Quarterly tax developments - Things to know about this quarter's tax developments and related US GAAP accounting implications - EY

 
Quarterly tax developments - Things to know about this quarter's tax developments and related US GAAP accounting implications - EY
In this issue:
                                          Tax developments ........................ 2
                                          Other considerations .................. 10
                                          Things we have our eyes on ........ 12
                                          Appendix: Treaty changes........... 14

Quarterly tax
developments
Things to know about this quarter’s tax
developments and related US GAAP
accounting implications
Updated through 31 March 2019
Quarterly tax developments - Things to know about this quarter's tax developments and related US GAAP accounting implications - EY
Welcome to our March 2019
Quarterly tax developments
publication. This edition is
                                     Tax developments
updated for certain developments
from 19 March 2019 through
31 March 2019. New                   Legislation enacted in the first quarter
developments are designated          Companies are required to account for the effects of changes in tax laws in the period the legislation is
by a dagger (†) after the            enacted. These changes are included in a company’s estimate of its annual effective tax rate in the first
country name.                        interim period that includes the effective date of the rate change, but not earlier than the period that
Once again, we describe certain      includes the enactment date. If an interim change is significant, companies may need to estimate temporary
tax developments previously          differences as of the enactment date.
summarized in Tax Alerts or
other EY publications or             Federal, state and territories
identified by EY tax professionals   Arkansas — On 26 February 2019, Arkansas enacted legislation adopting federal opportunity zone benefits
or EY foreign member firms.          for state income tax purposes. The benefits apply to projects in population census tracts located in Arkansas
These developments may affect        that are designated as qualified opportunity zones for federal tax purposes as of 1 January 2019. The
your tax provision or estimated      change is retroactively effective for tax years beginning on or after 1 January 2018. See the State and
annual effective tax rate.           Local Tax Weekly for 1 March 2019.
We compile this information          Kentucky † — On 26 March 2019, Kentucky enacted mandatory unitary combined reporting for tax years
because we recognize that, for
                                     beginning on or after 1 January 2019. Other changes include:
many companies, the most
challenging aspect of                •   Requiring a “combined report” to include only US members of the combined group
accounting for income taxes is
identifying changes in tax law       •   Amending the definition of a “combined group” to include only corporations whose voting stock is
and other events when they               more than 50% owned, directly or indirectly, by common owners
occur so the accounting can be
reflected in the appropriate
                                     •   Eliminating intercompany transactions from the computation of “combined income”
period. However, this                •   Excluding from the computation of “combined income” a US corporation that earns 80% or more of its
publication is not a                     income from foreign sources
comprehensive list of all
changes in tax law and other         See Tax Alert 2019-0688, dated 3 April 2019.
events that may affect income
tax accounting.                      Virginia — On 15 February 2019, Virginia enacted legislation requiring companies to exclude global
                                     intangible low-taxed income (GILTI) from their Virginia income tax base. The legislation also allows
We list EY publications that         companies to deduct, for Virginia income tax purposes, 20% of business interest expenses denied as a
you can access through our           deduction for federal tax purposes. The change is effective for tax years beginning on or after 1 January
Tax News Update website, if          2018. See the State and Local Tax Weekly for 15 February 2019.
you are registered. Anyone
interested in registering should     Internal Revenue Code conformity
contact Joan Osborne at
                                     The following chart lists the states that enacted legislation this quarter updating their date of conformity to
joan.osborne@ey.com.
                                     the US Internal Revenue Code (IRC). The chart also includes the dates on which the new conformity date
See our previous editions for        was enacted and became effective. Additionally, it lists certain IRC provisions to which each state will not
additional tax developments.         conform, if applicable. Further information on a state’s IRC conformity can be found in the cited reference.

                                     State            Enactment date Date of conformity              Effective date     Reference
                                     Idaho            4 February 2019 1 January 2019                 1 January 2019 State and Local Tax Weekly
                                                                                                                    for 15 February 2019
                                     Kentucky†        26 March 2019     31 December 2017            1 January 2018 Tax Alert 2019-0688,
                                                                        (for tax years beginning                   dated 3 April 2019
                                                                        1 January 2018 through
                                                                        31 December 2018 only)
                                                                        31 December 2018
                                                                        (for tax years beginning
                                                                        on or after 1 January 2019,
                                                                        with some exceptions)

                                     †
                                         Indicates a new development.

  2 | Quarterly tax developments Updated through 31 March 2019
Quarterly tax developments - Things to know about this quarter's tax developments and related US GAAP accounting implications - EY
State           Enactment date Date of conformity             Effective date      Reference
                                South Dakota 5 February 2019 1 January 2019                   1 July 2019         State and Local Tax Weekly
                                                             (for bank franchise tax)                             for 8 February 2019
                                Virginia        15 February 2019 31 December 2018             1 January 2018 State and Local Tax Weekly
                                                                 (with exceptions)                           for 15 February 2019
                                West Virginia 27 February 2019 31 December 2018               Retroactive to the State and Local Tax Weekly
                                                                                              effective date     for 1 March 2019
                                                                                              of the relevant
                                                                                              federal provision

                               International
                               Brazil — On 4 January 2019, Brazil enacted legislation extending the 31 December 2018 deadline for
                               companies with projects focused on the north and northeastern regions of the country to apply for tax
                               incentives, including a 75% reduction in corporate income tax. The new deadline is 31 December 2023.
                               See Tax Alert 2019-0084, dated 10 January 2019.

                               Denmark — On 31 January 2019, Denmark enacted legislation exempting from tax the dividends that
                               foreign investors receive from certain Danish mutual investment companies if the Danish companies pay
                               a 15% tax on the dividends they receive from their Danish equity holdings. The exemption also applies to
                               dividends that a Danish feeder fund in a fund-of-funds structure receives from a Danish master fund if
                               the master fund pays a 15% tax on dividends it receives from the Danish equities it holds. A 27% withholding
                               tax still applies, however, to dividends distributed to foreign investors, which must file refund claims to
                               recover the Danish withholding tax. The change is effective from 1 March 2019. See Tax Alert 2019-0353,
                               dated 13 February 2019.

                               Hong Kong* — On 1 March 2019, Hong Kong enacted legislation allowing companies to elect to treat
                               unrealized profits and losses on financial instruments as taxable profits or losses. The change applies to tax
                               years ending on or after 1 April 2018.

                               Also on 1 March 2019, Hong Kong enacted legislation exempting income from private collective investment
                               funds from tax. The change is effective 1 April 2019. See Tax Alert 2019-0514, dated 11 March 2019.

                               Japan† – On 27 March 2019, Japan enacted legislation further limiting interest expense deductions
                               under its earnings stripping rules. The change applies to tax years beginning on or after 1 April 2020.

