August 2019

On 13 August 2019, amendments to the Corporate Income Tax Act (CITA) were published in State Gazette. The main amendments are that the controlled foreign company (CFC) rules, introduced in Bulgaria as of 1 January 2019, will not be applicable to:

• taxable persons subject to alternative taxes (i.e. different from corporate income tax) under part V of the CITA; and
• CFCs that are subject to an alternative form of taxation in the countries of which they are tax residents.

The above amendments are in force as of 13 August 2019. Note: The amendment is necessary because the previous rules had erroneously transposed the ATAD. The previous rules provided that the CFC rules were not applicable to entities that were not subject to corporate income tax in the countries of which they were tax residents, which was manifestly incorrect. However, because the amendment does not specify the required actual tax paid by the CFC, it may still be possible that low-tax situations are excluded from the application of the CFC rules, which is not intended by the Directive.

On 13 August 2019, amendments to the Tax and Social Security Procedure Code were published in the State Gazette. They concern the following topics:

• introduction of mandatory transfer pricing documentation requirements; and
• implementation of the EU Tax Dispute Resolution Directive (2017/1852) of 10 October 2017 on tax dispute resolution mechanisms in the European Union.

  The following persons will be obliged to prepare transfer pricing documentation:

• Bulgarian legal entities;
• foreign legal entities carrying on economic activities in Bulgaria through a permanent establishment; and
• sole traders carrying on significant activities.

An exemption from the obligation to prepare transfer pricing documentation applies if one or more of the following conditions are met:

• companies with net sales revenue under BGN 76 million (approximately EUR 38 million) and with a net book value of assets of up to BGN 38 million (approximately EUR 19 million), or with an average number of staff not exceeding 250 persons during the reporting period;
• entities that are not subject to corporate income tax;
• entities that are subject to alternative tax under the Corporate Income Tax Act;
• entities conducting transactions with individuals who are not sole traders even if they are related parties;
• entities that perform controlled transactions only in Bulgaria; and
• the amounts (excluding VAT and excise duties) involved for each separate transaction with a related party for the relevant year are below the following thresholds:
  • for sales of goods: BGN 400,000 (approximately EUR 205,000);
  • for other transactions: BGN 200,000 (approximately EUR 100,000); and
  • with respect to loans taken out or granted: the amount is above BGN 1 million (approximately EUR 500,000), or the accrued interest and other income/expense related to the loan are above BGN 50,000 (approximately EUR 26,000).

Two or more transactions under similar conditions (or connected) with a related party will be grouped for the purposes of calculation of the above thresholds. A local transfer file must be prepared only for the group's transactions for which the aforementioned relevant threshold has been reached. The transfer pricing documentation must include a local file. In addition, a master file will be required only if the entity is part of a multinational group of companies. The local file must be prepared by 31 March after the end of the relevant tax year. The persons obliged to prepare a master file must do so not later than 1 year after the deadline for preparing the local file for the relevant year. Since the first tax year for which the transfer pricing documentation must be prepared is 2020, the deadline for this first period therefore is 31 March 2021 for both the local and the master files. The transfer pricing documentation must be kept by taxable persons and provided to tax authorities only at their request during tax checks and tax audits. Both the local and master files must be prepared annually. If no significant changes are made to the factors that impact the determination of the arm's length prices, the benchmark study must be updated at least every 3 years. However, the financial information on comparable transactions or persons must be updated annually. The sanctions for non-compliance with transfer pricing documentation requirements are as follows:

• for failing to provide the local file to the tax authorities before the deadline provided by them, the penalty will be up to 0.5% of the total amount of the transactions for which the transfer pricing documentation should have been prepared;
• if a company does not prepare a master file although such an obligation exists, the penalty will be between BGN 5,000 and BGN 10,000 (approximately EUR 2,500 to EUR 5,100); and
• if a company includes incorrect or insufficient information in its transfer pricing documentation, the penalty will be between BGN 1,500 and BNG 5,000 (approximately EUR 770 to EUR 2,600).

