| Colombia | Main corporate tax rate: On 28 December 2018, Colombia enacted the Tax reform bill for 2019. The Tax Reform reduces the corporate income tax (CIT) rate from 33% in 2018 to 32% for 2020, 31% for 2021 and 30% for 2022 and onwards. The 4% surcharge on corporate income has been abolished entirely. Financial institutions are to be taxed at 37% in 2019, dropping to 35% in 2020, and 34% in 2021.
Withholding tax on dividends: As from 1 January 2019, the Tax Reform increases the dividend tax on distributions to foreign nonresident entities from 5% to 7.5%. In addition, the Tax Reform establishes a 7.5% dividend tax on distributions between Colombian companies. PE rules: Under the tax reform, the tax base of a ‘permanent establishment’ has been expanded to cover worldwide income, instead of Colombia-source only income, and expense deductions are allowed only under certain conditions. Thin capitalization rule: The thin capitalization rule ratio is modified from 3:1 (which includes all debt that generates interest with local and foreign entities, related or unrelated) to a 2:1 ratio that only considers debt transactions involving related local and foreign parties (including back-to-back transactions involving foreign third parties). Incentives: The Tax Reform introduced an income tax exemption for gross income below 80,000 tax units (approximately US$850,000) that derives from certain entrepreneurial activities related to technological and creative industries, or agricultural activities. |
| Portugal | Submission of return: On 14 January 2019, the Secretary of State for Fiscal Affairs of Portugal was approved the amendments to the Model 22 periodic income statement, its annexes and instructions for completion. See the story in Regfollower |
| Finland | CFC rule: On 31 December 2018, Finland gazettes the law implementing the controlled foreign company (CFC) rules in line with EU directive (EU) 2016/1164 (2016). The law introduced changes to the CFC definition and applicable exemptions, including reducing the control threshold for a company that qualifies as a CFC from the current 50% (direct or indirect ownership) to 25% of ownership of share capital or voting rights or profit entitlements as defined by ATAD. The law entered into force on 1 January 2019. See the story in Regfollower |
| Latvia | CFC rule: On 13 December 2018, the Latvian Parliament adopted a Law amending the Corporation Tax Act, which provides for the implementation of the new rules on controlled foreign companies (CFCs) in line with the EU’s Anti-Tax Avoidance Directive (ATAD). Accordingly, from 1 January 2019, the rules apply to foreign permanent establishments and foreign companies. See the story in Regfollower |
| Lithuania | Filing return: On 10 January 2019, the State Tax Inspectorate of Lithuania announces tax amnesty deadline for entities to report undeclared income and pay taxes for 2014-18 tax years without penalties or interest. The announcement includes that taxpayers have until 1 July 2019 to take advantage of the tax amnesty program and notes that no amnesty will be provided in the future. See the story in Regfollower |
| Indonesia | Foreign tax credits: On 9 January 2019, Indonesia’s Directorate General of Taxation approves new foreign tax credits rules. The new regulations update and replace prior regulations and generally apply in respect of foreign income derived from the 2018 tax year. The new regulations include rules on determining sources of income, calculating the credit amount, proving that foreign tax has been paid, etc., as well as several examples. See the story in Regfollower |
| France | Corporate Income tax rate: On 28 December 2018, the French Finance Act 2019 passed its constitutional review, which was approved by Parliament on 20 December 2018. From 2019 all companies will be taxed at 28% of their first income amounting to EUR 500,000 and 31% above. The law also introduced a gradual reduction in the corporate tax rate to 25% in 2022.
Incentives for industry/manufacturing: The patent box regime is amended to comply with BEPS Action 5. This includes the introduction of the modified nexus approach to provide that the amount of patent income qualifying for the regime is limited to the amount resulting from the ratio of R&D expenditure incurred by the taxpayer and unrelated parties for the creation/development of the asset with a 30% uplift / total R&D expenditure. The amended regime generally applies from 1 January 2019. Incentives for small business: A special incentive is introduced for certain investments that are contemplated between 1 January 2019 and 31 December 2020 to support the robotization and digital transition of qualifying companies. GAAR-Rule: The new finance law implements the ATAD GAAR into domestic law. The GAAR provides that, with respect to corporate income tax, no genuine arrangements put in place for the main purpose (or one of the main purposes) of obtaining a tax advantage that defeats the object or purpose of the applicable tax law should be ignored. Participation relief: As from 1 January 2019, the 99% participation exemption will be extended to apply to dividends paid by an EU/EEA company to a French company that is not a member of a French tax-consolidated group, provided the payer would fulfill the conditions for being a member of the recipient’s French tax group if it were established in France. Currently, dividends paid by one company to another company that is not at least 5% held by the distributing entity are fully taxable at the level of the recipient entity. As from 1 January 2019, if the recipient is a member of a tax-consolidated group and the payer entity could be member of the group if it were established in France, the 99% participation exemption will apply to the dividends paid. |
| Greece | Corporate income tax rate: The Greek prime minister announces his plan to cut Greek taxes as part of the Budget for 2019. The corporate income tax rate will be reduced in 2020 from 29% to 25%, the V.A.T. rate will be reduced in 2021. The property tax will be reduced by 30% to 50%.
