COVID-19 Latin American tax effects and emergency provisions - April 23, 2020 - DLA Piper
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COVID-19 Latin American tax effects
and emergency provisions
April 23, 2020
Agenda Presenters
Augusto Mancinelli, Argentina
• Recent regional tax reform summary
Alex Jorge, Brazil*
• Introduction: Coronavirus disease 2019 (COVID-19) state of emergency in the
region; current expected dates of completion; legislative action Humberto Marini, Brazil*
• Per country analysis: Germán Vargas, Chile
• Import duty tariffs for COVID-19 strategic treatment products
• Deferral of filing and payment dates:
Andres Gonzalez, Colombia
• Taxes affected Daniela Sanchez, Colombia
• Beneficiary taxpayers
Abelardo Acosta, Mexico
• Other incentives to consider
Luis Miguel Sambuceti, Peru
• Description
• Beneficiaries John Guarin, Latin America
• Caribbean centers (services available and economic substance compliance) Antonio Macias, Latin America
• Central America
This information does not, and is not intended to, constitute legal advice. All information, content, and materials are for general
informational purposes only. No reader should act, or refrain from acting, with respect to any particular legal matter on the basis
of this information without first seeking legal advice from counsel in the relevant jurisdiction.
*Independent law firm Campos Mello Advogados
www.dlapiper.com
Recent tax reform summary • Argentina: New administration tax reform package December 2019 w/PAIS • Brazil: Two tax reform packages under discussion in Congress, Bolsonaro reform • Chile: 2018 tax reform that failed due to civil unrest – approved February 2020 w/B2C DGS • Colombia: December 2018 tax reform package declared unconstitutional/restated December 2019 • Costa Rica: Tax reform package came into effect June 2018 w/B2C DGS • Ecuador: December 2019 tax reform package w/B2C DGS • Mexico: December 2019 reform package w/B2C DGS/significant compliance effects • Paraguay: December 2019 reform package w/B2C DGS • Peru: Congress grant of comprehensive tax reform powers to Executive w/B2C DGS? www.dlapiper.com 3
LATAM B2C tax scenario – VAT, WHT and/or other
1. Argentina 2. Uruguay 3. Colombia 4. Costa Rica
1.1. 2014 As of December 2017 VAT at 19 + As of month following regulations are issued
- Up to 3% turnover tax 2.1. VAT at 19% + * NR registration or VAT at 16% +
- Not being collected yet 2.2. WHT at 12.50% + payment intermediaries * NR Registration or
1.2. Dec 2017 * NR registration requirement (not yet applicable) payment intermediaries at NR option
VAT at 21%+ + List of “Usual Suspects”
1.3. Dec 2019 new PAIS tax at 8%
* Payment intermediaries as
collectors 5. Paraguay
+ List of usual suspects As of July 1, 2020
1.1. VAT at 10% +
2.2. WHT at 4.50% +
* NR registration or
payment intermediaries @ NR option
Next in line [9?]
Brazil 6. Mexico
B2B: As of June 1, 2020
Federal WHT at15% + VAT at 16%
State VAT (various rates) + * NR registration with multiple
Municipal WHT (various rates) substance compliance requirements
= EWHTR up to 40%
7. Ecuador
B2C: As of July 1, 2020
VAT at 12%
- Unified VAT reform?
* Payment intermediaries as collectors
- Targeted DST?
8. Chile
As of June 1, 2020
VAT at 19%
* NR registration
- Credit card “collector” at IRS option
www.dlapiper.com 4COVID-19 – consequences for local economies
• Official declaration of national state of emergency (Brazil, Mexico, Nicaragua)
• Economic consequences:
• Economic stagnation/potential regional GDP loss for 2020 at 5%
• Plummeting of commodities prices (economic support basis)
• Lack of influx of hard currency/consequential devaluation
• Loss of employment COVID-19 LEGAL PACKAGES
• Generalized cash-strapped economy Source: Legislature/Presidential/local IRS
Time extension: limited/not limited to COVID-19 period
• Health-related and shelter-in-place and travel constraints and health passport
• Relevant to us:
• Import facilities/export restrictions on necessary health equipment and supplies
• CIT/VAT/payroll/regional tax filings and payment deferrals
• Tax court terms suspended
• Accelerated tax reimbursement provisions
• Incentives to come?
