Other tax considerations
Provincial taxes - Turnover tax
Turnover tax or gross income tax is a tax collected by the province. The taxable event is the performance of commercial or industrial activity in the territory of the province. Tax rates can be 0.5 percent up to 6 percent in connection with the activity applied on the gross income. Some activities are charged with higher tax rates, such as online gambling, which is taxed at a 15-percent tax rate in the Province of Buenos Aires.
In some provinces, turnover tax is also applicable to the import of digital services.
Every province has its own turnover tax. However, the turnover tax collected by each province is similar, although different tax treatments may be applicable for certain activities.
For some activities, there are special tax benefits at the federal level and provincial level.
There are tax benefits for an investment in renewable energy, software production and services, investments in capital assets, biodiesel fuel and mining.
The benefits may include partial or full exemptions, accelerated depreciation and drawback.
VAT on the import of digital services
The federal government collects VAT on the importation of digital B2C services. The taxpayer is the local resident unless the service provider has a fixed place in the Argentina. The tax rate is 21 percent.
The PAIS tax is applicable to the purchase of foreign currency by resident individuals. It is also applicable when a local individual pays for services to a foreign entity using their credit/debit cards. The tax rate is 30 percent, or 8 percent when the service being paid is already taxed with the VAT on digital services.
Double taxation treaties
Argentina has signed tax treaties with Germany, Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, United Arab Emirates, Spain, Finland, France, Italy, Mexico, Norway, Netherlands, the UK, Russia, Sweden and Switzerland (all in force), and Japan, Luxembourg, Turkey, China, and Qatar (signed but not yet in force).
Anti-avoidance regime and OECD BEPS-related developments
Australia has a general tax anti-avoidance regime. The regime empowers the Commissioner to deny a tax benefit if, where a taxpayer obtains a tax benefit in connection with a scheme, the tax benefit would not have arisen without the scheme, and under an objective test there was a dominant purpose of entering into the scheme to obtain the tax benefit.
In an effort to tackle multinational anti-avoidance, Australia's general tax anti-avoidance regime was amended with the introduction of the Multinational Anti-Avoidance Law (MAAL) which was operative from January 1, 2016. The MAAL applies to multinational entities with an annual global income of AUD1 billion or more and is targeted at multinational entities entering into contrived arrangements to avoid a taxable presence in Australia.
Further, Australia's general tax anti-avoidance regime was amended with the introduction of the Diverted Profits Tax (DPT), which applied from July 1, 2017. The DPT is targeted at multinational entities with an annual global income of AUD1 billion or more that have entered into contrived arrangements to shift taxable profits out of Australia.
Under Australia's domestic law, protection under DTAs is not available for Australia's general tax anti-avoidance rules, which include the MAAL and DPT.
In addition, the Australian Government has introduced rules targeting hybrid mismatches, which has generally applied from January 1, 2019. These rules are generally in line with OECD's BEPS Action 2, with certain modifications including a specific integrity rule targeting interposed entity structures.
Employers must make superannuation contributions to their employees' nominated super fund, at the rate prescribed by the relevant legislation. The current superannuation rate for the year ended June 30, 2022 is 10 percent.
Employers are required to take out insurance with an approved insurer covering the employer's full liability for workers' compensation as well as damages.
Goods and Services Tax (GST)
GST is a form of value added tax (VAT). It applies at a rate of 10 percent to taxable supplies of goods, services and other things that are connected with Australia.
From July 1, 2017, GST has applied to inbound intangible supplies made to Australian Consumers, but GST will not usually apply if the same inbound intangible supply is instead made to an Australian business. This reform is referred to as the "Netflix Tax."
From July 1, 2018, GST has applied to inbound supplies of goods with a value of less than AUD1,000 which are made to Australian Consumers. This may capture online sales of goods made by non-residents to Australian consumers where the goods are shipped directly to Australian customers.
From July 1, 2019, offshore sellers of Australian commercial accommodation (including online sellers) are required to include sales of Australian accommodation in their GST turnover. Where the GST turnover totals AUD45,000 or move in a 2-month period, the offshore sells are required to register for, charge and pay GST.
Digital services tax
In 2020 a digital tax of 5 percent on online advertising for large companies was introduced in Austria.
Online advertising services are subject to the digital tax if they are provided for remuneration by online advertising providers in Austria and only for large multinational companies with a worldwide revenue of at least EUR750 million and a yearly domestic revenue at least EUR25 million.
The purpose of the Advertising Tax Act is to tax advertising services in print media, radio and outdoor advertising at 5 percent of direct remuneration. A prerequisite for the obligation to pay the tax is an advertising service which is provided in Austria against payment. Advertising on the Internet on homepages, Web TV or Web radio is exempt from the advertising tax.
Inheritance and gift tax
There is no inheritance and gift tax in Austria.
Excise taxes are for example imposed on petroleum, tobacco products and alcoholic beverages.
Under the Austrian VAT law, companies and individuals, independently carrying out an active business on a permanent basis are qualified as entrepreneurs for VAT purposes. Non-residents may also be subject to VAT if they carry out taxable transactions in Austria.
