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April 23, 2020 COVID-19 Latin American tax effects and emergency provisions
April 23, 2020
COVID-19 Latin American tax effects and emergency provisions
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Agenda Presenters
Augusto Mancinelli, Argentina
Alex Jorge, Brazil*
Humberto Marini, Brazil*
Germán Vargas, Chile
Andres Gonzalez, Colombia
Daniela Sanchez, Colombia
Abelardo Acosta, Mexico
Luis Miguel Sambuceti, Peru
John Guarin, Latin America
Antonio Macias, Latin America
*Independent law firm Campos Mello Advogados
• Recent regional tax reform summary
• Introduction: Coronavirus disease 2019 (COVID-19) state of emergency in the
region; current expected dates of completion; legislative action
• Per country analysis:
• Import duty tariffs for COVID-19 strategic treatment products
• Deferral of filing and payment dates:
• Taxes affected
• Beneficiary taxpayers
• Other incentives to consider
• Description
• Beneficiaries
• Caribbean centers (services available and economic substance compliance)
• 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.
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• 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?
Recent tax reform summary
3
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LATAM B2C tax scenario – VAT, WHT and/or other
Next in line [9?]
Brazil B2B:Federal WHT at15% +
State VAT (various rates) + Municipal WHT (various rates)
= EWHTR up to 40%
B2C:
- Unified VAT reform?
- Targeted DST?
2. UruguayAs of December 2017
2.1. VAT at 19% +
2.2. WHT at 12.50% + * NR registration requirement
6. Mexico As of June 1, 2020
VAT at 16%
* NR registration with multiple substance compliance requirements
3. ColombiaVAT at 19 +
* NR registration or
payment intermediaries (not yet applicable)
7. EcuadorAs of July 1, 2020
VAT at 12%
* Payment intermediaries as collectors
1. Argentina1.1. 2014
- Up to 3% turnover tax
- Not being collected yet1.2. Dec 2017
VAT at 21%+
1.3. Dec 2019 new PAIS tax at 8%* Payment intermediaries as
collectors
+ List of usual suspects
4. Costa RicaAs of month following regulations are issued
VAT at 16% +
* NR Registration orpayment intermediaries at NR option
+ List of “Usual Suspects”
5. ParaguayAs of July 1, 2020
1.1. VAT at 10% +
2.2. WHT at 4.50% + * NR registration or
payment intermediaries @ NR option
8. ChileAs of June 1, 2020
VAT at 19%
* NR registration- Credit card “collector” at IRS option
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• 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
• Generalized cash-strapped economy
• 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?
5
COVID-19 – consequences for local economies
COVID-19 LEGAL PACKAGES
Source: Legislature/Presidential/local IRS
Time extension: limited/not limited to COVID-19 period
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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
6
Parent/regional opcos cash optimization options
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US IP owner
Argentina
CIT 30%*
D-WHT 7%**
ETR 34.9%
Brazil
CIT 15%
SRTX 10% + 9%
D-WHT 0%
ETR 34%
Chile
CIT 27%
D-WHT 35%
ETR 35%****
Colombia
CIT 32%
SUTX 4%*****
D-WHT 10%
ETR 32.68%
Mexico
CIT 30%
D-WHT 0% (US)
ETR 30%
Peru
CIT 29.5%
D-WHT 5%
ETR 34.5%
* 25% as of FY 2021
** 13% as of FY 2021
*** When investing from a tax non “signed” -treaty country
***** Only applicable to taxpayers operating in the
financial sectors
7
CIT rates to US
* 25% as of FY 2021
** 13% as of FY 2021
*** When investing from a tax non “signed” -treaty country
***** Only applicable to taxpayers operating in the
financial sectors
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WHT rates
Practical solution:• LRDs• S&M offices• Purchase of intangible by
opco to be amortized?