www.dlapiper.com 5Parent/regional opcos cash optimization options Typical: Worth Exploring: LATAM challenges: Distributions Downstream cash deferral • Capital • TP adjustments • Steep WHTs • Dividends • Imports • Indirect taxation Collections • Factoring • Statutory compliance restrictions • Principal prepayments • Other • FOREX regulations restrictions • Interest • Royalties • Services • Overhead reimbursement www.dlapiper.com 6
CIT rates to US
Argentina
CIT 30%*
D-WHT 7%**
ETR 34.9%
Brazil
Peru
CIT 15%
CIT 29.5%
SRTX 10% + 9%
D-WHT 5%
D-WHT 0%
ETR 34.5%
ETR 34%
US IP
owner
Mexico
Chile
CIT 30%
CIT 27%
D-WHT 0%
D-WHT 35%
(US)
ETR 35%****
ETR 30%
Colombia
CIT 32% * 25% as of FY 2021
** 13% as of FY 2021
SUTX 4%*****
*** When investing from a tax non “signed” -treaty country
D-WHT 10% ***** Only applicable to taxpayers operating in the
ETR 32.68% financial sectors
www.dlapiper.com 7WHT rates
Argentina
Royalties:
31.5%/21%/28%
Services:
TS/TA: 21% Practical solution:
Brazil
• LRDs
Peru Royalties 15% • S&M offices
Royalties: 30% Services: 25% • Purchase of intangible by
Services: 30% TS/TA: 15%
TS/TA:15% + other taxes
opco to be amortized?
(~25%)
US IP Owner
Chile
Mexico
Royalties
Royalties:25%/
0%/15%/20%/
35%
30%
Services:
Services:
TS/TA:25%
TS/TA: 15%
Colombia
Royalties 20%
Services:
TS/TA: 20%
www.dlapiper.com 8COVID-19 crisis – as a generator of opportunities to: • Reconsider existing incentives passed on in the past • R&D • Orange economy • FTZ • Regional • Tax NOL extension planning • Forex hedging • Regional transfer pricing planning (…) www.dlapiper.com 9
Regional TP planning opportunities www.dlapiper.com 10
Recession transfer pricing ideas • The current COVID-19 crisis creates challenges for managing tax and transfer pricing positions. The decline in financial markets and the potential ensuing recession require proactive management of tax positions. The following transfer pricing ideas should be considered: • Adjust routine company profit margins • Lower distribution prices • Adjust license agreements • Adjust management service fees • Transfer entities and assets • Lower manufacturing prices • Adjust intercompany financing rates • Provide market support payments • Consider profit split/loss sharing www.dlapiper.com 11
Change in transfer pricing model (example: LatAm)
Assessing LatAm entities moving from a Limited Risk Distribution Model to a Residual Profit Model (RPSM)
• Due to the actual structural change, an arm’s length behavior allows two entities to change their
business model/transfer pricing model
• MNE are exploring the alternative for changing to a model where the risk and profits are shared
• The following flowchart shows the different steps to consider for changing into a new transfer
pricing model:
Model result and
Reviewing actual Review the Initial assessment Review operational Impact on VAT,
Business reason impacts of
agreements cancellation economic reliability for the applicability transfer pricing customs duties and change of
for change policies (force majeure) of RPSM of RPSM capabilities year-end adjustments
methodology
www.dlapiper.com 12LatAm model change considerations beyond TP rules
• LatAm tends to be significantly formalist
• Review actual intercompany agreements, and see if they include clauses (force majeure) or allow to breech it without
penalties
• Focus on new agreements and flexibility to change when structural changes in economy happen
• Explain transfer pricing models from a simplistic perspective
• Moving into risk/profit sharing transfer pricing models, could create difficulty in transmitting and explaining the model to tax
authority
• Requires to have simple explanations in order to avoid a negative perspective from local tax authorities
• Limitation of Double Tax Treaties (DTT) could trigger high withholding taxes on management fees, royalties or technical
services
• Taxpayers should take advantage of DTT and APA programs for changing the TP model
• Mainly if there is a global change in the TP model and APAs were agreed in other countries
• Work in an efficient operational TP model, as new model will require more interaction of information for its correct application
• Assess the local tax consequences for any change on TP as well as disclosure requirements (eg, Mexico)
www.dlapiper.com 13Country-specific model change considerations
• Brazil
• Actual fix margin provide lower flexibility but allow the testing of other entity
• Moving into an OECD TP environment
• Key country for restructuring IP and intercompany transactions
• Also for setting up the risk profile of the different participant of the business model
• Colombia
• Exit charges on business restructuring
• Other countries regional expansion
• Prior to COVID-19, a significant number of entities were expanding into other Latin American entities
• Opportunity to move certain IP or value driver to a jurisdiction that could be a better fit for expanding globally
• Rethink the transfer pricing model for interacting regional or have robust documentation, as local tax
authorities will be aggressively looking for additional taxes
• High scrutiny of models where an entity assumes most of the losses on adverse economic circumstances
www.dlapiper.com 14Per-country analysis BRAZIL www.dlapiper.com 15
