Worldwide Tax News
G7 Declaration Following Japan Summit Encourages Adoption of BEPS Measures and Measures to Improve Transparency
The leaders of the G7 have issued a declaration following their summit held 26 to 27 May 2016 in Ise-Shima, Japan. Regarding tax and transparency, the G7 leaders stated the following.
Steady, consistent and concerted implementation of the G20/OECD Base Erosion and Profit Shifting (BEPS) package is critical to restore public trust in tax systems and to achieve a global level playing field for all engaged in economic activities. We remain committed to lead the process by example. To ensure widespread implementation of the BEPS package, we encourage all relevant and interested countries and jurisdictions to commit to implement the BEPS package and join the new inclusive framework, noting that the first meeting will be held in Kyoto in June.
To restore public trust in tax systems by enhancing transparency of tax information, we reaffirm G20’s call on all relevant countries including all financial centers and jurisdictions to implement the standard on automatic exchange of information by committed deadline and to sign the Multilateral Convention, as well as the request to the OECD to establish the "objective criteria to identify non-cooperative jurisdictions with respect to tax transparency." These actions, together with possible defensive measures to be considered against non-cooperative jurisdictions, will help ensure that all relevant countries and financial centers are committed to implementing the agreed standard of tax transparency.
We recognize that strengthening capacity of developing countries in tax policy and administration is indispensable to level the global playing field. To enhance both quantity and quality of assistances in this area, we are committed to the principles of the Addis Tax Initiative along with encouraging other countries to make a similar commitment, and we request that the Platform for Collaboration on Tax be actively utilized to provide an opportunity where developing and developed countries and relevant organizations can share information and knowledge on a regular basis.
Improving the transparency of the beneficial ownership of legal persons and legal arrangements is vital to prevent misuse of these entities and arrangements for corruption, tax evasion, terrorist financing and money laundering. We commit to the implementation of the international standards on transparency, and call on all jurisdictions to do so. In this respect, we look forward to the initial proposals of the Financial Action Task Force and the Global Forum on Transparency and Exchange of Information for Tax Purposes on ways to improve the implementation of the international standards, including on the availability of beneficial ownership information and its international exchange, to be presented by the October meeting of G20 Finance Ministers and Central Bank Governors.
Click the following link for the full G7 Ise-Shima Leaders’ Declaration as published by the Japanese government.
Update - Greek Legislation Amending VAT, Property Tax, and Taxation of Investment Companies and Funds
On 27 May 2016, Greece published in the Official Gazette recently adopted omnibus legislation including, which includes a number of tax changes needed as part of Greece's bailout (previous coverage). Additional details for some of the main changes are as follows:
The increase in the standard value added tax (VAT) rate from 23% to 24% is effective from 1 June 2016. Any invoices issued on or after that date are subject to the increased rate, regardless of when the transaction occurred. In addition, for the Aegean islands that are still eligible for the 30% VAT rate reduction, the standard rate for the islands is increased from 16% to 17%. The reduction is being abolished in three stages, with the reduction abolished for the first group of islands effective 1 October 2015, for the second group of islands effective 1 June 2016, and for the third group of islands effective 1 January 2017.
The unified property tax (ENFIA) is amended, with a number of change impacting legal entities. The main changes include:
- The rates and coefficients for the main ENFIA calculation is increased in the range of 20% for plots within city limits;
- The supplementary rate is increased from 0.50% to 0.55%; and
- The exemption for buildings and plots that are self-used for business purposes is abolished, with such property now taxed at a rate of 0.1%.
The changes are effective from 1 January 2016.
New minimum tax rates are introduced for the taxation of portfolio investment companies (PIC), real estate investment companies (REIC), real estate investment funds (REIF), and undertakings for collective investment in transferable securities (UCITS). Under general rules, such companies and funds established in Greece are exempt from income tax, and instead subject to a minimum flat tax payable every six months based on the European Central Bank MRO rate, which is currently 0%. Because of the low MRO rate, minimum tax rates are introduced as follows:
- For PICs and REICs, 0.375% on the average investments for the period increased by available cash computed at market value;
- For REIFs, 0.375% on the average net asset value for the period; and
- For UCITS, 0.025% to 0.375% (depending on investment type) on the average net asset value for the period.
The new minimum rates are effective from 1 June 2016.
On 27 May 2016, India's Central Board of Direct Taxes (CBDT) issued a release announcing that it is seeking input from stakeholders on which provisions of the country's general anti avoidance rule (GAAR) are in need of additional clarification. India's GAAR was developed in 2012 and was to be effective for fiscal years beginning on or after 1 April 2016, but was delayed to 1 April 2017 in order to take into account changes resulting from the OECD BEPS Project.
Click the following link for the CBDT release. Input is due by 30 June 2016.
Political Agreement Reached on Norwegian Tax Reform including a Corporate Tax Rate Cut and Implementation of BEPS Measures
Norway's political parties have reportedly reached agreement on a number of tax reform actions. Some of the main actions agreed to include:
- Reducing the corporate tax rate from 25% to 23% by 2018;
- Expanding the 25% of EBITDA interest deduction limit on related-party loans to also cover third-party loans, while including special provisions to limit impact on ordinary commercial lending;
- Introducing a tax on financial services to be effective from 2017;
- Introduction a new anti-avoidance standard, that may include the requirement for taxpayers to disclose the purpose of transactions; and
- Implementing measures from the BEPS Project, including Country-by-Country reporting.
Each action must now be finalized into the required legislation and submitted to parliament for approval.
UK Launches Consultation on Introduction of Secondary Adjustments into Domestic Transfer Pricing Legislation
On 26 May 2016, UK Treasury and HMRC launched a public consultation on whether to introduce secondary adjustment rules into domestic transfer pricing legislation. The potential rules would address the current issue that primary transfer pricing adjustments are only effective for tax purposes, while any cash benefit from non arm’s length pricing can accumulate in an overseas company. According to the consultation, the government's preferred secondary adjustment rule would treat the excess profits as a deemed loan from the potentially advantaged company. Such a deemed loan would have interest imputed upon it, which would then be treated as taxable income.
Click the following link for the consultation document - Introduction of secondary adjustments into the UK’s domestic transfer pricing legislation. Comments are due by 18 August 2016.
The income and capital tax treaty between Armenia and Indonesia reportedly entered into force on 8 April 2016. The treaty, signed 12 October 2005, is the first of its kind between the two countries.
The treaty covers Armenian profit tax, income tax, property tax and land tax. It covers Indonesian income tax.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 120 days within any 12-month period.
- Dividends - 10% if the beneficial owners is a company directly holding at least 25% of the paying company's capital; otherwise 15%
- Interest - 10%
- Royalties - 10%
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; and
- Gains from the alienation of movable property forming part of the business property of a permanent establishment 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 applies from 1 January 2017.
On 6 April 2016, the Czech Senate approved the pending social security agreement with Tunisia. The agreement, signed 20 November 2015, is the first of its kind between the two countries, and will enter into force on the first day of the second month after the ratification instruments are exchanged.
On 26 May 2016, officials from Ethiopia and South Korea signed an income tax treaty. The treaty is the first of its kind between the two counties, and will enter into force after the ratification instruments are exchanged.
Additional details will be published once available.
On 28 April 2016, officials from France and Quebec, Canada signed a protocol to the 2003 social security agreement between the two jurisdictions. The protocol is the first to amend the agreement, and will enter into force on the first day of the second month after the ratification instruments are exchanged.