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Approved Changes (5)

Brazil

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Brazil Extends Provisional Measure on Payroll-based Social Security Tax for Most Companies

On 23 May 2017, Brazil published National Congress Act 28/2017 in the Official Gazette. The Act extends the validity of Provisional Measure (PM) 774/2017 for 60 days. PM 774 was published on 30 March 2017 (previous coverage) and reestablishes the 20% social security tax on payroll (INSS) for most companies, except for those engaged in passenger transport, construction, broadcasting, and certain others, which remain eligible for the social security tax on gross income (CPRB).

PM 774 is to apply from 1 July 2017, but as a provisional measure, it must be approved and converted into law within the 60-day extension to remain in effect.

Costa Rica

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Costa Rica Publishes Decree Regulating the New Registration Tax

Costa Rica has published Executive Decree No. 40417-H in the 26 May 2017 edition of the Official Gazette. The Decree provides for the regulation of several aspects of Law No. 9428, which introduced a new version of the country's annual registration tax on companies to replace the prior version that was found unconstitutional in 2015 (previous coverage). The tax is levied annually at varying amounts depending on the nature and gross income of a registered entity, including entities that are neither declarants nor taxpayers. The Decree sets out certain details on the application of the law, including in relation to automatic registration, payment in general, payment by companies in the process of registration, adjustments in the amount to be paid, and other related matters.

The law for the new registration tax enters into force three months after the first day of the month following the publication of the regulation; therefore with the publication of Executive Decree No. 40417-H, it will enter into force on 1 September 2017.

Netherlands

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Netherlands Amends Consultation Procedures for Cross-Border Tax Rulings and APAs

The Netherlands Ministry of Finance has published Decree No. 2017-1209 of 9 May 2017, which amends the procedures for obtaining rulings from the tax authority. Among other changes, the Decree amends the procedures for cross-border tax rulings and advance pricing agreements (APAs) subject to automatic exchange of information. For such rulings and APAs, a request for prior consultation will only be accepted if the request is accompanied by a completed standard form (draft), which essentially contains the information that would be exchanged if the ruling was given or the APA was entered into, such as details of the relevant parties, the type of ruling, transaction amounts, the affected jurisdictions, etc.

New Zealand

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New Zealand Individual Income Tax Budget Measures Enacted

New Zealand's Taxation (Budget Measures: Family Incomes Package) Act 2017 received Royal assent on 29 May 2017. The legislation includes the Budget 2017 measures for individual income tax, including an increase in the first and second individual income tax brackets as follows:

  • up to NZD 22,000 (increased from NZD 14,000) - 10.5%
  • NZD 22,001 up to NZD 52,000 (increased from NZD 48,000) - 17.5%
  • NZD 52,001 up to NZD 70,000 - 30%
  • over NZD 70,000 - 33%

Other measures include repealing the tax credit for independent earners, amending the calculations for the family tax credit, the provisional tax liability, and installment payments, and various other changes.

The measures of the Act generally apply from 1 April 2018.

Portugal

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Portugal Extends 2016 Fiscal Year CbC Notification Deadline to October 2017

Portugal's State Secretary for Tax Affairs has issued Order No. 170/2017-XXI, signed 29 May 2017. The Order provides an extension of the deadline for the Country-by-Country (CbC) reporting entity notification to 31 October 2017 with respect to the 2016 fiscal year. This is the second extension of the deadline for CbC notification, which under Portugal's standard CbC reporting rules is due the end of the reporting fiscal year. The first extension, made by Order No. 254/2016-XXI in December 2016, was to 31 May 2017.

Proposed Changes (2)

Australia

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Draft Major Bank Levy Bill Submitted to Australian Parliament

On 30 May 2017, the Major Bank Levy Bill 2017 was submitted to the Australian Parliament and is currently before the House of Representative. The Bill provides for the introduction of the bank levy proposed in the Budget 2017-18 (previous coverage) on authorized deposit-taking institutions (ADIs) with total liabilities of greater than AUD 100 billion. The levy will be imposed at a rate of 0.015% on certain liabilities of affected ADIs on a quarterly basis (0.06% per annum).

Click the following link for the Parliament Major Bank Levy Bill 2017 webpage, which includes links to the Bill and the Explanatory Memorandum.

