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Approved Changes (2)

Ireland

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Ireland Publishes eBrief on Guidance for Irish Real Estate Funds

Irish Revenue has published eBrief No. 81/17 on the first chapter of new guidance for Irish Real Estate Funds.

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Guidance on Personal Portfolio Irish Real Estate Funds (PPIREFs)

Finance Act 2016 introduced a new regime for the taxation of Irish property funds. The regime applies to what are known as Irish Real Estate Funds, or IREFs. Given the complexity of the regime, the guidance is being published chapter by chapter, as each is finished.

One of the most complex and important aspects of the regime concerns the special rules that apply to what is known as a Personal Portfolio IREF (PPIREF), being an IREF that is under the control of its unit holders. Therefore, the first chapter to be published provides guidance on whether or not an IREF should be considered a PPIREF.

For further details refer to Tax and Duty Manual Part 27-01b-02.

Taiwan

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Taiwan Notice on Deduction of Head Office and Regional Headquarter Management Expenses

Taiwan's Ministry of Finance has published a notice on the deduction of foreign head office or regional headquarters (RHQ) management expenses by a Taiwan branch. The notice provides that a Taiwan branch may deduct its apportionment of management expenses if the following requirements are met:

  1. The foreign head office or RHQ business is not open to the public but has an operating department. This operating department shall share management expenses of the foreign head office’s or RHQ’s non-operating department with other affiliates within the group.
  2. The apportionment of the head office’s or RHQ’s management expenses should not be included in the Taiwan branch’s purchasing cost, and the head office or RHQ makes funding to the Taiwan branch for its working capital needs available without any finance charge to the Taiwan branch.
  3. The apportionment of management expenses shall be calculated on the basis of each income share of the head office’s or RHQ’s operating department and branch divided by the total company’s revenue. If there is any special situation, the applicant shall report to the competent authority for approval on a reasonable allocation basis.

Provided that the requirements are met, a tax deduction for management expenses will be allowed after being verified and approved.

Proposed Changes (3)

European Union

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European Commission Issues Communication on Taxation of the Digital Economy

On 21 September 2017, the European Commission announced the release of a communication on a Fair and Efficient Tax System in the European Union for the Digital Single Market. The communication provides an overview of the digitalization of the global economy and the associated challenges and inadequacies of current international tax rules, as well as approaches for a long-term strategy and possible short-term solutions.

In terms of a long-term strategy, the Commission refers to the work being done by the OECD on new international rules on the taxation of the digital economy, for which an interim report is to be presented to the G20 in April 2018. In this respect, the Commission expects a high level of ambition that would entail reformed rules on permanent establishment, transfer pricing, and profit attribution applicable to digital technologies. Further, the Commission believes that the Common Consolidated Corporate Tax Base (CCCTB) proposal provides an EU framework for revised permanent establishment rules and for allocating the profit of large multinational groups using the formula apportionment approach based on assets, labor and sales to better reflect where the value is created. In this respect, discussions for further enhancement within the scope of the CCCTB proposal are underway.

In terms of short-term solutions, the Commission includes three options that should be considered:

  • Equalization tax on turnover of digitalized companies - A tax on all untaxed or insufficiently taxed income generated from all internet-based business activities, including business-to-business and business-to-consumer, creditable against the corporate income tax or as a separate tax.
  • Withholding tax on digital transactions - A standalone gross-basis final withholding tax on certain payments made to non-resident providers of goods and services ordered online.
  • Levy on revenues generated from the provision of digital services or advertising activity - A separate levy could be applied to all transactions concluded remotely with in-country customers where a non-resident entity has a significant economic presence.

In terms of next steps, the communication will be used as a basis for further discussion among the EU Member States during the Tallinn Digital Summit on 29 September, and the Commission will support the Estonian Presidency in its work on these issues with a view to stabilizing Council conclusions on a coordinated EU approach by the end of the year. While the preferred option would be to adopt rules developed through the work of the OECD and agreed to at the international level, the communication notes that in the absence of adequate global progress, EU solutions should be advanced within the Single Market and the Commission stands ready to present the appropriate legislative proposals.

Hungary

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Hungary to Introduce New Master and Local file Requirements from 2018

The Hungarian government is reportedly in the process of finalizing draft legislation to amend current transfer pricing documentation requirements in line with the Master file and Local file guidelines developed as part of BEPS Action 13. The new requirements will likely expand upon Hungary's existing documentation requirements, which are already based on the Master/Local file type concept of the EU Code of Conduct on Transfer Pricing Documentation Requirements. The draft legislation is to be submitted to parliament in the coming months and the new requirements are to apply from 2018, with the option to also apply the requirements for 2017.

United States

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U.S. Legislation Proposed to Provide De Minimis Gains Exclusion for Virtual Currency

U.S. Representatives Jared Polis (D-CO) and David Schweikert (R-AZ) have introduced the Cryptocurrency Tax Fairness Act of 2017 (H.R.3708). The draft bill would create a tax structure for taxing purchases made with virtual currency, such as Bitcoin and Ethereum, which would allow consumers to make purchases with virtual currency up to USD 600 without reporting requirements. In particular, the draft legislation provides that gross income shall not include gain from the sale or exchange (not exceeding USD 600) of virtual currency for other than cash or cash equivalents. Under current rules, virtual currency is treated as property for federal tax purposes (previous coverage), with payments made in virtual currency subject to information reporting to the same extent as any other payment made in property, regardless of the dollar amount involved.

Treaty Changes (4)

China-Cyprus

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Revisions to Tax Treaty between China and Cyprus under Negotiation

On 19 September 2017, officials from China and Cyprus met to discuss bilateral relations, including the need to conclude negotiations to revise the 1990 income and capital tax treaty between the two countries. It is uncertain if the negotiations will result in an amending protocol to the current treaty or a new treaty to replace the current treaty. Additional details will be published once available.

Colombia-Peru

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SSA between Colombia and Peru under Negotiation

On 15 September 2015, officials from Colombia and Peru held the first round of negotiations for a social security agreement. Any resulting agreement would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Luxembourg-Uzbekistan

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Protocol to Tax Treaty between Luxembourg and Uzbekistan Signed

Luxembourg's Ministry of Finance has announced that on 18 September 2017, officials from Luxembourg and Uzbekistan signed a protocol to amend the 1997 income and capital tax treaty between the two countries. According to the announcement, the protocol updates the exchange of information provisions in line with OECD standards, includes minimum standards resulting from the BEPS project, and provides for assistance in the recovery of taxes. The protocol is the first to amend the treaty and will enter into force after the ratification instruments are exchanged.

United States-Colombia

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U.S. Signs CbC Exchange Arrangement with Colombia

According to an update to the IRS Country-by-Country Reporting Jurisdiction Status Table, the U.S. signed a bilateral competent authority arrangement on the exchange of Country-by-Country (CbC) Reports with Colombia on 30 August 2017. The arrangement is effective from the date it was signed.

The arrangement provides that pursuant to the provisions of Article 4 (Exchange of Information) of the 2001 tax information exchange agreement between the two countries, each competent authority intends to automatically exchange CbC reports received from each reporting entity resident for tax purposes in its jurisdiction, provided that, on the basis of the information provided in the CbC report, one or more constituent entities of the MNE group of the reporting entity are resident for tax purposes in the jurisdiction of the other competent authority, or are subject to tax with respect to the business carried out through a permanent establishment situated in the other jurisdiction.

With respect to fiscal years beginning on or after 1 January 2016, CbC reports are to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. With respect to fiscal years beginning on or after 1 January 2017, reports are to be exchanged no later than 15 months after the last day of the fiscal year.

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