COVID-19 measures – Brazil Customs • Zero rate of import tax and excise tax (IPI) levied on the importation of medical items (CAMEX Resolutions # 17 and 22/2020; Decrees # 10,285/2020 and 10,302/2020) • Simplification of customs clearance procedure on importation of medical items (Normative Ruling # 1,927/2020) www.dlapiper.com 16
COVID-19 measures – Brazil (cont’d) Deferrals • Social contributions on gross revenues (PIS/COFINS) and payroll (Ordinance ME # 139/2020) • SIMPLES (simplified tax system to small/medium companies) • FGTS (contribution to the Mandatory Severance and Pension Fund) • Delivery of compliance obligations (DCTF, EFD-Contributions, DEFIS, DASN-Simei, DAA-Individuals, etc.) • Validity of Federal Tax Clearance Certificate extended as of March 24, 2020 for 90 days www.dlapiper.com 17
COVID-19 measures – Brazil (cont’d) Incentives • Temporary 50% reduction of so-called S System contributions (SESCOOP, SESI, SESC & SEST, SENAI, SENAC & SENAT and SENAR). Not applicable to SEBRAE (Provisional Measure # 932/2020) • Temporary zero rate to IOF credit transactions entered into between April 3, 2020, and July 3, 2020 (Decree # 10,605/2020) Other state and municipal • Extension of tax clearance certificates term • Deferral of ICMS due under SIMPLES • Exemption of ICMS levied on importation of medical items • Suspension of terms at administrative proceedings • Deferral or property tax (IPUT) and donation and gift taxes (ITCMD) www.dlapiper.com 18
Opportunities to consider – Brazil Judicial measures • Deferral of other taxes (federal, state and municipal) • Substitution of judicial deposits (guarantees – eg, bank guarantee, insurance guarantee, real estate) • Expedite credit analysis and refund requests • Tax opportunities (eg, exclusion of ICMS from calculating basis of PIS/COFINS www.dlapiper.com 19
Opportunities to consider – Brazil (cont’d) • Voluntary disclosure – deferral of federal taxes avoiding penalty and interest • Review PIS/COFINS credits – non-cumulative regime • Review social contribution on payroll • Negotiate with states (reduction of ICMS rate levied on products subject to substitution regime, suspension of substitution regime) www.dlapiper.com 20
Per-country analysis COLOMBIA www.dlapiper.com 21
COVID-19 measures – Colombia Tax filing deadlines extended Customs relief New payment agreements Penalties forgiveness in special circumstances New expedited process for positive tax balance claims (income tax and VAT) New tax relief in corporate bankruptcy process Suspended deadlines in administrative/judicial processes VAT and transactional tax (GMF) exemptions New solidarity tax www.dlapiper.com 22
Tax filing deadlines extended – Colombia
Corporate income tax/annual tax return for assets held abroad
Tax Previous date Extension
Large taxpayers (LT) 2nd installment April 14-April 27, 2020 2st installment April 21-May 5, 2020
3rd installment June 9-June 24, 2020 3rd installment Did not change
Standard taxpayers (ST) Filings + 1st installment April 14-May 10, 2020 Filings + 1st installment April 21-May 19, 2020
2nd installment June 9-June 24, 2020 2nd installment June 1-July 1, 2020
Financial institutions Filings + 1st installment LT-ST: April 14-April 27, 2020 Filings + 1st installment LT: April 21-May 5, 2020
ST: April 21-May 19, 2020
2nd installment LT-ST: June 9-June 24, 2020 2nd installment Did not change
Taxpayers engaged in hoteling Filings + 1st installment See 1 and 2 Filings+ 1 installment ST: July 31, 2020
services, passenger air travel
services, theatrical activities and 2nd installment See 1 and 2 2nd installment LT: July 31, 2020
live show business activities ST: August 31, 2020
3rd installment See 1 3rd installment LT: August 31, 2020
www.dlapiper.com 23Tax filing deadlines extended – Colombia (cont’d)
Other tax filings
Tax Previous Date Extension
VAT March-April period (bimonthly) March-April period (bimonthly)
Taxpayers engaged in hoteling services, passenger January-April period (quarterly) January-April period (quarterly)
air travel services, theatrical activities and live show May 12-May 26, 2020 June 30, 2020
business activities
Consumption tax March-April period (bimonthly) March-April period (bimonthly)
For taxpayers engaged in the provision of alcoholic May 12-May 26, 2020 June 30, 2020
beverages in situ, cafeterias and restaurants, as well
as travel agencies and tour operators
Wealth tax N/A 1st Installment May 12-May 26, 2020
N/A 2nd Installment Sept 28-Oct 9, 2020
Simple tax regime N/A May 5 -May 18, 2020
January-February period (bimonthly advance)
Nonprofits reports subject to the special March 31, 2020 June 30 , 2020
nonprofit tax regime This deadline is also applicable to the board of directors
approval for 2019 profits
www.dlapiper.com 24Tax filing deadlines extended – Colombia (cont’d)
Local taxes
Some measures have been
adopted at a local level,
extending or suspending
deadlines for paying taxes such
as turnover tax property tax
Decree 461 allowed governors
and mayors to reduce the tax
rates on local taxes
www.dlapiper.com 25Customs relief – Colombia
Registrations deadlines for permanent customs users and large
exporting users was extended until May 31, 2020. Some new rules were
taken on the validity and renewal of their global guarantees.
