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Approved Changes (6)

Cyprus

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Cyprus Extends Deadlines for 2016 CbC Report and 2017 CbC Notification

On 11 December 2017, the Cyprus Tax Department published two announcements concerning an extension of the deadline for the submission of the Country-by-Country report for 2016 and the CbC notification for 2017. The announcements are as follows:

Country by Country Reporting

The Cyprus Tax Department informs that the reporting deadline for submission of country by country reporting for the year 2016 is the 28th of February 2018 rather than 31st of December 2017.

Notification for Country by Country Reporting

The Cyprus Tax Department informs that the reporting deadline for submission of notification for country by country reporting for the year 2017 is the 15th of January 2018 rather than 31st of December 2017.

European Union

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European Commission Release Code of Conduct on Withholding Tax

On 11 December 2017, the European Commission announced the release of a new code of conduct on withholding tax.

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The Commission has today put forward new guidelines on withholding taxes to help Member States reduce costs and simplify procedures for cross-border investors in the EU. The new Code of Conduct offers solutions for investors who, as a result of how withholding taxes are applied, end up paying taxes twice on the income they receive from cross-border investments. A withholding tax is a tax withheld at source in the EU country where investment income such as dividends, interests, and royalties is generated. These levies provide a way for Member States to ensure that taxes are being applied appropriately on cross-border transactions. Since the income is often taxed again in the Member State where the investor is resident, problems of double taxation can result. Investors do have the right to claim a refund when double taxation occurs but refund procedures are currently difficult, expensive and time-consuming.

Today's recommendations, developed alongside national experts, form part of the EU's Capital Markets Union Action Plan and should improve the system for investors and Member States alike. In particular, the Code of Conduct aims to reduce the challenges faced by smaller investors when doing business cross-border. It should result in quick, simplified and standardised procedures for refunding withholding taxes where appropriate. You can find a full press release online. The Code of Conduct will be presented to stakeholders at a public hearing organised by the European Commission on 30 January 2018. You can register here.

France

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France Publishes Guidance on Temporary Surcharge on Large Companies

On 8 December 2017, the French tax administration published guidance on the application of the exceptional surcharge and the additional surcharge that applies for large companies for financial years ending on or after 31 December 2017 up to 30 December 2018. The surcharge is levied at a rate of 15% for companies with gross revenue exceeding EUR 1 billion, with an additional 15% surcharge for companies with gross revenue exceeding EUR 3 billion. The guidance provides clarification on which companies are subject to the surcharge, the turnover taken into account in determining if the relevant threshold holds are met (only the amount realized in France), the calculation of the surcharge, and other related matters.

Italy

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Italy Extends CbC Report Deadline for First Year

On 11 December 2017, the Italian Revenue Agency issued Provision No. 288555, which provides an extension for the submission of CbC reports relating to the year 2016. The measure provides that CbC reports will be considered validly submitted if submitted to the Revenue Agency within 60 days of the measure, which would be 9 February 2018.

The extension provision refers to reporting tax periods beginning on or after 1 January 2016 and ending before 31 December 2016. It is assumed, however, that the intent of the extension is to have it apply for reporting periods ending up to and including 31 December 2016, which is the end of the first full 12-month period the CbC reporting requirements apply in Italy.

South Africa

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South Africa Issues Interpretation Notes on Connected Persons and Taxation of REITs and Controlled Companies

On 8 December 2017, the South African Revenue Service issued an updated Interpretation Note on connected persons (IN 67) and a new Interpretation Note on the taxation of REITs and controlled companies (IN 97).

IN 67 provides detailed guidance on the interpretation and application of the definition of "connected person" for income tax purposes (different definition applies for VAT), including in relation to natural persons, trusts, members of partnerships or foreign partnerships, and companies and close corporations.

IN 97 provides detailed guidance on the interpretation and application of the main provisions dealing with the taxation of REITs and controlled companies, as well as other selected provisions that are particularly relevant to REITs, controlled companies, and the holders of shares or linked units in these companies.

Untd A Emirates

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UAE Publishes VAT Quick Reference Guides

The United Arab Emirate Federal Tax Authority has published a series of quick reference guides for the country's new VAT regime, including:

  • 10 Things You Need to Know About VAT;
  • Real Estate Sector;
  • Registration;
  • VAT Treatment for Selected Sectors;
  • VAT for Businesses;
  • VAT for Education;
  • VAT for Retailers; and
  • Guidance on Zero-Rated and Exempt Supplies.