Under the provisions of the Austrian Value Added Tax Act (VATA), the following transactions are taxable:
- The supply of goods and services within Austria for a consideration by taxable persons within the scope of their business;
- The withdrawal of goods and rendering of services for the taxable person himself (self-supply);
- The import of goods from a country outside the EU;
- Intra-Community acquisitions of goods.
VAT place of supply
A supply of goods is deemed to have taken place within Austria if the goods were located in Austria at the point at which the power of disposition was transferred. In the case of the dispatch or transport of supplies of goods, the supply is deemed to have been made from the point at which the goods are handed over to the forwarding agent.
The place of supply primarily depends on whether the supply is made to a taxable person (B2B) or to a non-taxable person (B2C). For supplies of services to taxable persons, the general rule is that the place of supply of services should be the place where the recipient is established (B2B general rule). Services supplied to nontaxable persons should be taxed at the place where the supplier has established its business (B2C general rule). However, there are numerous exceptions to these general rules.
In general, an Austrian VAT rate of 20 percent exists. A certain limited range of goods and services is taxed at the reduced rate of 10 percent (e.g. books, food, restaurants, passenger transportation, medicine, hotel accommodation) or 13 percent (e.g. animals, seeds and plants, cultural services, museums, zoos, film screenings, wood, ex-vineyard sales of wines, domestic air travel, public pools, youth care, athletic events). Certain other transactions are exempted from Austrian VAT (e.g. export transactions).
Due to the COVID-19 pandemic, the Austrian government has announced and already introduced several measures, including VAT reductions, to strengthen the economy. This includes a reduction of the VAT rate for certain supplies of respirators and COVID vaccine from 20 percent to 0 percent, reduced VAT rate of 5 percent for supplies of all food and beverages in restaurants and other catering establishments, access to museums, cinemas, or musical events, and supplies in the publishing sector and hotels until December 31, 2021.
The numerous exemptions from VAT can be classified in 2 categories, depending on whether or not they preclude the deduction of input VAT.
The following supplies of goods and services are VAT exempt (with the loss of input VAT recovery): health services, financial, banking and insurance services, securities and share transactions, sales of immovable property, unless the taxable person opts to pay VAT, and supplies of small businesses (up to EUR35,000 net per annum).
Input VAT Deduction
Entrepreneurs are entitled to deduct Austrian input VAT insofar as the input VAT does not result from goods/services purchased that are directly linked to certain VAT-exempt categories as mentioned above. To be entitled to deduct input VAT, the entrepreneur must obtain an invoice from one's supplier that fulfills certain formal requirements.
Under the reverse charge system, the VAT liability of a non-resident business is shifted to the recipient of the supply. The reverse charge system applies to all supplies of services, installation supplies of goods rendered by nonresident taxable persons in Austria.
The monthly/quarterly VAT return must be submitted until the 15th of the 2nd month following the month/quarter concerned. The Annual VAT return must be filed until June 30 of the following year if filed electronically. If represented by a tax advisor, an extension until March 31 of the 2nd year following the year concerned might be granted within the quota agreement, althoughearlier filing may be requested by the Austrian tax authorities.
Not applicable for this jurisdiction.
Contribution for intervention in the economic domain (CIDE)
The contribution is due for payments made in connection with:
- License agreements
- Acquisition of technological know-how or
- Agreements involving cross-border transfer of technology
CIDE also applies to the cross-border provision of technical services, administrative assistance and other similar services that do not involve the transfer of technology.
CIDE is generally imposed at a 10 percent rate over the total amount paid, credited, delivered or remitted abroad to non-resident beneficiaries.
Welfare contributions on gross revenues (PIS/COFINS)
The Contribution to the Social Integration Program (PIS) and the Contribution to Finance Social Security (COFINS) are welfare contributions that are levied over a taxpayer's gross revenue. Currently, there are 2 methods of calculating PIS/COFINS, the cumulative and non-cumulative methods.
The cumulative method is applicable to cooperative organizations, immune or exempt entities companies, financial institutions, insurance companies and taxpayers that accrue the corporate income tax in accordance with the deemed profits method. Under such method, the PIS shall apply at a 0.65 percent rate, whereas the COFINS will apply at a 3 percent rate.
The non-cumulative method is applicable to most legal entities. The main purpose of this legislation is to avoid the cascading effect of the welfare contributions by granting tax credits that can be offset with PIS/COFINS payable amounts. Currently, PIS and COFINS apply at a combined rate of 9.25 percent, with PIS at 1.65 percent and COFINS at 7.6 percent.
The taxpayer is entitled to calculate tax credits over the following expenses:
- Acquisition of goods for resale
- Inputs (ie, goods and/or services) that are deemed as necessary and essential for the maintenance of the taxpayer's activities
- Acquisition of electric energy
- Payment of leases related to buildings, machinery and equipment
- Lease expenses derived from leasing transactions (arrendamento mercantil)
- Acquisition or manufacture of machinery and equipment to be leased to third parties, or used in the manufacture of products intended for sale, and/or for incorporation as a fixed asset
- Buildings and betterments in third-party real estate property to be used in the company's operations
- Storage and freight costs, incurred in sale transactions, supported by the seller
- Meal coupons, transportation and uniforms provided to employees by a company that engages in cleaning, conservation and maintenance services and
- Intangible assets, acquired for the utilization in the manufacture of goods destined for sale or in the rendering of services.
