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Worldwide Tax News

Approved Changes (5)

Latvia

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Latvia VAT Administration Changes for 2017

Latvia has introduced a number of changes regarding the administration of value added tax (VAT) for 2017. The main changes include:

  • The abolishment of the semiannual (six-month) VAT return period for low turnover businesses, with such businesses now required to file quarterly (first quarterly return for 2017 due 20 April);
  • Newly established businesses are required to file VAT returns monthly for at least the first six months of operation, after which monthly or quarterly filing will apply depending on turnover and supply type (monthly filing generally required if supplies exceed EUR 50,000 in previous 12 months or intra-community EU supplies are made);
  • The Latvia State Revenue Service is allowed to require more frequent VAT return filing for taxpayers identified as a risk for VAT loss or fraud (no more than monthly);
  • The threshold for a refund of overpaid VAT is reduced from EUR 11,392 to EUR 5,000; and
  • The reverse charge is introduced in respect of supplies involving precious metals (buyer accounts for VAT).

The changes apply from 1 January 2017.

Saudi Arabia

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Saudi Arabia Approves Agreement on Introduction of VAT

According to a release from the Saudi Press Agency, the Saudi Cabinet gave final approval on 30 January 2017 for the Unified Agreement for Value Added Tax (VAT), which is to be implemented by all members of the Gulf Cooperation Council (GCC). Under the agreement, a 5% VAT is to be implemented in 2018. Additional details of Saudi Arabia's implementation will be published once available.

Spain

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Spain Publishes Annual Tax Control Plan for 2017

The Spanish Tax Agency has published the annual tax control plan for 2017, which sets out the areas of focus and actions to be taken in 2017. According to an overview provided by the Tax Agency, the areas of focus are related to:

  • Control of large individual fortunes, including the development of new risk assessment tools, the study of aggressive tax planning techniques, and the consolidation of exchange of financial account information under FATCA and the OECD Common Reporting Standard;
  • Value added tax fraud prevention, including improved and increased detection practices and strengthened actions concerning high-risk sectors and business models identified;
  • Tax avoidance of multinationals, including the development of risk analysis models to make optimal use of information received on tax rulings and Country-by-Country reports, as well as increased analysis on risk areas for BEPS, including in relation to:
    • Aggressive tax planning and hybrid structures;
    • Artificial generation of financial expenses;
    • Misuse of transfer pricing policies;
    • Attribution of benefits to permanent establishments; and
    • Operations carried out with residents in tax havens;
  • The digital economy, including the analysis of new electronic means of payment that mask taxable operations, collaboration with foreign tax authorities to determine actual profits made through the internet, and publishing information to clarify tax and reporting obligations for e-commerce transactions; and
  • Prevention and control of fraud in the collection phase, including increased monitoring and review of debtors.

Click the following link for the full tax control plan (Spanish language).

United States

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IRS Releases Practice Units on Exchange Gains/Losses, Exchange Rates, Penalties, and Other Issues

On 30 January 2017, the U.S. IRS published five international practice units:

International practice units are developed by the Large Business and International Division of the IRS to provide staff with explanations of general international tax concepts as well as information about specific transaction types. They are not an official pronouncement of law and cannot be used, cited, or relied upon as such.

Click the following link for the International Practice Units page on the IRS website.

Uruguay

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Uruguay Enacts Law on Tax Transparency including CbC Reporting

On 24 January 2017, the Law on International Tax Transparency and Identification of Beneficial Ownership (Law No. 19.484 of 5 January 2017) was published as enacted on the Uruguay president website. The law includes four main sections, summarized as follows.

Financial Account Information Reporting and Exchange

Resident financial institutions and branches in Uruguay of non-resident financial institutions are required to annually report to the tax authorities on account balances and income of both resident and non-resident individuals. Information will also need to be reported when the account holder is considered an entity with a high risk of fiscal evasion. The information will be exchanged with other jurisdictions under international agreements entered into by Uruguay. This includes the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, which Uruguay intends to exchange under by September 2018.

The new requirements apply from 1 January 2017.

Ultimate Beneficiary Reporting

Resident entities and non-resident entities that have a permanent establishment or place of effective management in Uruguay are required to identify their ultimate beneficiary(s). For this purpose, ultimate beneficiaries include individuals that directly or indirect hold at least 15% of the capital or voting rights of the entity, or otherwise exercise ultimate control. Subject to certain conditions, access to the beneficial ownership information will generally be limited to the Directorate General of Taxation, The National Secretariat for Anti-Money Laundering and the Financing of Terrorism, the Information and Analysis Unit of the Central Bank of Uruguay, and The Board of Transparency and Public Ethics.

