welcome to our sixth foreign tax update webinar:...

The audio portion is available via conference call. It is not broadcast through your computer.

US Toll Free: +1 800 909 4578 Brazil Toll Free: 08008917074 UK Toll Free: 08004961094 Mexico Toll Free: 0018005148506US Toll: +1 212 231 2939*This webinar is offered for informational purposes only, and the content should not be construed as legal advice on any matter.

Tuesday, November 19, 2013 | 1:00 p.m. ET

WELCOME TO OUR SIXTH

FOREIGN TAX UPDATE WEBINAR:

FOCUS ON LATIN AMERICA

CURRENTLY SPEAKING

Agenda

� Welcome remarks

� Regional update• Argentina: Tax increase scenario

• Colombia: Tax haven list

• Regional overview: Reforms / audit trends

� Brazil• Tax accounting rules

• Federal Tax Amnesty Program (REFIS)

• VAT / interstate rates for resale of imported goods

• Transfer pricing: o New rules regulating commodities method

o New rules defining spread on intercompany loans

• CFC rules

• Application of article 7 under DTT

• Cost sharing developments

� Mexico• Mexican 2014 Tax Reform Package

Questions can be posted at any time via chat to the panelist

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John GuarinLatin American Project

Manager DLA Piper, New York

[email protected]

Presenters

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Alex JorgeTax Partner

Campos Mello Advogados, Sao [email protected]

Manuel RajunovCo-Managing Partner

DLA Piper, Mexico [email protected]

John GuarinLatin American Project Manager

DLA Piper, New [email protected]

Leonardo CastroTax Senior Associate

Campos Mello Advogados, Sao Paulo

[email protected]

CURRENTLY SPEAKING

Latin American regional update

Regional update

� Growth rates / Increase of individuals tax base

� Social demand for additional/better programs

� Regional political swing / larger governments additional funding requirements

� Increase in tax collection via:

� Moderate: via tax reforms, strengthening audits (TP /tax haven transactions) and re-negotiating/denouncing abusive tax treaties

� Extreme: expropriation/nationalization of private property and strengthening foreign exchange control

11/19/2013 4

John GuarinLatin American Project Manager

DLA Piper, New [email protected]


Argentina

� Argentine/Swiss, Spanish and Chilean treaties (status)

� Capital gains tax @15% on net gain or on 90% of gross

� Dividend withholding tax @ 10% (+ 35% on equalization)

� Extended application 0.6% bank credit/debit thru 12.31.15

� Audits

� TP auto/pharma � Commod. 6th method (soy:35%; wheat 20%; sunflower 32%)� Turnover tax per municipality

� Blanqueo de Capital Foreign currency whitewash bill

� None tax related: FOREX access /intercompany charges

� To come: new finance minister

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Colombia

� Reg. Decree 2193, October 7, 2013/ comes into force on January 1, 2014.

� Tax haven list and transitory list

� Main negative tax effects:

� Portfolio investment proceeds 25% v 14%

� Overall 33% WHT on all other payments (interest and admin?)

� Related/unrelated party TP compliance

� Fall under the scope of Colombian general anti-avoidance provisions

� US/Colombia 2001 TIEA approval by congress

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1. Andorra

2. Angola

3. Anguilla

4. Antigua and Barbuda

5. Bahamas

6. Bahrain

7. BVI

8. Brunei

9. Cape Verde

10. Cayman Islands

11. Cook Islands

12. Cyprus

13. Dominica

14. Grenada

15. Guyana

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16. Hong Kong

17. Isle of Man

18. Jersey

19. Jordan

20. Labuan

21. Lebanon

22. Liberia

23. Lichtenstein

24. Macau

25. Maldives

26. Marshall Islands

27. Mauritius

28. Monaco

29. Nauru

30. Oman

31. Pitcairn, Henderson, Ducie and Oeno Islands

32. Qeshm

33. St Helena, Ascension and Tristan da Cunha

34. Saint Kitts and Nevis

35. Saint Lucia

36. Saint Pierre and Miquelon

37. Saint Vincent and the Grenadines

38. Samoa

39. Seychelles

40. Solomon Islands

41. Svalbard

42. Trinidad and Tobago

43. Vanuatu

44. Yemen

Tax Havens List


1. Barbados

2. Bermuda

3. Guernsey

4. Kuwait

5. Panama

6. Qatar

7. United Arab Emirates

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Transitory list


Chile

� US tax treaty (2.4.10 @ US Senate from 5.17.12)