Furthermore, PIS and COFINS shall not apply to:
- Revenues resulting from export transactions, whose payment represents an inflow of foreign capital into Brazil and
- Revenues derived from domestic sales by trading companies (empresas comerciais exportadoras) with specific export purposes
Originally, under the non-cumulative system, a taxpayer's financial revenues were taxed by PIS/COFINS at a 0-percent tax rate (except those derived from interest on equity perceived by holding companies and hedge transactions). However, the tax rate applicable to these specific revenues is now 4.65 percent, with PIS at 0.65 percent and COFINS at 4 percent.
The concept of "gross revenues" for the calculation of the PIS and COFINS under the cumulative system has been changed under legislation. Accordingly, "gross revenues" for such purposes is defined as:
- The results of the sale of goods and provision of services
- The result of operations on behalf of third parties and
- Revenues derived from taxpayer's main activity that are not comprised as retail of goods and provision of services
PIS and COFINS over import transactions (PIS/COFINS-import)
PIS and COFINS are also charged on import transactions of goods and services. As a general rule, in respect of the importation of goods, PIS shall apply at a 2.1 percent rate and COIFNS at a 9.65 percent rate. Whereas, in respect of the importation of services, PIS shall apply at a 1.65 percent rate, and COFINS at a 7.6 percent rate.
Please note that the importation of certain goods, such as pharmaceuticals, are taxed at specific tax rates. In addition, with respect to certain import transactions, a COFINS 1 percent surcharge may apply.
The tax basis shall be the customs value of the imported goods or the amount charged for the service by the foreign contractor.
Taxpayers that are subject to the PIS/COFINS under the non-cumulative system are allowed to accrue tax credits from the PIS and COFINS paid on their imports and offset them against the PIS and COFINS accrued over their respective gross revenue.
Federal excise tax (IPI)
IPI is a Federal value-added tax, which applies to manufactured products, either to their importation or manufacture in Brazil. IPI rates may vary depending on the type of product and whether it is regarded as essential.
Import duty (II)
II is due upon customs clearance of imported products on an ad valorem basis. The rate varies, depending on the tariff classification of the product imported.
As mentioned above, import transactions are also subject to the PIS/COFINS-import and to the IPI. Import transactions are also taxed by the State VAT (ICMS). These taxes, along with II, are calculated as follows:
- The II and the PIS/COFINS-import are imposed over the good's customs value (ie, CIF value)
- The IPI is levied on the CIF value plus II and
- The ICMS is levied on the CIF value plus II, IPI and ICMS itself
Export tax (IE)
IE applies to the export of certain listed goods and the tax is calculated on an ad valorem basis. The tax rate varies depending on the type of product exported.
Financial transaction tax (IOF)
The IOF applies to several types of transactions such as credit, exchange and insurance, loans, as well as on transactions involving gold, financial asset or exchange instruments. IOF rates and basis vary depending on the nature of the transaction.
State VAT on sales and services (ICMS)
Similar to the IPI, the ICMS is another value-added tax on sales, communication and transportation services, payable upon the importation of a product into Brazil, the sale of a good in the Brazilian market, or upon the provision of certain communication and intrastate and interstate transportation services.
ICMS rates and tax benefits vary from State to State and depend on the type of transaction (eg, import, intrastate or interstate sale of goods, communication or transportation services, etc.).
The ICMS non-cumulative system permits a taxpayer to offset the ICMS paid in acquired goods and services against the ICMS due on subsequent taxable transactions (eg, sale of goods and services subject to ICMS tax). The difference is the amount due to the state government.
Note that State ICMS legislation may attribute the responsibility to pay the ICMS to a legal entity that, although it did not perform the relevant taxable transaction per se, had an indirect relation to it. An example is the responsibility for paying the ICMS attributed to electricity generator or distributors on 1 or more operations, from production or importation until the end consumer.
Specific rules apply to operations with hydrocarbons, such as oil, lubricants and natural gas.
Estate and gift tax (ITCMD)
ITCMD is a state tax that is levied on the transmission of movable or immovable assets as a result of donation or in the event of the death of the owner. As a general rule, ITCMD is subject to rates varying from 4 percent to 8 percent, depending on the state, over the fair value of the movable asset, real estate or transmitted rights.
Tax on services (ISS)
ISS is a municipal tax that applies to the price charged for the provision of certain listed services. Rates vary from 2 percent to 5 percent, depending on the type of service and the particular municipality in which the party rendering the services is located.
The ISS shall also apply to the importation of services. In such circumstances, each municipality may set forth in the relevant municipal legislation that the contracting parties located in Brazil are liable for collecting the relevant tax.
The ISS shall not apply to the exportation of services, except over those developed in Brazil and whose results also occur in Brazil, even if the contracting party is a foreign resident.
Real estate property tax (IPTU)
IPTU is a municipal tax levied annually, at progressive rates according to the appraised value and use of the real estate, and over the ownership, possession and use of urban realty.
