January 2020

On 31 December 2019, amendments to the VAT Act regarding the documentation requirements for intra-Community supplies were promulgated in the State Gazette. The amendments have been adopted and will enter into force 2 weeks after the proposal was introduced into parliament In essence, the changes come in response to amendments to the VAT Act of 6 December 2019, which introduced new mandatory documentation requirements under article 45a of Implementing Regulation (EU) 282/2011, necessary to apply a 0% VAT rate to an intra-Community supply. Article 45a of Implementing Regulation (EU) 282/2011 provided enhanced requirements regarding the documents, in which VAT-registered suppliers had to collect at least 2 separate non-contradicting documents from a pre-approved list of options in order to prove the dispatch of goods from Bulgaria to other EU-Member States. Previously, it was sufficient for suppliers to prove the dispatch based on a single document for transport i.e. either a valid transport document or a written confirmation by the recipient.

In a letter circulated to taxpayers in mid-December 2019, the Bulgarian National Revenue Agency (NRA) announced interim measures with respect to the temporary status of Bulgaria as a "non-reciprocal jurisdiction" under the Multilateral Competent Authority Agreement on the automatic exchange of Country-by-Country reports (CbC MCAA) i.e. Bulgaria has committed to send CbC reports but will not receive CbC reports from its exchange partners. Bulgaria's non-reciprocal status will affect Bulgarian constituent entities filing CbC reports who are part of non-EU multinational groups (i.e. groups with consolidated revenue above EU 750 million). The NRA announced that, pending the restoration of the automatic exchange of CbC reports, it will request such CbC reports from its partner jurisdictions by means of the bilateral agreement for administrative cooperation in tax matters. For 2018, Bulgarian constituent entities of foreign multinational groups filing CbC reports will not be required make a separate local filing of the group's CbC report or to change the jurisdiction of the reporting entity to a jurisdiction exchanging CbC reports with Bulgaria.

The State Council recently issued the Circular of Temporarily Adjusting Some Administrative Regulations in Pilot Free Trade Zones, in order to ensure measures of reform and opening-up are implemented well in accordance with the law. According to the announcement, three administrative rules will be adjusted in the pilot free trade zones. Under the Regulation on the Administration of Commercial Performances, foreign investors and Taiwan investors can establish wholly-owned performance brokerage agencies, joint ventures in art performing business can be established as long as the Chinese partners have controlling stakes. The Provisions on the Administration of Foreign-funded Telecommunications Enterprises have expanded coverage from Shanghai free trade zone (28.8 square kilometers) to all free trade zones in China. Under the Regulations on the Administration of Printing Industry, wholly foreign-owned printing companies can be established in China.

The Ministry of Finance, the State Taxation Administration and the General Administration of Customs recently issued the Announcement about Export Tax Rebate Policy for Fuel Refilling on International Ships. According to the announcement, fuel refilled for international ships at China's coastal ports can enjoy export tax rebate, with a rebate rate of 13% on paid value-added tax. The customs agency will issue a sheet of export declaration for the fuel oil, and the taxpayer can present the sheet to tax agency for export tax rebate or exemption. The announcement will be implemented from February 1, 2020.

The Ministry of Finance and the State Taxation Administration recently issued the Announcement about Individual Income Tax Policies for Overseas Income. According to the announcement, if residents get income from foreign countries, the income should be combined with domestic income to calculate taxable income; business income from foreign countries should also be combined with domestic business income to calculate taxable income; losses incurred in a country must not be used to offset taxable income in China or other countries or regions, but can be used to offset taxable income for the same country or region in the following years. The announcement applies to tax settlement in 2019 and afterwards.

The State Taxation Administration recently released the Announcement about Comprehensive Service Platform for Value-added Tax Invoices, to make it easier for taxpayers to issue and use VAT invoices. According to the announcement, if a taxpayer has lost the invoice form and deduction form of a VAT invoice or vehicle sale invoice, it can use the corresponding duplicate of the invoice issuer for the purpose of input VAT deduction, refund or tax accounting. The STA has upgraded the VAI invoice service platform to offer taxpayers with such services as verifying the use of invoices, risk warning and information download.