                               Other changes include:

                               •   Broadening the scope of intangible assets subject to transfer pricing rules and adding a new transfer
                                   pricing methodology (applies to tax years beginning on or after 1 April 2020 and to calendar years
                                   beginning in 2021)

                               •   Adding exceptions to the application of the controlled foreign corporation (CFC) rules

                               •   Increasing the amount of the research and development credit that companies may claim against their
                                   corporate income tax liability

                               Unless otherwise indicated, the changes are effective for tax years beginning after 1 April 2019. See
                               Tax Alert 2019-0664, dated 1 April 2019.

                               Portugal — On 28 January 2019, Portugal enacted legislation establishing a real estate investment trust
                               (REIT) regime. The new law exempts REITS from tax on investment income (e.g., dividends, interest),
                               rental income and capital gains. It also allows REITs to carry losses forward for five years but limits the
                               usage of those losses to 70% of taxable income. Other changes include:

                               •   Subjecting REIT income distributed to Portuguese corporate investors to the 21% corporate income
                                   tax rate (plus state and local surcharges, if applicable)

                               •   Subjecting distributions made by REITs to foreign corporate investors to a 10% withholding tax (higher
                                   rates of 25%/35% may apply in certain cases)

                               The changes are effective 1 February 2019. See Tax Alert 2019-0386, dated 18 February 2019.

                               * A Tax Alert on this development is not available.
                               †
                                 Indicates a new development.

3 | Quarterly tax developments Updated through 31 March 2019
Quarterly tax developments - Things to know about this quarter's tax developments and related US GAAP accounting implications - EY
United Kingdom † * — On 12 February 2019, the United Kingdom (UK) enacted a 20% tax on income that
                               certain foreign companies derive by using intangible property to generate UK sales of goods and services.
                               The law includes some exemptions from the tax, as well as an anti-avoidance rule and a formula for
                               apportioning income between the UK and other countries. The tax applies beginning 6 April 2019, but
                               anti-avoidance rules apply beginning 29 October 2018.

                               Other enacted measures include:

                               •   Permitting companies to amortize goodwill for tax purposes at a rate of 6.5% per year in relation to
                                   certain business acquisitions of eligible intellectual property (IP) (effective 1 April 2019) and changing
                                   the intangible assets de-grouping rules (effective 7 November 2018)

                               •   Allowing companies to depreciate over 50 years their tax basis in buildings constructed under
                                   contracts entered on or after 29 October 2018

                               •   Applying a special regime to the taxation of gains from direct and indirect disposals of UK property by
                                   nonresident collective investment vehicles (effective 6 April 2019)

                               •   Modifying the UK CFC rules (effective 1 January 2019) and the UK hybrid rules (effective beginning
                                   either 1 January 2019 or 1 January 2020) to comply with the Anti-Tax Avoidance Directive (ATAD)
                                   of the European Union (EU)

                               Legislation effective in the first quarter
                               Federal, state and territories
                               Alaska — Effective 1 January 2019, public utilities must use an equally weighted, three-factor formula to
                               apportion income to the state, unless specified otherwise. The change was enacted 13 July 2018. See the
                               State and Local Tax Weekly for 27 July 2018.

                               Colorado* — For tax years beginning on or after 1 January 2019, companies must apportion certain
                               income to Colorado using market-based sourcing. The change was enacted 4 June 2018.

                               Connecticut*— Effective 1 January 2019, the cap on certain research and development tax credits is 70%
                               of a company’s annual corporate tax liability, up from 65%. The legislation was enacted 29 December 2015.

                               Georgia — Effective 1 January 2019, the corporate income tax rate decreases to 5.75% from 6%.
                               The reduced rate expires 31 December 2025. The change, among others, was enacted 2 March 2018.
                               See Tax Alert 2018-0504, dated 6 March 2018.

                               Indiana* — For 2019, the financial institution tax rate decreases to 6.25% from 6.5%. The change was
                               enacted 25 March 2014.

                               Kentucky — Effective for tax years beginning on or after 1 January 2019, US members of a unitary
                               business must use combined reporting. In addition, companies must compute their net operating losses
                               (NOLs) after apportioning income to Kentucky and may not share losses among members of a combined
                               group. Other companies (generally telecommunications providers) may not use the single sales factor
                               formula and market-based sourcing to apportion income to Kentucky. The changes were enacted
                               27 April 2018. See Tax Alerts 2018-0819, dated 16 April 2018, and 2018-0911, dated 27 April 2018.

                               Michigan — Effective for tax years beginning on or after 1 January 2019, a financial institution’s tax base
                               is defined as its total equity capital, subject to certain deductions before allocation or apportionment. For
                               a unitary business group of financial institutions, the tax base is the top-tiered parent entity’s total equity
                               capital, subject to certain deductions before allocation or apportionment. This change was enacted
                               26 December 2018. See the State and Local Tax Weekly for 11 January 2019.

                               New Hampshire — Effective 1 January 2019, the business profits tax decreases to 7.7% from 7.9%.
                               The change was enacted 20 April 2018. See the State and Local Tax Weekly for 4 May 2018.

                               †
                                 Indicates a new development.
                               * A Tax Alert on this development is not available.

4 | Quarterly tax developments Updated through 31 March 2019
Quarterly tax developments - Things to know about this quarter's tax developments and related US GAAP accounting implications - EY
New Jersey — Beginning 1 January 2019, companies must use market-based sourcing when apportioning
                               service income to New Jersey. US members of a unitary business must use combined reporting for tax
                               years beginning on or after 1 January 2019 but may elect to include foreign members in the combined
                               group. The changes, among others, were enacted 1 July 2018. See Tax Alert 2018-1342, dated 2 July 2018.

                               North Dakota* — Beginning in tax year 2019, companies may elect to apportion income to the state
                               using a single sales factor method. The change was enacted 20 April 2015.

                               Pennsylvania — For tax year 2019 onward, the percentage cap on the use of NOLs increases to 40%
                               from 35%. The change was enacted 30 October 2017. See Tax Alert 2017-1857, dated 6 November 2017.

                               Puerto Rico — Effective for tax years beginning on or after 1 January 2019, the maximum corporate tax
                               rate decreases to 37.5% from 39%. Other changes include:

                               •   Reducing the 30% alternative minimum tax (AMT) rate to the greater of $500 or 18.5% of AMT net
                                   income (23% of AMT net income for taxpayers with gross revenues of $3 million or more)

                               •   Limiting the deductions that corporations may claim when calculating their AMT

                               •   Allowing corporate service providers whose income is subject to withholding at its source to elect to
                                   apply a fixed tax rate to their gross income to determine their income tax liability

                               •   Adding a new rule to determine whether members of a controlled group qualify as large taxpayers

                               •   Increasing the limit on NOL usage to 90% (rather than 80%) of net income

                               •   Disallowing 75% (up from 50%) of deductions for meals and entertainment expenses

                               •   Allowing companies to deduct 100% of intercompany payments, thus eliminating the prior 51%
                                   disallowance on related-party transactions, provided that the company prepares and submits a
                                   transfer pricing study that includes Puerto Rico with its income tax return filing

                               The changes were enacted 10 December 2018. See Tax Alert 2018-2560, dated 27 December 2018.