Real estate transfer tax (ITBI)
ITBI is a municipal tax on the transfer of real estate. The rates may vary according to the actual value of the transaction or the appraised value of the property, whichever is higher.
Individual income taxation (IRPF)
Brazilian tax legislation distinguishes individual residents from non-residents. As mentioned above, a Brazilian national is automatically a resident while legally domiciled in Brazil or, if not domiciled in Brazil, upon their election to be treated as a resident for tax purposes.
In general, resident individuals are subject to tax on their worldwide income, regardless of nationality (universal taxation), while non-residents are generally subject to tax in Brazil only on Brazilian source income (limited taxation).
A foreign individual will be considered to be a tax resident in Brazil when:
- Admitted to the country under a permanent visa or
- Admitted to the country under a temporary visa, and
- Under an employment relationship for purposes of Brazilian law, on the day such relationship is established or
- Upon completing 184 days, consecutive or not, of physical presence in Brazil within a 12-month period
The duration of the time period for this visa begins on the day the foreigner enters Brazil, independent of the calendar year. The days counted are only those days spent within the country, interrupted upon the moment they leave Brazil and recommenced if they return.
Tax residents are subject to income tax on worldwide income on a cash basis for each year, even if the income is generated abroad. An individual income tax return should be filed by the last business day of April to report income received in the previous year, with no extensions.
Brazil has a different set of rules for ordinary income, capital gains, income received from abroad and from individuals and income from financial products.
Ordinary income is subject to progressive rates ranging from 7.5 percent up to 27.5 percent.
Compensation received from a Brazilian company for services provided under an employment relationship or as an individual contractor is subject to WHT at monthly progressive rates also ranging from 7.5 percent up to 27.5 percent, depending on the amount of income perceived.
In the annual income tax return, the taxpayer must report all ordinary income received from all Brazilian payment sources on a consolidated basis. Consolidated ordinary income will be subject to income tax at the progressive rates mentioned above. Because each payment source calculates WHT separately, without taking into account the taxpayer's overall income and bracket, the taxpayer might be required to make an additional tax payment upon filing of the annual income tax return.
Capital gains resulting from the disposition of assets and other rights, including investments in the capital markets (ie, disposition of stocks, commodities and other rights) are subject to income tax at capital gains, at rates varying from 15 percent up to 22.5 percent.
Income received from paying sources located abroad and from individuals in Brazil are subject to a mandatory monthly tax payment (Carnê Leão), which is due at the same progressive tax rates applicable to ordinary income mentioned above. The tax must be collected until the last business day of the following month.
Financial income from Brazilian sources is subject to a final withholding tax system performed by the financial institution. Tax rates shall vary according to the type of investment and also on the term under which it was made.
Brazil provides double taxation relief through a foreign tax credit system applicable to income tax paid to countries with which Brazil has entered into a tax treaty or on a reciprocity basis when the source country also grants a foreign tax credit for taxes paid in Brazil on Brazilian source income. The Brazilian tax authorities have agreed on a reciprocity basis with the United States, Germany, United Arab Emirates and United Kingdom.
Not applicable for this jurisdiction.
There are several municipal taxes, the most relevant being the commercial patent (Patente Comercial). This municipal tax must be paid by everyone who engages in a for-profit activity (whether professional, industrial or commercial) within the territory of such municipality.
Obtaining and paying a commercial patent must be done in the municipality where the company has its registered commercial address or branches. The rate of municipal tax ranges from 0.25 to 0.5 percent of the tax net worth (Capital Propio Tributario) of the company. If the company opens branches in different municipalities, the commercial patent must be paid proportionally.
SIGNIFICANT CHANGES IN TAX LEGISLATION
On February 4, 2022, came into force the Law N° 21,420, which "Reduces or Eliminates the Tax Exemptions indicated" modifying nine (9) legal bodies with different particular effective dates. Among other changes, it is worth mentioning the following:
- Single tax rate of 10 percent on capital gains of transfer of publicly traded debt instruments (securities) or shares (in force in 6 months as of publication of the mentioned law).
- Transitory reduction for two years and subsequent elimination of the Special VAT Credit for Construction Companies (CEEC).
- Elimination of the tax benefits for the third home from now on, for those who have acquired DFL 2 homes before 2011.
- Affectation of VAT to all services, except for health, education, and transportation sectors, and for all taxpayers who issue fee receipts.
- Inheritance tax for life insurances. Which will affect all benefits obtained under life insurance contracts executed since the publication of the referred law.
R&D expenses may have a bonus deduction, including R&D service fees paid to a foreign R&D service provider.
The latest version of the equity tax (Law 2010, 2019) levied Colombian tax resident individuals and non-tax residents that held a net equity equal to or exceeding COP5,000,000,000 as of January 1, 2020 for fiscal years 2020 and 2021.
Non-tax residents’ individuals are subject to equity tax only with respect to its assets held in Colombia unless they have a permanent establishment in the country. In that case, the non-tax resident could be subject to equity tax with respect to the net equity attributable to it.
According to the Law 2010, 2019 foreign entities were levied with this tax in respect to its assets located in Colombia different to shares, receivable accounts, and portfolio investments.
As of 2022 no equity tax is applied; however, it could be re-introduced as from 2023.
