Latest updates

Deductible payments to CFCs can result in exorbitant BEAT
McDermott Will & Emery
  • USA
  • June 22 2018

A minimum tax has been imposed on domestic corporations with substantial amounts of deductible payments made to related foreign persons, referred to as the 'base erosion and anti-abuse tax' (BEAT). BEAT is particularly onerous if a controlled foreign corporation's income is subject to foreign taxation because, while foreign income taxes can be used as a credit to reduce regular tax liability, no foreign tax credit is permitted to offset the BEAT.

New Cyprus-Luxembourg double tax agreement enters into force
Elias Neocleous & Co LLC
  • Cyprus
  • June 22 2018

The double tax agreement between Cyprus and Luxembourg recently entered into force. It will apply to income arising from 1 January 2019 with regard to taxes deducted at source and for tax years beginning on or after that date for other taxes. The agreement includes a preamble which makes clear that it is not designed to create opportunities for double non-taxation or reduced taxation through evasion or avoidance and a principal purpose test-based general anti-avoidance rule.

Nothing is certain but death and taxes: Tax Department considers taxation of cryptocurrencies
Montt y Cia SA
  • Chile
  • June 22 2018

A taxpayer recently requested a ruling from the Tax Department on the treatment of gains from cryptocurrency transactions for income and value added tax purposes, as cryptocurrencies are not specifically regulated in Chile or recognised as legal tender or foreign currency. The department's analysis reflected the broad definition of 'income' in the Income Tax Act and the fact that there is no specific exemption or favourable treatment given to these specific gains.

Swiss Upper House issues revised Tax Proposal 17
Walder Wyss
  • Switzerland
  • June 22 2018

The Council of States recently issued a revised version of Tax Proposal 17, a proposal for corporate tax reform. The new proposal is based on the government's March 2017 proposal and aims to set the basis for new rules on Swiss corporate tax (the last proposal having been rejected in a nationwide referendum in February 2017) and secure and enhance Switzerland's overall attractiveness as a business location. Under the proposal, Switzerland will repeal the existing special corporate tax regimes.

Procedure is everything: win for taxpayers and importance of right to just administrative action
Cliffe Dekker Hofmeyr
  • South Africa
  • June 22 2018

In recent years, taxpayers have frequently been unsuccessful in their disputes with the South African Revenue Service, especially where the dispute has involved the interpretation or application of the substantive provisions of tax legislation. However, where disputes have involved compliance with the procedural requirements of tax legislation, taxpayers have generally had greater success.

IRS implementation of tax reform continues to move forward
McDermott Will & Emery
  • USA
  • June 15 2018

The latest announcement by the Internal Revenue Service (IRS) focuses on the $10,000 cap on the amount of state and local taxes that can be deducted for federal income tax purposes. In a press release and release of guidance in the form of Notice 2018-54, the IRS announced that proposed regulations will be issued to help taxpayers understand the relationship between federal charitable contribution deductions in exchange for a tax credit against state and local taxes owed.

Davis Tax Committee releases final reports
Cliffe Dekker Hofmeyr
  • South Africa
  • June 15 2018

The Davis Tax Committee (DTC) recently issued a media statement announcing the publication of four additional final reports and the conclusion of its work based on its terms of reference. The closing report on the work done by the DTC states that the 12 sub-committees consulted widely and that a number of themes emerged from the consultations with various stakeholders. The closing report also mentions some of the challenges faced by the DTC.

Raising jurisdictional issues
Cliffe Dekker Hofmeyr
  • South Africa
  • June 08 2018

The focus of a recent Supreme Court of Appeal case was not the merits of the dispute between the parties, but rather the correctness of the procedure that the taxpayer had followed in its appeal to the Tax Court. The Supreme Court of Appeal held that determining whether the Tax Court's decision was appealable was contingent on whether the decision was one contemplated in the Tax Administration Act.

Taxing transfers of trademark rights as contributions to charter capital
Gorodissky & Partners
  • Russia
  • June 01 2018

The Ministry of Finance recently issued an important clarification regarding the taxation of a foreign parent company's property rights to a trademark as a contribution to the charter capital of its Russian subsidiary. Previously, there had been ambiguity surrounding this issue due to the competing provisions of the Tax Code with regard to the procedure for imposing value added tax on contributions to a company's charter capital and transactions involving property rights to trademarks.

IRS announces HSA contribution limit increase for 2018
McDermott Will & Emery
  • USA
  • June 01 2018

The Internal Revenue Service has increased the 2018 maximum deductible health savings account (HSA) contribution for taxpayers with family coverage under a high deductible health plan to $6,900. Employers that previously lowered their plan's contribution limit for HSAs to $6,850 should consider how to address the increased limit and whether any changes or employee communications are necessary.