                               Virginia — Effective for investments made on or after 1 January 2019 and before 31 December 2024,
                               corporate investors in a Virginia REIT may deduct their investment income so it is not subject to
                               corporate income tax, provided certain conditions are met. The change was enacted 18 April 2018. See
                               the State and Local Tax Weekly for 24 May 2018.

                               International
                               Algeria — Effective 1 January 2019, limits apply to deductions for interest expense on loans paid to
                               shareholders or related companies and to deductions for the cost of technical assistance from foreign
                               suppliers. A 5% withholding tax also applies to income from internet sales or sales on other platforms.
                               The changes were enacted 30 December 2019. See Tax Alert 2019-0203, dated 23 January 2019.

                               Argentina — Effective 1 January 2019, income from new oil and gas projects in Tierra del Fuego may be
                               exempt from tax, under certain requirements that have yet to be issued. The change was enacted
                               14 November 2018. See Tax Alert 2018-2363, dated 29 November 2018.

                               Australia — Effective 1 January 2019, certain new rules apply to hybrid mismatch arrangements
                               (i.e., cross-border arrangements that allow an entity to benefit from differences in how two countries
                               treat certain financial instruments and entities) that make it more difficult for foreign investors to use
                               certain entities to circumvent the rules. The changes were enacted 24 August 2018. See Tax Alert
                               2018-1645, dated 16 August 2018.

                               Belgium — Effective for financial years beginning on or after 1 January 2019, Belgium’s CFC, interest
                               limitation and hybrid mismatch rules mirror the EU ATAD. The changes were enacted 30 July 2018.
                               See Tax Alert 2018-1707, dated 28 August 2018.

                               * A Tax Alert on this development is not available.

5 | Quarterly tax developments Updated through 31 March 2019
Bulgaria — Effective 1 January 2019, lessees may not deduct, for tax purposes, costs incurred on
                               operating lease arrangements under IFRS 16 but may deduct costs that would have been recognized
                               under Bulgarian GAAP for the respective operating lease agreements. Additionally, a new interest
                               deductibility rule applies to substantial borrowings, and 10% Bulgarian tax may be levied on certain
                               foreign subsidiary profits that were previously sheltered from taxation. The changes were enacted
                               27 November 2018. See Tax Alert 2019-0116, dated 14 January 2019.

                               Canada* — Effective 1 January 2019, oil and gas companies must deduct expenses from drilling or
                               completing discovery wells at a rate of 30% per year on a declining-balance basis. Previously, these
                               expenses were 100% deductible in the year incurred. The change was enacted 14 December 2017.

                               Cameroon — Effective 1 January 2019, the withholding tax rate on capital gains from real estate sales
                               decreases to 5% from 10%. Additionally, certain petroleum purchases are not subject to withholding tax.
                               Other changes include:

                               •   Requiring investors to use raw materials produced in an economic disaster area to claim tax benefits
                                   for rehabilitating the disaster area

                               •   Allowing eligible businesses that build their production facilities in an economic disaster area to claim
                                   a 30% tax credit against taxable income (capped at FCFA 100 million) for the three years following the
                                   investment year

                               The changes were enacted 12 December 2018. See Tax Alert 2019-0227, dated 25 January 2019.

                               Chad — Effective 1 January 2019, companies subject to the actual taxation regime (i.e., large companies)
                               must pay a minimum tax of XAF 2 million annually. Previously, all companies paid a minimum tax of XAF
                               1 million. The Government maintained the 1.5% tax rate on monthly revenue. The change was enacted
                               31 December 2018. See Tax Alert 2019-0187, dated 21 January 2019.

                               Colombia — Effective 1 January 2019, the 4% surcharge on the corporate income tax no longer applies,
                               and the presumptive income tax (i.e., an alternative income tax based on a percentage of net equity
                               from the prior year) decreases to 1.5% from 3.5%. A 9% corporate income tax rate also applies to income
                               from certain activities (e.g., hospitality services in new or refurbished hotels) for 10 to 20 years, depending
                               on the activity. Other changes include:

                               •   Providing income tax incentives for “mega” investors (i.e., those investing approximately US $320 million
                                   or more over five years and generating 250 jobs or more), as well as entrepreneurs in the technology,
                                   creative and agriculture industries

                               •   Allowing companies to deduct certain paid taxes and contributions when determining net taxable income

                               •   Allowing companies to claim 50% of certain taxes as a credit against their income tax liability

                               •   Subjecting a permanent establishment (PE) to taxation on its worldwide source income and limiting
                                   deductions for interest expenses that are attributable to a PE and not subject to withholding tax

                               •   Establishing a holding company regime that would exempt certain dividends and capital gains from tax

                               •   Applying a 20% withholding tax to payments made to foreign companies for services, royalties, movie
                                   sales (currently 15%) and software licenses (currently 26.4%)

                               •   Increasing the withholding tax on payments made to foreign companies for management and certain
                                   administrative fees to 33% from 15%

                               •   Limiting the application of the CFC regime

                               •   Limiting the thin capitalization rules to loans between related companies with a 2:1 debt-to-equity ratio

                               The changes were enacted 28 December 2018. See Tax Alert 2019-0028, dated 3 January 2019.

                               Costa Rica* — Effective 1 January 2019, the withholding tax rate on certain payments to foreign financial
                               institutions generally increases to 15% from 14%. Lower rates and an exemption may apply in some cases.
                               The changes were enacted 27 November 2014.

                               * A Tax Alert on this development is not available.
                               * A Tax Alert on this development is not available.

6 | Quarterly tax developments Updated through 31 March 2019
Equatorial Guinea — Effective 1 January 2019, the withholding tax rate on nonresident subcontractors
                               increases to 20% from 10% on the gross income earned in Equatorial Guinea. In addition, companies may
                               no longer deduct withholding taxes against their corporate income tax liability. The changes, among
                               others, were enacted 19 December 2018. See Tax Alert 2019-0107, dated 11 January 2019.

                               France — Effective 1 January 2019, the corporate rate on taxable income over EUR 500,000 decreases to
                               31% from 33.33%. A 28% corporate income tax rate still applies to the first EUR 500,000 of a company’s
                               taxable income. These changes, among others, were enacted 31 December 2017. See Tax Alert 2018-0033,
                               dated 5 January 2018. For discussion of a related development, see the “Things we have our eyes on”
                               section of this publication.