The Implementation Regulation on the Foreign Investment Law of the People's Republic of China was published on December 31, 2019, to be effective from January 1, 2020. The regulation has stressed the principles of promoting and protecting foreign investment in China, and set articles in four perspectives. The first is to encourage and promote foreign investment; the second is to specify detailed policy measures to encourage foreign investment; the third is to strengthen protection of foreign investment; the fourth is to regulate and manage foreign investment. According to the regulation, government departments must not use administrative means to force foreign investors and foreign-funded companies to transfer technologies and trade secrets.

Five authorities including the Ministry of Finance, the General Administration of Customs and the State Taxation Administration recently issued a circular to release the Administrative Measures for Tax Policies on Imported Major Technological Equipment, with immediate effect. According to the regulation, eligible companies and nuclear project owners can enjoy tariff and value-added tax exemptions when they import some key parts, components and materials in order to manufacture major technological equipment or products. In the meantime, the Circular about Adjusting the Import Tax Policies for Major Technological Equipment and the Circular about Adjusting the Catalogue and Provisions on the Import Tax Policies for Major Technological Equipment

It was a successful and memorable year for Rwanda Stock Exchange (RSE) – the country’s youngest market in the region. The Stock market, which just opened in 2011, has been growing steadily – despite being surrounded by a small economy with a GDP of less than $10 billion. At exactly 12 noon Kigali time on Tuesday, December 31, Faustin Byishimo – Division Head of Business Development at I&M Bank Rwanda which is among the 8 listed companies on Rwanda Stock Exchange, rung the bell as the market business for 2019 ended. Franked by Rwanda Stock Exchange CEO Celestin Rwabukumba and his entire staff, Byishimo immediately dropped the bell before speaking to journalists who attended the closing event. “As an investor, this was the best choice. To invest on this market means quick returns and safety,” he said. Shortly after, Rwabukumba took to the stage to outline the market’s performance for the past 8 years – which he termed a “great milestone”. As the RSE turns 8 years, it has raised $761 million through primary market and $306 million traded on the secondary market. “It is a very big milestone for a small market like this in a GDP of less than $10 billion. It’s already 10% of the GDP,” Rwabukumba said. Asked on what has triggered this milestone performance, Rwabukumba responded that: “Well, I think it the need for people who have invested before, people who want to save and companies that want to raise money and government which wants to raise money through the market and the need for the economy to raise long-term finance.” He added that all this “was possible due to our 20,000 active investors.” Of these, he added, 83.6% were local, 13.8% regional while International investors accounted for 2.6%. As the year clocks its end, Rwanda Stock Exchange boss told journalists at the closure of the business that within 8 years of its existence, the Rwanda bourse listed 8 companies, 36 debt instruments with a $3.3 million market capitalization. The Exchange also has 12 members including 10 trading members and 2 non-trading members. In the Stock Exchange world, a trading member is the one who settles the trade in the clearing corporation or clearing house through a clearing member, while a non-trading member a ‘Sub-Broker’ or a non-trading member is any person who is not a Trading Member of a Stock Exchange but who acts on behalf of a Trading Member as an agent or otherwise for assisting investors in dealing in securities through such Trading Members. Bank of Kigali the biggest investor During the review of Rwanda Stock Exchange performance in the past 8 years, Celestin Rwabukumba said that Bank of Kigali – the country’s biggest financial institution in terms of assets, outpaced other listed companies as the most performing investor. He, however, admitted that there is still a small margin of Small and Medium Enterprises joining the market. “It’s worldwide. I don’t it’s particularity for Rwanda. What happens for the SMEs or retail investors is that they always thing that the Stock Market is for big people. The Stock Market requires a few things that you must be careful about,” he said. “Most SMEs don’t have good governance. Good governance and accountability are the big issues for companies coming to the market. You need to have good corporate governance, good management system,” he added. 20% annual growth Meanwhile, despite a milestone achievement registered, Rwabukumba said that Rwanda Stock Exchange targets to increase the number of people joining the market every year. According to Rwabukumba, “Going forward, we want to be the main place for raising money for long-term finance in this country. So that is our objective and we would like to see every household owning an investment product in Rwanda,” “In the next one year, we want to atleast increase 20% every year of people who are joining the market and because of technology, this can even be 100%,” he said.

