Latin America in Focus — October 2015

Barbados

Key updates affecting the international business sector

Recent developments impacting the international business sector in Barbados include the country’s removal from Spain’s “blacklist,” amendments to the Income Tax Act to implement reporting requirements under the US Foreign Account Tax Compliance Act and the extension of Barbados’ tax treaty network.

Brazil

Government confirms proposed changes for austerity package with tax measures

Following the issuance of a proposed package of austerity measures on 17 September 2015, the Brazilian government published Provisional Measure (PM) 694/2015 on 30 September, confirming the proposed changes to interest on net equity payments, capital gains and the financial transaction tax (for prior coverage, see World Tax Advisor). The new PM also suspends certain research and development incentives for calendar year 2016.

New federal tax amnesty program introduced

A new amnesty program in Brazil allows taxpayers to use “credits” that are based on previous loss carryforwards to repay their tax debts.

Chile

Guidance issued on loss carryforwards upon change in ownership

Chile’s tax authorities issued guidance on 14 July 2015 that addresses when a change in ownership will affect the ability of a corporate taxpayer to carry forward tax losses.

Fully integrated regime not to apply to foreign investors

Chile’s Minister of Finance intends to present a bill that would change to the fully integrated tax regime and clarify the general anti-avoidance rule introduced as part of the 2014 tax reform.

Chile ratifies treaty with US

On 2 September 2015, Chile’s senate approved the tax treaty and accompanying protocol signed with the US in 2010. Since the lower house approved the treaty in 2014, the ratification process is now completed. The US government has not yet ratified the treaty. The treaty will come into force when the ratification procedure is finalized in both countries.

Colombia

Second report from the Commission for Tax Equality and Competitiveness

On 15 September 2015, Colombia’s Ministry of Finance published the second report from the Commission for Tax Equality and Competitiveness, which was formed to assess the existing tax system and to propose appropriate changes (for coverage of the Commission’s first report, see World Tax Advisor). The second report includes an analysis of the Commission’s proposals to make changes and improvements to the Colombian tax authorities (DIAN), such as separating the department within the DIAN responsible for dispute resolution from the collection and audit departments, creating special tax courts to ensure partiality and relive some of the burdens on the judiciary and increasing the DIAN’s budget to facilitate the collection of additional revenue.

Costa Rica

Revised draft bill would reform income tax and sales tax

A new draft bill presented to Costa Rica’s congress on 12 August 2015 proposes substantial changes to Costa Rica’s income tax rules and introduces a value added tax (VAT) to replace the existing sales tax.

Mexico

Measures proposed to implement CbC reporting and OECD standard for information exchange

On 8 September 2015, Mexico’s executive branch presented several bills to congress that would amend various laws. There are proposals to implement the OECD and profit sharing (BEPS) initiative on country-by-country (CbC) reporting and the OECD standard for the automatic exchange of information.

SAT issues guidance on Hydrocarbons Revenue Law

Mexico’s Tax Administration Service has issued additional guidance on certain aspects of the petroleum tax regime introduced in 2014.

Panama

Administrative ruling for nonresident income recipients

A recent administrative ruling published on 29 July 2015 sets out the requirements for a nonresident recipient of Panama-source income to claim an exemption from, or a reduced rate of withholding tax under, Panama’s tax treaties. According to the ruling, a Panamanian withholding agent must submit an application to the tax authorities (which includes specific information and other documentation on the recipient of the income). The tax authorities will examine the application and issue a decision as to whether treaty benefits will be granted. Panama currently has tax treaties with the following countries: Barbados, Czech Republic, France, Ireland, Israel, Korea, Luxembourg, Mexico, Netherlands, Portugal, Qatar, United Arab Emirates, Singapore, Spain and the UK.

Peru

New legislation provides a three-year tax exemption

On 12 September 2015, Peru’s government approved legislation that provides a three-year tax exemption for capital gains derived from the sale of certain shares (and other securities representing shares) through the Lima stock exchange or an equivalent exchange that may be established in the future (for prior coverage, see World Tax Advisor). The exemption will apply from 1 January 2016 and will require that certain conditions be fulfilled (e.g. a liquidity threshold and a limit on the maximum number of shares that can be sold during a 12-month period). Companies listing their shares for the first time on the Lima stock exchange will have 360 calendar days from the listing date to comply with the necessary liquidity threshold. In the interim, these companies may benefit from the exemption, provided they do not exceed the maximum number of sales allowed.

Super deduction granted for scientific research and development expenses

A four-year tax super deduction will be granted to companies that incur scientific research, technological and innovation development expenses on certain projects.