During the framework of the Fourth Session of the Intergovernmental Bulgarian-Turkmenistan Commission for Economic Cooperation, held in Avaza from 10 to 12 August 2019, Bulgaria and Turkmenistan reached a consensus on the swift conclusion of an income and capital tax treaty between them. Further developments will be reported as they occur.

The State Administration of Taxation, the Ministry of Finance and the General Administration of Customs recently issued the Announcement of Promoting General Value-added Taxpayer Qualification at Comprehensive Bonded Zones. According to the announcement, customs agencies can grant general value-added taxpayer qualification to enterprises in the special customs regulatory zones. Pilot enterprises can issue special value-added tax invoices when they sell products to domestic customers (Including other pilot firms in the zones), and declare value-added tax and consumption tax. If pilot enterprises import self-use equipment (Including machinery, infrastructure resources and office supplies), they would be exempted from import tariff, import value-added tax and consumption tax.

Shanghai municipal government published on August 20, 2019 the Measures for the Administration of New Lingang Area of China (Shanghai) Pilot Free Trade Zone. The regulation said the new area will build open-minded regulatory systems and expand openness to foreign investors in such key sectors like telecommunication, insurance, securities brokerage, research and technology services, education and healthcare. The area will strive to build a business cluster for high-end sectors like integrated circuits, artificial intelligence, biomedicine, civil aviation, new energy vehicle and intelligent equipment. The new area will continue to expand opening-up and introduce innovative institutional reforms.

The State Council released two documents on August 26, 2019 - the Approval of Six New Pilot Free Trade Zones, and the Overall Development Plans for Six New Pilot Free Trade Zones. The six new pilot free trade zones are located in Shandong, Jiangsu, Guangxi, Hebei, Yunnan, and Heilongjiang. According to the plans, these pilot free trade zones are mandated to fulfill different reform tasks. For instance, China (Shandong) Pilot Free Trade Zone will develop high-quality marine economy, and enhance shipping service capacity. The zone will also explore ways to deepen economic cooperation with Japan and the Republic of Korea. China (Jiangsu) Pilot Free Trade Zone is tasked to enhance investment cooperation with foreign countries, strengthen the financial industry's service and support to the real economy, and work out effective policies to promote innovative development of the manufacturing sector.

The National Development and Reform Commission and the State Administration of Taxation recently issued the Circular about Strengthening Construction of Tax Credit System for Individual Income Taxpayers. The circular said individual income taxpayers with serious dishonest behaviors would be subject to joint punishment. Tax agency and relevant departments will work together to roll out joint punishment measures against taxpayers who make dishonest or false tax declarations, special additional tax deductions and tax privileges. Their information will be transferred to the national credit information sharing platform, and their credit data will be updated from time to time.

On 15 August 2019, the Financial Secretary of Hong Kong announced a package of measures to counter the challenging external and local economic environments. The proposed measures aim to support enterprises, in particular small and medium-sized enterprises (SMEs), in safeguarding jobs and relieving people's financial burdens. The tax-related measures are summarized below.

• Twenty-seven (27) groups of government fees and charges will be waived for a period of 12 months, which will benefit a wide range of sectors, including maritime, logistics, retail, catering, tourism, construction, agriculture and fisheries.
• Further to the Budget for 2019/2020, a one-off reduction of salaries tax, tax under personal assessment and profits tax will be increased from 75% to 100% for the year of assessment 2018/2019, subject to a maximum of HKD 20,000 per case.
• An additional 1-month allowance is provided to social security recipients based on the standard rates of comprehensive social security assistance (CSSA) payments, old age allowances, old age living allowances and disability allowances, respectively.

The above proposals will be submitted to the Legislative Council for approval.

On 1 August 2019, Georgia and Hong Kong initialled a tax agreement, following a successful first round of negotiations held in Hong Kong from 29 July to 1 August 2019. Further developments will be reported as they occur.