South Africa's governing political party, the African National Congress (ANC), has approved plans to allow municipalities to buy their own electricity as well as the expansion of the current Independent Power Producer (IPP) programme. According to the Business Day, this was tabled in a report, from the commission on state-owned enterprises (SOEs) and the economic growth strategy at the party’s two-day lekgotla, which ended on Monday.   Additionally, the report endorses plans to ease the regulation of businesses to generate their own power. This development comes as the national power utility, Eskom, is struggling to avoid loadshedding. Business Insider reported that Eskom spends as much as R27 to buy one kilowatt-hour (kWh) of electricity from private diesel turbines to keep lights on, while the average selling price is roughly R1 per kWh.

The pan-African telecoms company has indicated its wholesale 5G network will be arriving in major South African cities early this year

Novità legislative in ambito fiscale. Dal 1° gennaio 2020 sono entrate in vigore alcune modifiche legislative a livello tributario. Lo comunica la Divisione delle contribuzioni del Dipartimento delle finanze e dell’economia (DFE), che riassume di seguito le principali novità derivanti da revisioni di leggi federali. Riforma fiscale e finanziamento dell’AVS (RFFA) e relativo adeguamento della Legge tributaria (LT) Il 4 novembre 2019 il Gran Consiglio ha approvato il rapporto di maggioranza inerente al Messaggio del Consiglio di Stato nr. 7684 sull’implementazione, nella Legge tributaria cantonale, della Legge federale concernente la riforma fiscale e il finanziamento dell’AVS (RFFA). Contro questo progetto di legge è stata depositata alla Cancelleria dello Stato, nei termini di legge, una domanda di referendum: l’esito della raccolta delle firme è atteso a breve. È tuttavia opportuno ricordare anche in questa sede che gli statuti fiscali privilegiati di società holding, società di amministrazione e società ausiliarie, attualmente regolamentati agli art. 91-93 della LT, sono stati aboliti con l’entrata in vigore a livello federale, il 1 gennaio 2020, della RFFA, indipendentemente dalla contestuale entrata in vigore delle norme di attuazione cantonali soggette a possibile referendum.   Adeguamento della LT alla nuova legge federale (LF) sull’Energia e relative ordinanze, in particolare all’Ordinanza sui costi degli immobili (ord. 642.116) La nuova LF sull’energia ha comportato degli adattamenti della Legge federale sull’imposta federale diretta (LIFD) e della Legge federale sull’armonizzazione delle imposte dirette dei Cantoni e dei Comuni (LAID), introducendo due nuovi concetti:

• la deducibilità fiscale, a determinate condizioni, dei costi di demolizione di un immobile privato in vista della costruzione di uno nuovo, in quanto assimilati alle spese di manutenzione;
• la possibilità di riportare questi costi di demolizione, unitamente agli investimenti destinati al risparmio di energia e alla protezione dell’ambiente su un immobile privato, sui due periodi fiscali successivi, se questi non possono essere interamente presi in considerazione nel periodo fiscale durante il quale sono stati sostenuti.