Djibouti-OECD

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Djibouti Joins Inclusive Framework for Implementation of BEPS Measures and Global Forum on Transparency and Exchange of Information

The OECD announced on 31 May 2017 that Djibouti has joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 97. As a member of the Framework, Djibouti has committed to the implementation of the four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse), and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).

Djibouti has also joined the Global Forum on Transparency and Exchange of Information for Tax Purposes as the 141st member. As a member of the Forum, Djibouti will now be subject to monitoring and a peer review process to ensure the implementation of and compliance with the international standards for information exchange.

Treaty Changes (4)

Armenia-Sweden

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Tax Treaty between Armenia and Sweden has Entered into Force

The income and capital tax treaty between Armenia and Sweden reportedly entered into force on 1 June 2017. The treaty, signed 9 February 2016, is the first of its kind directly between the two countries, although the 1981 income and capital tax treaty between Sweden and the former Soviet Union had applied in respect of Armenia, but was terminated.

Taxes Covered

The treaty covers Armenian profit tax, income tax, and property tax. It covers Swedish national income tax, withholding tax on dividends, income tax on nonresidents, income tax on nonresident artistes and athletes, municipal income tax, and net wealth tax.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be considered a resident of either State for the purpose of claiming any benefits provided by the treaty, except those provided by Articles 22 (Elimination of Double Taxation), 23 (Non-Discrimination), and 24 (Mutual Agreement Procedure).

Withholding Tax Rates

  • Dividends -
    • 0% if the beneficial owner is a company holding at least 25% percent of the capital or voting power of the paying company for a period of at least 2 years and the dividends are exempt from tax in the hands of that company;
    • 5% if the beneficial owner is a company holding at least 10% percent of the capital or voting power of the paying company;
    • Otherwise 15%
  • Interest - 5%
  • Royalties - 5%

Capital Gains

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 deriving more than 50% of their value directly or indirectly from immovable property situated 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.

Double Taxation Relief

Both countries generally apply the credit method for the elimination of double taxation. However, in respect of dividends paid by an Armenian company to a Swedish company, Sweden will apply the exemption method in accordance with the provisions of Swedish law.

Limitation of Benefits

Article 26 (Limitation of Benefits) includes that an exemption or reduction of tax provided by the treaty will not apply to the income of companies:

  • That derive income primarily from other states:
    • from banking, shipping, financing or insurance activities, or
    • from being the headquarters, co-ordination centre or similar entity providing administrative services or other support to a group of companies which carry on business primarily in other states; and
  • The income from such activities bears a significantly lower tax burden due to a preferential regime for such activities in the other states.

Dividends paid by such companies will also not qualify for an exemption or reduction of tax provided by the treaty.

MFN Clause

The final protocol to the treaty provides that if Armenia signs an agreement with a current OECD member state (as of the date of signature of the protocol) that provides for a lower rate or exemption from tax on interest, such lower rate or exemption will automatically apply to interest covered by the Armenia-Sweden treaty.

Effective Date

The treaty applies from 1 January 2018.

Costa Rica-Untd A Emirates

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Tax Treaty between Costa Rica and the U.A.E. under Negotiation

Costa Rica's Ministry of Foreign Affairs has announced that on 23 May 2017, officials from Costa Rica and the United Arab Emirates met to begin negotiations for an income tax treaty. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Czech Rep-Kyrgyzstan

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Czech Republic and Kyrgyzstan to Sign Tax Treaty

According to a release published by the Supreme Council (parliament) of Kyrgyzstan, Kyrgyz and Czech officials met 26 May 2017 to discuss bilateral cooperation, including the signing of an income tax treaty. Negotiations for a treaty have been ongoing for several years, with different drafts initialed in 2005 and 2014. Any treaty ultimately signed would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Slovenia-Japan

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Slovenia Approves Pending Tax Treaty with Japan

On 24 May 2017, the Slovenian parliament approved the bill for the ratification of the pending income tax treaty with Japan (previous coverage). The treaty, signed 30 September 2016, is the first of its kind between the two countries. It will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force. However, Articles 25 (Exchange of Information) and 26 (Assistance in the Collection of Taxes) will apply from the date the treaty enters into force.

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