Penalties for non-attendance to proceedings ordered by the customs
authority were suspended until May 31, 2020.
Personnel of companies located in FTZs may work outside the FTZ area by using any telecommunications equipment or
technology that allows them to connect remotely. Normally, companies located in FTZs must undertake all their activities within
the physical location of the FTZ to access the tax and customs benefits granted under the FTZ regime.
FTZ regulations are being proposed but are not yet approved. They will address new commercial challenges and will facilitate
the regime operability.
The measures reduce customs duties to 0% for imports of: (i) certain medicines,
medical equipment and devices (eg, oxygen, soaps, antibacterial gel, special
masks, gloves for surgery); and (ii) certain goods used in the air travel industry.
The 0% customs duties will apply for six months.
www.dlapiper.com 26New payment agreements – Colombia
Taxpayers will be able to negotiate to defer payment of taxes liquidating interests in the following years:
• Applicable to pending tax obligations
• Not required to provide guarantees, but economic solvency must be credited
• This agreement is subject to approval by special officer within the tax authority
1y • Further regulations would be issued
• It is necessary to provide guaranties (as guarantee trust, insurance escrow,
property seizure, others)
5y
www.dlapiper.com 27Penalties forgiveness in special
circumstances – Colombia
• When a taxpayer is subject to an event that is:
Penalties forgiveness for
• Unforeseen (its occurrence cannot be predicted)
unforeseen, inevitable
• Inevitable (the effects cannot be avoided) and and external events
• External (not related to the taxpayer), it shall not need to
liquidate
• If, due to such event the taxpayer did not comply in a timely
manner with its tax obligations, the taxpayer will not be required
to:
• Liquidate late-filing penalties and/or
• Interests for late filing, and/or late payment on their tax
obligations
• A case-by-case analysis will be required
www.dlapiper.com 28New expedited process for positive tax balance claims – Colombia • Tax authority shall resolve claims requesting refund and/or compensation of tax positive balances within 15 working days after Decree 535 created a new the request is filed. Previously, the deadline was 50 working days expedited process for • Applies to income and VAT taxpayers. For VAT, the taxpayer should requesting tax positive not be classified as high-risk qualified taxpayer balances (income tax and • When considered high-risk qualified taxpayers, the tax authority may VAT) (i) suspend the process, or (ii) authorize the refund and/or compensation • Taxpayers do not need to provide ratio of costs, expenses and deductions when filing the request, but must provide this information within the month following such time as the declared state of emergency ends (currently May 30, 2020) • Requests that have already been filed will benefit from this new process • Tax authority may audit taxpayers who use this expedite process www.dlapiper.com 29
Tax relief for corporate bankruptcy
process – Colombia Decree 560 provides the
following tax measures for
both companies that are
Companies in a bankruptcy process: admitted to a
• Will not be subject to or need to practice withholding tax reorganization process
and for those companies
• For fiscal year 2020 will not have to liquidate or pay advance that are already executing
income tax payments a reorganization
• For the year 2020, will not be subject to the alternative income agreement before to the
tax system (renta presuntiva) issuance of these
regulations
• Subject to VAT withholding tax at a reduced rate of 50%
www.dlapiper.com 30Suspended deadlines in administrative and judicial
processes – Colombia
Colombia has suspended all tax, customs or foreign exchange
procedures or actions carried out by the tax authorities from
March 19 - April 3, 2020. Requests or claims submitted through the tax
authorities’ webpage also are suspended during those dates
Judicial process: Judicial deadlines are suspended, with the exception
of: (i) tutela and habeas corpus processes; (ii) constitutional court’s
proceedings related to the emergency’s Presidential act; (iii)
administrative courts review of emergency’s Presidential acts; and (iv)
some family and criminal proceedings
Tax offices (at the regional and central level) will be closed to taxpayers
from March 19 - April 3, 2020. The tax authorities will provide virtual
assistance to assist taxpayers with registering before the Colombian tax
registry or updating the taxpayer’s tax registry information
www.dlapiper.com 31VAT and transactional tax (GMF) exemptions – Colombia VAT • With the purpose of expending telecommunications access during the state of emergency, mobile and data services, where the price does not exceed two Tax Value Units (COP$71,214 c. US$18), will be exempted from VAT (19%) during the four months following the issuance of regulations. This exemption must be reflected in the billing to each user • VAT rate was reduced to 0% for certain medical equipment (eg, nebulizers, vital sign monitors, sphygmomanometers, defibrillators, portable x-ray machines and hospital beds, among others). During the 30-day state of emergency, the 0% VAT rate will apply to the medical equipment if certain requirements are met Transactional Tax (GMF) • Withdrawals made by nonprofits subject to the special nonprofit tax regime will not be subject to transactional tax (GMF). They may register up to two current or savings accounts www.dlapiper.com 32