La LT è stata conseguentemente adattata riprendendo i medesimi concetti all’art. 31 cpv. 2 e 2bis LT. L’attuale Circolare no. 7/2019 Deduzioni dai proventi sulla sostanza immobiliare sarà aggiornata a breve. Adeguamento della LT alla LF sulle banche e le casse di risparmio (LBCR) in materia di regimi “too big to fail” A fronte dell’adeguamento della LBCR in materia di banche di rilevanza sistemica, e conseguentemente della LIFD e della LAID per gli aspetti fiscali, si è reso necessario inserire un nuovo cpv. 7 all’art. 77 LT in materia di riduzioni per partecipazioni. Tale capoverso apporta dei correttivi al calcolo delle deduzioni per partecipazioni, affinché le società madri di banche di rilevanza sistemica non risultino penalizzate qualora provvedano a finanziare le loro società del gruppo attraverso l’emissione di particolari strumenti finanziari (prestiti obbligazionari).   Anche a livello cantonale si segnalano le seguenti novità: Introduzione del principio degli ammortamenti accelerati per nuovi investimenti direttamente nei nuovi capoversi 2bis degli artt. 27 e 71 LT A partire dal 1° gennaio 2020 è stato ancorato nella legge tributaria il principio che prevede la possibilità di applicare un tasso doppio di ammortamento rispetto a quello usualmente ammesso, sui nuovi investimenti e nell’anno stesso dell’investimento, in deroga agli artt. 27 cpv. 2 e 71 cpv. 2 LT. Tale principio, in vigore già dal 01.01.1996, era sino ad ora regolato attraverso l’aggiornamento periodico del Decreto legislativo concernente la concessione di ammortamenti accelerati per nuovi investimenti, il quale rimarrà applicabile agli investimenti effettuati sino al 31.12.2019. Adeguamenti legislativi dell’istituto del deposito agli artt. 253a, 253b e 254 LT Le principali novità in ambito di obbligo di versamento del deposito in caso di trasferimento di proprietà immobiliare sono di ordine procedurale e possono essere riassunte come segue:

• in caso di trasferimento tramite atto pubblico, è stato formalmente introdotto l’obbligo per l’alienante di versare il deposito su un conto del notaio rogante, il quale funge da intermediario nell’incasso del dovuto;
• il termine di 30 giorni dal trasferimento di proprietà per il versamento del deposito al notaio rogante rimane invariato;
• il notaio rogante è poi tenuto a riversare tale somma all’Ufficio esazione e condoni entro 10 giorni dalla sua ricezione e posto che il trapasso di proprietà sia già avvenuto;
• eventuali eccedenze di deposito, riservata la facoltà dell’autorità fiscale di effettuare determinate compensazioni, saranno ritornate su un conto del notaio, salvo istruzioni contrarie scritte da parte dell’alienante;
• la possibilità di consegnare una garanzia bancaria a prima richiesta direttamente all’Ufficio esazione e condoni invece del versamento su un conto del notaio rimane invariata.

L’attuale Circolare sul Deposito 9/2016 sarà oggetto di revisione nei prossimi mesi. Estensione dello strumento del Calcolo provvisorio previsto nel nuovo art. 252a LT A partire dal 01.01.2020 l’Autorità fiscale può emettere un calcolo provvisorio d’ufficio o su richiesta del contribuente, non solo in caso di compravendita generante un’imposizione sugli utili immobiliari ma anche in relazione ad altre imposte cantonali e comunali che hanno una relazione particolare con l’immobile secondo l’art. 252 LT. Obblighi del contribuente in materia di allegati alla dichiarazione fiscale giusta l’art. 199 cpv. 2 lett. a LT È stato formalmente precisato nella LT che le persone fisiche con reddito da attività lucrativa indipendente e le persone giuridiche che sono obbligate ad allestire il conto annuale secondo quanto previsto dal Codice delle obbligazioni all’art. 958 cpv. 2 CO saranno altresì tenute ad allegare alla dichiarazione di imposta, oltre al bilancio ed al conto economico, anche il relativo allegato per il periodo fiscale in questione. Modifiche a decreti esecutivi Le disposizioni del Decreto esecutivo concernente la riscossione e i tassi d’interesse delle imposte cantonali valevole per il 2020 sono state modificate per quanto attiene ai tassi di interesse rimunerativi sul rimborso delle somme riscosse in eccedenza (art. 2 cpv. 1) e sul rimborso delle eccedenze di deposito (art. 11) entrambi ridotti ad un tasso rimunerativo dello 0.10% (prima: 0.25%) come misura di adeguamento dei tassi a quelli di mercato. La Divisione delle contribuzioni segnala, infine, che le seguenti Circolari sono attualmente oggetto di revisione e saranno pubblicate a breve in versione aggiornata sul sito Internet della Divisione: Circolare no. 7/2019 Deduzioni dai proventi sulla sostanza immobiliare Circolare no. 26/2016 Deposito Circolare 27/2015 Calcolo provvisorio Circolare 17/2016 Vincite alle lotterie e manifestazioni analoghe Circolare 1/2003 Usufrutto e diritto di abitazione Circolare 18/2020 Imposizione della famiglia.