                               Effective for tax years beginning on or after 1 January 2019, favorable tax treatment for patent-related
                               income depends on whether the related research and development is performed in France. Additionally,
                               France’s interest deduction limitation rules are intended to mirror those in the ATAD of the EU. Other
                               changes include:

                               •   Limiting deductibility for royalties that a French company pays to certain related parties to license IP
                                   rights if the beneficiary entity is not sufficiently subject to tax and benefits from a “harmful” tax regime

                               •   Implementing the general anti-abuse rule under the EU’s ATAD

                               The changes were enacted 30 December 2018. See Tax Alert 2018-2555, dated 21 December 2018.

                               Hungary — Effective 1 January 2019, new limits apply to interest expense deductions. Companies may
                               deduct excess financing costs of up to the higher of either 30% of earnings before interest, taxes,
                               depreciation and amortization (EBITDA) or a nominal threshold of HUF 939,810,000 (about US $3.3 million).
                               The change was enacted 23 November 2018. See Tax Alert 2019-0349, dated 12 February 2019.

                               Italy — Effective 1 January 2019, Italy’s interest deduction limitation rules, CFC rules, dividends and
                               capital gains rules, among others, have been modified by the decree implementing the ATAD. The
                               changes were enacted 28 December 2018. See Tax Alert 2019-0016, dated 2 January 2019.

                               Also effective 1 January 2019, the corporate income tax rate decreases to 15% from 24% for certain
                               income equaling an adjusted portion of a company’s investment in new fixed assets and the cost of hiring
                               new personnel under certain circumstances. The notional interest deduction (NID), which allowed companies
                               to deduct a certain percentage of their qualifying equity, no longer applies. Companies may, however,
                               continue to carry forward and use any excess NIDs as of 31 December 2018.

                               Other changes include:

                               •   Limiting companies’ ability to claim research and development credits

                               •   Allowing real estate companies to fully deduct mortgage interest

                               The changes were enacted 31 December 2018. See Tax Alert 2019-0061, dated 8 January 2019.

                               Japan — Effective for tax years beginning on or after 1 January 2019, the definition of a PE aligns with that
                               recommended by the Organisation for Economic Co-operation and Development (OECD) in its base erosion
                               and profit shifting (BEPS) project. The change was enacted 28 March 2018. See Tax Alert 2018-0749,
                               dated 6 April 2018.

                               Jordan — Effective 1 January 2019, the income tax rates for pharmaceutical companies, clothing
                               manufacturers and companies engaged in certain industrial activities will decrease to 10% from 14%. The
                               income tax rate for companies engaged in all other industrial activities increases to 15% from 14%. New
                               income tax rates may also apply to companies operating in Development Zones or Free Zones, depending
                               on the type of activity in which they engage. New corporate contribution taxes also apply with varying
                               rates of 1% to 6%. Other changes include:

                               •   Imposing capital gains tax on certain corporate share transfers

                               •   Subjecting certain dividend or profit distributions to tax at the same rate as the company’s corporate
                                   tax rate

                               •   Taxing income from the electronic trade of goods and services

                               The changes were enacted 2 December 2018. See Tax Alert 2019-0008, dated 2 January 2019.

7 | Quarterly tax developments Updated through 31 March 2019
Luxembourg — Effective for financial years beginning on or after 1 January 2019, new CFC rules, general
                               anti-abuse rules and hybrid mismatch rules, among others, apply. The new rules mirror the EU’s ATAD.
                               The ATAD’s limits on interest deductibility also apply. The changes were enacted 21 December 2018.
                               See Tax Alert 2019-0006, dated 2 January 2019.

                               Malaysia — Effective 1 January 2019, companies may carry forward tax losses and certain depreciation
                               allowances only for seven years. They may not, however, deduct payments made to companies located
                               in the territory of Labuan, which Malaysia considers a tax haven. Other changes include applying
                               withholding tax to technical and nontechnical advice, assistance and services. The changes were enacted
                               27 December 2018. See Tax Alert 2019-0033, dated 3 January 2019.

                               Mauritius — Effective 1 January 2019, all tax resident companies, including CFCs with a global business
                               license, may exempt 80% of their foreign dividends, foreign interest and PE income from corporate income
                               tax if they meet certain requirements. The exemption also applies to certain leasing and approved service-
                               related income. Additionally, foreign companies whose principal business and place of effective management
                               are outside Mauritius will be taxed only on their Mauritian-source income. Banks are subject to a separate
                               regime. The changes were enacted 9 August 2018. See Tax Alert 2018-1658, dated 20 August 2018.

                               Netherlands — For tax years beginning on or after 1 January 2019, Dutch companies must pay income tax
                               on certain undistributed passive income from subsidiaries that are tax residents in specified low-tax
                               jurisdictions. The change was enacted 18 December 2018. See Tax Alert 2019-0244, dated 29 January 2019.

                               Panama — Effective 1 January 2019, transfer pricing rules apply to certain related party transactions
                               involving call center activities, as well as transactions between call centers and related parties domiciled
                               in Panama, abroad or under a preferential regime in Panama. Income tax, however, does not apply to
                               income generated by eligible call centers. Other taxes still apply, such as a 5% dividend tax (regardless of
                               the source) and a 2% complementary tax on net profits (under certain conditions). The changes were
                               enacted 19 October 2018. See Tax Alerts 2018-2161, dated 29 October 2018, and 2018-2180, dated
                               1 November 2018.

                               Also, effective 1 January 2019, Panama’s multinational headquarters regime (MHQ regime) aligns with
                               Action 5 of the OECD’s BEPS project. Additionally, transfer pricing rules apply to MHQ companies. Other
                               changes include:

                               •   Guaranteeing MHQ companies at a set tax rate for a certain period

                               •   Applying a 5% tax rate to net taxable income that companies with an MHQ license derive from
                                   rendering services

                               •   Applying a 2% tax rate on gains from transactions conducted by companies with an MHQ license and
                                   allowing the 1% tax withheld by the buyer on the total value of the sale to be treated as capital gains
                                   tax paid in advance

                               •   Allowing MHQ companies that provide administrative support, data processing and interrelated
                                   company loans to qualify for benefits under the MHQ regime

                               The changes were enacted 25 October 2018. See Tax Alerts 2018-2091, dated 19 October 2018, and
                               2018-2218, dated 6 November 2018.

                               Peru — Effective 1 January 2019, Peruvian companies may deduct royalties and service payments made
                               to nonresidents in the tax year in which the payment is made, regardless of whether the nonresident
                               recognized the payment in a different tax year. REITs and funds investing in real estate (which have the
                               same tax benefits as REITs) may depreciate the real estate transferred to them. The changes were
                               enacted 2 August 2018. See Tax Alert 2018-1582, dated 7 August 2018.

                               Also effective 1 January 2019, transfer pricing rules apply to transactions entered into with residents in
                               “non-cooperating jurisdictions,” as well as transactions with residents whose revenue or income is
                               subject to a “preferential tax regime.” Broader definitions of tax havens and preferential tax regimes
                               also apply for Peruvian tax purposes. The changes, among others, were enacted 24 August 2018. See
                               Tax Alerts 2018-1732, dated 4 September 2018, and 2018-1746, dated 5 September 2018.

