Worldwide Tax News
Brazil Clarifies Payments for Rights to Market or Distribute Software Subject to Withholding Tax but Not CIDE unless Technology is Transferred
On 19 June 2017, Brazil published private ruling No. 7014/2017 concerning the taxation of amounts paid, credited or remitted abroad for the right to market or distribute software for resell. The ruling clarifies that such outbound payments are considered royalties subject to the standard 15% withholding tax, but are not subject to the Contribution for Intervention in the Economic Domain (CIDE - 10%), unless the transaction involves a transfer of the corresponding technology (i.e., the software source code).
Estonia Approves Reduced Tax Rate on Distributions, New Intragroup Loan Requirements, and a New Tax Regime for Credit Institutions
The Estonian parliament has announced that the Act on Amendments to the Income Tax Act and Associated Acts (Amendment Act 458 SE) was approved on 19 June 2017. The law provides for three key measures:
- The introduction of a reduced tax rate of 14% on distributions up to the average distribution amount in the previous three years, with the excess subject to the standard 20% rate — first year to be taken into account is 2018, but will be limited as follows:
- Amount eligible for reduced rate in 2019 is one third of the distribution subject to tax in 2018; and
- Amount eligible for reduced rate in 2020 is one third of the distributions subject to tax in 2018 and 2019;
- The introduction of the requirement that Estonia taxpayers (including PEs of non-resident) must be able to demonstrate within 30 days of a request from the tax authority that an intragroup loan is not a hidden profit distribution, otherwise the loan may be treated as such and subject to 20% tax on the net amount (loan amount X 0.8) — the requirement applies with respect to loans with a term exceeding 48 months granted to the taxpayer's parent company or a subsidiary of the parent that is not a subsidiary of the taxpayer; and
- The introduction of a new tax regime for credit institutions that imposes an advance corporate income tax of 14% to be paid quarterly on accrued profits, with a credit for the advance tax paid when profits are distributed.
The measures of the Amendment Act generally apply from 1 January 2018, although the new intragroup loan requirements apply for loans granted (or terms or conditions changed) on or after 1 July 2017, with a quarterly reporting obligation for affected loans from 2018.
Click the following link for Amendment Act 458 SE (Estonian language), which has been sent to the president for signature.
Hungary Publishes 2018 Budget Tax Amendment Measures Law
On 19 June 2017, Hungary published Law LXXVII (Bill T/15428) as approved by parliament. The Law provides for certain tax amendments in relation to the 2018 Budget, including a reduction in the VAT rate on Internet access services from 18% to 5% and reduction in the VAT rate on fish products from 27% to 5%. The Law also amends the exemption for capital gains from the sale and contribution in kind of shares by removing the 10% holding condition. The condition that shares be held for at least one year and registered within 75 days of acquisition is maintained.
The main budget bill, Bill T/15381, has also been approved by parliament but has not yet been signed into law and published.
Ireland eBrief on New PAYE Services and ROS Registration Changes
On 16 June 2017, Irish Revenue published eBrief No. 66/17 on new PAYE services and ROS registration changes.
We are continuing to develop new online services for PAYE customers and will be making further changes this coming weekend which will include the withdrawal of the PAYE Anytime service to be replaced by enhanced PAYE Services.
The PAYE (2013-2016) tab in ROS, which is the access point to the PAYE Anytime service, will also no longer be available. Agents representing PAYE taxpayers will now use the enhanced PAYE Services in ROS to manage their clients’ tax affairs.
From the ‘Other Services’ tab within ‘Client Services’ you can access the following services for PAYE taxpayers:
- PAYE Services 2017: This service allows you to:
- claim or update your clients’ tax credits
- declare or update non-PAYE income such as rental income for your client
- divide tax credits and rate bands in a way that ensures your client pays the right amount of tax
- view your client’s updated Tax Credit Certificate in our new My Documents service which can be accessed from any of the PAYE Services screen.
- PAYE Services 2013 – 2016 (including Form 12): This service replaces the Form 12 (2013 – 2016) service currently available on the ‘Other Services’ tab within ‘Client Services’. This service allows you to:
- review your client’s taxes for an earlier year including claiming tax relief for health expenses by submitting a Form 12. You will also be able to amend your client’s review if you need to make changes.
- obtain an End of year Statement (P21), without completing a review, provided there are no changes needed to your clients’ record.
- view your client’s End of Year Statements (P21) for prior tax years in our new My Documents service which can be accessed from any of the PAYE Services screen.
Agents are also reminded that they must use PAYE Services where the transaction can be done online.
ROS Registration Changes (including security questions)
We are also updating and simplifying the ROS registration process from June 19th. The enhancements include:
- streamlined screens to make it easier to follow the steps in the registration process
- a quicker process as ROS system passwords are sent by email or text instead of post
- the addition of security questions in the ROS Profile
- a new Reset ROS Login option to speed up password and/or certificate retrieval.
Additional information on the changes is included on the ROS login page ROS Registration changes - upcoming developments.
We are issuing emails to ROS Administrator inboxes about these changes and enhancements during the coming week.
