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Worldwide Tax News

Approved Changes (3)

Colombia

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Colombia Invites Taxpayers to Take Part in Tax Normalization Program before it Expires end of 2017

Colombia's National Tax Authority (DIAN) published a notice on 24 August 2017 to invite taxpayers to take part in the tax normalization program, which will expire on 31 December 2017. The program provides for a normalization tax at a rate of 13% and relief from further sanctions for the disclosure of undeclared assets, such as real estate, investments, machinery, equipment, rights, cash, etc., as well as the disclosure (correction) of non-existent liability claims. From 2018, any undeclared assets and non-existent liability claims discovered will be subject to standard administrative and criminal sanctions.

Luxembourg

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Luxembourg Publishes Circular on Mutual Agreement Procedure

Luxembourg has published Circular L.G. - Conv. D.I. No. 60 of 28 August 2017 on arrangements for the implementation of the mutual agreement procedure (MAP) provided for in bilateral tax treaties concluded by Luxembourg. Main points of the Circular include:

  • MAP may be requested when a taxpayer considers that measures taken by one or both Contracting States result in taxation not in accordance with the provisions of an applicable tax treaty;
  • In general, a MAP case must be submitted within three years of the first notification of the measure that resulted in the perceived non-conforming taxation, with the deadline to be interpreted in the least restrictive manner possible for the taxpayer (specific deadline may vary based on provisions of the applicable treaty);
  • Where the competent authority of Luxembourg has received a request for MAP, the other competent authority should be informed within four weeks from receipt of the request;
  • The first phase of the MAP proceedings is the internal phase, during which time the competent authority of Luxembourg evaluates the merits of the request and whether all required information and documentation has been provided by the taxpayer - if requested, taxpayers should submit additional information and documentation within two months;
  • If the MAP request is deemed inadmissible for not meeting the relevant conditions of the applicable treaty, the taxpayer will be informed, along with the reasons for the decision;
  • If the MAP request is deemed admissible, the competent authority of Luxembourg will first determine if the issue can be resolved unilaterally as a measure of Luxembourg, otherwise, the MAP proceedings will enter the international phase, during which time the competent authorities will seek mutual agreement;
  • Interest and penalty disputes are not eligible for MAP as they are not treated by Luxembourg as taxes covered by tax treaties, although when tax is revoked or reduced as a result of MAP, the related interest and penalties, if any, will be adjusted accordingly;
  • The Competent authorities may consult each other under the MAP provisions of a treaty in order to eliminate double taxation in cases not provided for in a tax treaty, such as cases where a resident of a third State has a permanent establishment in the other two States concerned;
  • Mandatory binding arbitration is available when provided for under the relevant tax treaty;
  • MAP cannot be refused to taxpayers under an audit; and
  • MAP requests can take place simultaneously with administrative and judicial appeals and with requests under the EU Arbitration Convention.

Click the following link for the Circular (French language).

Russia

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Russia Issues Notice on Increased Late Payment Penalty Starting October 2017

The Russian Federal Tax Service has issued a notice that on 1 October 2017, the penalty for late tax payment will be increased for companies if exceeding 30 days delay. The increase was introduced by Law No. 401-FZ (previous coverage), and includes that if payment is more than 30 days late, the penalty is increased from 1/300 to 1/150 of the Russian Central Bank's refinancing rate (currently 9%) for each day of delay starting on the 31st calendar day.

Treaty Changes (5)

Cambodia-Philippines

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Cambodia and the Philippines to Resume Tax Treaty Negotiations

According to recent reports, officials from Cambodia and the Philippines are planning to resume negotiations for an income tax treaty by the end of 2017. Negotiations first began in 2015 and then stalled. 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.

Cook Isl-Lebanon-OECD

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Mutual Assistance Convention has Entered into Force for the Cook Islands and Lebanon

On 1 September 2017, the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol entered into force for the Cook Islands and Lebanon. The Convention generally applies in both countries from 1 January 2018. However, it may apply for earlier periods with another signatory if agreed to, and applies in relation to any period regarding criminal matters.

Click the following link for the list of signatories to the Mutual Assistance Convention to date.

Malaysia-Azerbaijan-Brazil-Cambodia-China-Cyprus-Finland-Kenya-Lesotho-Mexico-Nepal-Norway-Portugal-Russia-Tunisia-Uruguay

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Malaysia Negotiating Tax Treaties with Fifteen Countries

According to a 30 August 2017 tax treaty status update from the Inland Revenue Board of Malaysia, tax treaty negotiations are underway with: Azerbaijan, Brazil, Cambodia, China, Cyprus, Finland, Kenya, Lesotho, Mexico, Nepal, Norway, Portugal, Russia, Tunisia, and Uruguay.

Treaties resulting from the negotiations with China, Finland, Norway, and Russia would replace existing treaties, while the other resulting treaties would be the first of their kind between Malaysia and the respective countries. Each must be finalized, signed, and ratified before entering into force.

Saudi Arabia-OECD

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Saudi Arabia Approves Multilateral Agreement on Automatic Exchange of Financial Account Information

On 22 August 2017, the Saudi Cabinet approved the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA), which provides for the exchange of information under the OECD Common Reporting Standard (CRS). Saudi Arabia plans to begin the first exchanges under CRS by September 2018.

Click the following link for the list of the CRS MCAA signatories to date.

Switzerland-Zambia

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Update - Tax Treaty between Switzerland and Zambia

The income tax treaty between Switzerland and Zambia was signed on 29 August 2017. Once in force and effective, the treaty will replace the 1954 tax treaty between Switzerland and the UK as it applies in respect of Switzerland and Zambia.

Taxes Covered

The treaty covers Swiss federal, cantonal, and communal taxes on income, including total income, earned income, income from capital, industrial and commercial profits, capital gains, and other income. It covers Zambian income 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 entitled to the benefits of the treaty, except for those provided under Articles 22 (Elimination of Double Taxation), 23 (Non-Discrimination), and 24 (Mutual Agreement Procedure).

Service PE

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 a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company that has directly held at least 10% of the paying company's capital for a period of at least 365 days prior to the date of payment; otherwise 15%
  • Interest - 10%
  • 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 in a company deriving more than 50% of their value directly or indirectly from immovable property situated in the other State, with an exemption for shares listed on a stock exchange in either Contracting State (or other exchange agreed to) and an exemption if the company carries on its business in the property.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Entitlement to Benefits

Article 21 (Entitlement to Benefits) provides that a benefit of the treaty will not be granted if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

Double Taxation Relief

Zambia applies the credit method for the elimination of double taxation, while Switzerland generally applies the exemption method. However, in respect of income covered by Articles 10 (Dividend), 11 (Interest), and 12 (Royalties), Switzerland may allow a deduction of the Zambian tax paid (not exceeding Swiss tax), a lump sum reduction of the Swiss tax, or a partial exemption. In addition, a Swiss resident company deriving dividends from a Zambian company will be entitled to the same relief that would be granted to the Swiss company if the company paying the dividends were a resident of Switzerland.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. The 1954 tax treaty between Switzerland and the UK as extended to Zambia will cease to be effective in respect of relations between Switzerland and Zambia on the date the new treaty is effective.

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