Solidarity tax – Colombia • Decree 568 created a new solidarity tax for public officials, contractors of professional services or management support in the public sector, and retirees who earn US$3,125 per month or more • This tax will contribute to the Emergency Mitigation Fund (EMF), and will be destined to social investment favoring vulnerable middle class and informal workers • The solidarity tax due to COVID-19 will have a progressive rate (15%-20%) • This tax accrues at the time of the payment or accounting accrual of wages, fees or pension allowances, and must be withheld by the payor • The Legislative Decree also provides a mechanism to make additional voluntary contributions to the solidarity tax • Both the solidarity tax due to COVID-19 and the amount of voluntary contributions may be reported as non-taxable revenues for income tax purposes • This tax will apply as of May 1-July 31, 2020 www.dlapiper.com 33
Per-country analysis PERU www.dlapiper.com 34
COVID-19 measures – Peru Customs • Import of goods such as medicines and other medical supply/equipment are exempt from custom duties. (Decreto Supremo No. 051-2020-EF) • Exportation of medicines, medical supplies and medical equipment related to COVID-19 requires approval from the Ministry of Health. (Decreto Supremo No. 013-2020-SA) www.dlapiper.com 35
COVID-19 measures – Peru (cont’d) Deferrals • Taxpayers whose annual income does not exceed: US$3 million: • VAT, advanced CIT and payroll taxes of February have been extended until June 2020 (Resolución de Superintendencia No. 065-2020/SUNAT and No. 069-2020/SUNAT) US$7 million: • VAT and advanced CIT of March and April has been extended until June 2020 (Resolución de Superintendencia No. 065-2020/SUNAT) • Payroll taxes for March have been extended until May 2020 (Resolución de Superintendencia No. 069-2020/SUNAT) • Annual CIT return has been extended until June and July (Resolución de Superintendencia No. 061-2020/SUNAT) www.dlapiper.com 36
COVID-19 measures – Peru (cont’d)
Deferrals
• Payment deferrals for refinanced tax debts: taxpayers will be able to delay payments for the
months of March and April until May 2020 and not lose their benefits (Resolución de
Superintendencia No. 065-2020/SUNAT)
• Some municipalities have extended the deadline to comply with property tax payments for March
and April 2020
Incentives
• Tax incentives:
• Early release of funds from the taxpayers’ drawdown fund (Resolución de Superintendencia
No. 058-2020/SUNAT)
• The monthly interest rate for late payment has been reduced from 1.2% to 1% (Resolución de
Superintendencia No. 066-2020/SUNAT)
www.dlapiper.com 37COVID-19 measures – Peru (cont’d)
Economic incentives
• REACTIVA PERÚ (Decreto Legislativo No. 1455):
• Loan guarantee program
• Loans will be provided by private financial institutions
• The guarantee per credit is up to (i) three times the contributions to EsSalud 2019 (9% of the
whole payroll) or (ii) the monthly average of the sales during 2019 (according to the Tax
Administration report) and it does not exceed in any case
• Loans will be granted for periods of up to three years
• Total amount of the guarantee program is S/ 30 billion (US$9 billion)
www.dlapiper.com 38COVID-19 measures – Peru (cont’d) Tax reform • The Congress has given powers to the President to legislate in the following tax matters: • Flexibilization of legal requirements of a tax debt financing application • Modification of the formula to determine advance CIT payments • Allowance of expenses for tax purposes corresponding to donations exceeding the limit • Accelerated depreciation of certain fixed assets • Extension of the deadline to offset the loss generated in 2020 www.dlapiper.com 39
Per-country analysis MEXICO www.dlapiper.com 40
COVID-19 measures – Mexico Customs • None as of today Tax incentives • Nothing at federal level so far; however, the private sector continues to push the government for incentives • Limited deferral and reductions on fines for social security contributions • Some states have offered reduction in local taxes, such as payroll tax, property taxes and real estate transfer tax Deferrals and debt forgiveness • None as of today www.dlapiper.com 41
COVID-19 measures – Mexico (cont’d)
New digital services tax
• The tax reform targets digital services provided by foreign companies to customers located in
Mexico. The main changes to the VAT law include the following:
• Effective June 1, 2020, non-resident companies that provide digital services would be subject
to VAT if the recipient is located in Mexico; the service is provided through applications or
digital content over the Internet and is “automatized”
• Digital services refers to streaming services; gaming activities, download of images, movies,
text, videos, access to news, weather, and traffic information; online education; and
transactions between unrelated parties for the acquisition of goods and services (ie,
intermediation activities), etc.
