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:
Amendments to rules on application of tax reliefs
- 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.
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.