-owned enterprises from 1 October 2018. With the extension of the requirement, enterprises are required to submit a return for a transition period from 1 April to 30 September 2019.
The Norwegian Tax Administration has published a Tax Appeals Board ruling on the deduction of losses of an acquired company (case 01 NS 9/2019). The case involved a Norwegian company (Company B) that had acquired a pharmaceutical company (Company A), which had a tax loss of over NOK 85 million at the time of acquisition, with a nominal tax value of nearly NOK 24 million based on the 28% corporate tax rate at the time (2012).
After the acquisition, Company B claimed the tax loss as a deduction in its return but was denied by the tax authority. While Company B claimed the acquisition was business motivated based on the potential of Company A's IP, the tax authority held the acquisition was predominantly tax motivated, resulting in the denied deduction. This was appealed.
In the ruling, the Tax Appeals Board sided with the tax authority. In particular, the ruling highlights the amount of the loss as opposed to the consideration paid for the shares, which was approximately NOK 14.3 million, including cash and receivables of NOK 11.3 million and the IP rights valued at NOK 3 million. Given that the loss position appeared to be the largest value in the pharmaceutical company at the time of acquisition and Company B was unable to overcome this presumption, its appeal to being denied the loss deduction was rejected.
Saudi Arabia's General Authority for Zakat and Tax (GAZT) has announced that the effective date for the recently expanded scope of the selective excise tax to sweetened beverages will be effective from 1 December 2019 (previous coverage). From that date, the excise tax will be imposed at a rate of 50% on the retail price. The excise tax applies to any sweetened beverages, whether ready to drink or in a concentrated liquid, powder, gel, or extract form.
Note - The selective excise tax was also extended to electronic smoking devices, tools, and liquids, although the effective date for this was not addressed in the announcement.
Turkey's Revenue Administration has announced the publication of Presidential Decree No. 1149 of 16 June 2019, which extends the recent reduction (previous coverage) in the banking and insurance transactions tax rate to 0% for:
- Foreign exchange sales to enterprises holding industrial registration certificates; and
- Foreign exchange sales to exporters who are members of Exporters' Associations.
The Presidential Decree is effective from 18 June 2019.
The Ukraine State Fiscal Service recently published guidance letter No. 2219/6/99-99-15-02-02-15/ІPK of 17 May 2019 concerning the 30% adjustment (increase) in taxable income for deemed controlled transactions with residents of tax havens, which includes jurisdictions where residents are not subject to tax. The letter notes that such transactions will not be considered controlled and subject to adjustment if the Ukrainian taxpayer can show that the non-resident has paid income tax in the respective period.
For this purpose, a Ukrainian taxpayer is not limited under law with regard to the method and form for showing that the non-resident has paid income tax, but it is recommended that documentation issued by the foreign tax authority is obtained from the non-resident to confirm payment, which must be duly legalized and translated in accordance with Ukraine law.
Finland Launches Consultation on Implementation of Reporting Requirements for Cross-Border Tax Planning Arrangements
Finland's Ministry of Finance has announced the launch of a public consultation on draft legislation for the implementation of reporting requirements for cross-border tax planning arrangements as required in Council Directive (EU) 2018/822 of 25 May 2018 (DAC6). The reporting requirements will apply for intermediaries that design, market, organize, or manage the implementation of a reportable arrangement. The reporting obligation may also be shifted to a taxpayer in some cases.
The law is intended to come into force in 2020 but applies in respect of tax planning arrangements entered into from 25 June 2018. The initial disclosure in respect of the period 25 June 2018 to 30 June 2020 will need to be made by 31 August 2020 at the latest. Reportable arrangements from 1 July 2020 will need to be reported within 30 days from the date the arrangement is made available for implementation, the arrangement is ready for implementation, or the first stage of the arrangement is implemented.
The consultation period runs from 19 June to 16 August 2019.
According to a release from Russia's Federal Tax Service (FTS), the FTS and the Ministry of Finance are working on a reduction in the thresholds taxpayers must meet in order to take part in the tax monitoring system. The system allows for the exchange of information between taxpayers and the tax authority and exempts taxpayers from desk and field audits in most cases, among other benefits. The proposed thresholds for taxpayers to take part include:
- The annual sum total of value added tax, excise tax, profits tax, and mineral extraction tax must be at least RUB 200 million (down from RUB 300 million);
- Total annual income must be at least RUB 2 billion (down from RUB 3 billion); and
- Total assets value must be at least RUB 2 billion (down from RUB 3 billion).
Taxpayers meeting the above conditions would be allowed to apply for tax monitoring voluntarily.
Japan's Ministry of Finance has published the synthesized text of the 1992 Japan-Luxembourg income tax treaty as impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). A summary of the application of the MLI has also been published. The synthesized text contains the consolidated text of the provisions of the treaty and the applicable provisions of the MLI. It is solely for the purpose of facilitating the understanding of the application of the MLI to the treaty and does not constitute a source of law.
The MLI enters into force for Japan on 1 January 2019 and for the Netherlands on 1 August 2019 and has effect as follows:
- The provisions of the MLI shall have effect in each Contracting State with respect to the treaty:
- with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2020; and
- with respect to all other taxes levied by each Contracting State, for taxes levied with respect to taxable periods beginning on or after 1 February 2020.
- Notwithstanding the above, Article 16 (Mutual Agreement Procedure) of the MLI shall have effect with respect to the treaty for a case presented to the competent authority of a Contracting State on or after 1 August 2019, except for cases that were not eligible to be presented as of that date under the Convention prior to its modification by the MLI, without regard to the taxable period to which the case relates.
- Notwithstanding the above, the provisions of Part VI (Arbitration) of the MLI shall have effect:
- with respect to cases presented to the competent authority of a Contracting State (as described in subparagraph a) of paragraph 1 of Article 19 (Mandatory Binding Arbitration) of the MLI), on or after August 1, 2019; and
- with respect to cases presented to the competent authority of a Contracting State prior to August 1, 2019 (only to the extent that the competent authorities of both Contracting States agree that Part VI of the MLI will apply to that specific case), on the date when both Contracting States have notified the Depositary that they have reached mutual agreement pursuant to paragraph 10 of Article 19 of the MLI, along with information regarding the date or dates on which such cases shall be considered to have been presented to the competent authority of a Contracting State (as described in subparagraph a) of paragraph 1 of Article 19 of the MLI) according to the terms of that mutual agreement.
Click the following link for the Ministry of Finance's webpage on the BEPS MLI for more information.