• The recipient is deemed to be located in Mexico when its domicile or phone number is in
Mexico, when payment is made through an intermediary located in Mexico or when the IP
address is located in Mexico
www.dlapiper.com 42COVID-19 measures – Mexico (cont’d)
New digital services tax (cont’d)
• The foreign provider of digital services is required to register in Mexico as a VAT taxpayer, keep
local books, issue invoices and pay VAT at a 16% rate. It is important to note that the VAT
reform provides that a local PE would not be created
• Basic regulations and forms have been issued for registration procedures
• Further, the tax reform provides that a local legal representative must be appointed, and that a
tax domicile is necessary for review purposes.
www.dlapiper.com 43Opportunities to consider – Mexico Repatriation alternatives • Dividend distributions or capital reductions, to the extent that tax attributes are available • Potential WHT issues should be addressed • Revisit existing structures, and look for alternatives to make them efficient www.dlapiper.com 44
Per-country analysis ARGENTINA www.dlapiper.com 45
COVID-19 measures – Argentina Customs • 0% rate of import tax levied on the importation of critical medical items related to the detection and treatment of COVID-19 (Executive Branch Decree 333/2020) • Lift of anti-dumping rights related to critical medical items • Exportation of items related to the detection and treatment of COVID-19 is forbidden by default. Previous authorization of the Executive Branch must be granted (Executive Branch Decree 317/2020) • Prohibition of the exportation of ventilators (Executive Branch Decree 301/2020) and other critical devices www.dlapiper.com 46
COVID-19 measures – Argentina (cont’d) Deferrals • Social security contributions: deferral of the terms of payment. The extension is larger for companies with activities considered essential in the fight against COVID-19 • Deferral of expiration date to comply with information regimes related to transfer pricing • Tax amnesty; condonation of interests and penalties. The expiration date to apply to the last tax amnesty is postponed to June 30, 2020 • All administrative and judicial terms are suspended. No activity in fiscal courts nor in the Judicial Branch www.dlapiper.com 47
COVID-19 measures – Argentina (cont’d) Incentives • Temporary reduction of social security contribution for companies (small, mid, large). This regime also contemplates the possibility of requesting for public aid to pay salaries under some exceptional situations (Executive Branch Decree 332/2020) • 95% reduction of social security contributions and reduction of tax on debits and credits in bank accounts applicable to companies related to health services (Executive Branch Decree 300/2020) Other provincial taxes • Extension for the payment of turnover tax • Extension for the payment of real estate tax or other property taxes • Extension for the payment of installments of payment plans www.dlapiper.com 48
Opportunities to consider – Argentina • Use of accumulated tax credits to offset against other taxes • Judicial refund requests • Judicial request for suspension of advance income tax payments • Judicial request for suspending withholding tax regimes • Inflation adjustment: opportunity to request a court injunction in order to apply 100% of the inflation adjustments for FY 2019 and future years www.dlapiper.com 49
Per-country analysis CHILE www.dlapiper.com 50
COVID-19 measures – Chile Customs • Simplification of customs clearance procedure on importation of medical items (Normative Ruling # 1.313/2020) Tax incentives • Reduction of stamp tax rate to 0% for the period April-September, 2020 • All measures undertaken by companies to face COVID-19 will be deductible expenses from taxable income, including medical supplies acquisition, home office expenses and agreements with employees to maintain labor contracts www.dlapiper.com 51
COVID-19 measures – Chile (cont’d)
Deferrals and debt forgiveness
• Forgiveness of monthly payments due in April, May and June 2020 regarding corporate tax and
tax on independent workers
• Deferral of VAT due in April, May and June 2020
• Companies with annual income below US$12 million. VAT shall be paid in six monthly
installments beginning in July 2020
• Companies with annual income below US$2.5 million
• Deferral of first payment real estate tax for companies with annual income below US$12 million
• Corporate tax payment deferral to July 2020
• Forgiveness of monthly payments and reimbursement of taxes paid by independent workers in