On 28 December 2018, the UAE Federal Tax Authority (FTA) issued an Input Tax Apportionment: Special Methods Guide (the updated guide) according to which it was clarified that the calculation of the "actual use" should be made in accordance with one of the special apportionment methods described in the updated guide.

The first version of the guide was published on December 2018 and provides for special methods to determine the recoverable part of the residual input VAT for the taxpayers who are not allowed to fully recover the Input VAT incurred on the goods and services supplied to them. These methods such as the outputs based method or transaction count method would be accepted in the case where the standard method provided by article 55 of the Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree Law No 8 of 2017 on Value Added Tax is not appropriate. However, the application of the special methods requires prior approval from FTA following an application made by the taxpayer. The updated guide provides for the same rules as its first version with the following amendments:

• The taxpayers applying for methods of Input VAT Apportionment other than the standard method are required to submit their calculations to the FTA for a minimum period of 12 months preceding the application (previously the calculation was set for a 6-12 month period).
• Appendix 2 amended (example on input tax apportionment): the FTA has added a disclaimer stating that the example may not be suitable for all taxpayers and needs to be adapted to the type of business.
• Addition of an Appendix 3 on Common Errors: the FTA has provided a checklist that taxpayers need to go through before sending their application to the FTA.

On 30 December 2019, the UAE Federal Tax Authority (FTA) published an updated User Guide on excise tax returns. This is an updated version of the guide issued previously in August 2019. The new guide provides the following amendments:

• addition of Form EX203D on Stockpile Declarations;
• Form EX203B on Lost & Damaged Declarations: the FTA clarifies that this form can be submitted multiple times but if the FTA requests a Destruction Certificate for any Lost & Damaged form, then the taxpayer will not be allowed to submit a new Lost & Damaged declaration until the process of the Destruction Certificate is completed;
• Destruction Certificate: the FTA provides that it can request that the taxpayer submit the Destruction Certificate; and
• the FTA added a paragraph in each section providing that when filing the forms, the taxpayer has the possibility to request from the FTA to add a new product if it is not on the FTA list.

On 13 January 2020, the Federal Tax Authority (FTA) published the turnover declaration form. This form must be submitted by an applicant registering for VAT purposes. The form, which must be printed with the applicant's letterhead, must disclose the following items:

• turnover realized by the applicant from 2017 to 2020 (if applicable); and
• the month and year from which the applicant started making taxable supplies and reached the registration threshold (i.e. the mandatory threshold of AED 375,000 or the voluntary threshold of AED 187,500).

On 7 January 2020, the Federal Tax Authority (FTA) published an updated version of the new residences VAT refund user guide (the guide), which had initially been published in April 2018.

The guide provides that VAT refund applicants must file an electronic request using the FTA portal (and not through the manual process previously applicable). The guide also provides detailed instructions on the new VAT refund application processes.

