December 2019

  • India
  • Bulgaria
    • Amendments to various tax acts gazetted – mandatory transfer pricing documentation

      On 6 December 2019, amendments to various tax acts were published in the State Gazette. Amendments to the Tax and Social Security Procedures Code concerning the thresholds for preparation of mandatory transfer pricing documentation are set out below. More specifically, the obligation for preparation of such documentation will not be applicable for persons that, as at 31 December of the previous year, did not exceed at least two of the following thresholds:
      • net book value of assets: BGN 38 million (approximately EUR 19 million);
      • net sales revenue: BGN 76 million (approximately EUR 39 million); and
      • average number of personnel for the reporting period: 250 persons.
      The other rules and thresholds regarding the mandatory transfer pricing documentation remain unchanged. The above rules will apply from 1 January 2020.
    • Amendments to various tax acts gazetted – Value Added Tax Act

      On 6 December 2019, amendments to various tax acts were published in the State Gazette. Amendments to the Value Added Tax Act (the VAT Act) are set out below. For other amendments, The main changes relate to implementation of "quick fixes" for intra-Community trade within the European Union as provided in Council Directive (EU) 2018/1910 of 4 December 2018 amending Directive 2006/112/EC as regards the harmonization and simplification of certain rules in the value added tax system for the taxation of trade between Member States. An overview of implemented rules that will apply from 1 January 2020 is set out below. In addition, other amendments to the VAT Act were also published in the State Gazette Changes to the required evidence for application of the 0% VAT rate for intra-Community supplies As from 1 January 2020, suppliers must obtain a document (e.g. invoice, protocol, etc.) for intra-Community supplies, as well as documents evidencing dispatching/transporting the goods to other EU Member States (as provided in article 45a of Implementing Regulation (EU) 282/2011) in order to apply a 0% VAT rate to an intra-Community supply. Other mandatory conditions for applying the 0% VAT rate to intra-Community supplies are as follows:
      • the recipient must provide to the supplier its VAT number issued by an EU Member State (different from Bulgaria); and
      • the intra-Community supply must be reported correctly in the VIES return (EC Sales List) of the supplier.
      Introduction of call-off stock simplification rules and new reporting requirements in this respect Currently, the call-off stock simplification is possible. Therefore, it is considered that an intra-Community supply and acquisition are taking place when the goods arrive at the warehouse of the recipient. As from 1 January 2020, the new EU call-off stock simplification rules will be applied. As a result, an intra-Community supply/acquisition will be deemed to take place when the goods are removed from the warehouse by the recipient. Specific rules are introduced for cases of changing the recipient or when the goods are stored in the warehouse of the recipient for more than 12 months. New reporting requirements are introduced for persons involved in a call-off stock simplification, as well as penalties for non-compliance with these requirements. New rules for successive supplies (chain transactions) between EU Member States Changes are introduced for successive supplies (chain transactions) within the European Union in order to establish rules for determining the transaction which should be considered as intra-Community supply subject to 0% VAT rate in the cases where an intermediary operator dispatches or transports the goods either himself or through a third party acting on his behalf.
    • Amendments to various tax acts gazetted – Corporate Income Tax Act