Withholding tax on Dividend: The Greek government approved a planned reduction in the withholding tax rate on dividends from 15% to 10%. The reduction is to apply from 2020, although the legislative amendments to implement the reduction are pending. |
| Qatar | Withholding tax rate: On 17 January 2019, Qatar’s new Income Tax Law was published in the Official Gazette and replaced the previous Law 21 of 2009, and is effective from 13 December 2018. Accordingly, a 5% withholding tax rate applies on cross borders payments in connection with royalties, interest, omission, and services rendered in Qatar by non-residents with no permanent establishment in Qatar.
Sanctions for non-compliance: On 17 January 2019, Qatar’s new Income Tax Law was published and replaced the previous Law 21 of 2009, and is effective from 13 December 2018. The law introduced a number of changes in relation (mainly) to administrative procedures in order to enhance tax compliance. |
| Spain | Reduced rate: On 16 January 2019, Spain published the national budget for 2019. The budget proposed to reduce the CIT rate for small businesses with a turnover of no more than EUR 1 million by 23%. See the story in Regfollower |
| Argentina | PE rules: On 27 December 2018, Argentina published a Regulatory Decree 1170/2018 in the Official Journal, which entered into force on 28 December 2018. In respect of permanent establishment the decree clarifies that agents with a significant role regarding contracts are considered to create a permanent establishment, and that profits are to be allocated to a permanent establishment in respect of the functions performed, assets involved, and risk assumed.
Thin capitalization rule: The Decree introduced a new limit on deducting interest arising from financial loans. The limit equals 30% of earnings before interest, taxes, depreciation and amortization (EBITDA) or a certain amount to be determined by the Executive Power, whichever is higher. The Decree establishes that the amount determined by the Executive Power is Argentine Pesos (ARS) 1 million. It also clarifies that the limit does not apply to interest subject to withholding tax, even when the provisions of a tax treaty (e.g., reduced rates or exemptions) apply. CFC rules: With respects to Controlled foreign corporation (CFC) rules, the Decree includes clarifications about concepts such as control, tax personality and substance. |
| Chile | Interest-Bond: Recently, the Internal Revenue Service (IRS) issued Ruling 2546 to clarify the taxation of interest paid to a Chilean resident subject to corporate income tax (CIT), which is derived from bonds issued by a non-resident company abroad.
Dividends: The Internal Revenue Service (IRS) issued Ruling 59, to clarify the taxation of dividend income paid by a financial institution to resident and non-resident taxpayers under the Income Tax Law (ITL). |
| Turkey | Incentives for industry/manufacturing: On 17 January 2019, Turkey published the Omnibus Law in the Official. Accordingly, from 18 January 2019, the existing rules on reduced rates for investment expenditure on manufacturing were extended until 31 December 2019. See the story in Regfollower |
| UK | Treatment of losses-Carry forward: On 12 December 2018, the HMRC have updated their draft guidance on administrative requirements for the deductions allowance in relation to restricted corporation tax loss relief. This draft guidance explains the additional administrative requirements included in Corporation Tax Act 2010 Part 7ZA that covers the restriction of Corporation Tax loss relief and how these requirements can be met, including a template for the group allowance allocation statement. See the story in Regfollower |
| Puerto Rico | Main corporate income tax rate: On 10 December 2018, Puerto Rico enacted Bill No. 1544 as Law No. 257 of 10 December 2018. Under the law, the corporate income tax rate is reduced from 20% to 18.5%. Thus, including a surtax, the highest income tax rate is 37.5%.
Withholding rates-service: The law Increases the withholding rate on payments made after 31 December 2018, on account of services rendered from 7% to 10%, with several exemptions. |
| Korea | Treatment of losses-Utilization rules: On 24 December 2018, Korea enacted the 2019 tax reform bill (the 2019 Tax Reform) after it was passed by Korea’s National Assembly on 8 December 2018. Under the reform, from 1 January 2019, the cap on deductions of carry forward losses for foreign corporations having a place of business or real estate income in Korea is reduced from 80% to 60% of the taxable income of the company.
PE rules: The 2019 Tax Reform introduces a new rule to prevent misuse of specific exceptions to the PE rules. Accordingly, a dependent agent that does not have the authority to conclude contracts for a foreign corporation is nonetheless considered a Korean permanent establishment (PE) of the corporation if the agent habitually plays a principal role in concluding contracts in Korea. The 2019 Tax Reform also clarifies that the types of contracts that may be deemed to create an agency PE in Korea are contracts executed in the name of the foreign company. |
| Italy | Reduced rate: On 29 December 2018, the Italian Parliament approved the 2019 Budget Law. The Law introduced a reduced corporate Income Tax at 15% on the income reinvested in certain new fixed assets and for the creation of jobs.
Incentives for Industry/manufacturing: The 2019 Budget Law amends the tax credit for Research and Development by reducing the rate from 50% to 25%. Accordingly, starting from 2019, the tax credit will be applied generally in the amount of 25%. Submission of returns- withholding taxes due: On 15 January 2019, the Italian Tax Authority issued a new withholding tax form and instructions for the 2018 financial year. The form must be submitted electronically by 31 October 2019. |
World Tax Brief: February 2019
07 February, 2019
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