On 21 January 2020, the Federal Tax Authority (FTA) launched an online platform for processing VAT refund requests for UAE nationals on expenses incurred on their new residential construction in the United Arab Emirates. The FTA also issued a user guide detailing the procedures to be followed for submitting the online VAT refund requests. The applicant is required to create an e-Services account on the FTA portal and submit the new residence VAT Refund Request form along with the specified documents. FTA will send an email notification if any additional details are required for their verification. After processing and approval of refund, the VAT refund amount is transferred to the applicant's bank account. The four specified documents to be submitted online along with the application are:

• a copy of the Family Book;
• a copy of the Emirates ID;
• documents such as water and electricity bills as proof of the building occupancy; and
• the construction contract and certificate of completion from the municipality.

The refund form is to be submitted within 6 months from the date the residence becomes occupied or the date of building completion certificate, whichever is earlier. The new residencies VAT refund user guide is published on the official website in the VAT refunds section.

On 30 January 2020, the Federal Tax Authority (FTA) published clarification VATP017, "Time-frame for recovering Input Tax Issue" (the clarification). In accordance with the combined provisions of article 55(1) of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and article 54 (2) of the Executive Regulations (Cabinet Decision No. (52) of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax), input tax must be recovered in the first taxable period in which the following conditions are satisfied:

• the taxable person receives the tax invoice; and
• the taxable person has the intention to make the supply payment before the expiration of a period of 6 months after the agreed date of payment.

The FTA clarified that the above conditions will only be met when the taxable person completes the internal approval process and forms the intention to make the payment within the prescribed period. If an invoice is received during a taxable period and the intention to make the payment is formed in a later taxable period, the input tax can only be recovered in that later taxable period. The clarification further provides that if the input tax is not recovered in the first two taxable periods, a taxable person is required to submit a voluntary disclosure. The voluntary disclosure should amend the input tax reported in the VAT return of one of the two taxable periods.

The Landfill Disposals Tax (Tax Rates) (Wales) (Amendment) Regulations 2020 were made on 6 January 2020 and will come into force on 1 April 2020. The Regulations prescribe the rates for landfill disposals tax chargeable on taxable disposals made on or after 1 April 2020, as follows:

• the standard rate is GBP 94.15 per tonne;
• the lower rate is GBP 3.00 per tonne; and
• the unauthorized disposals rate is GBP 141.20 per tonne.

On 23 December 2019, HMRC published The Code of Practice on Taxation for Banks – Annual Report 2019.

On 7 January 2020, the Chancellor confirmed that the next Budget will be held on 11 March 2020.

On 13 January 2020, the Scotland's Finance Secretary announced that the Scottish Budget will be published on 6 February 2020. This announcement follows the UK government's confirmation that Budget 2020 is delayed until 11 March 2020

On 10 January 2020, HMRC announced that The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 have come into force on the same day. The Regulations update existing regulations. HMRC Guidance will also be revised accordingly.

The US Treasury Department and the US Internal Revenue Service (IRS) released final regulations (TD 9890) to provide guidance on certain due diligence and reporting rules applicable to persons making certain US source payments to foreign persons, and guidance on certain aspects of reporting by foreign financial institutions on US accounts. The final regulations were published in the Federal Register on 2 January 2020. The final regulations incorporate the modifications in the proposed regulations (REG-132881-17) that were published on 18 December 2018. The final regulations are designated Treasury Regulations sections 1.1441.-0, 1.1441-1, 1.1441-2, 1.1441-6, 1.1441-7, 1.1471-0, 1.1471-3, 1.1471-4, 1.1474-1, and 1.6049-6. The final regulations are effective on 2 January 2020. The final regulations contain various applicability dates.

On 2 January 2019, the US Internal Revenue Service (IRS) issued Revenue Procedure 2020-7 with its updated list of international tax issues on which it will not accept applications for private letter rulings and determination letters. Revenue Procedure 2020-7 includes two lists of international no-ruling areas, i.e. (i) areas in which rulings or determination letters will not be issued, and (ii) areas in which rulings or determination letters will "not ordinarily be issued". Inclusion of an item on the "not ordinarily be issued" list means that the IRS will not issue a private letter ruling or determination letter on the issue absent unique and compelling reasons given by the taxpayer that would justify a ruling or determination letter. Revenue Procedure 2020-7 became effective on 2 January 2020. Revenue Procedure 2020-7 has been issued as part of the IRS's annual series of revenue procedures for obtaining guidance from the IRS National Office with respect to the tax treatment of specific transactions.