      On 6 December 2019, amendments to various tax acts were published in the State Gazette. Amendments to the Corporate Income Tax Act (the Act) are set out below. Implementation of EU exit taxation and anti-hybrid mismatch legislation The exit taxation rules contained in European Union Anti-Tax Avoidance Directive 2016/1164 (2016) (ATAD 1) and the anti-hybrid mismatches rules contained in Council Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (ATAD 2) were implemented into national legislation. Recognition of expenses for technical infrastructure Expenses for construction, improvement and repairs of public technical infrastructure owned by the state or a municipality incurred by a taxable person and relating to the person's economic activity (even if the infrastructure is also available for use by other persons) will be recognized for corporate income tax purposes (either directly or through depreciation). In addition, and under certain conditions, expenses incurred in the period 1 January 2015 to 31 December 2019 may also be recognized. Amendments to thin capitalization rules The list of expenses not considered interest expense for the application of the thin capitalization rules is extended to include the lease and/or loan which is guaranteed and/or secured both by the lessee and/or borrower and its related part. In that case, the part of the interest expense calculated by multiplying the total interest expense by the market price of the security provided by the lessee and/or borrower (determined at the date when the security is provided) and the amount of the lease and/or loan should not be included in the interest expense. If the coefficient is higher than 1, it will be considered to be 1 for the purposes of this provision. Amendments to controlled foreign company (CFC) rules The criteria for determining the persons for which CFC rules apply is clarified. Currently, the Act provides that the CFC rules are not applicable for a CFC which is not subject to corporate income tax in the country in which it is a tax resident. According to the amendment, CFC rules will not be applicable for a CFC which:
      • is subject to alternative forms of taxation of its activities in the country in which it is a tax resident or in another country; or
      • has a permanent establishment in another country which is subject to alternative forms of taxation of its activities.
      Amendments to rules on application of tax reliefs An amendment is introduced regarding the application of the tax relief allowing companies to retain the full or partial amount of the corporate income tax due, provided that it is used for specific investments referred to in the Corporate Income Tax Act. More specifically, to avoid different interpretations in situations where the requirements for applying the tax relief are not met, it is explicitly stated that the full amount of tax is due, not just the part related to the amount not invested.
    • Changes to VAT Act proposed

      On 6 December 2019, a proposal for amendments (the proposal) to the VAT Act was submitted to the parliament by some of its members. The proposal addresses documents required for evidencing intra-Community supplies. The previous amendment, gazetted on 6 December 2019 provided that, as from 1 January 2020, suppliers must obtain a document (invoice, protocol, etc.) for intra-Community supplies, as well as documents evidencing dispatching/transporting the goods to other EU Member States (as provided in article 45a of Implementing Regulation (EU) 282/2011) in order to apply a 0% VAT rate to an intra-Community supply. Other mandatory conditions for applying the 0% VAT rate to intra-Community supplies are as follows:
      • the recipient must provide the supplier with its VAT number issued by another EU Member State; and
      • the intra-Community supply must be reported correctly in the VIES return (EC Sales List) of the supplier.
    • New service allowing taxpayers to confirm or receive information on tax checks or inspections – announced by National Revenue Agency

      On 13 December 2019, the National Revenue Agency announced a new service allowing taxpayers to verify the assignment of, and receive updates on the status of, ongoing tax checks or tax inspections. A taxpayer under investigation will be able to confirm the date, scope, the tax auditing team and audit deadline. The audit may, among other things, include requests for information and checks. A taxpayer may use the new service in person at every territorial directorate of the National Revenue Agency (NRA), or do so electronically using the NRA's e-portal. Obtaining access to the service requires a unique identification number of the tax check or tax inspection. The new proposed amendments of 6 December 2019 introduce an alternative option allowing taxpayers to also use the documents evidencing the transportation/dispatch as provided in the regulations for the application of the VAT Act. As a next step, the proposal must be voted on by the parliament.
    • Bill implementing EU Directive on exchange of information relating to reportable cross-border arrangements (DAC6) – adopted by parliament

      On 18 December 2019, the bill implementing the provisions of Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU (DAC6) as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements was adopted by the parliament. The bill, introduced to the parliament by the government, is available here.
  • China
    • Six Authorities Issue Plan to Optimize System of Employment Security Funds for the Disabled

      Six authorities, including the National Development and Reform Commission, the Ministry of Finance and the Ministry of Human Resources and Social Security recently released the Overall Plan for Optimizing the System of Employment Security Funds for the Disabled and Promoting the Employment of Disabled People. According to the plan, if the proportion of disabled workers at an employer is 1% or higher but still less than the percentage set by the provincial or municipal government, the employer shall pay 50% of the employment security funds in the next three years it's supposed to pay; if the proportion of disabled workers is less than 1%, it should pay 90% of the funds in the next three years; if an employer has a total workforce of 30 or below, it will not have to pay the employment security funds for the disabled.
    • STA Issues Announcement about Final Settlement and Payment of Individual Income Tax on Comprehensive Income in 2019