January and February 2020
www.dlapiper.com 52Tax reform – Chile
• Congress approved tax reform proposed by the government (February 2020)
• Chilean Corporate Income Tax Law (effective as of January 1, 2020)
• General regime “partially integrated”:
• CIT at 27% rate
• Shareholders entitled to a 65% credit of CIT paid by the company against final taxes
• Chilean ETR for foreign shareholders at 35%
• Special CIT regime for small companies (annual income below US$2.5 million)
• New concept of deductible expenses: “able to generate taxable income”
• Reimbursement of absorbed losses will be progressively eliminated in 2024 (90%-2020; 80%-
2021; 70%-2022; 50%-2023)
www.dlapiper.com 53Tax reform – Chile (cont’d)
• New deductible expenses include:
• Mitigation measures to reduce environmental damage
• Payments arising from settlements agreements
www.dlapiper.com 54Tax reform – Chile (cont’d)
VAT
• VAT at 19% on digital services
• Effective as of June 1, 2020
• Includes services rendered by non-resident digital services providers (NDSP)
• Activities subject to VAT include:
i. Intermediation
ii. Supply and delivery of digital content
iii. Supply of software services (SAAS), data storage, platforms and digital infrastructure
iv. Advertising
• NDSP comply via mandatory simplified registration procedure with Chilean IRS to collect, file
and pay VAT on services rendered to Chilean residents
• IRS reserves the right to require Chilean payment intermediaries to collect the VAT from
NDSPs that have not voluntarily registered
www.dlapiper.com 55Caribbean centers www.dlapiper.com 56
COVID-19 effects and measures – Caribbean centers • Curfew/state of emergency declaration throughout • Registrar of companies • Facilitating electronic applications/consultation depending on stage of development • Late fee payments allowed with no penalties • Name search/certificates of good standing available electronically • Courts • Temporary electronic court attendance protocols and procedures enacted • Upper courts procedures adjourned until unspecified date • Economic substance compliance and residency • Compliance assessment will consider COVID-19 travel and undertaking restrictions • Adjustment to operating scenario to be subject to reasonable/practical approach • Meetings in situ to the extent they be reasonable/allowed given travel restrictions • Compliance filing deferrals (benefiting ownership and others) www.dlapiper.com 57
Central America www.dlapiper.com 58
COVID-19 measures – Central America
Costa Rica
• The Government of Costa Rica announced the following tax measures to support taxpayers in
light of the COVID-19 pandemic:
• Deferral of filing and payment for the period April - June 2020 has been approved for corporate
income tax, VAT and custom duties on certain goods
• Deferral of custom duties on determine imports
• Deferral of all tourism taxes
• Permission has been granted to Free Trade Zone (FTZ) operators to operate remotely, allowing
temporary extraction of remote work equipment
www.dlapiper.com 59COVID-19 measures – Central America (cont’d)
Dominican Republic
On March 19, 2020, the Directorate General of Internal Revenue (DGII) announced the
implementation of the following tax measures by Notice 21-2020:
• Corporate income tax:
• Taxpayers may request payment arrangements of up to four installments for the remittance of
tax on transfers of industrialized goods and services (ITBIS, in Spanish) relating to February
2020 (filing and remittance deadline of March 20, 2020) without interest or any other surcharge
• The installments of all payment arrangements currently in force are reduced to 50%, and the
term will be doubled
• The filing and remittance of corporate income tax for the 2019 fiscal year is extended from April
29, 2020, to May 29, 2020
• Taxpayers may request payment arrangements of up to four installments for corporate income
tax purposes without interest or any other surcharge
www.dlapiper.com 60COVID-19 measures – Central America (cont’d)
Dominican Republic (cont’d)
• Individual income tax:
• The filing of the individual income tax return of taxpayers under the simplified tax regime (RST,
in Spanish) is postponed from March 20, 2020, to April 30, 2020
• The remittance of the first installment is postponed from March 20, 2020, to April 30, 2020 for
taxpayers under the RST
• The filing and remittance deadline for income tax on individuals (IR-1) is postponed from March
30, 2020, to April 30, 2020
• These measures are effective immediately.