On 2 January 2020, the US Internal Revenue Service (IRS) issued its updated procedures for private letter rulings and other guidance from the IRS National Office. The procedures, effective 2 January 2020, are as follows:

• Revenue Procedure 2020-1, with the procedures for taxpayers to obtain private letter rulings and other guidance on issues under the jurisdiction of the following Associate Chief Counsel's offices: Corporate; Financial Institutions and Products; Income Tax and Accounting; International; Passthroughs and Special Industries; Procedure and Administration; and Tax Exempt and Government Entities;
• Revenue Procedure 2020-2, with procedures for the above Associate Chief Counsel's offices to issue Technical Advice Memoranda (TAMs) to IRS directors and IRS appeals area directors;
• Revenue Procedure 2020-3, with a listing of the provisions of the US Internal Revenue Code on which the above Associate Chief Counsel's offices, apart from International, will not issue private letter rulings or determination letters;
• Revenue Procedure 2020-4, with information on the types of advice provided by the Commissioner, Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements Office, including procedures for issuing determination letters and letter rulings;
• Revenue Procedure 2020-5, with procedures for applying for and issuing determination letters in the Exempt Organization (EO) area; and
• Revenue Procedure 2020-7, with a listing of the provisions of the US Internal Revenue Code on which the Associate Chief Counsel (International) will not issue private letter rulings or determination letters.

The above procedures are updated annually and published in the first IRS Internal Revenue Bulletin (IRB) of each year.

The US Social Security Administration has issued a fact sheet with the 2020 wage ceiling amount for the Old Age Survivors Disability Insurance (OASDI) portion of US social security taxes, which are imposed by the Federal Insurance Contribution Act (FICA). The FICA is composed of two components: OASDI and Medicare or Hospital Insurance. The Social Security Administration has also released information on the 2020 rates and limits for the OASDI, Medicare and SSI (Supplemental Security Income) programs, as well as a related News Release dated 10 October 2019. The 2020 wage ceiling amount for the OASDI portion of the FICA tax is USD 137,700, which is an increase from the 2019 ceiling of USD 132,900. For 2020, employees are subject to OASDI tax on wages up to this amount at the rate of 6.20%. Employers are also required to pay OASDI tax for their employees at the same rate. Earnings above the wage ceiling amount are not subject to OASDI tax. Employees and employers are also subject to Medicare tax at the rate of 1.45%, but there is no limit placed on the amount of wages subject to the Medicare tax. Individuals with wages of more than USD 200,000 (USD 250,000 for married taxpayers filing jointly and USD 125,000 for married taxpayers filing separately) pay an additional Medicare tax at a rate of 0.9% beginning in 2013. Self-employed individuals must pay their own portion of the US social security taxes plus the portion that would otherwise be paid by an employer. The combined OASDI tax rate for self-employed individuals for 2020 is thus 12.40%, and the combined rate for the Medicare tax is 2.90%. The USD 137,700 ceiling amount applies to the OASDI tax imposed on the net earnings of the individuals from self-employment. Foreign nationals working in the United States are subject to OASDI and Medicare taxes unless exempted under a Social Security Totalization Agreement between the United States and their country of residence.