      The State Taxation Administration released on December 31, 2019 the Announcement about Final Settlement and Payment of Individual Income Tax on Comprehensive Income in 2019.   The first article explained the concept and content of the annual settlement and payment of individual income tax. According to the second article, taxpayers will not have to make the annual tax settlement and payment as long as their annual income is no more than 120,000 yuan; if taxpayers' additional tax payment is no more than 400 yuan, they will not have to make the annual tax settlement and payment. According to the fifth article, the tax settlement and payment for 2019 should be handled from March 1, 2020 to June 30, 2020. If taxpayers have no permanent residence in China and plan to leave the country before March 1, 2020, they can make tax arrangement before departure.
    • State Council Grants Exemptions on Value-added Tax and Consumption Tax for Cross-border E-commerce Transactions

      The State Council recently released the Approval of Establishing Pilot Cross-border E-commerce Zones in 24 Cities. Preferential tax policies will be introduced for retail and exported goods, including exemptions on value-added tax and consumption tax.   Details about how to establish and operate these cross-border e-commerce zones will be worked out by provincial governments. Relevant departments are mandated to develop and optimize information management systems and provide electronic information to regulatory authorities, submit work plans and experiences to the Ministry of Commerce, and strive to make new progress and breakthrough in developing the cross-border e-commerce market and building a sound framework to sustain the market development.
    • PBOC Revises and Releases Measures for the Registration of the Pledge of Accounts Receivable

      The People's Bank of China recently released the Measures for the Registration of the Pledge of Accounts Receivable, to be implemented from January 1, 2020.   There are some prominent revisions: in the chapter of supplementary rules, some articles are added to regulate the registration of guaranteed transactions on other movable properties and rights; scrapping the requirement that registration agreement must be uploaded to increase registration efficiency; shorten the time limit for initial registration and extended registration to one month; add clauses to stipulate the responsibilities and duties of financing parties in a legal dispute; and revise or add clauses about the name of creditors and pledge borrowers, cancellation registration, revocation registration and the right to interpret the articles.
  • South Africa
    • Johannesburg Stock Exchange and AfDB promote cross-border activity

      Improving links between African stock exchanges and increasing cross-border trade and investment are the aims of an alliance led by the Johannesburg Stock Exchange, African Development Bank and six other stock exchanges. The Johannesburg Stock Exchange (JSE) and African Development Bank (AfDB) have partnered to promote African cross-border investment. The two organisations hosted the African Exchange Linkage Project (AELP), along with other African exchanges from the African Securities Exchanges Association (ASEA), last month, aiming to improve cross-border trading and securities activity between the continent’s exchanges. The organisations also sought to increase pan-African investment, encourage diversification and improve financial market liquidity. Lack of intra-African trade, compared to trade with non-African countries and trading blocs, has been cited as one of the major factors limiting the growth of the continent’s economies, and many recent initiatives, led by the African Continental Free Trade Area (AfCFTA) have been launched to tackle this. A recent report suggested that AfCFTA could bring up to USD 3 trillion in economic benefits, much of it from trade within the continent, with 53 out of 54 countries now having signed the agreement. Last month also saw the establishment of a partnership between AfDB and Johannesburg-headquartered bank Absa, aimed at supporting trade and finance for small businesses and corporates. Speaking at the opening of the event, AfDB capital markets and development manager Emmanuel Diarra cited the long association between the bank and the African Securities Exchanges Association, saying: “This partnership compliments the Bank’s interventions toward the development of deep and resilient capital markets in Africa.” He promised: “The bank will continue to enhance its work with regulatory institutions, institutional investors, stock exchanges and other capital market stakeholders to strengthen regulatory frameworks, broaden market participation and product offerings, as well as improve the dissemination of capital markets data for transparent pricing mechanisms.” JSE policy head Anne Clayton commented that AELP “is a great addition to many collaborative initiatives around Africa”. She said JSE was focused on supporting “sustainable and inclusive growth and development, not only in South Africa but on the continent as well”. Clayton added: “There is great interest within Africa for investment, and the AELP provides an opportunity for alignment of exchanges within the continent, therefore collaborations with key stakeholders will continue to be at the centre of securing a growth path for Africa.” As well as JSE, AELP consists of the Egyptian Exchange, Stock Exchange of Mauritius, the Casablanca Stock Exchange, Nairobi Securities Exchange, the Nigerian Stock Exchange and West Africa’s Bourse Régionale des Valeurs Mobilières (BRVM), based in Ivory Coast, which between them make up 85% of the continent’s securities market capitalisation. BRVM formed a partneship with the International Finance Corporation in early 2019, aimed at improving corporate governance. Trade links was one of the factors considered by the World Bank’s recent Doing Business report, which found that Africa’s business climate had improved, but not enough to make the necessary progress. Ethiopia recently became the second African country, after Rwanda, to join the electronic trade platform established by Chinese corporation Alibaba
    • Akuapem South to develop biggest poultry industry in Ghana – Minister