Value added tax – VAT
VAT is an indirect national tax applicable on:
Sales and imports of tangible goods.
Provision of services in Colombia or from abroad (if the beneficiary is located in Colombia).
Sale or transfer of rights over certain intangibles associated with industrial property.
Gambling activities (except of those operated online).
Generally, VAT’s taxable base is the price of the goods or services, and the tax rate is 19 percent. However, there is a special taxable base and/or a special tax rate (5 percent or 0 percent) for certain goods or services.
Usually, a taxpayer may reduce input VAT by offsetting it against output VAT.
Foreign suppliers providing services, including digital services, rendered in Colombia to Colombian recipients that are not VAT responsible (eg, individuals) must generally register with the Colombian Tax Office and account for VAT on their supplies.
National consumption tax is levied on the following services
Mobile phone, internet and mobile navigation services, with a 4 percent rate.
Sale of certain vehicles, aircraft, and other goods, with a rate of 8 percent or 16 percent.
Restaurant and cafeteria services with an 8 percent rate, provided that these services are not rendered under a franchise agreement (restaurant franchise services are levied with VAT). According to Law 2155, 2021, Consumption Tax would not apply to bars and restaurants in 2022.
Turnover Tax – ICA
Local Tax on Industrial, Commercial and Service Activities Tax (“ICA”) levies the gross income generated from industrial, commercial, or service activities carried out in the corresponding municipality. The tax rates are between 0.2 percent and 1.4 percent.
50 percent of the ICA paid in a certain period can be used as a tax credit to offset the Corporate Income Tax or, alternatively, 100 percent can be used as a deductible expense.
SIMPLE Taxation Regime
Colombia provides for a voluntary simple tax regime for small businesses ("SIMPLE Taxation"). The SIMPLE tax replaces income tax, the consumption tax and the turnover tax, with a single, unified payment.
In order for a taxpayer to be able to access to the SIMPLE Taxation regime, among other requirements, gross annual income of the previous taxable year must be less than 100,000 UVT (In 2022, COP3,800,400,000).
The simple consolidated rate will depend on the annual gross income, as well as the business activity of each company. Tax rates range between 1.8% and 14.5% on the gross ordinary and extraordinary income accrued during the taxable year.
Taxpayers of the SIMPLE Taxation regime will not be subject to withholding income tax neither self-withholding, and shall not act as withholding agents except in the case of labor payments.
Not applicable for this jurisdiction.
Not applicable for this jurisdiction.
Hong Kong, SAR
Imports into Hong Kong are generally tax-free with few exceptions. No customs or excise duty is levied on exports from Hong Kong.
Not applicable for this jurisdiction.
Withholding tax on fees for technical or consultancy services applies to payments made to non-residents. Corresponding provisions of the relevant tax treaty may be examined to ascertain any relief or exemption.
Goods and Services Tax
Goods and Services Tax (GST) is an indirect tax that came into effect on July 1, 2017. GST is levied at every stage of production-distribution chain with applicable set off credits in respect of tax paid at previous stages. Goods and services are divided into 5 tax slabs for collection of tax - 0 percent, 5 percent, 12 percent, 18 percent and 28 percent with lower rates for essential items and the highest for luxury and de-merits goods. Petroleum products and alcoholic drinks are taxed separately by the individual state governments.
Any services offered by Indian resident to a person resident outside India are usually treated as "export of service" and are thus exempt from levy of GST which is otherwise payable at 18 percent rate. This is subject to certain exceptions.
Following are the different types of levies in GST:
- Central GST (CGST)
- State GST (SGST)/Union Territory GST (UTGST)
- Integrated GST(IGST)
SGST is levied along with CGST on the supply made by a registered person within a State and UTGST is levied along with CGST on the supply made by a registered person within a Union Territory. However, in no case, both SGST and UTGST are levied on an invoice of supply of goods or services or both. It is either be SGST or UTGST along with CGST which can be levied on the invoice. IGST can be levied on Import or Inter-State supply of goods or services or both. IGST is equivalent to sum total of CGST and SGST/UTGST.
The Indian Government has introduced an equalization levy (EL) on consideration received by non-resident e-commerce operators for e-commerce supply or services at a rate of 2 percent with effect from April 1, 2020. “E-commerce supply or service” has been defined include online sale of goods or online provision of services or facilitation of online sale of goods or provision of service. The levy is triggered on consideration received by a non-resident e-commerce operator on an e-commerce transaction conducted by a person resident in India. Further, EL is also applicable on consideration received by the e-commerce operator from a non-resident for (i) sale of advertisement targeting an Indian resident or customer who has access to such advertisement through an internet protocol (IP) address located in India and (ii) where a non-resident avails the supply of goods or services using an IP address located in India. Further EL is not applicable where the consideration is related to a permanent establishment in India. Additionally, EL is applicable only to digitized products and services, it does not apply to goods and services which are available physically offline i.e. to e-commerce transactions that merely facilitate communication, placement, conclusion and delivery of orders.
Not applicable for this jurisdiction.
Not applicable for this jurisdiction.