• Finally, filing and payment of lottery, gambling, casino and sport taxes for the period April-June
2020 have been deferred
www.dlapiper.com 61COVID-19 measures – Central America (cont’d)
El Salvador
• The following tax-related COVID-19 emergency measures have been announced by the
Government:
• Payment dates for monthly payments of corporate income tax have been deferred for some
sensitive economic sectors, but no deferral for filing
• Exemption of tourism related tax charges for small tourism operators
• Judicial suspension to April 4, 2020
• Import duties and VAT exemption for:
i. personal online imports
ii. Free Trade Zone (FTZ) donations to government and charity
iii. certain consumer goods (to ensure medical and food supplies are continuous)
www.dlapiper.com 62COVID-19 measures – Central America (cont’d)
Guatemala
• The following tax-related COVID-19 emergency measures have been announced by the
government:
• Filing and payment dates for corporate income tax, VAT, payroll tax and social security have
been deferred on the assumption that March 24 - April 14, 2020, are non-working days
• Judicial processes are on hold during this same period, thus all notice terms have been
suspended
• Accelerated VAT refund processes have been approved for certain taxpayers
• Customs are operating normally, so there is no suspension of customs terms
www.dlapiper.com 63COVID-19 measures – Central America (cont’d)
Honduras
• The following COVID-19 emergency tax measures have been announced by the government:
• Revenue and judicial processes have been suspended
• Work commissions have been installed to recommend tax and monetary measures aimed at
preserving employment, including:
• salary payments will be fully creditable charges (as opposed to allowed deduction) against
the advanced monthly income tax prepayment of 1% tax on gross income
• salary income will not be taxable income for low income employees (threshold for low income
to be determined)
• creation of funds for employment crisis, funded by increasing the existing VAT rate by 3%
(however, this measure is doubtful because the constitution may not allow it)
• Corporate income tax (CIT) filing to be postponed from April 30, 2020, to June 30, 2020
• CIT payment is due on June 30, 2020, to be deferred and paid as three monthly payments.
www.dlapiper.com 64COVID-19 measures – Central America (cont’d) • CIT prepayments can be deferred by 90 days • No net asset tax will be levied on taxpayers suffering from the COVID-19 crisis • Exemption from penalties and late payment interest granted for unpaid taxes during the crisis www.dlapiper.com 65
Q&A www.dlapiper.com 66
LATAM Tax dedicated team/US-based
John Guarin Antonio Macias Daniela Sanchez
Latin American Tax Desk Principal Economist, LATAM TP DLA Piper, New York
DLA Piper, New York DLA Piper, Miami T: +1 212 335.4514
T: +1 212 776 3877 T: +1 305 423 8526 daniela.sanchez@dlapiper.com
john.guarin@dlapiper.com antonio.macias@dlapiper.com
Alex Jorge Abelardo Acosta Manuel López-Zambrana
Partner, Co-Head of Tax in Mexican Tax Desk Puerto Rico Tax Partner
Brazil* DLA Piper, San Diego DLA Piper, San Juan
Campos Mello Advogados Sao T: +1 858 677 1440 T: +1 787.641.7265
Paulo & NY abelardo.acosta@dlapiper.com manuel.lopez-
T: +1 212 335 4541 zambrana@dlapiper.com
T: +55 (11) 3077 3500
alex.jorge@cmalaw.com
**Campos Mello Advogados is an independent Brazilian law firm.
www.dlapiper.com 67LATAM Tax team/per-country leadership and presenters
ARGENTINA BRAZIL – RIO DE JANEIRO CHILE
Augusto Mancinelli Humberto Marini Rodrigo Alvarez
Of Counsel Partner, Co-Head of Tax in Tax Partner
DLA Piper Argentina Brazil* DLA Piper Chile
T: +54 11 4114 5500 Campos Mello Advogados, Brazil T: +56 2 2798 2600
a.mancinelli@dlapiper.com.ar T: +55 (21) 2217 2011 ralvarezl@bazdlapiper.cl
Humberto.marini@cmalaw.com
COLOMBIA PERU PERU
Andres Gonzalez Francisco Botto Luis M Sambucetti
Tax Partner Head of Tax Tax Partner
DLA Piper Martinez Beltran DLA Piper Peru DLA Piper Peru
T: +57 1 317 4720 T: +51 1 616 1200 T: +51 1 616 1200
agonzalez@dlapipermb.com fbotto@dlapiperpbe.com lmsambuceti@dlapiperpbe.com
CHILE
Germán Vargas
Tax Associate
BAZ|DLA Piper
T: +56 2 2798 2600
ralvarezl@bazdlapiper.cl
www.dlapiper.com 68This information does not, and is not intended to, constitute legal advice. All information, content, and materials are for general informational purposes only. No reader should act, or refrain from acting, with respect to any particular legal matter on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction. www.dlapiper.com 69
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