      The Ghana Exim Bank has given approval for funds for the development of the biggest poultry industry in the Akuapem South District of the Eastern Region. Mr O. B. Amoah, the Deputy Minister of Local Government and Rural Development, and Member of Parliament of Akuapem South, said this at the 35th Annual Farmers Day of the Akuapem South District at Ahwerase near Aburi. He said this would help boost the poultry industry and create employment for the people and called on investors to invest in agro-business. The MP said Parliament would soon pass a legislative instrument for the District to become a municipality. Mr Frank Aidoo, the District Chief Executive (DCE), explained that the District was noted for the production of pineapples and the addition of poultry production would enhance economic growth as the second major agricultural product. He said the District had decided to promote massive production of maize at a low price to be able to produce poultry feed for the sector to make it competitive. Mr Aidoo said the Assembly had budgeted to register farmers willing to accept high yielding maize seed and produce at an agreed price. Next year, the District would raise 200,000 hybrid coconut seedlings to support coconut plantations and promote greenhouse project to ensure all-year-round production of vegetables. Ms Tharzia Akwetey, the Akuapem South District Director of Agriculture, said policies on agro-business must be developed, which must be district specific, to improve the whole agriculture value chain. Eighteen farmers were presented with prizes for their contribution to food production. The Overall Best Farmer went to Mr Noah Offei, 46, of Ashirensu and received a tricycle, two pairs of wellington  boots, five cutlasses, knapsack spraying machine, a piece of cloth, aluminium pans, hand gloves, pack of vegetable seeds and fertilizer. The Best Female Farmer went to Ms Mary Camour of Konkonuru and was presented with a table top fridge, a piece of cloth, head pan, knapsack sprayer, aluminium pans, pack of vegetable seeds and fertilizer. The Best Young Farmer was won by Mr Andrew Asiedu, 29, from Pakro and received 32-inche television set, a bicycle, aluminium pans, knapsack sprayer, a pack of vegetable seeds and fertilizer.
    • Morocco’s Bank Profits Exceeded $1.1 Bn by End of September

      Casablanca - Lahcen Mokena
      The profits of eight main Moroccan banks reached $1.1 billion at the end of September, a 0.96 percent increase compared to the same period last year, while the total net banking income increased 6.6 percent to reach $5.62 billion, according to financial data released by Moroccan banks for the third quarter of 2019. The performance of the eight banks had uneven profit growth during this period. The net profits of the Moroccan Bank of Foreign Commerce (BMCE) decreased 16.7 percent, and CIH Bank S.A. dropped 28.6 percent. The net profits of the rest of the banks varied between 2.17 percent for the Morocco Bank of Commerce and Industry (BMCI), and 29.41 percent for Credit Agricole Group of Morocco. Meanwhile, the profits of the two largest Moroccan banks, Attijariwafa bank and Banque Populaire of Morocco (GBP), both increased 4.76 percent, while those of Societe Generale grew 6.27 percent. During this period, the banks strengthened their capital in the context of the gradual implementation of the new precautionary measures for the banking sector. The capital of the eight Moroccan banks at the end of September was $16.7 billion, an increase of 6.33 percent compared to the same period last year. The capital of the Banque Populaire of Morocco saw the largest increase with about 9.95 percent, and BMCE’s capital rose during this period about 8.4 percent. As for CIH Bank S.A, its capital rose 7.03 percent, preceding Credit Agricole Group of Morocco which had a 6.27 percent growth. Attijariwafa bank and Banque Populaire of Morocco (GBP) came in last with 5.77 percent and 4.02 percent respectively.
    • Qatar Airways to take 60% stake in Rwanda international airport

