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Tax planning, transfer pricing and other regulatory developments have come to dominate the tax space in recent years. Tax authorities around the world are rethinking tax regulations in a bid to raise revenues, and companies must be mindful to improve their compliance efforts. In the US, for example, the Tax Cuts and Jobs Act that became effective in 2018 introduced wide-ranging changes to corporation tax, including shifting US multinationals largely to a territorial system of taxation. Many of those changes have been felt outside the US, particularly in Canada. In response to the Act, all taxpayers, most notably US-based multinationals, should review their corporate structures.

UNITED STATES

Jeffrey H Koppele

Ashurst LLP

“The most significant US tax reform legislation in more than 30 years, the Tax Cuts and Jobs Act (Tax Act), became effective in 2018. This legislation implements sweeping changes to the US taxation of corporations, including shifting US multinationals largely to a territorial system of taxation. The Tax Act reduces the US federal corporate income tax rate to 21 percent; foreign-derived intangible income (FDII) of US C corporations is taxed at an even lower rate. US 10 percent shareholders of controlled foreign corporations (CFCs) are taxed currently on their global intangible low-taxed income (GILTI).”

CANADA

Alexander Smith

Grant Thornton LLP

“Over the last 18 months, the minister of finance has focused more on tax planning at the owner-manager level, with more targeted developments at multinational taxpayers. In particular, the minister has released rules which target income splitting arrangements between family members where contributions to the business may not be equivalent in all respects, and tightened some of the foreign affiliate exceptions to address tracking structures that seek to avoid a controlled foreign companies (CFCs) pick-up where operations are pooled to meet the more than five employees test.”

MEXICO

Josemaría Cabanillas

Deloitte Mexico

“There have been a number of developments, both in Mexico and abroad, that have affected Mexican corporate tax. The main Mexican developments include a temporary stimulus tax package which has been granted for the northern border region, allowing taxpayers located in 43 municipalities near the border to apply a tax credit to reduce their income tax liability by a third and their value added tax (VAT) liability by half, provided they comply with certain requirements. Also, as of 1 January 2019, it is no longer possible for taxpayers to recover a favourable VAT balance by offsetting the balance against their federal income tax liability; instead, taxpayers with VAT overpayments may only offset the overpayment against their VAT liability, or request a refund.”

BRAZIL

Alexandre Gleria

ASBZ Advogados

“Brazil has been aligning itself with the global tax practices advocated by the Organisation for Economic Co-operation and Development (OECD) in recent years, in order to become a full member of that organisation. However, and curiously, the most notable evolution in recent months is related to the new perspectives that were presented based on the new political scenario established after the elections of 2018. In recent months, the Ministry of Finance has been discussing, with more emphasis than in past proposals, a tax reform with the goal of modernising and simplifying corporate taxes.”

NETHERLANDS

Gert-Jan Hop

NovioTax B.V.

“Recently, we have observed an increase in questions relating to the Anti-Tax Avoidance Directive (ATAD1), which came into effect on 1 January 2019. ATAD1, and later ATAD2, set out a framework and minimum implementation requirements for EU Member States in order to cope with tax avoidance practices that, according to its title, ‘directly affect the functioning of the internal market’. We especially observe a strong market demand in respect of questions involving the ATAD1 provisions limiting the deduction of interest.”

GERMANY

Claus Jochimsen-von Gfug

KPMG AG

“It is hard to believe, but in the last 12 to 18 months we have not seen any major developments in German corporate tax laws. While Germany is known for its eagerness to adapt tax laws to make them more stringent and safeguard tax revenues for Germany, recently the legislator has been unusually quiet. However, one should not mistake this inactivity for the new normal. Rather, it is that major changes are around the corner and will likely surface within the coming months.”

ITALY

Luca Bosco

Studio Tributario E Societario – Deloitte

“On 28 December 2018, the Italian government approved Legislative Decree no. 142 which transposes the EU Anti-Tax Avoidance Directives (ATAD 1 and 2) into domestic law. The new legislation revises Italy’s interest expense deduction limitation, controlled foreign company rules, rules on dividends and capital gains associated with foreign subsidiaries, exit tax rules and hybrid mismatches, the latter of which will apply from 1 January 2020 and 1 January 2022 for reverse hybrids. The decree does not amend the existing general anti-avoidance rule (GAAR), which the Italian government considers to be in line with the ATAD.”

AUSTRALIA

Michael Catterall

Grant Thornton Australia Limited

“Government proposals to reduce the 30 percent company tax rate to a more internationally competitive 25 percent rate were contested and only partly implemented. The 2018 income year rate was reduced to 27.5 percent – 26 percent in 2021 and 25 percent in 2022 income years – for base rate entities (BRE) companies with turnover under $25m for 2018 – under $50m for 2019 and subsequent years, subject to an 80 percent cap on passive income. Non-BRE companies are still subject to the 30 percent general company tax rate.”

ETHIOPIA

Getu Jemaneh

HST Consulting Plc

“Corporate tax is considered a key source of government income. Hence, both the federal and local governments are aggressively mobilising their resources to increase their corporate tax collection efforts. As such, the governments are implementing various tax reforms, including the widening of e-filing to large- and medium-size taxpayers, the use of banks for corporate tax payments, the classification of taxpayers by size and sector and dividing taxpayers into various categories, depending on the level of risk assigned, such as red, yellow and green, for tax audit purposes.”

CONGO

Emmanuel Le Bras

PricewaterhouseCoopers Tax & Legal

“With the exception of transfer pricing (TP) provisions, there has been very little change in corporate tax over the last 12 to 18 months. In particular, lawmakers have increased the corporate income tax basis by rejecting the deductibility of certain expenses. The sanctions applicable for failure to comply with TP requirements have been strengthened. A major reform aimed at modernising the tax system – notably the General Tax Code, the Book of Tax Procedures and the Income Tax System for the Informal Sector – is currently being studied. By unilaterally denouncing investments agreements providing for tax incentives and calling on their holders to renegotiate them, lawmakers have contributed to the already palpable increase in legal and tax insecurity.”

CONTRIBUTORS

ASBZ Advogados

Ashurst LLP

Deloitte Mexico

Grant Thornton Australia Limited

Grant Thornton LLP

HST Consulting Plc

KPMG AG

NovioTax B.V.

PricewaterhouseCoopers Tax & Legal

Studio Tributario E Societario – Deloitte