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Approved Changes (4)

Finland

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Finland Health Insurance Contribution Rates for 2019

Finland's Ministry of Social Affairs and Health has announced the health insurance contribution rates for 2019. For employers, the health insurance contribution rate is reduced from 0.86% to 0.77%. For employees, the contribution rate is increased from 1.53% to 1.54% for those with annual salary of at least EUR 14,282. If annual salary is below that amount, a 0% rate applies. The health insurance rate for employees includes two components; a daily allowance contribution and a medicare contribution. For 2019, the 1.54% rate is for the daily allowance contribution on gross salary, while the medicare contribution on salary is 0.00%.

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Peru Issues Regulations for OECD Common Reporting Standard for Financial Account Information Exchange

Peru published Supreme Decree No. 256-2018 EF in the 10 November 2018 edition of the Official Gazette. The Decree provides the regulations for the implementation of the OECD Commoner Reporting Standard (CRS) on the automatic exchange of financial account information. This includes establishing the required information that financial institutions subject to reporting must provide to the Peru tax authority (SUNAT) to carry out the exchange of information with other competent authorities, in accordance with what has been agreed upon in international treaties and in the decisions of the Commission of the Andean Community, as well as the due diligence procedures that said institutions must apply to obtain and identify the financial information that they must declare to SUNAT.

United States

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U.S. IRS Provides Tax Inflation Adjustments for Tax Year 2019

On 15 November 2018, the U.S. IRS issued a release providing an overview of the tax inflation adjustments for tax year 2019 for individual taxpayers as included in Revenue Procedure 2018-57.

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WASHINGTON — The Internal Revenue Service today announced the tax year 2019 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2018-57 provides details about these annual adjustments. The tax year 2019 adjustments generally are used on tax returns filed in 2020.

The tax items for tax year 2019 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married filing jointly rises to $24,400 for tax year 2019, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,200 for 2019, up $200, and for heads of households, the standard deduction will be $18,350 for tax year 2019, up $350.
  • The personal exemption for tax year 2019 remains at 0, as it was for 2018, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  • For tax year 2019, the top rate is 37 percent for individual single taxpayers with incomes greater than $510,300 ($612,350 for married couples filing jointly). The other rates are:
    • 35 percent, for incomes over $204,100 ($408,200 for married couples filing jointly);
    • 32 percent for incomes over $160,725 ($321,450 for married couples filing jointly);
    • 24 percent for incomes over $84,200 ($168,400 for married couples filing jointly);
    • 22 percent for incomes over $39,475 ($78,950 for married couples filing jointly);
    • 12 percent for incomes over $9,700 ($19,400 for married couples filing jointly).
    • The lowest rate is 10 percent for incomes of single individuals with incomes of $9,700 or less ($19,400 for married couples filing jointly).
  • For 2019, as in 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  • The Alternative Minimum Tax exemption amount for tax year 2019 is $71,700 and begins to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption begins to phase out at $1,020,600). The 2018 exemption amount was $70,300 and began to phase out at $500,000 ($109,400 for married couples filing jointly and began to phase out at $1 million).
  • The tax year 2019 maximum Earned Income Credit amount is $6,557 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,431 for tax year 2018. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
  • For tax year 2019, the monthly limitation for the qualified transportation fringe benefit is $265, as is the monthly limitation for qualified parking, up from $260 for tax year 2018.
  • For calendar year 2019, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is 0, per the Tax Cuts and Jobs act; for 2018 the amount was $695.
  • For the taxable years beginning in 2019, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.
  • For tax year 2019, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,350, an increase of $50 from tax year 2018; but not more than $3,500, an increase of $50 from tax year 2018. For self-only coverage, the maximum out-of-pocket expense amount is $4,650, up $100 from 2018. For tax year 2019, participants with family coverage, the floor for the annual deductible is $4,650, up from $4,550 in 2018; however, the deductible cannot be more than $7,000, up $150 from the limit for tax year 2018. For family coverage, the out-of-pocket expense limit is $8,550 for tax year 2019, an increase of $150 from tax year 2018.
  • For tax year 2019, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $116,000, up from $114,000 for tax year 2018.
  • For tax year 2019, the foreign earned income exclusion is $105,900 up from $103,900 for tax year 2018.
  • Estates of decedents who die during 2019 have a basic exclusion amount of $11,400,000, up from a total of $11,180,000 for estates of decedents who died in 2018.
  • The annual exclusion for gifts is $15,000 for calendar year 2019, as it was for calendar year 2018.
  • The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $14,080, up from $13,810 for 2018.

Venezuela

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Venezuela Increases Financial Transactions Tax to 2%

Venezuela has published Decree No. 3.654 of 8 November 2018 in the Official Gazette. The decree provides for an increase in the tax on large financial transactions from 1% to 2% effective 19 November 2018. The tax was recently amended from a set rate of 0.75% to a rate range of 0% to 2% and set at 1% from September 2018.

Proposed Changes (3)

Belgium

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Belgium Consulting on Draft Circular on the 2017 OECD Transfer Pricing Guidelines

Belgium's Federal Public Service Finance launched a public consultation on 9 November 2018 on a draft transfer pricing circular. The circular provides an overview of the OECD 2017 Transfer Pricing Guidelines (2017 TPG), including the Belgian tax administration position on certain areas. The circular notes that the Belgian tax administration will follow the principles of the 2017 TPG and that any subsequent amendments to the 2017 TPG will be adopted. The circular also notes that it is important to recognize that transfer pricing between related parties is not an exact science and both the tax administration and the taxpayer will have to show flexibility and cooperation to achieve an arm's length price. In this respect, the tax administration cannot impose unreasonable requirements with respect to the basis and evidence of a transfer price. On the other hand, taxpayers are required to provide the necessary documentation to justify an applied transfer price.