8 | Quarterly tax developments Updated through 31 March 2019
Additionally, the limit on interest deductibility (3:1 debt-to-equity ratio) now applies to unrelated parties.
                               Previously, it only applied to interest paid to related parties. Other changes include:

                               •   Identifying the circumstances under which a PE exists in Peru

                               •   Identifying the circumstances under which Peru’s indirect transfer rules apply to a transfer of shares
                                   in a foreign company

                               •   Allowing Peruvian companies receiving dividends or profits from their foreign subsidiaries to deduct
                                   foreign income taxes paid by those subsidiaries, provided certain requirements are met

                               The changes were enacted 13 September 2018. See Tax Alert 2018-1831, dated 17 September 2018.

                               Poland — Effective 1 January 2019, eligibility is limited for preferential tax treaty rates and withholding
                               tax exemptions for dividends, interest income, royalties and payments for certain services. The changes
                               were enacted 23 November 2018. See Tax Alert 2018-2321, dated 19 November 2018.

                               Russia — Effective for income and expenses recognized on or after 1 January 2019, transfer pricing
                               rules do not apply to certain domestic transactions and an increased transfer pricing control threshold
                               applies for cross-border transactions. The changes, which were enacted 3 August 2018, apply regardless
                               of when the relevant contract was concluded. See Tax Alert 2018-1627, dated 13 August 2018.

                               Sweden — Effective 1 January 2019, the corporate income tax rate decreases to 21.4% from 22%, and
                               interest expense deductions are limited to 30% of EBITDA. These changes, among others, were enacted
                               14 June 2018. See Tax Alert 2018-1262, dated 21 June 2018.

                               Thailand — For tax years beginning after 1 January 2019, tax authorities may adjust the income and
                               expenses in related party transactions when determining the parties’ corporate income tax liability under
                               new transfer pricing rules. In addition, a new definition of “related parties” applies. The changes, among
                               others, were enacted 21 November 2018. See Tax Alert 2018-2387, dated 3 December 2018.

                               Turkey — Effective 1 January 2019, a 15% withholding tax applies to cross-border payments for online
                               advertising services. The change was enacted 19 December 2018. See Tax Alert 2019-0387, dated
                               18 February 2019. For discussion of a related development, see the Other considerations section of
                               this publication.

9 | Quarterly tax developments Updated through 31 March 2019
Other considerations
Court decisions, regulations      Federal, state and territories
issued by tax authorities and
                                  Federal — The Government published final regulations implementing the one-time transition tax on untaxed
other events may constitute
                                  foreign earnings of US CFCs, under IRC Section 965. See Tax Alert 2019-0232, dated 25 January 2019.
new information that could
trigger a change in judgment in   In final regulations, the Government clarified the scope of the centralized partnership audit regime. It also
recognition, derecognition or
                                  addresses imputed payments, including interest and penalties on those payments. See Tax Alert 2019-0110,
measurement of a tax position.
                                  dated 11 January 2019.
These events also may affect
your current or deferred          The US District Court for the Southern District of Ohio held that the parent company of a controlled
tax accounting.                   group of corporations could not claim a research credit because it failed to establish that it could use an
                                  alternative base period (i.e., the start-up method) to compute a research credit for the years at issue.
                                  See Tax Alert 2019-0327, dated 7 February 2019.

                                  New Jersey — The New Jersey Tax Court held that state tax authorities could not require a multistate
                                  company to add back royalties paid to a related subsidiary when computing the company’s entire New
                                  Jersey net income. The Court noted that the subsidiary filed its own New Jersey corporation business
                                  tax returns, included the income from the royalty payments received from the parent company on those
                                  returns, and properly allocated its income to New Jersey. See Tax Alert 2019-0488, dated 7 March 2019.

                                  Pennsylvania — The Government issued guidance instructing multistate companies to exclude certain
                                  hedging transactions from the formula used to calculate income apportioned to Pennsylvania. See the
                                  State and Local Tax Weekly for 18 January 2019.

                                  State — Several states have recently released guidance for state corporate income tax purposes on
                                  certain provisions under the Tax Cuts and Jobs Act (P.L. 115-97) (TCJA), including:

                                  •   Idaho (repatriated income under the new federal transition tax, GILTI)

                                  •   Missouri (GILTI)

                                  •   Mississippi (repatriated income under the new federal transition tax, GILTI, bonus depreciation,
                                      Section 179 expensing, NOLs, Section 163(j) limitation on business interest deduction, among others)

                                  •   New Mexico (repatriated income under the new federal transition tax)

                                  •   New York (GILTI, FDII)

                                  •   Pennsylvania (GILTI, FDII)

                                  See the State and Local Tax Weekly for 1 February 2019, the State and Local Tax Weekly for 15 February
                                  2019, and the State and Local Weekly for 1 March 2019.

                                  Texas — The Comptroller held that a retail drugstore could not claim a cost-of-goods-sold deduction for
                                  labor costs associated with the time a pharmacist spends counseling consumers or for costs associated
                                  with the purchase of customer lists from previously acquired pharmacies. The Comptroller reasoned that
                                  the costs were not direct costs of acquiring or producing goods. See the State and Local Tax Weekly for
                                  22 February 2019.

                                  Virginia — The Virginia Supreme Court held that state tax authorities properly allocated to Virginia nearly
                                  100% of fees earned by a multinational internet company headquartered in the state, even though 95%
                                  of the company’s sales occurred outside Virginia. See the State and Local Tax Weekly for 1 March 2019.

10 | Quarterly tax developments Updated through 31 March 2019
International
                                Brazil — In a normative instruction, the Government clarified some aspects of applying different Brazilian
                                transfer pricing methods. See Tax Alert 2019-0373, dated 15 February 2019.

                                Colombia — In an opinion, the Government clarified that the dividend tax does not apply to dividends paid
                                from profits generated before FY 2017, regardless of the date the dividends are distributed. See Tax Alert
                                2019-0532, dated 13 March 2019.

                                Denmark — The Danish Supreme Court held that compensation received by a Danish company for marketing
                                services performed on behalf of its Irish sister company was reasonable. As a result, the Court reasoned, transfer
                                pricing adjustments proposed by Danish tax authorities were unwarranted. See Tax Alert 2019-0284,
                                dated 1 February 2019.

                                EU — The EU’s General Court overturned a ruling by the European Commission that Belgium violated EU
                                state aid rules by allowing Belgian multinational companies to reduce their corporate tax liability by the
                                amount of “excess profits” that allegedly result from being part of a multinational group. The Court
                                reasoned that the excess profit ruling system did not qualify as an aid scheme because Belgian tax
                                authorities had discretion over whether to grant tax exemptions, as well as the conditions under which
                                the exemptions would be granted. See Tax Alert 2019-0384, dated 18 February 2019.