      Qatar Airways has agreed to take a 60 percent stake in a new $1.3bn international airport in Rwanda, according to a Memorandum of Understanding (MoU) signed on Monday. The board said a first phase of construction would provide facilities for seven million passengers a year in the Bugesera district, about 25km southeast of the capital Kigali. A second phase, expected to be completed by 2032, would double capacity to 14 million passengers a year. "The partnership features three agreements to build, own, and operate the state-of-the-art facility," the MoU signed between Qatar Airways and the Rwandan government said. The country's infrastructure minister Claver Gatete told a news conference that a construction company was still being sought to build the airport. The plans for the new airport are a modification of those drawn up in 2017 for a smaller facility with a maximum capacity of 4.5 million passengers a year in the same location. Company and government officials said at the time that Rwanda had signed a deal with the African division of Portuguese construction firm Mota-Engil to build an international airport at a cost of $818m. Gatete said the investment from Qatar Airways would enable it to build the larger airport. "We are looking for a bigger sized airport. That's why we are looking for a bigger investor," he said. Qatari ruler Sheikh Tamim Bin Hamad Al Thani is currently visiting Kigali for the presentation of the International Anti-Corruption Excellence (ACE) Award. Gatete said there was also a possibility that Qatar Airways would help state-run carrier RwandAir to expand, but gave no more details.
    • Danish Brewing Company to set up a US$45 million plant in Kenya

      KENYA – Danish Brewing East Africa Limited, a subsidiary of Bounty Global Management DWC LLC will be setting up a US$45 million (KSh4.59 billion) plant at the Naivasha Industrial Park, Kenya.

      While more than 100 local and international investors have so far expressed interest in setting up shop at the planned industrial park, Danish Brewing Company will be the first anchor tenant.

      The new plant with a production capacity of 12-15 million cases of beer annually, will enable Danish Brewing East Africa Limited to undertake local production of Tuborg, Carlsberg, Holsten, and Kronenbourg beers in Kenya.

      In August the company acquired Carlsberg and Tuborg beers distributor in Kenya, King Beverage Limited from Centum Investment.

      Centum Investment sold King Beverage, in which it held 100 per cent of the issued shares, for US$1.3 million (Sh130 million) against the US$5 million (Sh500 million) it had invested in the company.

      The firm will also employ 350 locals and produce beverages using sorghum sourced locally from their recently launched Farmers Outreach Programme, expecting to contract 17,000 farmers.

      Cabinet Secretary for Trade, Peter Munya, said support given by the government has created an enabling environment in turn attracting a number of local and international private investors.

      “As our Government believes in public-private partnership we are working hand-in-hand to realise the goals of the Manufacturing pillar of the Big 4 Agenda,” he said.

      Among these is the provision of a direct connection to cheaper geothermal power from the Olkaria plant as well as special tax incentives in line with provisions of the Fiscal Incentives Act, 2015.

      Foreign investors from India, Europe, United States of America (USA), the Netherlands, China, Sri Lanka and Thailand are said to be interested in setting up base within the economic zone.

      The Government, in July, designated 9,000 acres of land in Naivasha, Mombasa and Machakos as Special Economic Zones (SEZs), aimed at boosting the manufacturing pillar under the Big Four Agenda.

      The Naivasha Industrial Park under the Special Economic Zones Authority (SEZA) will see the development of the 1,000-acre Special Economic Zone (SEZ) of which 800 acres will have warehousing for various manufacturers, logistics parks and support services to provide a world class manufacturing hub in the region.

      “The Government continues to support investment opportunities in the Industrial Park and encourages private investors to make their enquiries about tenancy opportunities through SEZA,” Munya said.

      Under the 2019/20 budget, the government allocated a total of KSh1.1 billion (US$11m) to go towards the development of textile and leather industrial parks, the Naivasha Industrial Park and the Cotton Development subsidy.

      Construction works at the KSh6.9 billion (US$69m) industrial park began early last month after President Uhuru Kenyatta opened the Mai-Mahiu SGR Terminus.

      Land for the industrial park is situated where the SGR and the Inland Container Depot will meet.