The deadline for comments on the circular is 12 December 2018.

Congo, DRC

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The Democratic Republic of the Congo Draft Finance Bill for 2019

The Democratic Republic of the Congo National Assembly (lower house of parliament) is reportedly considering the draft Finance Bill for 2019, which was approved by the government and submitted in October 2018. Tax-related measures of the bill include:

  • A reduction in the standard corporate tax rate from 35% to 30%;
  • Allowing the minimum tax paid by loss-making companies to be carried forward and deducted in subsequent years;
  • New individual employment income tax brackets/rates as follows:
    • up to CDF 1,944,000 – 0%
    • over CDF 1,944,000 up to 21,600,000 – 15%
    • over CDF 21,600,000 up to 43,200,000 – 30%
    • over CDF 43,200,000 – 40%
  • Annual transfer pricing documentation submission requirements, with the documentation due within two months following the tax return deadline; and
  • Amended tax penalties, including:
    • 20% of the tax due where an adjustment is made prior to receiving notification from the tax authority (40% for subsequent offenses);
    • 50% of the tax due where an assessment is issued (100% for subsequent offenses); and
    • 2% late payment interest per month, capped at 50% of the principal tax amount due.

Subject to approval, the measures are to apply from 1 January 2019.

Macedonia

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Macedonia Individual Income Tax Reform Legislation

Macedonia's Ministry of Finance has published draft legislation for individual income tax reform that is meant to provide fairness in the tax system. Some of the key changes of the reform include:

  • The separation of labor income and capital income for tax purposes;
  • The introduction of an 18% tax bracket for labor income exceeding MKD 1,080,000 per year (MDK 90,000 per month), with the current 10% tax rate on income continuing to apply on income up to that amount;
  • An increase in the standard monthly deduction for salary income to MKD 8,000;
  • The introduction of a 15% tax rate on capital income (rental income, capital gains, dividends, etc.); and
  • The introduction of the 15% tax rate on interest income from deposits and gains from the sale of securities from 2020, with an exemption for interest income up to MKD 15,000 per year.

Aside from the changes in taxation of interest and gains from securities, the reform measures are to generally apply from 1 January 2019, subject to approval in parliament.

Treaty Changes (5)

Australia-Canada-Japan-Mexico-New Zealand-Singapore

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Trans-Pacific Partnership Agreement to Enter into Force

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) will enter into force on 30 December 2018 for Australia, Canada, Japan, Mexico, New Zealand, and Singapore. The entry into force follows the ratification of the agreement by the sixth signatory, Australia, on 31 October 2018. TPP-11 incorporates, by reference, the provisions of the original Trans-Pacific Partnership Agreement, signed 4 February 2016, with the exception of a limited set of provisions to be suspended.  

TPP-11 will enter into force for the other signatories to the agreement after the respective ratification procedures are completed. The other signatories include Brunei, Chile, Malaysia, Peru, and Vietnam.  

Austria-Italy-Qatar-Korea, Rep of

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Austria to Negotiate Amending Protocols to Tax Treaties with Italy, Qatar, and South Korea

On 14 November 2018, the Austrian government authorized the negotiation of amending protocols to the 1981 tax treaty with Italy, the 2010 tax treaty with Qatar, and the 1985 tax treaty with South Korea. The amending protocols must be finalized, signed, and ratified before entering into force.

Bahamas-Norway

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Protocol to TIEA between the Bahamas and Norway Signed

According to a notice from the Norwegian Ministry of Finance published 14 November 2018, an amending protocol to the 2010 tax information exchange agreement with the Bahamas was signed by Norway on 19 March 2018 and by the Bahamas on 16 April 2018. The protocol is the first to amend the agreement and will enter into force after the ratification instruments are exchanged. Details of the protocol will be published once available.

Czech Rep-Qatar

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The Czech Republic and Qatar Conclude Tax Treaty Negotiations

On 16 November 2018, officials from the Czech Republic and Qatar concluded negotiations with the initialing of an income tax treaty. 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.

Denmark-Armenia-Japan-Netherlands-Faroe Isl-Finland-Iceland-Norway-Sweden

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Denmark Approves Pending Tax Treaties with Armenia and Japan and Pending Protocols to the Tax Treaty with the Netherlands and the Nordic Tax Treaty

On 15 November 2018, the Danish parliament approved for ratification:

  • The income and capital tax treaty with Armenia, which was signed on 14 March 2018 and is the first of its kind between the two countries (previous coverage)
  • The new income tax treaty with Japan, which was signed on 11 October 2017 and will replace the 1968 tax treaty between the two countries (previous coverage);
  • The amending protocol to 1996 income and capital tax treaty with the Netherlands, which was signed on 9 May 2018 and includes BEPS and exchange of information amendments (previous coverage); and
  • The amending protocol to the 1996 Nordic income and capital tax treaty, which was signed on 29 August 2018 and include BEPS amendments (previous coverage).

The tax treaties and protocols will all enter into force after the ratification instruments are exchanged and will generally apply from 1 January of the year following their entry force.

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