                                The EU Court of Justice held that EU member states could deny withholding tax exemptions authorized
                                under the EU’s parent-subsidiary directive and the interest and royalty directive based on the general
                                anti-abuse principle of EU law, even if the member state has no domestic or treaty-based anti-abuse
                                provisions. The decision allows Danish courts to determine whether certain dividend and interest payments
                                made by Danish companies to their EU affiliates violated EU law, thereby barring the companies from
                                claiming withholding tax exemptions for those payments under EU law. See Tax Alert 2019-0426, dated
                                26 February 2019.

                                Kenya — The Court of Appeal held that withholding tax becomes due the earlier of when an expense accrues
                                (i.e., the expense is booked) or a payment is made (i.e., money or other valuable consideration is transferred).
                                Previously, a lower court held that withholding tax was not due until a payment was made. See Tax Alert
                                2019-0395, dated 20 February 2019.

                                Luxembourg — In a circular, the Government explained that it will base determinations of whether domestic
                                companies have a PE in a country with which Luxembourg has an income tax treaty on the treaty’s PE
                                criteria. If the treaty does not define a specific term, the Government will apply Luxembourg’s recently
                                revised PE definition, which addresses the recognition of foreign PEs. See Tax Alert 2019-0422, dated
                                25 February 2019.

                                Mexico — In a decree, the Government reduced the capital gains tax rate to 10% from 35% for certain
                                gains that nonresident entities realize from eligible stock sales from an initial public offering. The
                                reduced rate applies for 2019 through 2021. The Government also allowed Mexican companies to claim
                                a 100% tax credit against taxes to be withheld from certain interest paid to foreign investors from
                                corporate bonds issued through Mexican exchanges. See Tax Alert 2019—156, dated 16 January 2019.

                                Oman — In a ministerial decree, the Government clarified the circumstances under which withholding tax
                                applies to services, interest and dividends. The Government also increased the limit on tax-deductible
                                compensation that a company pays to its owners or partners to 35% of annual taxable income (calculated
                                before deducting the compensation) from 10%. Other changes include broadening eligibility for the
                                reduced tax rates (0% or 3%) applicable to enterprises. See Tax Alert 2019-0344, dated 12 February 2019.

                                Turkey — In a communiqué, the Government explained how to apply the 15% withholding tax on cross-
                                border payments for online advertising services. See Tax Alert 2019-0387, dated 18 February 2019.

11 | Quarterly tax developments Updated through 31 March 2019
Things we have our eyes on
National, state and local       Federal, state and territories
governments continue to seek    AMT credits — In a reversal, the Government announced that it will not subject corporate AMT credits
to increase their revenues.     refundable under the TCJA to sequestration under the Balanced Budget and Emergency Deficit Control
Companies should continue to    Act of 1985, as amended, See Tax Alert 2019-0143, dated 15 January 2019.
monitor developments in this
area. Some of these potential   TCJA guidance — In proposed regulations, the Government outlined how to calculate the deduction for
tax law changes are             foreign-derived intangible income under IRC Section 250. See Tax Alert 2019-0500, dated 10 March 2019.
summarized here.
                                TCJA technical corrections — Former Ways and Means Committee Chairman Kevin Brady (R-TX) released
                                draft legislation of technical corrections for the TCJA. See Tax Alert 2019-0247, dated 29 January 2019.

                                Hawaii — The Government proposed taxing out-of-state businesses on income earned in Hawaii if those
                                businesses engage in or solicit 200 or more business transactions with persons in Hawaii and have gross
                                income attributable to Hawaiian sources of $100,000 or more. See Tax Alert 2019-0305, dated
                                5 February 2019.

                                Kentucky – The Legislature passed legislation that would update Kentucky’s IRC conformity date for
                                2019 to the IRC as of 31 December 2018. Regarding IRC Section 179 expensing, the legislation would
                                conform to the IRC as of 31 December 2003, allowing $100,000 to be expensed when property is
                                placed in service after 1 January 2020. Other changes would include:

                                •   Narrowing the definition of combined group to include only corporations whose common owner
                                    directly or indirectly owns more than 50% of the voting stock

                                •   Limiting combined groups to domestic corporations for combined reporting purposes and requiring
                                    companies to eliminate intercompany receipts when computing combined income

                                •   Adopting an 80/20 test under which US-domiciled corporations earning 80% or more of their income
                                    from sources outside the US would be excluded from the combined income computation

                                See Tax Alert 2019-0568, dated 18 March 2019.

                                New York — The Government proposed requiring companies to include GILTI in their formula for
                                apportioning income to New York. Companies would include net GILTI in the denominator of the formula,
                                as part of their total income, but not in the numerator. The Government also proposed decoupling from
                                TCJA provisions that affect whether a manufacturer qualifies for certain state tax incentives. See Tax
                                Alert 2019-0217, dated 24 January 2019.

                                Oregon — The Government proposed taxing out-of-state businesses on income earned in Oregon if those
                                businesses have sales of $100,000 or more in Oregon. See Tax Alert 2019-0305, dated 5 February 2019.

                                Puerto Rico — The Government proposed a tax incentives bill for investments in designated opportunity zones
                                within Puerto Rico. The incentives, which would be available to eligible businesses for 15 years, would include:

                                •   A 20% fixed tax rate on the net income from opportunity zones

                                •   Tax-free dividend distributions

                                •   A 50% tax exemption for patent-related income and property taxes

                                •   A 90% tax exemption for income from “priority residential projects” in opportunity zones

                                •   A 100% exemption from construction taxes

                                •   A 15% investment credit (maximum) that is transferable

                                •   Deferral of capital gains taxes on investment gains from qualified opportunity funds in Puerto Rico

                                •   An income tax exemption for accrued interest on loans to tax-exempt businesses

                                See Tax Alert 2019-0303, dated 5 February 2019.

12 | Quarterly tax developments Updated through 31 March 2019
International
                                Botswana — The Government proposed requiring all related party transactions in Botswana to be conducted
                                at arm’s length. It also proposed repealing the thin capitalization rules. See Tax Alert 2019-0347, dated
                                12 February 2019.

                                Czech Republic — The Government proposed additional requirements that certain manufacturers must
                                satisfy to qualify for investments incentives. Currently, manufacturers that invest over EUR 4 million
                                (EUR 2 million in selected regions) may receive corporate income tax relief equal to 25% of qualifying
                                investment expenses, depending on the amount of investment and type of activity and subject to
                                government approval. See Tax Alert 2019-0243, dated 29 January 2019.

                                EU — The European Commission is investigating whether Luxembourg violated EU state aid rules by
                                allowing a Luxembourg subsidiary of a Finnish group to deduct notional interest on interest-free loans it
                                received from an Irish company in the same group. See Tax Alert 2019-0494, dated 8 March 2019.

