MoF Decision No.54/1 dated January 31st, 2019 concerning the determination of the tax treatment of the amendments made by the financial units concerned with the income tax on the declarations and activities of limited companies

The Ministry of Finance (MoF) has issued and published the here below Decision No.54 dated 31/01/2019 (published in the Official Gazette on February 7, 2019), defining the tax treatment of the amendments made by the financial units concerned with the income tax on the declarations and activities of the limited companies. This Decision mainly focuses on the tax treatment of the amendments resulting from tax inspections of limited companies’ accounts and activities and the related amounts that are returned to the tax result of those companies and subject to the tax of Title I of the Income Tax Act (Law).

Thus, will be liable to the tax of Title I (corporate tax) only and restrictively, those amounts that are returned to the profit as nondeductible charges and expenses in accordance with the provisions of article 7 of the Income Tax Law and which did not benefit, directly or indirectly, to the shareholders in a way or another. On the other hand will be liable to both taxes of Title I (corporate tax of 17%) and Title III (movable capital/dividends 10%) of the same Law, the amounts that are returned to the tax result as a result of tax evasion or described as disguised, alleged or hidden irregular distributions (i.e. artificial increase or decrease purchase price; fictive transactions; personal loans to shareholders without interests, relinquishment of debts, excessive remunerations or attendance fees of directors, etc.). Besides, article 7 of this Decision states that in the event of liquidation/dissolution of the Company, the assets devolved on the shareholders would be doubly taxed as if they were transferred to the shareholders (capital gains tax and dividend tax). It should be highlighted as well that the provision contained in the last paragraph of section 2 of article 3 of said Decision gives discretionary power to the revenue director in order to determine the cases to which these measures should be applicable as well as the modifications in connection therewith.

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