US IP Owner
Argentina
Royalties: 31.5%/21%/28%
Services:
TS/TA: 21%
Brazil
Royalties 15%
Services: 25%
TS/TA: 15%
+ other taxes (~25%)
Chile
Royalties 0%/15%/20%/ 30%
Services:
TS/TA: 15%
Colombia
Royalties 20%
Services:
TS/TA: 20%
Mexico
Royalties:25%/ 35%
Services:
TS/TA:25%
Peru
Royalties: 30%
Services: 30%
TS/TA:15%
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• Reconsider existing incentives passed on in the past
• R&D
• Orange economy
• FTZ
• Regional
• Tax NOL extension planning
• Forex hedging
• Regional transfer pricing planning (…)
9
COVID-19 crisis – as a generator of opportunities to:
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Regional TP planning opportunities
10
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• 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
11
Recession transfer pricing ideas
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• 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:
Assessing LatAm entities moving from a Limited Risk Distribution Model to a Residual Profit Model (RPSM)
12
Change in transfer pricing model (example: LatAm)
Business reason for change
Reviewing actual agreements cancellation policies (force majeure)
Review the economic reliability
of RPSM
Initial assessment for the applicability
of RPSM
Review operational transfer pricing
capabilities
Impact on VAT,customs duties and
year-end adjustments
Model result and impacts of change of
methodology
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• 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)
13
LatAm model change considerations beyond TP rules
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• 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
14
Country-specific model change considerations
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Per-country analysisBRAZIL
15
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• 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)
Customs
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COVID-19 measures – Brazil
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• 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
Deferrals
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COVID-19 measures – Brazil (cont’d)
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• 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)
Incentives
18
COVID-19 measures – Brazil (cont’d)
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• 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
Judicial measures
19
Opportunities to consider – Brazil
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• 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)
20
Opportunities to consider – Brazil (cont’d)
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Per-country analysisCOLOMBIA
21
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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
22
COVID-19 measures – Colombia
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Corporate income tax/annual tax return for assets held abroad
Tax filing deadlines extended – Colombia
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
services, passenger air travel
services, theatrical activities and
live show business activities
Filings + 1st installment See 1 and 2 Filings+ 1 installment ST: July 31, 2020
2nd installment See 1 and 2 2nd installment LT: July 31, 2020
ST: August 31, 2020
3rd installment See 1 3rd installment LT: August 31, 2020
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Other tax filings
Tax filing deadlines extended – Colombia (cont’d)
Tax Previous Date Extension
VAT
Taxpayers engaged in hoteling services, passenger
air travel services, theatrical activities and live show
business activities
March-April period (bimonthly)
January-April period (quarterly)
May 12-May 26, 2020
March-April period (bimonthly)
January-April period (quarterly)
June 30, 2020
Consumption tax
For taxpayers engaged in the provision of alcoholic
beverages in situ, cafeterias and restaurants, as well
as travel agencies and tour operators
March-April period (bimonthly)
May 12-May 26, 2020
March-April period (bimonthly)
June 30, 2020
Wealth tax N/A 1st Installment May 12-May 26, 2020
N/A 2nd Installment Sept 28-Oct 9, 2020
Simple tax regime
January-February period (bimonthly advance)
N/A May 5 -May 18, 2020
Nonprofits reports subject to the special
nonprofit tax regime
March 31, 2020 June 30 , 2020
This deadline is also applicable to the board of directors
approval for 2019 profits
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Local taxes
Tax filing deadlines extended – Colombia (cont’d)
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
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Customs 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.
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1y
• 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
• Further regulations would be issued
5y• It is necessary to provide guaranties (as guarantee trust, insurance escrow,
property seizure, others)
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Taxpayers will be able to negotiate to defer payment of taxes liquidating interests in the following years:
New payment agreements – Colombia
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• When a taxpayer is subject to an event that is:
• Unforeseen (its occurrence cannot be predicted)
• Inevitable (the effects cannot be avoided) and
• 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
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Penalties forgiveness in special circumstances – Colombia
Penalties forgiveness for
unforeseen, inevitable
and external events
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• Tax authority shall resolve claims requesting refund and/or compensation of tax positive balances within 15 working days after the request is filed. Previously, the deadline was 50 working days
• Applies to income and VAT taxpayers. For VAT, the taxpayer should not be classified as high-risk qualified taxpayer
• When considered high-risk qualified taxpayers, the tax authority may (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
29
New expedited process for positive tax balance claims – Colombia
Decree 535 created a new
expedited process for
requesting tax positive
balances (income tax and
VAT)
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Companies in a bankruptcy process:
• Will not be subject to or need to practice withholding tax
• For fiscal year 2020 will not have to liquidate or pay advance
income tax payments
• For the year 2020, will not be subject to the alternative income
tax system (renta presuntiva)
• Subject to VAT withholding tax at a reduced rate of 50%
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Tax relief for corporate bankruptcy process – Colombia Decree 560 provides the
following tax measures for
both companies that are
admitted to a
reorganization process
and for those companies
that are already executing
a reorganization
agreement before to the
issuance of these
regulations
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Suspended 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
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• 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
VAT
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VAT and transactional tax (GMF) exemptions – Colombia
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• 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
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Solidarity tax – Colombia
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Per-country analysisPERU
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• 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)
Customs
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COVID-19 measures – Peru
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• 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)
Deferrals
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COVID-19 measures – Peru (cont’d)
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• 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)
Deferrals
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COVID-19 measures – Peru (cont’d)
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• 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)
Economic incentives
38
COVID-19 measures – Peru (cont’d)
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• 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
Tax reform
39
COVID-19 measures – Peru (cont’d)
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Per-country analysisMEXICO
40
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• 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
Customs
41
COVID-19 measures – Mexico
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• 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
New digital services tax
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COVID-19 measures – Mexico (cont’d)
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• 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.