In addition to corporate income tax (IRES), local income tax is levied at the level of Italian corporations (ie, IRAP). IRAP is levied on the net value of the production generated in each Italian region, computed as the difference between revenues and production costs. Employment expenses (if not related to open-ended relationships), write-down of assets and other specific costs are not deductible. The IRAP tax rate is equal to 3.90 percent, but any region can decide to increase the tax rate up to 4.82 percent. Further increases in the rate are provided for specific business activities. IRAP is deductible from corporate income tax up to an amount of 10 percent of IRAP paid.
Specific IRAP provisions apply to banks and financial institutions.
The Consumption Tax rate has increased from 8 percent to 10 percent since October 1, 2019.
Net Wealth Tax (NWT)
Both Luxembourg resident companies and Luxembourg branches of non-resident companies are subject to NWT. As of January 1, 2016, a new scale of rates has been introduced as follows:
- 0.5 percent up to EUR500 million and
- 0.05 percent over EUR500 million.
Interest deduction limitation
In practice, the tax administration uses a debt-to-equity ratio of 85:15 for the financing of participations. Luxembourg has introduced an interest limitation rule in the context of the transposition of ATAD. As from January 1, 2019, exceeding borrowing costs (ie, tax-deductible borrowing costs which exceed underlying interest income and economically equivalent income) are only deductible up to the higher of 30 percent of earnings before interest, taxes, depreciation and amortization (EBITDA) of the taxpayer and EUR3 million.
Exceeding borrowing costs which are not deductible in a tax period may be carried forward without time limitation. Unused interest capacity in a given tax period may be carried forward for 5 years.
The interest limitation rule is not applicable to exceeding borrowing costs:
- On loans concluded before June 17, 2016, so long as the loans are not subsequently modified;
- On loans to finance EU long-term public infrastructure projects; or
- On loans incurred by standalone entities and "financial undertakings."
Intra-EU hybrid mismatches
As from January 1, 2019, hybrid mismatch provisions apply in an intra-EU context as a result of ATAD.
The rule aims at preventing hybrid mismatches which result in a double deduction (ie, a deduction of the same expenses both in Luxembourg and in the other EU member state) or a deduction without inclusion (ie, a deduction of expenses in Luxembourg and no corresponding inclusion of the income in the taxable basis of the other EU member state).
The anti-tax avoidance directive provisions provide that when a structure includes a hybrid mismatch with double deduction, the deduction shall only be granted in the EU member state where the payment has its source. When a structure includes a hybrid mismatch with deduction without inclusion, the EU member state of residence of the payer shall deny the deduction of such payment.
Hybrid mismatches with third countries (ATAD 2) and covering a wider range of intra-EU mismatches have been implemented and came into force on January 1, 2020, with the additional “reverse hybrid” measures applying from the 2022 tax year.
Payments to EU black-listed entities
Interest or royalties paid or due to related enterprises as of 1 March 2021 are not tax deductible in Luxembourg if the recipients are corporate entities established in countries that are 'black-listed' as being 'non-cooperative' for tax purposes (based on the so-called EU blacklist adopted by the EU Council in 2017, as revised).
On March 25, 2020, the Law implementing the Council Directive (EU) 2018/822 (on administrative cooperation in the field of taxation, of May 25, 2018) introduces an obligation on a wide range of intermediaries to disclose cross-border tax arrangements to the tax authorities.
A reportable cross-border arrangement means any cross-border arrangement that contains at least one of the hallmarks foreseen by DAC 6, which refer to characteristics, features and examples of cross-border arrangements that present an indication of potential risk of tax avoidance. In principle, a cross-border arrangement becomes reportable if it meets one or more hallmarks, while certain hallmarks can only be triggered if a main benefit test (MBT) is also satisfied (ie, when the main benefit or one of the main benefits that a person can reasonably expect to obtain from the arrangement, taking into account all relevant facts and circumstances).
The first reportable transactions are those whose first implementation step occurred between June 25, 2018 and June 30, 2020 and should be reported by February 28, 2021. In addition, starting from January 1, 2021, any other reportable arrangements implemented as from July 1, 2020 that would fall under DAC 6 should be reported within 30 days of their implementation (ie, any reportable arrangements implemented between July 1, 2020 and December 31, 2020 should be reportable by January 31, 2021). These are the new deadlines that have been extended by the government within the context of the COVID-19 pandemic.
Proposed EU Directive to fight against the misuse of shell entities for tax purposes
On December 22, 2021, the EU Commission published a proposed Directive to tackle legal entities with no or minimal substance and no economic activities that are used for improper tax purposes.
The Directive introduces reporting requirements for EU tax-resident companies with certain mobile and passive income streams and inadequate operational substance. In certain cases of inadequate substance, the benefits of tax treaties and EU Directives may be denied, resulting in an increased withholding tax burden as well as potential penalties for failure to report or incorrect reporting.
The EU Commission recommended that Member States should incorporate the Directive into their national law by June 30, 2023, for the rules to enter into force on January 1, 2024.
Not applicable for this jurisdiction.
VAT is a general consumption tax levied on goods and services. It is applicable at each stage of the economic chain, which means that the tax base for taxation is the value added at each stage of that cycle.