ADDIS ABABA, July 27 (Xinhua) -- The Ethiopian government on Saturday said the country made more than 1.2 billion U.S. dollars in revenue from the exports of coffee and oilseeds during the just-concluded Ethiopian fiscal year that ended on July 7. The revenue was generated from the export of coffee, mung beans, white kidney beans, sesame seeds and soya beans, state-affiliated Fana Broadcasting Corporate (FBC) reported on Saturday. Large amount of the export revenue was generated from the export of coffee. Ethiopia is one of Africa's largest producers of Arabica coffee, in which coffee production is dubbed as the backbone of the country's agriculture-led economy. Ethiopia also recently revealed a new initiative to uplift the current close to 600,000 tons of annual coffee production to 1.8 million tons within the coming five years period. According to the Ethiopian Coffee and Tea Authority (ECTA), the Chinese market is expected to be a major destination for the nation's coffee exports. In April this year, China and Ethiopia signed a Memorandum of Understanding on coffee exports to China and to deepen bilateral trade cooperation. Amid increasing demand for coffee among younger Chinese, penetrating the emerging coffee market is also increasingly seen as a major priority among Ethiopian coffee producers and exporters. Ethiopia's sesame production, which is also considered as one of Ethiopia's top export commodities next to coffee, has in recent years witnessed growing interest from the Chinese market. Haile Berhe, President of the Ethiopian Pulses, Oilseeds and Spices Processors-Exporters Association, told Xinhua recently that the export of sesame seed to China currently constitutes close to 70 percent of the East African country's total export of the product to the global market. China is already the east African country's major export destination. Ethiopia, during the previous Ethiopian 2017-2018 fiscal year, had exported 245 million U.S. dollars of goods to China, according to the Ethiopian Ministry of Trade.

The governments of Rwanda, Burundi and Democratic Republic of Congo (DRC) have signed a tripartite deal that marks official launch of construction works for a $700 million joint Hydropower project. The project, dubbed ‘RusiziIII’ Hydropower is expected to generate up to 230 MW, with total cost expected to range between $644 and $700 million, according to Rwanda’s Infrastructure Ministry.

Arusha. Ethiopian

Airlines says it is ready to uplift Tanzanian perishable horticultural exports to the markets overseas to beat the growing demand.

The move would reduce the trucking of the horticultural produce by exporters based in the northern regions to Nairobi where it is put on freighters to Europe.

"With its freighters and large terminal facilities in Addis Ababa, Ethiopian Cargo can connect Tanzania's exporters directly with the buyers abroad", said Ms Fitsmit Dejene, the airline's sales manager for Arusha and Kilimanjaro.

Africa's largest airline, she explained, would avail additional uplifts of perishable goods from Tanzania at competitive prices after learning of the low capacity of the carriers currently doing the same.

"The (horticulture) industry wrongly perceives that the main problem it faces is the cost and capacity of airfreight out of the Kilimanjaro International Airport (KIA)", she told The Citizen.

She said after the recent upgrading of its Bole International Airport hub, Ethiopian Airlines Cargo and Logistics now operated one of the largest trans-shipment terminals in Africa and has 12 air cargo freighters.

(Reuters) - A consortium led by Bombardier Inc said on Monday it had won a contract to build and operate two monorail lines in Egypt for more than $4.5 billion. The project, for which Bombardier’s rail division had emerged as the preferred bidder, would be its largest in recent years, with the company having a $2.85 billion share of the contract. Orascom Construction will have a share of about $900 million. The project, signed with the National Authority for Tunnels in Cairo, includes a 54-kilometre monorail system connecting the New Administrative City with East Cairo and a second 42-kilometre line linking 6th October City with Giza. As part of the contract, Bombardier Transportation will design, supply and install the electrical and mechanical equipment for the two lines. The consortium, which also includes Eqypt’s Arab Contractors, will be responsible for the operation and maintenance of both lines for 30 years. Bombardier is in the middle of a broader restructuring, shedding underperforming commercial plane programs to focus on its more profitable jet and rail units. The Montreal-based plane and train maker lowered its full-year core earnings and free cash flow forecasts, and reported a quarterly loss last week, as the company wrestles with challenges in the rail division, its largest by revenue.

