On 25 January 2021, the Tax Department issued Implementing Guideline 7/2021, which extends the provisions of Implementing Guideline 4/2020 for the year 2021, for the period that the COVID-19 related restrictions continue to apply globally.

Brief reminder of Implementing Guideline 4/2020

The Guideline followed a similar non-binding guidance issued by the Organisation of Economic Cooperation and Development (OECD), OECD’s Guidance and determined the application of the following:

• Tax residency of individuals (“183 days rule” and “60 days rule”);
• Tax residency of legal entities;
• Permanent Establishment Matters;
• 50% exemption – Article 8(23) of the Income Tax Legislation (ITL);
• 90 days rule – Article 36(5) of the ITL.

The Guideline clarified that:

• the period of 21 March 2020 to 9 June 2020 should be considered as a “freezed period” and should not be taken into consideration for the purpose of determining the tax residency and/or the existence of a PE.
• The taxpayer has the option to choose to apply the relaxations offered or to choose to apply the “standard” provisions of the ITL.
• It does not take into consideration possible different tax treatments of other jurisdictions.