The requirements generally apply from 30 June 2018. However, for entities obligated to report under Law No. 18.930 of 2012, the requirement applies from 30 September 2017. Reporting obligations under Law 18.930 are in relation to issuers of bearer shares.

Low or No Tax Jurisdictions and Tax Regimes

A number of measures are introduced in relation to entities that are resident, domiciled, or incorporated in low or no tax jurisdictions or benefiting from a low or no tax regime (low tax entities). Main measures include:

  • Transactions carried out with low tax entities will be considered controlled for transfer pricing purposes whether related or not;
  • Income from the transfer of shares or other equity participations in low tax entities will be considered Uruguayan source income if at least 50% of the value of the entity's assets is derived from assets in Uruguay;
  • Low tax entities are subject to an increase in the non-residents tax rate from 12% to 25%;
  • Capital gains derived by a low tax entity from the alienation of immovable property situated in Uruguay are subject to the standard tax rate of 25% plus an additional tax of 5.25%;
  • Income derived by a low tax entity from the sale of goods located in Uruguay are subject to tax on deemed net income equal to 30% of the sales price; and
  • Individuals resident in Uruguay with a direct or indirect participation in a low tax entity will have the investment income and capital gains of the entity allocated to them as a deemed dividend or profit distribution in proportion to their participation percentage.

The new rules apply from 1 January 2017. The government will determine which jurisdictions/regimes are considered low or no tax and issue a list for the purpose of the new rules.

CbC Report and Master File

Country-by-Country (CbC) reporting and Master file requirements based on BEPS Action 13 are introduced. Regarding CbC reports, the law does not set out detailed requirements, but does provide that large MNE groups will be required to submit a CbC report on an annual basis if meeting a consolidated revenue threshold to be established by the government. The content of the report will be in line with BEPS Action 13 and notification requirements will apply.

Details regarding the Master file are also limited. The law provides that the Directorate General of Taxation may require the submission of a Master file that contains information on an MNE group's organizational structure, activities, functions performed, assets used, and risks assumed by each entity, intangible assets, financing, and financial and fiscal situation.

The CbC and Master file requirements apply for fiscal years beginning on or after 1 January 2017. Specific requirements are to be issued and will be published once available.

Proposed Changes (1)

Philippines

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Philippine Tax Reform Bill Submitted to Parliament including Major Individual Income Tax Changes

The Philippine government has announced that the first package of measures for the Comprehensive Tax Reform Program has been filed in the House of Representatives. One of the main changes in the reform package (House Bill 4774) is in relation to the individual income tax brackets. This includes reducing the number of brackets and greatly shifting taxation to higher income earners from 1 July 2017 as follows:

  • up to PHP 250,000 - 0%
  • over PHP 250,000 up to 400,000 - 20%
  • over PHP 400,000 up to 800,000 - 25%
  • over PHP 800,000 up to 2 million - 30%
  • over PHP 2 million up to 5 million - 32%
  • over 5 million - 35%

From 1 January 2020, the rates would be further adjusted as follows:

  • up to PHP 250,000 - 0%
  • over PHP 250,000 up to 400,000 - 15%
  • over PHP 400,000 up to 800,000 - 20%
  • over PHP 800,000 up to 2 million - 25%
  • over PHP 2 million up to 5 million - 30%
  • over 5 million - 35%

Currently, no general bracket exemption is provided and the top rate of 32% kicks in at relatively low PHP 500,000.

Other changes include:

  • The expansion of the value added tax (VAT) base by removing most VAT exemptions, except the exemptions provided for senior citizens and persons with disabilities (VAT threshold for smaller businesses will still apply);
  • A lower rate for estate and donor’s taxes;
  • Increased automobile and fuel excise taxes; and
  • The introduction of a sugar-sweetened beverage tax.

Click the following links for the government release and House Bill No. 4774.

Treaty Changes (2)

Albania-Greece

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SSA between Albania and Greece under Negotiation

According to a recent release from the Albanian government, negotiations are under way for a social security agreement with Greece. 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.

Denmark-Vanuatu

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TIEA between Denmark and Vanuatu in Force

The tax information exchange agreement between Denmark and Vanuatu reportedly entered into force on 9 September 2016. The agreement, signed 13 October 2010, is the first of its kind between the two countries. It applies for criminal tax matters on 9 September 2016 and for other tax matters from 1 January 2017.

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