Update - Romania Publishes Emergency Ordinance Implementing CbC Reporting
The Romanian National Agency for Fiscal Administration has announced the publication of Emergency Ordinance No. 42/2017 in the Official Gazette of 13 June 2017. The Emergency Ordinance amends Law No. 207/2015 on the Fiscal Procedure Code for the implementation of Country-by-Country reporting requirements in line with the requirements of the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) as amended for the exchange of CbC reports. The main aspects of the final Emergency Ordinance are as follows:
- CbC reporting obligations apply for MNE groups meeting the standard EUR 750 million revenue threshold in the previous year (or RON equivalent as of January 2015);
- Ultimate parent entities and designated surrogate parent entities resident in Romania must submit a CbC report for fiscal years beginning on or after 1 January 2016;
- Non-parent constituent entities resident in Romania must submit a CbC report for fiscal years beginning on or after 1 January 2017 if the standard secondary local filing conditions are met (not required if qualifying surrogate parent has been designated in another jurisdiction that will exchange reports with Romania);
- When a non-parent entity is required to submit a CbC report, it must request all necessary information from the ultimate parent, and if not provided, must still submit a report with available information and notify that the ultimate parent refused to provide the information (in case of multiple local non-parent entities, one may be designated to submit the report);
- Constituent entities of an MNE group resident in Romania must provide notification to the competent authority on whether they are the ultimate parent, surrogate parent, or otherwise required to submit a report (secondary local filing); otherwise, notification must be provided on the identity and tax residence of reporting entity;
- The deadline for the CbC report is 12 months after the end of the reporting fiscal year, and the deadline for the notification is no later than the last day for filing the annual tax return of the notifying entity (generally 25 March for calendar year); and
- Penalties of RON 30,000 to 50,000 will apply for late CbC report submission or submission of incomplete or inaccurate information, and penalties for RON 70,000 to RON 100,000 will apply for failure to report each country.
As with the draft, the final Emergency Ordinance does not include any transitional provisions regarding notification for the first year. Additional guidance in this regard is expected, given that standard return deadline for calendar year taxpayers has already passed. Additional guidance also expected on the form and method of submission for both CbC reports and notifications.
Click the following link for Emergency Ordinance No. 42/2017 as published (Romanian language).
OECD Consults on Attribution of Profits to Permanent Establishments and Revised Guidance on Profit Splits
On 22 June 2017, the OECD published public discussion drafts on:
- Attribution of Profits to Permanent Establishments, which deals with work in relation to Action 7 (Preventing the Artificial Avoidance of Permanent Establishment Status) of the BEPS Action Plan;
- Revised Guidance on Profit Splits, which deals with work in relation to Actions 8-10 (Assure that transfer pricing outcomes are in line with value creation) of the BEPS Action Plan.
Both discussion drafts build upon and replace the drafts published for comment in July 2016 (previous coverage). Comments on the new drafts are due by 15 September 2017.
Multilateral Exchange Agreement for CbC Reports Signed by Belize, the Cayman Islands, Colombia, Haiti, Pakistan, Singapore and the Turks and Caicos Islands
The OECD has announced that Belize, the Cayman Islands, Colombia, Haiti, Pakistan, Singapore, and the Turks and Caicos Islands signed the Multilateral Competent Authority Agreement on the exchange of Country-by-Country (CbC MCAA) reports during the third meeting of the Inclusive Framework on BEPS held 21 to 22 June 2017. As part of the conditions for signing the CbC MCAA, signatories must be a party to (or intend to sign) the OECD Council of Europe Convention on Mutual Administrative Assistance in Tax Matters and have (or commit to introduce) CbC reporting requirements.
Click the following link for the list of the CbC MCAA signatories to date.
Along with the CbC MCAA, Singapore also signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, which provides for the exchange of information under the OECD Common Reporting Standard (CRS MCAA).
Update - Italy Confirms Entry into Force of TIEA with Andorra
On 19 June 2017, the Italian Department of Finance published a release announcing that the tax information exchange agreement with Andorra entered into force on 8 June 2017, and not 27 March as previously reported. The agreement, signed 22 September 2015, is the first of its kind between the two countries. It applies for criminal tax matters from the date of its entry into force and for other tax matters for tax periods beginning on or after 1 January 2018 (from date of entry into force where there is no tax period).
Qatar to Sign Tax Treaty with Argentina
On 21 June 2017, the Cabinet of Qatar approved the signature of an income tax treaty with Argentina. The treaty will be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.
U.S. Signs CbC Exchange Arrangements with Denmark, Guernsey, Ireland, Latvia, and the Slovak Republic, and South Korea
According to an announcement from the OECD, the U.S. signed competent authority arrangements on the exchange of Country-by-Country (CbC) Reports with Denmark, Guernsey, Ireland, Latvia, the Slovak Republic, and South Korea during the third meeting of the Inclusive Framework on BEPS held 21 to 22 June 2017. The arrangements were not yet published at the time of writing, but will likely be published on the IRS competent authority arrangements webpage in the near future and are expected to be effective for fiscal years starting on or after 1 January 2016.