VAT is due in respect of the following operations: (i) transfer of goods and services undertaken within the national territory, on a paid basis, and (ii) import of goods. Mozambique VAT rate is 17 percent.
Import duties and taxes
On import of goods into Mozambique, custom duties, excise duty (if applicable) and VAT are levied, unless the goods are exempt from these taxes or subject to a special customs regime. Exports are 0 rated.
Double taxation treaties
Mozambique has signed tax treaties with the UAE, Mauritius, Italy, Portugal, Botswana, India, South Africa, Vietnam and Macau.
In Mozambique, investors may apply for investment projects. The incentives available are of four types, namely (i) tax incentives, (ii) customs incentives, (iii) incentives related to the repatriation of capital invested and profits and (iv) the protection/guarantees provided by the Mozambican State for private property and investments.
Not applicable for this jurisdiction.
Foreign employees who work temporarily in Norway may opt to pay 25-percent salary tax on the gross remuneration received, up to a certain maximum (NOK643,800 in 2022). The 25-percent salary tax is final, and no deductions are allowed. Certain exemptions apply.
Financial Transaction Tax (ITF – Impuesto a las Transacciones Financieras) is applied to debits or credits within accounts in the financial system and has a rate of 0.005 percent of the transaction amount.
Certain legislative measures have been introduced in the recent year to ensure more effective tax collection and combating tax fraud, eg:
- introduction of the minimum corporate income tax that covers the companies which are taxpayers and the tax groups that in a fiscal year suffered loss from a source of income other than capital gains or achieved the share of income in revenues (other than from capital gains) of not more than 1%;
- introduction of the provisions on deemed income to the employer in connection with so called illegal engagement of an employee or the failure to disclose a correct amount of income from engagement as well as on exclusion from tax deductible costs of the remuneration paid by virtue of illegal engagement.
An annual property tax is levied by the local tax authorities for constructions, land and vehicles held in patrimony. Other local taxes are applicable in some cases.
Rules for deductibility of borrowing costs
In certain situations, excess borrowing costs, which are higher than the RON equivalent of EUR1 million, are deductible within a limit of 30 percent of the computation basis.
The excess borrowing costs which fail the 2 deductibility tests are not deductible in the tax period when they are incurred, but will be carried forward to the following tax periods without a time limit.
The provisions of EU Directive 2017/1852 on tax dispute resolution mechanisms within the European Union are present in the Romanian legislation. This provides the steps, and maximum deadline for each step, for the resolution of any tax disputes involving a Romanian tax resident entity and an EU tax resident entity.
The DAC6 provisions (i.e. reporting of cross-border arrangements) have been implemented in the Romanian legislation. The wording is in line with EU Directive 2018/822 of 25 May 2018 and introduces reporting obligations for local taxpayers and intermediaries (e.g., advisors) that were involved in implementation of cross-border transactions that meet certain hallmarks listed by the legislation. Tax consultants and lawyers are covered by the professional privilege and can only report if the taxpayer releases them from such privilege. In the absence of such a waiver granted by the taxpayer, the reporting responsibility lie with the taxpayer.
Value-added tax shall be charged by Romanian companies for goods supplied or services provided.
Foreign entities are also liable to register for VAT purposes in Romania and charge Romanian VAT on supplies of goods and provision of services whose place of supply is in Romania. The standard VAT rate is 19 percent, while reduced VAT rates of 9 percent or 5 percent are applicable for supply of certain goods.
Companies registered for VAT purposes are allowed to deduct the input VAT incurred upon acquisition of goods and services used in respect of taxable transaction. The difference between the output VAT charged on goods supplied or services provided and the input VAT incurred upon acquisitions of goods or services should be paid to the state budget, if positive, or could be requested for refund from the state budget, where negative.
From January 1, 2019, foreign companies supplying e-commerce services to Russian customers, including to private individuals, legal entities and individual entrepreneurs, are obliged to register with the Russian tax authorities. The legislative changes cover both B2C e-commerce supplies, as is the case under previously enacted rules, and B2B e-commerce operations. B2B supplies shall not be subjected to VAT taxation via a reverse-charge VAT mechanism, and foreign e-commerce suppliers must independently calculate and pay VAT on the value of rendered services from January 1, 2019 on a go-forward basis.
Tax implications and latest initiatives associated with COVID-19 pandemic
In response to the economic difficulties presented by the current public health situation, the Russian president, legislature and government are enacting initiatives designed to support businesses through easing tax payment and compliance burdens. While some provisions apply to businesses of all sizes and in all sectors, there are special measures targeted at helping small and medium-sized businesses and those operating in the industries most heavily affected by the current circumstances.
The measures can be grouped as follows: extension of deadlines for payment of taxes, extension of the deadlines for submitting tax returns and tax calculations, suspension of tax control and granting deferrals on individual basis. The most important tax measures include (applicable for specific types of taxpayers):
- A 6-month delay for the payment of income tax for 2019; a 6-month delay for the payment of taxes (excluding VAT and taxes paid as tax agents) for the first quarter of 2020; a 4-month delay for the second quarter and first half of 2020
- A 6-month delay for social insurance contributions for the March-May period 2020 for 6 months; a 4-month delay for the June-July period of 2020 and
- Deferrals (installments) for payment of specific taxes, advance payments for taxes and insurance contributions which may be requested on an individual basis.