Adelani Adepegba, Abuja The Federal Government, the United States and other stakeholders have mapped out strategies to mobilise $300m to support investment and boost business in the agricultural sector in the country. The fund aimed to reach at least 5,000 small and medium enterprises in order to expand opportunities for agribusiness borrowers and lenders in Nigeria. Vice President Yemi Osinbajo, while speaking during the launch of the initiative in Abuja on Tuesday, said the Federal Government was creating the enabling environment and would ensure coordination among the states, the Federal Government and the US to achieve the target. Represented by Andrew Kwasari, Senior Policy Adviser in the Office of the Vice President, Osinbajo noted that “the synergy between the US, the Federal Government and the states is a way for the future.” The USAID Contractor of the FTF Nigeria Agribusiness Investment Activity, Adam Saffer, explained that Nigeria had tremendous opportunity to take advantage of the arable land in the country, abundant water, human resources, fertile soil and many other things that should make Nigeria not only self-sufficient but also the food basket of the region. He said, “FTF Activity in order to help Nigeria reach the target is working with financial institutions, investors, agro data, processors and other businesses and producers to create a more enabling environment to attract those finances and investors.” “With a more efficient agribusiness sector, food generation, better income and more inclusiveness of women and youth, we can end up with a better quality food at a lower price.  Our activity is trying to activate $300m from the investors, from the banks and from the finance institutions to make this happen.” US Ambassador to Nigeria, Stuart Symington, said the US government would work with  Nigeria to improve the ease of doing business in the agriculture sector, mitigate the risks to lending institutions and promote investment opportunities for agribusiness to expand and scale up their operations. Kebbi State Governor, Atiku Bagudu, told reporters that Kebbi was doing a number of things to key into the programme to unlock the agricultural potential of the state. “In the last five years, we have recorded significant improvement in yields in many commodities particularly rice where we have seen yields increasing from as little as one tonne per hectare to an average of five to six tonnes per hectare. We have similar increases in other crops like soya beans and millet,” he said. Also speaking, Cross River State Governor, Ben Ayade, called on the US to assist Nigeria with the requisite technology to tackle some of the challenges associated with food production and preservation in the country. The $15.7m Agribusiness Investment Programme aimed to facilitate the growth of existing private sector agribusinesses and work with producer organisations in the rice, maize, soybean, aquaculture, and cowpea value chains to increase Nigeria’s food security status and foster job creation opportunities. Kaduna, Niger, Kebbi, Benue, Delta, Ebonyi and Cross River States are targeted under the initiative.

Uganda plans to invest as much as 3 trillion shillings ($813 million) during the next decade through a state-owned investment company to unlock industrial investment in areas that currently attract the least private-sector interest. Uganda Development Corp. is already in agricultural manufacturing and wants to venture into services and mineral processing, Chief Executive Officer Patrick Birungi said Tuesday in an interview in the capital, Kampala. In addition to a hotel, a fruit processor and a stake in a planned sugar miller, the company will build more plants for cereals, cocoa and cassava. “We want to invest where the private sector is not going strongly,” he said. “We want to go in and de-risk these sectors; we shall start companies in these sectors and then divest them to the private sector.” The state may raise at least a third of the planned cost and the agency will mobilize the rest from the private sector, multilateral lenders and its own funds, he said. The government has committed to increasing the company’s capitalization to 500 billion shillings in five years, from 70 billion shillings, to boost investment, he said. UDC will be done with feasibility studies and exploration for clinker in the northeastern Karamoja region by the end of 2019 and plans to start raising funds for the project thereafter, Birungi said. The nation imports as much as 70% of its requirements of the cement-making ingredient from Kenya, India and China, he said. Exploration for salt and associated chemicals is ongoing in Lake Katwe near the border with the Democratic Republic of Congo, and UDC plans to undertake glass-sheet manufacturing and invest in the iron and steel industry, he said. Uganda has 300 million tons of iron ore and estimates that reserves could potentially triple that amount, according the Energy and Mineral Development Ministry.