� New Government (12.15.13) / education

Peru

� Strengthening of anti abuse enforcement provisions and re-characterization powers to SUNAT

� TP reporting return/report

� Indirect transfer of shares

Venezuela

� Fight against inflation

� Legislative superpower to the President11/19/2013 9

CURRENTLY SPEAKING

Agenda

Brazil• Tax accounting rules



• Transfer pricing: o New rules regulating commodities methodo New rules defining spread on intercompany loans

• CFC rules



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[email protected]



[email protected]

CURRENTLY SPEAKING

Brazil

AGENDA:

• Tax accounting rules



• Transfer pricing:

� o New rules regulating commodities method� o New rules defining spread on intercompany loans

• CFC rules



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[email protected]

Leonardo CastroTax Senior Associate


[email protected]

Brazil

• Tax accounting rules: normative instruction 1,397/2013

� Regulates Transitory Tax Regime (RTT): For tax purposes, companies need to book their revenues, costs and expenses in accordance with the existing accounting rules prior to the conversion to IFRS (2007 Brazilian GAAP)

� Main changes include:� New tax filling obligation - ECF (Escrituração Contabil Fiscal) requires more

detailed adjustments from the IFRS (replacing previous FCONT)� Taxation on dividends distribution: considers the basis for such payment under the

accounting net income calculated under the IFRS (New BRGAAP), therefore, taxing dividends paid in excess of the net income calculated under the old BRGAAP

� Interest on net equity (INE): the equity basis for INE calculation is the 2007 Brazilian GAAP. This interpretation may reduce the amount of INE as a consequence of accounting differences.

• Federal Tax Amnesty Program (REFIS): deadline for joining is December 31, 2013 � Law No. 12,865/13 provides for three main categories of claims/debts, subject to discount

under REFIS: (i) CFC rules (ii) PIS/COFINS; and (iii) other claims � For taxes due until November 30, 2008, the discount varies from (a) 100% to 60% for

penalties; (b) 40% to 20% for isolated fines; and (c) 45% to 25% for interests, depending on the number of installments (up to 180 installments)

Foreign Tax Update Webinar 1211/19/2013 12

Brazil

• VAT / interstate rates for resale of imported goods: uniform rate of 4% forall interstate transactions involving imported goods, as long as:

(i) not subject to local industrialization process or(ii) if subject to local industrialization process, result in products withimported content higher than 40%

� Main exception: Products with no national similar

• Transfer pricing:

� New rules regulating commodities method (Normative Instruction1,395/2013):

� Definition of commodities subject to the application of the PCI and PECEXmethods, as the products listed in Appendix I and products traded in thecommodities and futures exchanges listed in Appendix II of Normative Instruction1,395/2013 and

� Set forth the possibility of adjustments in relation to variations of quality, featuresand content of the substance of the product sold

� New rules defining spread on intercompany loans (Ordinance MF 427/2013):� 3.5% on inbound loans (for deducting the maximum interest expense)� 2.5% on outbound loans (for recognizing the minimum interest income)


Brazil

• CFC rules: Supreme Court ruled that they are:

� unconstitutional to affiliated foreign companies situated in non-tax havenjurisdictions (and before the year 2001 – irrespectively of where situated )

� constitutional to controlled foreign companies situated in tax haven jurisdictions (orin jurisdictions that guarantee shareholding anonymity)

� constitutional to controlled foreign companies not situated in tax haven jurisdictions(or in jurisdictions that guarantee shareholding anonymity)

• Application of Article 7 under DTT: Recent decision

� Decision issued by Federal Court of the 3rd Region on July 2013 confirmed the non-taxation of business profits of a foreign enterprise carrying out business in Brazilwithout a Permanent Establishment under Brazil-Netherlands DTT (similar todecision issued by Superior Court of Justice in “Copesul case” in 2012)