Status of SARS interpretation notes
Cliffe Dekker Hofmeyr
  • South Africa
  • June 01 2018

A recent Supreme Court of Appeal judgment referred with approval to certain sections of a South African Revenue Service (SARS) interpretation note. The taxpayer appealed to the Constitutional Court, which held that the courts should not have regard to SARS interpretation notes when interpreting legislation, but may do so where SARS's practice is evidenced by an interpretation note which has been recognised by SARS and the taxpayer.

Waiver leads to double tax liability on patent royalties
McDermott Will & Emery
  • USA
  • May 25 2018

Declining to address whether certain technology licensing royalties should be subject to taxation as income or capital gains, the US Court of Appeals for the Third Circuit found that a patentee-taxpayer had waived his claim on appeal and affirmed the Tax Court's decision that the royalties should be treated as income. The Third Circuit acknowledged that a patentable invention may be subject to capital gains treatment even without a patent or patent application.

Quebec goes it alone with sales tax proposal
Thorsteinssons LLP
  • Canada
  • May 25 2018

Quebec recently announced that it intends to expand its requirements for non-resident vendors to collect and remit Quebec sales tax on sales to Quebec consumers, effective as early as January 1 2019. It will be interesting to see whether the Quebec government has the authority to impose requirements on non-resident businesses that do not carry on business in the province. Another issue will be whether an assessment for failure to collect the tax can be enforced against a non-Quebec seller.

SARS speaks up: clarity provided on taxation of cryptocurrencies
Cliffe Dekker Hofmeyr
  • South Africa
  • May 25 2018

The South African Revenue Service (SARS) recently announced that it will continue to apply normal income tax rules to cryptocurrencies and expects affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income. Due to the growing popularity of cryptocurrencies in South Africa and the absence of legislation concerning their taxation and regulation, SARS's decision to address this issue was widely anticipated.

Tax treatment of doubtful debts to be clarified through statutory amendments
Cliffe Dekker Hofmeyr
  • South Africa
  • May 18 2018

In line with the removal of the remnants of the administrative assessment system in 2015, the South African Revenue Services commissioner's discretion in respect of the doubtful debt allowance was to be deleted from the Income Tax Act. The intention behind this deletion was that, in future, the allowance would be claimed according to certain criteria set out in a public notice. However, according to the recent budget, it is now proposed that the criteria for determining the allowance be included in the act.

Switzerland and Brazil sign double taxation agreement
Walder Wyss
  • Switzerland
  • May 18 2018

Switzerland and Brazil recently signed a double taxation agreement, which is a major achievement for both countries and has been a long-standing demand of the private sector. The new agreement will significantly increase Switzerland's attractiveness for Latin American investments and provide investors with legal certainty in tax matters.

Timely opinion regarding state taxation of Subpart F income and dividends from foreign affiliates
McDermott Will & Emery
  • USA
  • May 18 2018

The New Mexico Administrative Hearings Office recently issued an opinion that addressed the following questions: under what circumstances can a state constitutionally impose tax on a domestic company's income from foreign subsidiaries, including Subpart F income; and when is factor representation required? Since many state income taxes are based on federal taxable income, inclusion of these new categories of income at the federal level could potentially result in their inclusion at the state level.

Oregon bars use of three-factor apportionment formula
McDermott Will & Emery
  • USA
  • May 11 2018

The Oregon Supreme Court has rejected a business taxpayer's constitutional challenges to a 1993 Oregon statute that eliminated the right to utilise a three-factor apportionment formula in calculating Oregon income tax. The Oregon Supreme Court joined courts in Texas, Minnesota, California and Michigan in rejecting taxpayer arguments that states which have enacted Article IV of the Multi-state Tax Compact have entered into a binding contractual obligation which may not be overridden.

Legal professional privilege and director general of inland revenue's powers
Shearn Delamore & Co
  • Malaysia
  • May 11 2018

Members of the Malaysian Bar recently complained that Inland Revenue Board officers had carried out raids on them in order to audit their clients' accounts and gain access to those records. The Malaysian Bar then wrote to the director general of inland revenue (DGIR), stating that such audits breached the principle of solicitor-client privilege. However, the DGIR held that the Income Tax Act overrode the provisions of the Evidence Act that conferred solicitor-client privilege.

Tax rate adjustments
Cliffe Dekker Hofmeyr
  • South Africa
  • May 11 2018

​Although an increase of 1% in the value added tax rate was announced in the budget in February 2018, no adjustments have been made to the top four income tax brackets. Rather, below-inflation adjustments to the bottom three income tax brackets were announced. It was also announced that the primary, secondary and tertiary rebates will be partially adjusted to account for inflation.

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