NAIROBI (Reuters) - Ethiopia’s central bank granted a financial services licence to a foreign-owned company for the first time on Thursday, as the government begins to open up the economy of Africa’s second most populous nation. Ethio Lease’s new licence signals Prime Minister Abiy Ahmed is moving ahead with the economic reforms he pledged when he took office last year. The company will lease equipment such as MRI scanners, tractors and drilling rigs to companies that can’t import such equipment themselves due to foreign exchange shortages. This will create jobs and increase productivity, Ethio Lease said in a statement. The company is owned by New York-based equipment leasing firm Africa Asset Finance Company (AAFC). “There is a liquidity shortage and a lot of businesses are craving equipment that they just can’t get,” said Frans Van Schaik, chairman and CEO of AAFC. “Almost every factory in Ethiopia will be able to tell you about how an equipment shortage or some other issue is delaying their construction or operations.” The company plans to import $600 million of equipment initially. Abiy wants the private sector to help provide jobs for millions of unemployed youth in the nation’s 100 million people.

City of Johannesburg in South Africa is set to launch a new high-density housing scheme. The city’s Mayor, Herman Mashaba announced the reports and said that the housing development are aimed at integrating mixed-income groups to achieve social, economic, and spatial integration.

High density housing scheme

Mashaba said that the development being built by Johannesburg Social Housing Company (Joshco), is part of the four sites zoned for high density residential projects across the country. It forms part of a mixed integrated housing development, with 24 buildings consisting of two and three storey walk-up apartment and blocks with a total 407 rental units.   The new high density of social housing scheme will be built in Lufhereng Ext. 1 in Soweto. The building will accommodate mixed income households with gross income ranging from US $98.17 to US $981.6 per month. These units also comprise of bonded-housing, Finance Linked Individual Subsidy Programme (FLISP) and Breaking New Ground (BNG) houses. Mashaba added that the project will feature and incorporate optimal water and energy efficient practices such as solar geysers, energy efficient lighting, insulation, waste management initiatives, as well as water harvesting directly from the roofs. “The development of new and improvement existing affordable rental housing opportunities for the residents of Johannesburg is critical for driving our economy, and stimulating the creation of much-needed jobs. The City is therefore committed to designing and building quality, resource efficient, economically sustainable and affordable housing, located in neighborhoods that have easy access to transport nodes, which links to job opportunities, and ultimately, better quality of life,” said the mayor.

On 30 July 2019, the Federal Tax Authority (FTA) published clarification VATP014 on VAT treatment of options and option premiums (the clarification). The main highlights of the clarification are summarized below.

The clarification provides definitions of "option", "option premium and "VAT treatment". It also provides guidance on adjusting any incorrect treatment made by the taxpayer before 31 July 2019.

Definitions

The clarification provides the following definitions of "option" and "option premium": Option: A financial "option" gives the holder the right to buy or sell the underlying financial instrument at a specified price. Option premium: is the fee received for selling an option.

VAT treatment

In accordance with the provisions of Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on VAT (VAT Executive Regulations), the VAT treatment of options is as follows:

• if the options relate to debt or equity securities, they are exempt from VAT (article 42.3 of the VAT Executive Regulations); and
• if the options are non-debt or non-equity securities, including underlying commodities, they are subject to VAT (article 42.4 of the VAT Executive Regulations).

Adjustments for incorrect treatment

The clarification states that, if a taxable person has incorrectly treated the supply of exempt options as subject to VAT at 5% before 31 July 2019, the person must correct the treatment as follows:

• issue a tax credit note to the recipient for correcting the VAT treatment; and
• adjust incorrect output VAT discharged earlier in the tax return for the period in which the tax credit note has been issued wherein the supplier can show the tax credit notes are issued and are passed on to the recipients to whom the VAT was charged.