New digital services tax (cont’d)
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COVID-19 measures – Mexico (cont’d)
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• 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
Repatriation alternatives
44
Opportunities to consider – Mexico
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Per-country analysisARGENTINA
45
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• 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
Customs
46
COVID-19 measures – Argentina
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• 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
Deferrals
47
COVID-19 measures – Argentina (cont’d)
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• 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
Incentives
48
COVID-19 measures – Argentina (cont’d)
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• 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
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Opportunities to consider – Argentina
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Per-country analysisCHILE
50
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• 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
Customs
51
COVID-19 measures – Chile
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• 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
Deferrals and debt forgiveness
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COVID-19 measures – Chile (cont’d)
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• 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)
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• New deductible expenses include:
• Mitigation measures to reduce environmental damage
• Payments arising from settlements agreements
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Tax reform – Chile (cont’d)
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• 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
VAT
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Tax reform – Chile (cont’d)
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Caribbean centers
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• 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)
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COVID-19 effects and measures – Caribbean centers
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Central America
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• 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
Costa Rica
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COVID-19 measures – Central America
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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
Dominican Republic
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COVID-19 measures – Central America (cont’d)
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• 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
Dominican Republic (cont’d)
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COVID-19 measures – Central America (cont’d)
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• 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)
El Salvador
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COVID-19 measures – Central America (cont’d)
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• 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
Guatemala
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COVID-19 measures – Central America (cont’d)
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• 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.
Honduras
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COVID-19 measures – Central America (cont’d)
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• 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
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COVID-19 measures – Central America (cont’d)
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Q&A
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LATAM Tax dedicated team/US-based
Alex JorgePartner, Co-Head of Tax in Brazil*Campos Mello Advogados Sao Paulo & NYT: +1 212 335 4541T: +55 (11) 3077 [email protected]
John GuarinLatin American Tax DeskDLA Piper, New YorkT: +1 212 776 [email protected]
Abelardo AcostaMexican Tax DeskDLA Piper, San DiegoT: +1 858 677 [email protected]
Antonio MaciasPrincipal Economist, LATAM TPDLA Piper, MiamiT: +1 305 423 8526 [email protected]
Manuel López-Zambrana Puerto Rico Tax PartnerDLA Piper, San JuanT: +1 [email protected]
Daniela SanchezDLA Piper, New YorkT: +1 212 [email protected]
**Campos Mello Advogados is an independent Brazilian law firm.
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LATAM Tax team/per-country leadership and presenters
ARGENTINAAugusto MancinelliOf CounselDLA Piper ArgentinaT: +54 11 4114 [email protected]
CHILEGermán VargasTax AssociateBAZ|DLA PiperT: +56 2 2798 [email protected]
PERUFrancisco BottoHead of TaxDLA Piper PeruT: +51 1 616 [email protected]
BRAZIL – RIO DE JANEIRO Humberto MariniPartner, Co-Head of Tax in Brazil*Campos Mello Advogados, BrazilT: +55 (21) 2217 [email protected]
CHILERodrigo AlvarezTax Partner DLA Piper ChileT: +56 2 2798 [email protected]
PERULuis M SambucettiTax PartnerDLA Piper PeruT: +51 1 616 [email protected]
COLOMBIAAndres GonzalezTax PartnerDLA Piper Martinez BeltranT: +57 1 317 [email protected]
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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.
