Transfer Pricing Regime Change for Maquiladora Companies

On October 26, the Mexican Congress passed the proposed 2022 budget (the “Bill”) which contains a significant change to the current transfer pricing regime for Maquiladora Companies.  If approved by the Mexican President, the change would be effective starting January 1, 2022.

The Bill would eliminate the option that maquiladora companies currently have to obtain an Advance Transfer Pricing Agreement (APA) in order to comply with their transfer pricing obligations and maintain the tax benefits of the maquiladora regime.  Maquiladoras will only be able to comply with their transfer pricing obligations through Safe Harbor rules established in Article 182 of the Mexican Income Tax Law.  This change has potential to significantly increase  Mexican income tax obligations for Maquiladora Companies.

Many tax professionals question the legality of such change and expect much heated discussion with and push-back from U.S. taxing authority, Internal Revenue Service.   Accordingly, the ultimate enactment of this change is yet to be confirmed.  However, taxpayers with Maquiladora subsidiaries are recommended to contact their Mexican tax service provider for further advise.

Main Street Small Business Tax Credit II

The Main Street Small Business Tax Credit II 는 Covid-19로 인해 어려움을 겪고있는 Small business 에 재정적 도움을 줄 수 있을것으로 예상된다. 2021년11월 1일부터 2021년 11월 30일까지 California Department of Tax and Fee Administration (CDTFA) 는 온라인 신청 시스템을 통해 자격을 갖춘 Small business 고용주를 대상으로 직원들의 순 증가분당 $1,000씩에 해당하는  tax credit 신청을 받고있다. 해당 tax credit 금액은 최대 $150,000까지로, 기존 Employee Retention Credit을 받은 고용주더라도 Main Street Small Business Tax Credit II을 받을 수 있다.

잠정적인 Main Street Small Business Tax Credit II금액은 Main Street Small Business Tax Credit I에 신청되었거나, 공제 신청된 tax credit금액만큼 감소된다. 또한, 해당 tax credit 에 할당된 금액은 총 $116  million 이며, 신청은 선착순으로 진행된다. 자격을 갖춘Small business는 해당 tax credit을 세금보고신고시, tax credit 형식으로 사용할수 있거나, 변경불가한 election을 통해sales tax와 use tax를 상쇄하는 데 사용할수있다.

다음 자격을 충족하는 캘리포니아 small business는 The Main Street Small Business Tax Credit II신청이 가능하다:

• 2020년 12월 31일 기준, 500명 이하의 직원을 고용하였고,
  • 2020년 특정기간 동안 총 수입이 2019년 해당 기간 대비20%이상 감소했을 경우

Tax Credit 금액은 월평균 qualified 직원들의 순 증가분의 $1,000만큼 계산된다. 4/1/2020 부터 6/30/2020 사이엔 고용된 직원수가 작지만, 7/1/2020 부터 6/30/2021 사이에 많은 직원을 고용한 고용주들은 현 프로그램을 통해 많은 제정적인 도움을 받을수 있을것으로 생각된다.

The Main Street Small Business Tax Credit II신청을 위해서는 다음과 같은 정보가 필요하다:
2020년과 2019년 특정분기의 총 수입금액 , 2020년 4월 1일부터 2021년 6월 30일까지의 급여 정보, 회사 이름, Entity 유형, 메일 주소, 전화 번호, 전자 메일, 2020년 12월 31일 기준 직원 수.

Main Street Small Business Tax Credit II

The Main Street Small Business Tax Credit II will provide COVID-19 financial relief to qualified small business employers. Beginning November 1, 2021, and ending November 30, 2021, the California Department of Tax and Fee Administration (CDTFA) will be accepting applications through their online reservation system for qualified small business employers to reserve $1,000 per net increase in qualified employees, not to exceed $150,000. Taxpayers that qualified for Employee Retention Credit may also qualify for the Main Street Small Business Tax Credit.

Tentative credit reservation amounts will generally be reduced by credit amounts reserved or received under the first Main Street Small Business Tax Credit. The credits are reserved on a first-come, first-served basis, and the allocation limit for this credit will be approximately $116 million.

Qualified small businesses can use the credit against income taxes, or can make an irrevocable election to apply the credit against sales and use taxes.

The credit only applies to California small businesses that meet the following qualifications:

• Employed 500 or fewer employees as of December 31, 2020, and
• Experienced a decrease of 20 percent or more in income tax gross receipts by comparing gross receipts for 2020 to gross receipts for 2019.

The amount credit is $1,000 for each net increase in qualified employees, measured by monthly average full-time equivalent. Employers that had low headcounts from April 1, 2020 though June 30, 2020 and added employees during the 12 month period beginning July 1, 2020 and ending June 30, 2021 are good candidates for this program.

The following information is needed to assess the opportunity:

Both 2020 and 2019 gross receipts. Payroll information during the periods April 1, 2020 to June 30, 2021. Business name, type of entity, mailing address, phone number, email. Number of employees as of December 31, 2020.

Washington State Enacts New Capital Gains Tax

The Washington State Legislature passed a new capital gains tax on April  25, 2021, which will take effect on January 1, 2022, and the first payment are due on or before April 17, 2023. This tax creates a 7% tax on the sale or exchange of long-term capital assets, if the profits exceed $250,000 annually. It applies to individuals for gains allocated to Washington state and can also be applicable to individuals’ ownership interest in an entity that sells or exchanges long-term capital assets.

Exempt assets

The sale or exchange of the following assets are exempt from the Washington capital gains tax:

• Real estate
• Interests in a privately-held entity to the extent that the capital gain (loss) is directly attributable to the real estate owned directly by such entity
• Assets held in certain retirement accounts
• Assets subject to condemnation, or sold or exchanged under imminent threat of condemnation.
• Assets used in a trade or business to the extent of the exhaustion, wear and tear of property or qualify for expensing under Title 26 U.S. code § 179 of the internal revenue code
• Please see the Department of Revenue Washington State website for other exempt assets.

(https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax)

Credits

• A business and occupation (B&O) tax credit is included for B&O taxes due on the same sale or exchange which is subject to the Washington capital gains tax.
• A Washington capital gains tax credit is included for any legally imposed income or excise tax owed to other jurisdictions on capital gains included within the individual's Washington capital gains.

written by Sean Jeong