    • Garissa solar plant raises Kenya’s green energy to 93pc

      Kenya's new 50 megawatt (MW) solar plant in Garissa has increased the share of renewable energy to the grid to 93 percent, setting the stage for cheaper electricity. The 54.6 megawatt (MW) plant, the largest in East and Central Africa and located 15 kilometres from Garissa Town, was commissioned on Friday by President Uhuru Kenyatta, further cutting reliance on expensive thermal power. The Government is increasing electricity generation and investing in Kenya’s power grid to keep up with growing demand and reduce frequent blackouts. But Kenya’s solar energy is still small compared to other sources. “The 50MW solar plant has increased the share of renewable energy in our energy mix to more than 90 percent,” the Ministry of Energy said on Twitter. Most of Kenya’s electricity is generated by renewable sources, with geothermal ranked the biggest source of power to the grid with hydroelectricity and wind following. The new solar plant, backed by increased geothermal and hydropower generation—which has received a boost from the ongoing rains—has cut the share of expensive thermal power to the grid at seven percent from 19 percent in April. Kenya ranks 40th worldwide in EY’s renewable energy country attractiveness index, which was issued in November. The injection of the Sh13 billion Chinese loan- funded solar power to the national grid comes months after Kenya increased its share of cheaper wind power. Rural Electrification and Renewable Energy Corporation (REREC), formerly Rural Electrification Authority (REA), owns the plant. The 310MW Turkana Wind Farm, which was switched on in October last year, accounted for 13.9 percent of Kenya’s generation mix, up from 9.8 percent in June, say the electricity regulator. Solar power cost about Sh8 per kilowatt hour matching the wholesale cost off wind, and lower than thermal that goes for above Sh20. The reduced reliance of thermal power will reflect on electricity bills, pulled down by lower fuel cost charge.
    • Tanzania, partners sign 14.8 mln USD deal to improve cancer care

      DAR ES SALAAM, Dec. 16 (Xinhua) --Tanzanian government and its two partners, the Aga Khan Health Services and the French Development Agency, on Monday signed a 13.3 million Euros (about 14.8 million U.S. dollars) grant agreement and Memorandum of Understanding (MoU) to improve cancer care in the east African nation. The funding will be run by the Tanzania Comprehensive Cancer Project (TCCP), an innovative public-private project aimed at enhancing cancer care in Tanzania. Under this funding, the French Development Agency will release a grant to the tune of 10 million Euros and 3.3 million Euros will be contributed by the Geneva-based Aga Khan Foundation, which is part of the Aga Khan Development Network (AKDN). Speaking shortly after the signing of the agreement in the commercial capital Dar es Salaam, Tanzania's Deputy Minister for Health Faustine Ndugulile said with the rise in the prevalence of cancer in Tanzania, the project will serve to accelerate performance in cancer screening, prevention and early detection targeting low-income groups through mobile outreach campaigns. Harrison Chuwa, a consultant oncologist at the Aga Khan Hospital in Dar es Salaam and director of TCCP, said the project was a four-year plan designed to reduce the burden of cancer mortality and morbidity in Dar es Salaam and Mwanza regions. Chuwa said under the project, the implementing partners will create an integrated health care network at local and hospital levels to accelerate performance in cancer care in the country. Julius Mwaiselage, the Executive Director of the Ocean Road Cancer Institute, the country's leading facility for treating cancer patients, said the facility was currently receiving 64,000 cancer patients annually, compared to 30,000 patients received in 2015.
    • Uganda to start exporting medical marijuana in 2020

      Uganda will officially start exporting medicinal marijuana in March 2020 with the first batches going to Malta and Israel. The medical marijuana comes courtesy of a partnership between Hemp Uganda and an Israeli firm, Together Pharma. The partnership first began growing medical marijuana at a factory in Hima Town in 2014. The factory sits on 12.5 acres of land and houses five greenhouses of marijuana weed and a processing factory. Benjamin Cadet, Director Industrial Hemp Uganda Limited, said the facility will produce several different varieties of medical marijuana for treatment of a number of health issues including skin ailments, chronic pain, epilepsy and cancer.
  • Switzerland
    • Recognition of transactions with Swiss residents as controlled for transfer pricing purposes – STS clarifications