Similarly, if the recipient of the supply has already deducted the input tax in respect of the supply, it must make an input tax adjustment (as a negative in the net and VAT column of Box 9) in the tax return for the tax period in which the recipient received the tax credit note.

On 30 July 2019, the Federal Tax Authority (FTA) published clarification VATP013 on disbursements and reimbursements of expenses (the clarification). The clarification provides that where the taxpayer acts as an agent, the recovery of expenses is considered a "disbursement", which does not fall within the scope of VAT. However, where the taxpayer acts as a principal, the recovery of expenses is considered a "reimbursement", with the VAT treatment being the same as that regarding the main supply. The clarification also provides a number of principles determining whether a recovery of expenses can be considered a disbursement or a reimbursement. The principles are set out in the table below.

Reimbursements	Disbursements
the taxable person must have contracted for the supply of goods or services in his own name and capacity	the other party on whose behalf the taxable person acts must be the recipient of the goods or services
the taxable person must have received the goods or services from the supplier	the other party on whose behalf the taxable person acts must be responsible for making the payment to the supplier
the supplier must have issued the invoice in the taxable person's name, with the latter being under the legal obligation to make payment for it	the other party on whose behalf the taxable person acts must have received an invoice or tax invoice, as the case may be, in its own name from the supplier
in the case of goods, the taxable person must own the goods prior to making the forward supply to the other party	the other party on whose behalf the taxable person acts must have authorized the taxable person to make the payment on its behalf
	the goods or services paid for must clearly be additional to the supplies the taxable person makes to the person on whose behalf he acts;
	the payment must be shown separately in the invoice and the taxable person who acts as an agent must recover the exact amount, without a mark-up, paid to the supplier.

Report from our correspondent Mohamed Fayçal Charfeddine, Group Tax Manager, Aujan Group Holding

On 6 August 2019, the Federal Tax Authority (FTA) published an updated Clarifications User Guide (the updated guide), which was first published in April 2018. The update mainly addresses the manner in which the clarifications must be submitted and the FTA response delay. The updated guide explains that the clarifications request form, along with the supporting documents, must be uploaded onto the FTA's official website. Previously, the form had to be sent to FTA using the following email address: clarifications@tax.gov.ae. With regard to the response delay, the updated guide provides that the FTA may take up to 45 business days to respond to the clarifications request. Previously, the delay was 40 business days. It should be noted that the updated guide states that any request received after 3 pm on a specific business day will be deemed to have been received the following business day.

On 30 July 2019, the Federal Tax Authority (FTA) published clarification VATP015 on Transfer of a Business (the clarification). In accordance with article 7(2) of Federal Decree-Law No. 8 of 2017 on value added tax, the transfer of an entire or an independent part of a business, from a non-taxable person to a taxable person for the purposes of continuing the business is not considered a supply for VAT purposes. Such a transfer of business, commonly known as a "transfer of business as a going concern", or a "TOGC", is not subject to VAT. This rule has a compulsory application. The clarification provides that the conditions to be met for the transfer to be qualified as a TOGC under the provisions of the aforementioned article 7(2) are as follows:

• the transfer must be a transfer of an entire or an independent part a business; the transferred business must be operational before and at the time of the transfer. Depending on the facts, this may include, among other things, goodwill, licences, premises, machinery and equipment, employees, ongoing contracts and liabilities;
• the recipient must be a taxable person at the time of the transfer; the recipient must be registered or obliged to register for VAT purposes; and
• the recipient intends to continue the business which is transferred; this requirement is met once the recipient intends to continue carrying on the same kind of business it acquires. Whether the buyer operates this business separately, or as part of any other business that he is already operating, is irrelevant.

The clarification provides that the supplier must satisfy himself that the recipient intends to continue to carry on the same business. It states that if the transfer was incorrectly treated as a TOGC, VAT may be due on the supply with retrospective effect.