• Cost sharing developments: divergence ruling no. 23/2013� Confirmed and granted general effects for the understanding originally issued by

Federal Tax Authorities on Consultation Proceeding COSIT No. 08/2012 that there isno Corporate Income Tax (IRPJ) or Social Contribution on Net Profits (CSLL) onpayments received under cost-sharing agreements and that such repayments are taxdeductible for the Payor as expenses; and

� Expressly extended such non-assessment position for the PIS/COFINS taxes


CURRENTLY SPEAKING

Agenda

MEXICO• Mexican 2014 Tax Reform Package

A whole new ballgame. From the repeal of the IETU to the new rules for consolidated tax filings, Mexico has revamped its tax system with a focus on revenue enhancements.

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[email protected]

Manuel RajunovCo-managing Partner


CURRENTLY SPEAKING

Mexico

� 2014 tax reform at a glance

� Abolishment of IETU and IDE

� Brand new – old income tax

� Homologized VAT regime

� New consumption taxes

� General provisions

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Manuel RajunovCo-managing Partner


Mexico

� Brand new – old income tax law� Corporate tax rate established at 30%

� New tax treatment of mandatory profit sharing

� Abolishment of installment sale provisions

� Limitations on deduction of fringe benefits and pension fund

� Limitations on deductions on royalties, interest or technical assistance paid to (i) favorable tax regimes; (ii) transparent entities; or (ii) on items not taxable to related-party recipient (anti-double dipping)

� Elimination of LIFO and straight cost as COGS methods

� Elimination of tax consolidation and replaced with deferral option

� Elimination of accelerated depreciation of new fixed assets

� Modification to tax regime for real estate developers

11/19/2013 17Foreign Tax Update Webinar 17

Mexico

� Brand new – old income tax law (cont.)� Elimination of real estate investment companies (SIBRAS)

� New progressive individual income tax rate system introducing rates of 32% (MX$750,000 - MX$1 million), 34% (>MX$1 million - MX$3 million) and 35% (>MX$3 million)

� Introduction of 10% income tax rate on capital gains on sale of publicly traded securities

� New anti-treaty shopping provisions

� New definition of maquiladora for tax purposes to allow for permanent establishment protection� All income from manufacturing operations)� 30% foreign ownership of manufacturing assets

� Transfer pricing rules remain� Safe harbor (ROI of 6.9% of assets or 6.5% of cost)� Apas still allowed

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Mexico

Foreign Tax Update Webinar 19Foreign Tax Update Webinar 19

� Brand new – old income tax law� Mexican tax on sale of equity issued by Mexican companies (35%

of net gain)

� New dividend withholding tax (10%)

� Interest and other items of WHT remain as before

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Mexico

Foreign Tax Update Webinar 20Foreign Tax Update Webinar 20

� Homologized VAT regime

� 16% rate applies to entire country (abolishment of 11% rate for border and tourist regions)

� VAT exemption on sale and leasing of housing and residential mortgage payments remains

� VAT exemption on tuition and entertainment remains

� 16% rate applies to the sale of gum, pets and pet food

� 0% rate applies to the wholesale of gold, jewelry, art, metal works and bullions.

� Special VAT regime for maquiladoras (certification process)

21

Mexico

11/19/2012Foreign Tax Update Webinar 21Foreign Tax Update Webinar 21

� New consumption taxes

� New tax on flavored drinks

� New tax on high-caloric (“junk”) foods

� New environmental taxes (fuels and pesticides)

22

Mexico

11/19/2012Foreign Tax Update Webinar 22Foreign Tax Update Webinar 22

� General provisions

� Tax domicile – bank statements as assumption

� Electronic filing system

� 40 period for processing refund claims

� Subsidiary and limited liability of shareholders for unpaid taxes in certain cases

� New and expansive definition of accounting records

� Option to file audit report for large taxpayers remains

� New right for SAT to publish blacklist of taxpayers

� Shorter periods for filing administrative appeals

welcome to our sixth foreign tax update webinar:...

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