      On 18 November 2019, the State Tax Service (STS) clarified in Guidance Letter No. 806/6-99-00-05-05-01-15/IПK when transactions with Swiss residents established under certain legal forms are recognized as controlled for transfer pricing purposes. The STS clarified that, generally, a transaction should be considered as controlled and subject to transfer pricing rules if it affects the taxation of the parties and the transaction involves non-resident entities that do not pay corporate income tax, including on income received outside the state of registration of such entity, or entities that are not tax residents of the states where they are registered as legal entities. The list of jurisdiction-based legal forms of such non-resident legal entities was approved by the Cabinet of Ministers by Order No. 480 of 4 July 2017 (the Order). The list includes Swiss residents registered as Kollektivgesellshaft, Société en nom collectif, Sociétá in collectivo, Kommanditgesellshaft, Société en commandite, Societá in accomandita (LP), Einfache Gesellscaft, Société simple and Societá semplice. The STS emphasized that transactions with Swiss residents registered and established under the legal forms that are not included in the list will not be recognized as controlled if the parties are not related or the transactions are not conducted through a non-resident commissionaire. Similarly, transactions with Swiss residents will not be recognized as controlled if such entities are established under the legal forms specified in the Order and pay the corporate income tax due in the reporting year in which the relevant transactions took place, including on income received from outside Switzerland.
    • Exemption from withholding tax for dividend, interest and royalty payments to companies resident in Switzerland

      On 4 December 2019, the Public Revenue Authority published circular Δ.2196 providing clarifications on the exemption from withholding tax (WHT) for dividend, interest and royalty payments to companies that are resident in Switzerland. The circular clarifies that, if there is no guarantee provided to the Greek tax authorities and thus the dividend, interest and royalty payments cannot be paid WHT free (based on article 63 of the Income Tax Code), the Swiss companies are entitled to request the refund of the WHT levied following the completion of the two-year period even if the dividend, interest or royalty has been paid at a moment during which the minimum 2-year period has not been completed. As a result, the treatment of Swiss companies is the same as the treatment of an EU company receiving dividend, interest or royalty payments from a Greek company.
    • Federal Council opens consultation on Federal Act on Implementation of International Tax Agreements

      On 13 December 2019, the Swiss Federal Council launched a consultation on the Federal Act on the Implementation of International Tax Agreements (ITAIA). The Federal Council plans to adapt the existing law to the recent changes in international tax law. The total revision of the Federal Act of 22 June 1951 on the Implementation of International Federal Conventions on the Avoidance of Double Taxation (new version: ITAIA) is intended to ensure that tax agreements, particularly double taxation agreements, can continue to be applied easily and with legal certainty in the future. The revision of the law stipulates how mutual agreement procedures are to be carried out at national level. The defined procedure largely follows current practice and is applied only if the agreement does not contain any deviating provisions. The revision also provides for certain simplifications. Moreover, it contains the key points for withholding tax relief based on international agreements, as well as criminal provisions in connection with relief from withholding taxes on capital income. The consultation runs until 27 March 2020.
  • United Arab Emirates
    • UAE launches website for CbC reporting

      On 4 December 2019, the Ministry of Finance launched the website for county-by-country (CbC) reporting. Pursuant to Article 3 of the Council of Ministers resolution no. 32 of 2019 concerning the regulation of the submission of reports by multinational enterprises (MNEs), any constituent entity of an MNE group that is resident for tax purposes in the UAE shall notify the competent authority of whether it is the ultimate parent entity or the surrogate parent entity no later than the last day of the reporting fiscal year of such MNE Group.
  • United States
    • US Treasury Inspector General releases semi-annual report to Congress on oversight of IRS

      On 4 December 2019, the Treasury Inspector General for Tax Administration (TIGTA) released its semi-annual report to Congress on its oversight of the US Internal Revenue Service (IRS). The report covers the period between 1 April 2019 and 30 September 2019. The report contains the details of audits conducted by the TIGTA during the reporting period with regard to the areas that the TIGTA has identified as among the IRS's most important management and performance challenges of Fiscal Year 2019, including:
      • the implementation of the Tax Cuts and Jobs Act (TCJA) and other recent tax law changes; and
      • taxpayer rights with a focus on cybersecurity and taxpayer protection from identity theft
      The TIGTA was created by Congress in 1998 to ensure that the US tax system is effectively, efficiently and fairly administered by the IRS.
    • IRS releases interest rates on tax overpayments and underpayments: Q1/2020