The US Treasury Department and the US Internal Revenue Service (IRS) released final regulations (TD 9889) to provide guidance on the extent to which taxpayers may elect the Federal income tax benefits provided by section 1400Z–2 of the US Internal Revenue Code (IRC) with respect to certain equity interests in a qualified opportunity fund (QOF). The final regulations are published in the Federal Register on 13 January 2020. The IRS also issued a related News Release (IR-2019-212) dated 19 December 2019. The Tax Cuts and Jobs Act (TCJA) added IRC sections 1400Z-1 and 1400Z-2. IRC section 1400Z-1 addresses the designation of population census tracts located in the 50 US states, US territories, and the District of Columbia (Washington DC) as qualified opportunity zones (QOZs). IRC section 1400Z-2 provides two main Federal income tax benefits to eligible taxpayers that make longer-term investments of new capital in one or more designated QOZs through QOFs and QOZ businesses, including:

• electing to defer until an inclusion event or 31 December 2026, whichever is earlier, the inclusion in gross income of certain gains that would otherwise be recognized in a taxable year if the taxpayer invests a corresponding amount of such gain in a qualifying investment in a QOF within a 180-day statutory period, combined with:
  • potentially excluding 10% of such deferred gain from gross income if the eligible taxpayer holds the qualifying investment in the QOF for at least five years; and
  • potentially excluding addition 5% of such deferred gain if the eligible taxpayer holds that qualifying investment for at least seven years; and
• electing to exclude from gross income any appreciation on the eligible taxpayer's qualifying investment in the QOF if the eligible taxpayer holds the qualifying investment for at least 10 years.

The final regulations provide guidance for taxpayers eligible to make an election to temporarily defer the inclusion in gross income of certain eligible gain. The final regulations also address such taxpayers' eligibility to increase the basis in their qualifying investment equal to the fair market value of the investment on the date that it is sold, after holding the equity interest for at least 10 years. The final regulations provide a list of inclusion events. Further, the final regulations provide guidance to determine the amount of income that must be included at the time of the inclusion event or 31 December 2026. In addition, the final regulations address the various requirements that must be met to qualify as a QOF, as well as the requirements an entity must meet to qualify as a QOZ business, including the requirement that a QOF or QOZ business engage in a trade or business. The final regulations are effective on 13 March 2020. The final regulations contain various applicability dates. Related IRS forms, IRS instructions and other information are scheduled to be released in January 2020.

On 17 January 2020, the US Internal Revenue Service (IRS) issued a News Release (IR-2020-16) to announce that the IRS is open to considering relief for limited circumstances in which double taxation results from the transition tax on foreign earnings under section 965 of the US Internal Revenue Code (IRC), as amended by the Tax Cuts and Jobs Act (TCJA). The IRS notes that, in unique circumstances where a corporation paid an unusual dividend for business reasons, not because of the enactment of the TCJA, double taxation may result if (1) the same earnings and profits of foreign corporations are taxed both as dividends and under IRC section 965; and (2) there is no significant reduction in the resulting tax by the application of foreign tax credits (FTCs). The IRS invites taxpayers to contact the IRS Office of Associate Chief Counsel (International) if the taxpayers have fact patterns that may fit such limited circumstances.

The US Treasury Department and the Internal Revenue Service (IRS) have issued final regulations (TD 9892) that update the due dates and available extensions of time to file certain US tax returns and information returns. The final regulations were published in the Federal Register on 30 January 2020. The final regulations remove the temporary regulations (TD 9821) that were published on 20 July 2017 and were applicable for tax returns and information returns filed after 20 July 2017. The final regulations also adopt the proposed regulations (REG–128483–15), published on 20 July 2017, with only non-substantive revisions. The final regulations are effective 30 January 2020. The final regulations generally apply to returns filed on or after 30 January 2020. The final regulations are designated Treasury Regulation sections 1.1446-3, 1.6012-6, 1.6031(a)-1, 1.6032-1, 1.6033-2, 1.6041-2, 1.6041-6, 1.6072-2, 1.6081-1, 1.6081-2, 1.6081-3, 1.6081-5, 1.6081-6, 1.6081-9, and 31.6071(a)-1.

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

Date	Country A	Country B	Object	Status
02.01.20	Chile	United Arab Emirates	Income Tax Treaty	Signed
24.01.20	Bulgaria	Pakistan	Income Tax Treaty	Approved by Bulgarian Parliament
30.01.20	Burkina Faso	United Arab Emirates	Income Tax Treaty	Signed