Not applicable for this jurisdiction.
Interest deduction limitations
In addition to any transfer pricing adjustments that may be applicable, SA has interest deduction limitation provisions, which may apply to loan funding obtained from a controlling foreign company not subject to tax in SA. From April 1, 2023, the interest deduction will limited to 30 percent of a corporate's adjusted taxable income, which is in line with the OECD's recommendation.
Interest deduction limitation rules also apply to certain reorganization transactions.
VAT is levied in SA at a standard rate of 15 percent. VAT is largely directed at the domestic consumption of goods and services as well as at goods and services imported into South Africa. The tax is designed to be paid mainly by the ultimate consumer or purchaser in South Africa.
Most business transactions carried out in South Africa are subject to VAT. The tax is collected by businesses, which are registered as vendors with SARS. A vendor is required to register for VAT if they made taxable supplies or have a written contractual obligation to make taxable supplies of more than ZAR1 million during the relevant period. A vendor may register voluntarily in certain instances.
Foreign exchange controls
The Financial Surveillance Department (FSD) of the South African Reserve Bank imposes exchange controls on South African residents. Exchange control is not applicable to nonresidents, but they must comply with the notice requirements to the FSD in order to facilitate subsequent withdrawals of their capital from SA. Most commercial banks are authorized dealers of the FSD.
Value added tax (VAT) is a tax levied on added value acquired in the process of the transaction of goods or the provision of services. VAT is imposed on value generated at each step of a transaction, and applies a VAT rate of 10%. Certain supplies are eligible for VAT zero-rating or VAT exemption. VAT zero-rating is the same as VAT exemption in that no VAT is charged. However, only VAT zero-rating allows input VAT deduction for VAT incurred in relation to the VAT zero-rating supplies. The VAT imposed on businesses is calculated by subtracting the input tax from the output tax.
Value added tax should be reported and paid every 6 months, and the taxable period of 6 months is divided into 3 months for a preliminary report.
Not applicable for this jurisdiction.
Value Added Tax (VAT)
VAT should be charged on the supply of goods or services. Registration for VAT is normally mandatory if sales of taxable goods or services are made in Sweden by a taxable person. The standard VAT rate is 25 percent. Reduced rates apply on certain goods and services.
Effective as of May 1, 2017, a foreign enterprise, institution, group or organization with no PE in Taiwan, but that supplies electronic services to domestic individuals, with annual income derived from Taiwan that exceeds TWD480,000 shall be the taxpayer (the E-Services Provider) under the Taiwan Value-added and Non-value-added Business Tax Act, and shall apply by itself or appoint a Taiwan resident or an entity with a PE in Taiwan as its tax agent for taxation registration, filing bimonthly VAT returns and paying VAT.
On January 2, 2018, the Taiwan authority further introduced a ruling in regard to the income tax payable by the E-Services Provider, which applies retroactively from January 1, 2017. Under this ruling, the E-Services Provider is required to report its Taiwan-source income and file annual income tax returns and pay income tax, either by itself or through the Tax Agent, in regard to revenues derived from domestic individuals, while income tax for business-to-business transactions are withheld at source by the domestic business entities.
An environmental tax is applied on places of business at fixed rates that change every year based on the determined categories.
Bank and insurance charges are subject to transaction tax at a general applicable rate of 5 percent.
A simplified taxation system is available for Ukrainian companies upon certain conditions and allows for payment of a single tax at the rate of 5 percent applied on turnover or 3 percent (if the company is a VAT payer).
United Arab Emirates
Value Added Tax
The UAE introduced value added tax (VAT) on January 1, 2018. The VAT regime is loosely based on the EU VAT system with a number of notable differences. The UAE VAT applies to most supplies of goods and services, including the import of goods and services. The standard VAT rate is 5 percent. For specific activities, a zero rate applies (such as on exports), whereas other activities may be exempt (such as financial services).
The UAE is a member of the Gulf Cooperation Council's (GCC) Customs Union, which is governed by the GCC Customs Law. The GCC Customs Union is based on the principle of a single entry point upon which all customs duty on foreign imported goods is collected. Under the GCC Customs Law, customs duties (if any) are levied over the customs value of the foreign imports (eg, the Cost, Insurance and Freight, or CIF, value).
VAT applies generally at 20 percent to supplies of goods and services taking place in the UK, subject to a reduced rate of 5 percent for specified goods and services, and exemptions and zero-rating of certain goods and services.
Not applicable for this jurisdiction.
Value-added tax (VAT) is a tax levied on the supply of goods and services by persons/entities in Zimbabwe once the supplier has reached a certain revenue threshold. A supplier of taxable supplies is obliged to charge VAT at the prescribed rate (which currently is 14.5 percent of the cost of the supply) and pay over this tax to ZIMRA as output tax. Presently, where the value taxable supplies made by a taxpayer have reached ZWL7,800,000 or more in the previous 12 months, or where the taxpayer believes that the value of their taxable supplies will be ZWL7,800,000 or more in the next 12 months, then the taxpayer must register to be a VAT operator with ZIMRA.