The Federal Tax Authorities in the UAE (FTA) issued clarification EXTP001 (the clarification) on scenarios requiring the return of Digital Tax Stamps (marks). Article 6.3.1 of Cabinet Decision No. 42 of 2018 on Marking Tobacco and Tobacco Products provides that marks must be returned to the FTA where the person becomes aware that it no longer has the intention to use the marks for the purposes of affixing them to designated excise goods. The clarification provides that the FTA will interpret this provision broadly, and the cases where a person would be considered as no longer having the intention to use the marks will include (but not be limited to) the following:

• cease of business;
• cease of trade in a particular product line;
• wastage during the production process, e.g. when the marks are damaged during the process of applying them to products; and
• damage of marks outside the production process, e.g. when marks are damaged as a result of water leakage or fire.

The FTA requires that marks are physically returned to the authorized operator of the Digital Tax Stamps scheme on the FTA's behalf. However, the clarification specifies that where it is not possible to return the marks if they are damaged, destroyed or stolen, the FTA will require sufficient evidence to prove the marks are no longer in the person's possession due to those reasons. Finally, the clarification provides that any person required to return marks must also report the return of the marks via the official Digital Tax Stamps system at the time the obligation to return the marks arises.

The US Court of Appeals for the Ninth Circuit has held that the definition of an "intangible" does not include "residual-business assets", and is limited to independently transferrable assets, under the former transfer pricing regulations that were promulgated in 1994 and 1995 (Amazon.com, Inc. & Subsidiaries v. Commissioner of Internal Revenue, No. 17-72922, 16 August 2019). (a) Facts. Amazon.com, Inc. and its US subsidiaries (collectively, Amazon US) entered into a cost sharing arrangement (CSA) with a Luxembourg holding company for European subsidiaries (Amazon Europe Holding Technologies SCS, AEHT). Amazon US transferred three groups of pre-existing intangibles (website technology, marketing intangibles, and customer information) to AEHT for purposes of research under the CSA. To compensate Amazon US for the transferred pre-existing intangibles, AEHT made an up-front buy-in payment, which was required under the transfer pricing regulations to reflect the fair market value of the pre-existing intangibles. The buy-in payment was US taxable income to Amazon US. The US Internal Revenue Service (IRS) examined Amazon US's income tax returns for 2005 and 2006 and increased the buy-in payment under section 482 of the US Internal Revenue Code (IRC). The IRS's calculation of AEHT's buy-in payment included compensation for "residual-business assets" (i.e. Amazon US's culture of innovation, the value of workforce in place, going concern value, goodwill, and growth options). Amazon US filed a petition in the US Tax Court to challenge the IRS's valuation. The US Tax Court sided primarily with Amazon US (see United States-3, News 27 March 2017). The IRS appealed. (b) Issue. The issue in the present case was whether the buy-in payment for pre-existing intangibles must include compensation for "residual-business assets" under the 1994/1995 transfer pricing regulations. (c) Decision. The US Court of Appeals held that, although the language of the now-superseded regulatory definition is ambiguous, the overall transfer pricing regulatory framework and the rule-making history of the regulations strongly indicate that intangibles were limited to independently transferable assets. The US Court of Appeals accordingly agreed with the US Tax Court that the former regulatory definition of an "intangible" does not include residual-business assets. Note: In 2009, the US Treasury Department issued temporary regulations broadening the scope of contributions for which compensation must be made as part of the buy-in payment. In 2017, Congress amended the definition of "intangible property" in IRC section 367(d)(4)). The US Court of Appeals stated in a footnote that, if the present case were governed by the 2009 regulations or by the 2017 statutory amendment, the IRS's position would be correct without a doubt.

The US Treasury Department and the US Internal Revenue Service (IRS) have issued the fourth quarter update to their Priority Guidance Plan for 2018-2019. The fourth quarter update is dated 28 August 2019. The fourth quarter update includes eight additional projects.

A tax treaty is a bilateral agreement made by two countries to resolve issues involving double taxation of passive and active income. Treaties Update – August 2019    

Date	Country A	Country B	Object	Status
15.08.19	Bulgaria	Turkmenistan	Income and Capital Tax Treaty	Negotiations ongoing