Americas

Costa Rica: Tax administration temporarily suspends filing date for TP information return

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The Costa Rican Tax Administration has temporarily suspended the filing date for the transfer pricing information return. On 5 June 2017 Resolution DGT-R-28-2017 was published in the Official Gazette to give effect to this measure. The resolution modifies Article 4 of Resolution DGT-R-044-2016 to temporarily suspend the due date for filing the information return.

According to a previous ruling transfer pricing information returns for fiscal years 2015 and 2016 would have been due on 30 June 2017. This deadline is suspended until further notice. However, taxpayers should maintain the information that would be included on those information returns for filing when the tax administration requests the information.

Canada: Minister announces consultations on changes to the Voluntary Disclosures Program

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The Canadians pay their tax shares and expect a responsive and fair tax system. Unfortunately, some rich Canadians continue to find ways to not pay what they owe, which places an unfair burden for this country.

The Canadian Government and the Canada Revenue Agency (CRA) have taken action by highlighting resources in the highest risky areas, both domestically and internationally. The Minister of National Revenue, Diane Lebouthillier, on 9th of June 2017, announced an online consultation to give Canadians a say about the CRA proposed changes to tighten its Voluntary Disclosures Program.

The proposed changes to the Voluntary Disclosures Program (VDP) follow an extensive review of the program that was completed over the past months in response to the recommendation by the Standing Finance Committee. The proposed changes to the Voluntary Disclosures Program contains:

  • narrowing the criteria of who is eligible;
  • confirming that severe cases of non-compliance do not benefit from the same level of penalty and interest relief;
  • ensuring that requests that reveal proceeds of crime are excluded from relief; and
  • requiring payment of the estimated taxes owing as a condition to qualify for the program.

Voluntary Disclosures Program applies to disclosures relating to income tax, excise tax, excise duties under the Excise Act, 2001, source deductions, GST/HST and charges under the Air Travelers Security Charge Act and the Softwood Lumber Products Export Charge Act, 2006. The CRA’s online consultations on the Voluntary Disclosures Program will be open for 60 days. The CRA will announce changes to the program in the fall of 2017. The Voluntary Disclosures Program gives taxpayers a chance to voluntarily come forward and correct preceding omissions in their dealings with the CRA.

A new guidelines was proposed by the Canada Revenue Agency (CRA) to limit voluntary disclosures program’s use. Large Canadian companies would no longer be allowed to qualify for the program regarding income tax matters according to these proposed changes. But, some relief remains present for GST/HST matters. Additionally, the CRA has proposed to give only reduced relief in some cases. To show the eligibility for the program, taxpayers would have to pay their estimated taxes at the time of submitting an application. The CRA is inviting public comments on its proposed changes on or before 8th of August 2017. The official announcement of the amendments to the voluntary disclosures program would be announced in the fall of 2017, with effect for 2018.

Brazil: The Federal Government establishes the Special Tax Regularization Program

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On 31st May 2017 the Federal Government published Provisional Measure No. 783, which established the Special Tax Regularization Program (PERT). Under the program’s rules, taxpayers may settle debts with the Federal Revenue Service and the Attorney General of the National Treasury, due by April 30, 2017.

Membership of PERT may be made through a request to be made by August 31 of 2017 and will cover debts indicated by the taxable person, in the condition of taxpayer or responsible, even if they are in administrative or judicial discussion, as long as the taxpayer has previously withdrawn from the litigation. Likewise, the taxpayer may include in this program debts that have already been included in other installments.

The PERT allows the taxpayer to opt for one of four modalities:

  1. Exclusively for debits in the Revenue, the taxpayer can choose the cash payment, with a minimum of 20% of entry and the remainder to be paid with credits of tax loss and Base of Negative Calculation of the Social Contribution on the Net Income (CSLL).
  2. For debts in the Revenue and in the Attorney of the National Treasury, the option may be by installment in 120 installments, without reductions, being:
  • 4% of the debt in installments 1 to 12;
  • 5% of the debt in installments 13 to 24;
  • 6% of the debt in installments 25 to 36;
  • Installment of the remaining balance 84 times, as of the 37th month.
  1. Also for debts in the Revenue and in the Office of the Attorney General of the National Treasury, an option can be made for the payment of 20% in 2017, in 5 installments, without reductions, and the remainder under one of the following conditions:
  • Discharge in January 2018, in a single installment, with reductions of 90% interest and 50% of fines; or
  • Installments in up to 145 installments, with reductions of 80% of interest and 40% of fines; or
  • Installments in up to 175 installments, with reductions of 50% of interest and 25% of fines, with installments corresponding to 1% of the gross revenue of the previous month, not lower than 1/175.
  1. Finally, for debts of less than R $ 15 million under the Revenue and the Attorney of the National Treasury, the taxpayer may choose to pay 7.5% in 2017, in 5 installments, without deductions, and the remainder to be paid Under one of the following conditions, with cumulative use, in this order, of reductions in additions and the utilization of credits:
  • Payment in full in January 2018, with reductions of 90% interest and 50% of the fines and use of credits of Tax Loss and Negative Calculation Base or other own tax credits administered by the Internal Revenue Service; or
  • Installments in up to 145 installments, with reductions of 80% of interest and 40% of fines and use of credits of Tax Loss and Negative Calculation Base or other tax credits managed by the Federal Revenue Service; or
  • Installments in up to 175 installments, with installments corresponding to 1% of the gross revenue of the previous month, not less than 1/175, with reductions of 50% of interest and 25% of fines and use of credits of Tax Loss and Base of Negative calculation or other own credits of taxes administered by the IRS.

US: Interest rates on tax underpayments and overpayments for the third quarter of 2017

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The Internal Revenue Service on 9 June 2017 announced that interest rates for tax underpayments and overpayments will remain the same for the calendar quarter beginning July 1, 2017.

The rates will be:

  • four percent for overpayments (three percent in the case of a corporation);
  • one and one-half percent for the portion of a corporate overpayment exceeding $10,000;
  • four percent for underpayments; and
  • six percent for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest on tax underpayments and overpayments is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half of a percentage point.

The interest rates are computed from the federal short-term rate determined during April 2017 to take effect May 1, 2017, based on daily compounding. Revenue Ruling 2017-13, announcing the rates of interest, will appear in Internal Revenue Bulletin 2017-26, dated June 26, 2017.

Mexico signs Multilateral Convention on BEPS

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Mexico has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) on 7th June 2017. The signing of the MLI will modify over 1,100 international treaties by more than 68 countries aimed to avoid double taxation and tax evasion, including those treaties previously signed by Mexico. The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide. The OECD’s goal is to lessen tax avoidance by Multinational Groups emerged from forceful International Tax and Transfer Pricing positions, which, as per OECD estimations, ranges from 100 to 240 billion dollars every year.

The signing of the MLI effectively concludes the objective put forward by Action 15 of the BEPS Plan, and is without a doubt a watershed moment relating to International Tax. It is accordingly fundamental for Multinational Groups to assess the adequacy of their Transfer Pricing and International Tax policies to the new worldwide condition.

Chile signs OECD Multilateral Treaty on Double Taxation

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Chile has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). More than 68 countries, including Chile, signed the Convention on 7 June 2017 at Paris.

The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, aiming to put forward concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.

The Convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6.

The Convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD.

Costa Rica signs OECD Multilateral Instrument

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Costa Rica has signed the Multilateral Convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). More than 68 countries, including Costa Rica, signed the Convention on 7 June 2017 at Paris.

The convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.

The convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6.

The convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD.