Worldwide Tax News
The Puerto Rican House of Representatives on 30 April 2015 voted against the implementation of the VAT regime proposed by the government to help resolve Puerto Rico's budget issues, including mounting debt and difficulty raising needed funds. The initial proposed VAT rate was 16%, but later reduced to a 13% rate plus a 1% municipal tax. The VAT regime would have replaced Puerto Rico's 7% sales and use tax.
In response to the rejected measure, the government has announced government spending cuts, and will develop a new revenue proposal.
Much to the chagrin of wait staff, bellhops, valet attendants and other tip earners throughout Romania, Emergency Ordinance No. 8, which includes provisions for the taxation of tips (gratuities), was published in Romania's Official Gazette on 28 April 2015.
Beginning 10 days following the publication of the Ordinance, tips paid in addition to the basic price of goods and services that are kept by the employer will be subject to a flat tax of 16% of profit, or 3% of income in the case of small enterprises. If the tips go to the employee, a 16% flat tax would apply on the income. VAT and social contributions do not apply.
According to a notice published by the Uruguayan government, Uruguay will implement the automatic exchange of information in tax matters in 2017. Although Uruguay has committed to the implementation of the automatic exchange of information, it did not sign the OECD multilateral competent authority agreement to automatically exchange information, which has been signed by over 50 countries/jurisdictions.
EU Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici recently spoke on his taxation agenda for the EU focused on "fairness, transparency and a truly single market from a taxation point of view." The two key actions discussed include:
- The introduction of the automatic exchange of information on tax rulings by EU Member States in order to increase transparency and reduce harmful tax rulings; and
- The launch of an action plan by mid-2015 that will build on the OECD Base Erosion and Profit Shifting (BEPS) Project to ensure that profits are taxed where the value is created, including the relaunch of the Common Consolidated Corporate Tax Base in the EU
Click the following link for a copy of Moscovici's speech published on the EU Commission website.
On 30 April 2015, officials from the Czech Republic and Iran signed an income tax treaty. The treaty is the first of its kind between the two countries.
The treaty covers Czech tax on the income of individuals and the tax on the income of legal persons. It covers Iranian income tax.
The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for a period or periods aggregating more than 6 months within any 12-month period.
- Dividends - 5%
- Interest - 5%, however, an exemption is provided for interest paid in connection with the sale on credit of any merchandise or equipment, and on any loan or credit of whatever kind granted by a bank
- Royalties - 8%
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
- Gains from the alienation of immovable property situated in the other State;
- Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
- Gains from the alienation of shares or other interests in a company resident in the other State
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Both countries apply the credit method for the elimination of double taxation.
The treaty will enter into force once the ratification instruments are exchanged, and will apply in the Czech Republic from 1 January of the year following its entry into force, and in Iran from 21 March of the year following its entry into force.
According to a recent announcement by the Polish government, negotiations are underway for an income tax treaty with Ethiopia and are expected to be concluded in the near future. The treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.
On 15 April 2015, the Italian Chamber of Deputies approved a bill authorizing the negotiation if an income tax treaty with Taiwan. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.
The double taxation agreement with respect to bank taxes between the Netherlands and the UK entered into force on 30 April 2015. The agreement, signed 12 June 2013, covers the Netherlands bank tax set out in the Law on bank tax, and the U.K. bank levy set out in Schedule 19 of the Finance Act 2011.
Under the agreement, when an entity resident in one country is a subsidiary of an entity resident in the other country, the first mentioned country will allow a credit against its domestic bank tax for the bank tax applied on the subsidiary by the other country. However, the credit will not be allowed if the head/parent of the group is an entity resident in the first mentioned country. The same method and restriction applies for permanent establishments.
The agreement applies retroactively from 1 January 2011.