                                France — The Government proposed reversing a previously enacted decrease in the corporate income tax
                                rate. For companies with revenue of EUR 250 million or more, the rate on taxable income over EUR 500,000
                                would revert to 33.33% from 31% for tax years beginning on 1 January 2019 through 31 December 2019.
                                The rate on the first EUR 500,000 of taxable income would remain at 28%. For tax years beginning on or after
                                1 January 2020, the rate would gradually decrease to 25% by 2022, as scheduled. See Tax Alert 2019-0496,
                                dated 8 March 2019. For discussion of a related topic, see the “Effective legislation” section of this publication.

                                Hong Kong — The Government proposed exempting from tax 50% of profits earned by eligible insurance
                                businesses, including those in the marine insurance industry. See Tax Alerts 2019-0484, dated 7 March
                                2019, and 2019-0485, dated 7 March 2019.

                                Luxembourg — The Government proposed reducing the nominal corporate tax rate to 17% from 18% for
                                taxable profits over EUR 200,000. Other proposed changes include allowing the recently enacted
                                limitation on interest expense deductions to apply to certain consolidated groups (a Luxembourg fiscal
                                unity) as a whole, rather than to individual members. See Tax Alert 2019-0476, dated 6 March 2019.

                                Mozambique — The Government proposed an amnesty for taxes, including corporate income taxes, due
                                by 31 December 2018. In exchange for full payment by 31 December 2019, the Government would
                                waive related fines, interest and any charges. See Tax Alert 2019-0338, dated 8 February 2019.

                                New Zealand — A Tax Working Group created by the Government recommended extending capital gains
                                taxation to gains from land sales and land improvements (excluding primary residences), stock sales and
                                sales of intangible property and business assets. See Tax Alert 2019-0423, dated 25 February 2019.

                                OECD — In a public consultation document, the OECD proposed options for addressing the tax challenges
                                of the digital economy and remaining BEPS issues, including:

                                •    Revising profit allocation and nexus rules to account for the value that digital businesses create by
                                    “developing an active and engaged user base, and soliciting data and content contributions from them”

                                •   Adopting an income inclusion rule similar to the GILTI regime in the US that would require certain
                                    shareholders in a company’s foreign branch or subsidiary to “bring into account a proportionate share
                                    of income if that income was subject to a low effective tax rate in the jurisdiction”

                                •   Denying deductions for payments to a related party if the payments were not subject to a minimum
                                    tax rate

                                •   Denying treaty benefits for income that is insufficiently taxed in the other jurisdiction

                                See Tax Alerts 2019-0357, dated 13 February 2019, and 2019-0366, dated 14 February 2019.

                                Singapore — The Government proposed a five-year extension (to 2025) for amortizing certain
                                intellectual property rights that are acquired. It also proposed, among other things, extending the 100%
                                investment allowance by two years to March 2021. The allowance would remain capped at S $10 million
                                (US $7.4 million) per project. See Tax Alert 2019-0429, dated 26 February 2019.

13 | Quarterly tax developments Updated through 31 March 2019
Appendix

                                Treaty changes
                                Tax treaties are agreements between countries that typically address withholding tax rates or exemptions
                                on dividends, interest and royalties paid in multiple jurisdictions. Exceptions may apply based on tax treaty
                                (for instance, reduced rates may apply to certain categories of investors, capital gains from immovable
                                property or property-rich companies may be taxable). All of the following tax treaty changes were effective
                                in the first calendar quarter, except where indicated.

                                Countries involved                         Summary of changes
                                Argentina          Brazil                  Provides general withholding tax rates of 15% on dividends and
                                                                           interest and 10% on royalties; exempts capital gains from tax.
                                Armenia            Israel                  Provides general withholding tax rates of 15% on dividends, 10%
                                                                           on interest and 5% on royalties; exempts capital gains from tax.
                                Austria            Israel                  Provides general withholding tax rates of 10% on dividends, 5%
                                                                           on interest and 0% on royalties; exempts capital gains from tax.
                                Austria            Japan                   Provides general withholding tax rates of 10% on dividends,
                                                                           0% on interest and royalties; exempts capital gains from tax.
                                Austria            Kosovo                  Provides general withholding tax rates of 15% on dividends,
                                                                           10% on interest and royalties; exempts capital gains from tax.
                                Bahrain            Bangladesh              Provides general withholding tax rates of 15% on dividends,
                                                                           10% on interest and royalties; exempts capital gains from tax.
                                                                           (Effective 1 July 2019 in Bangladesh.)
                                Bahrain            Egypt                   Provides general withholding tax rates of 10% on dividends,
                                                                           interest and royalties; exempts capital gains from tax.
                                Belarus            Indonesia               Provides general withholding tax rates of 10% on dividends,
                                                                           interest and royalties; exempts capital gains from tax.
                                Belgium            Norway                  Provides general withholding tax rates of 15% on dividends, 10%
                                                                           on interest and 0% on royalties; exempts capital gains from tax.
                                Belgium            Poland                  Provides general withholding tax rates of 10% on dividends, 5%
                                                                           on interest and royalties; exempts capital gains from tax.
                                Bosnia-            Romania                 Provides general withholding tax rates of 10% on dividends, 7%
                                Herzegovina                                on interest and 5% on royalties; exempts capital gains from tax.
                                Botswana           Malta                   Provides general withholding tax rates of 0%/6% on dividends,
                                                                           8.5% on interest and 7.5% on royalties; exempts capital gains
                                                                           from tax.
                                Brunei             Cambodia                Provides general withholding tax rates of 10% on dividends,
                                                                           interest and royalties; exempts capital gains from tax; 14% on
                                                                           technical fees.
                                Cambodia           China                   Provides general withholding tax rates of 10% on dividends,
                                                                           interest, royalties and technical fees; exempts capital gains
                                                                           from tax.
                                Cambodia           Vietnam                 Provides general withholding tax rates of 10% on dividends,
                                                                           interest, royalties and technical fees; exempts capital gains
                                                                           from tax.
                                Chile              Uruguay                 Provides general withholding tax rates of 15% on dividends and
                                                                           interest and 10% on royalties; exempts capital gains from tax.
                                Cyprus             Luxembourg              Provides general withholding tax rates of 5% on dividends, 0%
                                                                           on interest and royalties; exempts capital gains from tax.
                                Cyprus             United Kingdom          Provides general withholding tax rates of 0% on dividends,
                                                                           interest and royalties; exempts capital gains from tax.