The UAE VAT regime is effective from 1 January 2018.

Proposed Changes (1)

United States-France-Germany-Italy-Spain-United Kingdom

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EU Finance Ministers Voice Concerns on U.S. Tax Reform in Letter to Treasury Secretary

The Finance Ministers of France, Germany, Italy, Spain, and the UK have sent a joint letter to U.S. Treasury Secretary Steven Mnuchin voicing concerns over certain aspects of the House and Senate tax reform plans. In particular, the Finance Ministers have concerns with three measures summarized as follows:

The excise tax (House bill)

This proposal provides for an excise tax of 20% on payments to foreign affiliated companies, unless the related foreign corporation elected to treat the payments as income effectively connected with the conduct of a U.S. trade or business. Given that this measure would impact on genuine commercial arrangements, and would do so only where payments are being made for foreign goods and services, it could discriminate in a manner that would be at odds with international rules embodied in the WTO. The measure would also be inconsistent with existing double taxation agreements on the basis that it would impose a tax on the profits of a non-U.S. resident company that does not have a US permanent establishment.

Base erosion and anti-abuse tax (BEAT, Senate bill)

This provision would also be poorly targeted at erosion of the U.S. tax base, and would impact on genuine commercial arrangements involving payments to foreign companies that are taxed at an equivalent or higher rate than the U.S. This is most evident in the financial sector where the provision appears to have the potential of being extremely harmful for international banking and insurance business, as cross-border intra-group financial transactions would be treated as non-deductible and subject to a 10% tax. This may lead to significant tax charges and may harmfully distort international financial markets.

GILTI (Senate bill)

The Senate proposal provides for a preferential tax regime for "foreign-derived intangible income". In essence, income from the sales or licensing of goods and the provision on services for use outside the US that is deemed to be in excess of the return from tangible assets will benefit from a reduced corporate tax rate of 12.5%. The proposed incentive would subsidize exports compared with the domestic consumption. It could therefore face challenges as an illegal export subsidy under WTO Subsidies and Countervailing Measures Agreement rules. The design of the regime is notably different from accepted IP regimes by providing a deduction for income derived from intangible assets other than patents and copyright software, such as branding, market power, and market-related intangibles. It would not be compatible with the BEPS consensus that has been approved by more than 100 states and jurisdictions worldwide. Furthermore, in deviation of the agreed nexus approach, the proposal will provide benefits to income from IP assets that are in no direct connection with R & D activity.

Click the following link for the full text of the letter as published by a third party.

Treaty Changes (4)

Costa Rica-Denmark

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TIEA between Costa Rica and Denmark in Force

According to a decree from the Danish Ministry of Taxation published 9 December 2017, the tax information exchange agreement with Costa Rica entered into force on 5 March 2014. The agreement, signed 29 June 2011, is the first of its kind between the two countries. It applies for criminal tax matters on the date of its entry into force and applies for other tax matters for taxable periods beginning on or after 1 January 2015, or where there is no taxable period, for all charges to tax arising on or after 1 January 2015.

Lithuania-Ukraine

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Protocol to SSA between Lithuania and Ukraine Signed

On 8 December 2017, officials from Lithuania and Ukraine signed an amending protocol to the 2001 social security agreement between the two countries. The protocol is the first to amend the agreement and must be ratified before entering into force.

Philippines-Portugal

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SSA between the Philippines and Portugal has Entered into Force

The social security agreement between the Philippines and Portugal entered into force on 1 October 2017. The agreement, signed 14 September 2012, is the first of its kind between the two countries and generally applies from the date of its entry into force.

Tajikistan-Untd A Emirates

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Tajikistan and the UAE Conclude Negotiations for New Tax Treaty

According to a release from the Tajikistan Ministry of Finance, officials from Tajikistan and the UAE concluded negotiations with the initialing of an amended income tax treaty on 8 December 2017. The treaty must be signed and ratified before entering into force and once in force and effective will replace the 1995 tax treaty between the two countries. Details of the treaty will be published once available.

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