      On 6 December 2019, the US Internal Revenue Service (IRS) issued Revenue Ruling 2019-28 with the announcement of the interest rates on tax overpayments (i.e. tax refunds) and tax underpayments (i.e. tax assessments and late tax payments) for the calendar quarter beginning 1 January 2020. The IRS also issued an accompanying News Release (IR-2019-201) dated 6 December 2019. The interest rates, which apply to amounts bearing interest during that calendar quarter, are as follows:
      • 5% for non-corporate overpayments;
      • 4% for corporate overpayments up to USD 10,000;
      • 2.5% for corporate overpayments to the extent in excess of USD 10,000;
      • 5% for non-corporate and corporate (other than large corporate) underpayments; and
      • 7% for large corporate underpayments (i.e. underpayments in excess of USD 100,000).
      Revenue Ruling 2019-28 also includes:
      • interest factors for daily compound interest for an annual rate of 0.5% (Appendix A); and
      • tables including overpayment and underpayment interest rates for prior periods.
      The interest rates on overpayments and underpayments for the first quarter of 2020 remain the same as the rates announced for the fourth quarter of 2019. Revenue Ruling 2019-28 will appear in the IRS Internal Revenue Bulletin (IRB) as part of IRB 2019-52, dated 23 December 2019.
    • IRS issues updated guidance on penalties for understatement of income tax

      The US Internal Revenue Service (IRS) has issued Revenue Procedure 2019-42 to identify circumstances under which the disclosure on a taxpayer's income tax return with respect to an item or position is adequate for the purpose of reducing the understatement of income tax under section 6662(d) of the US Internal Revenue Code (IRC) (relating to the substantial understatement aspect of the accuracy-related penalty), and for the purpose of avoiding the tax return preparer penalty under IRC section 6694(a) (relating to understatements due to unreasonable positions) with respect to income tax returns. Revenue Procedure 2019–42 was published in the IRS Internal Revenue Bulletin (IRB) as part of IRB 2019-49 dated 2 December 2019. Revenue Procedure 2019–42 applies to any income tax return filed on 2019 tax forms for a taxable year beginning in 2019, and to any income tax return filed in 2020 on 2019 tax forms for short taxable years beginning in 2020.
    • Final regulations issued on payment of dividend equivalents from US sources

      The US Treasury Department and the US Internal Revenue Service (IRS) issued final regulations (TD 9887) on certain financial products providing for payments that are contingent upon or determined by reference to US source dividend payments. The final regulations are scheduled to be published in the Federal Register on 17 December 2019. The final regulations provide: (i) guidance defining the term "broker" for purposes of section 871(m) of the US Internal Revenue Code (IRC); (ii) guidance related to when the delta of an option that is listed on a foreign regulated exchange may be calculated based on the delta of that option at the close of business on the business day prior to the date of issuance; and (iii) guidance identifying which party to a "potential section 871(m) transaction" is responsible for determining whether a transaction is a "section 871(m) transaction" when multiple brokers or dealers are involved in the transaction. The final regulations adopt the proposed regulations (REG-135122-16) that were published on 24 January 2017 without any substantive change. The final regulations will be effective from 17 December 2019. The proposed regulations are designated Treasury Regulation section 1.871-15.
    • IRS announces DISC deferral interest rate for 2019

      The US Internal Revenue Service (IRS) issued Revenue Ruling 2019–27 to announce the annual interest rate to be used to calculate the interest charge for deferred income of US domestic international sales corporations (DISCs). Revenue Ruling 2019–27 was included in the IRS Internal Revenue Bulletin (IRB 2019-51) dated 16 December 2019. The rate is prescribed pursuant to section 995(f) of the US Internal Revenue Code (IRC), which requires that shareholders of a DISC must pay an annual interest charge on the tax liability associated with DISC income that is deferred from taxation under the IRC, i.e. the income of the DISC that is not currently taxed to the shareholders. The calculation under IRC section 995(f) is made by multiplying the shareholder's DISC-related deferred tax liability for the year by the applicable base period T-bill rate (i.e. the average of the 1-year US Treasury bill yields for the base period). Revenue Ruling 2019-27 provides that the base period T-bill rate for the 1-year period ending 30 September 2019 is 2.32%. The rate is required to be compounded daily. A table with the daily compounding factors is included in the ruling.
  • Tax Treaties