14 | Quarterly tax developments Updated through 31 March 2019
Countries involved                 Summary of changes
                                Czech Republic   Turkmenistan      Provides general withholding tax rates of 10% on dividends,
                                                                   interest and royalties; exempts capital gains from tax.
                                Denmark          Japan             Provides general withholding tax rates of 15% on dividends,
                                                                   0% on interest and royalties; exempts capital gains from tax.
                                Ecuador          Russia            Provides general withholding tax rates of 10% on dividends and
                                                                   interest and 15% on royalties; exempts capital gains from tax.
                                Estonia          Japan             Provides general withholding tax rates of 10% on dividends and
                                                                   interest and 5% on royalties; exempts capital gains from tax.
                                Estonia          Kyrgyzstan        Provides general withholding tax rates of 10% on dividends and
                                                                   interest and 5% on royalties; exempts capital gains from tax.
                                Ethiopia         Poland            Provides general withholding tax rates of 10% on dividends,
                                                                   interest and royalties; exempts capital gains from tax.
                                                                   (Effective 8 July 2018 in Ethiopia.)
                                Ethiopia         Slovak Republic   Provides general withholding tax rates of 10% on dividends,
                                                                   5% on interest and royalties; exempts capital gains from tax.
                                Finland          Hong Kong         Provides general withholding tax rates of 10% on dividends,
                                                                   0% on interest and 3% on royalties; exempts capital gains
                                                                   from tax. (Effective 1 April 2019 in Hong Kong.)
                                Finland          Spain             Provides general withholding tax rates of 15% on dividends,
                                                                   0% on interest and royalties; exempts capital gains from tax.
                                Finland          Sri Lanka         Provides general withholding tax rates of 10% on dividends,
                                                                   interest and royalties; exempts capital gains from tax.
                                                                   (Effective 1 April 2019 in Sri Lanka.)
                                Gambia           Turkey            Provides general withholding tax rates of 15% on dividends,
                                                                   10% on interest and royalties; exempts capital gains from tax.
                                Georgia          Moldova           Provides general withholding tax rates of 5% on dividends,
                                                                   interest and royalties; exempts capital gains from tax.
                                Guernsey         United Kingdom    Provides general withholding tax rates of 15% on dividends,
                                                                   0% on interest and royalties; exempts capital gains from tax.
                                Hong Kong        Saudi Arabia      Provides general withholding tax rates of 5% on dividends, 0%
                                                                   on interest and 8% on royalties; exempts capital gains from
                                                                   tax. (Effective 1 April 2019 in Hong Kong.)
                                Iceland          Japan             Provides general withholding tax rates of 15% on dividends,
                                                                   0% on interest and royalties; exempts capital gains from tax.
                                Indonesia        Serbia            Provides general withholding tax rates of 15% on dividends, 10%
                                                                   on interest and 15% on royalties; exempts capital gains from tax.
                                Iran             Slovak Republic   Provides general withholding tax rates of 5% on dividends,
                                                                   interest and 7.5% on royalties; exempts capital gains from tax.
                                Isle of Man      United Kingdom    Provides general withholding tax rates of 0% on dividends,
                                                                   domestic law rates apply on interest and royalties; exempts
                                                                   capital gains from tax.
                                Jamaica          Mexico            Provides general withholding tax rates of 10% on dividends,
                                                                   interest and royalties; exempts capital gains from tax.
                                Japan            Lithuania         Provides general withholding tax rates of 10% on dividends and
                                                                   interest and 0% on royalties; exempts capital gains from tax.
                                Japan            Russia            Provides general withholding tax rates of 10% on dividends,
                                                                   0% on interest and royalties; exempts capital gains from tax.
                                Jersey           Liechtenstein     Provides general withholding tax rates of 0% on dividends,
                                                                   interest and royalties; exempts capital gains from tax.
                                Jersey           Mauritius         Provides general withholding tax rates of 0% on dividends,
                                                                   interest and royalties; exempts capital gains from tax.
                                                                   (Effective 1 July 2019 in Mauritius.)

15 | Quarterly tax developments Updated through 31 March 2019
Countries involved                                                                 Summary of changes
                                               Jersey                              United Kingdom                                 Provides general withholding tax rates of 0% on dividends,
                                                                                                                                  domestic law rates apply on interest and royalties; exempts
                                                                                                                                  capital gains from tax.
                                               Kosovo                              Switzerland                                    Provides general withholding tax rates of 15% on dividends, 5%
                                                                                                                                  on interest and 0% on royalties; exempts capital gains from tax.
                                               Latvia                              Vietnam                                        Provides general withholding tax rates of 10% on dividends,
                                                                                                                                  interest and royalties; exempts capital gains from tax.
                                               Luxembourg                          Senegal                                        Provides general withholding tax rates of 15% on dividends,
                                                                                                                                  10% on interest and royalties; exempts capital gains from tax.
                                               Macau                               Vietnam                                        Provides general withholding tax rates of 10% on dividends,
                                                                                                                                  interest and royalties; exempts capital gains from tax.
                                               Mexico                              Philippines                                    Provides general withholding tax rates of 15% on dividends,
                                                                                                                                  12.5% on interest and 15% on royalties; exempts capital gains
                                                                                                                                  from tax.
                                               Mexico                              Saudi Arabia                                   Provides general withholding tax rates of 5% on dividends,
                                                                                                                                  10% on interest and royalties; exempts capital gains from tax.
                                               Netherlands                         Zambia                                         Provides general withholding tax rates of 15% on dividends,
                                                                                                                                  10% on interest and 7.5% on royalties; exempts capital gains
                                                                                                                                  from tax.
                                               Nigeria                             Singapore                                      Provides general withholding tax rates of 7.5% on dividends,
                                                                                                                                  interest and royalties; exempts capital gains from tax.
                                               Pakistan                            Switzerland                                    Provides general withholding tax rates of 20% on dividends,
                                                                                                                                  10% on interest and royalties; exempts capital gains from tax.
                                                                                                                                  (Effective 1 July 2019 in Pakistan.)
                                               Philippines                         Sri Lanka                                      Provides general withholding tax rates of 25% on dividends,
                                                                                                                                  15% on interest and 25% royalties; exempts capital gains from
                                                                                                                                  tax. (Effective 1 April 2019 in Sri Lanka.)
                                               Philippines                         Thailand                                       Provides general withholding tax rates of 15% on dividends,
                                                                                                                                  interest and royalties; exempts capital gains from tax.
                                               San Marino                          Serbia                                         Provides general withholding tax rates of 10% on dividends,
                                                                                                                                  interest and royalties; exempts capital gains from tax.

EY | Assurance | Tax | Transactions | Advisory About EY
                                              EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the
                                              capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing,
© 2019 Ernst & Young LLP.
                                              we play a critical role in building a better working world for our people, for our clients and for our communities.
All Rights Reserved.
                                              EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal
SCORE No. 07061-191US                         entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization,
                                              please visit ey.com.
ey.com/us/accountinglink                      Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.
                                              This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

16 | Quarterly tax developments Updated through 31 March 2019
You can also read
NEXT SLIDES ... Cancel