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Approved Changes (3)

European Union

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European Commission Launches Preliminary Inquiry into Luxembourg Tax Rulings for McDonald's

The European Commission has reportedly launched a preliminary inquiry into the tax rulings provided by Luxembourg for McDonald's. The inquiry is in regard to tax rulings that enabled McDonald's to avoid paying tax that would have otherwise been due in the EU countries in which the company operates.

A report issued earlier in the year by the European Federation of Public Service Unions outlines the alleged tax avoidance practices of McDonald's in Europe. The report states the McDonald's was able to reduce its tax by moving its European headquarters from the U.K. to Switzerland and transferring its intellectual property and franchising rights to a Luxembourg resident subsidiary. Through that structure and tax rulings provided by Luxembourg, from 2009 to 2013 the Luxembourg subsidiary was able to pay just EUR 16 million in tax to other European countries and EUR 3,235 to Luxembourg on EUR  3.7 billion in reported royalty income.

Additional details of the inquiry will be published once available.

India

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Application Deadline for Indian APA Rollback Extended

On 31 March 2015, the Indian Central Board for Direct Taxes published a notice that the deadline for advanced pricing agreement (APA) rollback applications has been extended. The implementation of the APA roll-back provision was announced 14 March 2015, with an initial deadline of 31 March for taxpayers that had entered into or applied for an APA prior to 1 January 2015. With the recent notice, the deadline is changed to 30 June 2015 for taxpayer who have entered into or applied for an APA prior to 31 March 2015.

The roll-back provision allows taxpayers who enter into APAs with India to apply the terms of the APA for the covered related party transactions for a rollback period of up to 4 years. Going forward, the application for the rollback period is made along with the APA application.

Italy

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Italy Implements VAT Place of Supply Change for EU Telecommunications, Broadcasting, and Electronic B2C Services

On 1 April 2015, Italy implemented the required legal changes needed for the EU's change in the place of supply rules for B2C telecommunications, broadcasting, and electronic services made to persons located in the EU. The implementation was to have taken place 1 January 2015, but the required legislative process was not completed.

Under the new rules, the place of supply is changed to the EU country of the consumer, and the supply is subject to that country's VAT rate. Each EU country must establish a Mini One Stop Shop (MOSS) through which companies can manage the VAT payments for all EU countries instead of registering in each one where they have B2C sales.

Italy was the only country to miss the 1 January 2015 deadline.

Proposed Changes (1)

Bahrain-Kuwait-Oman-Qatar-Saudi Arabia-Untd A Emirates

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GCC States Preparing to Implement VAT System

The Member States of the Gulf Cooperation Council (GCC) have concluded a general framework for the implementation of a value added tax (VAT). Members of the GCC include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

The project to introduce a GCC-wide VAT system has been ongoing for a number of years. However, with the Member States supported by strong oil prices, the need for increased revenue from a VAT was not sufficient to push the project forward. With the drop in oil prices though, the project is moving forward with a general framework finalized, and the detailed rules for implementation expected by the upcoming GCC meeting in May 2015.

Treaty Changes (2)

China-Hong Kong

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Protocol to the Income Tax Arrangement between China and Hong Kong Signed

The Hong Kong government has announced that a protocol to the 2006 income tax arrangement between Hong Kong and China was signed on 1 April 2015. The protocol is the third to amend the arrangement. The protocol:

  • Reduces the withholding tax imposed by Mainland China on royalties paid to aircraft and ship leasing businesses from 7% to 5%,
  • Sets out that gains derived by a Hong Kong resident from the sales and purchase of shares in a Mainland China listed company shall be taxable only in Hong Kong, and gains derived by a China Mainland resident from the sales and purchase of shares in a Hong Kong listed company shall be taxable only in Mainland China,
  • Clarifies conditions under which an investment fund would be qualified for Hong Kong resident status, and
  • Expands the tax types covered by the exchange of information arrangement to include VAT, consumption tax, business tax, land tax and property tax

The protocol will enter into force after the ratification instruments are exchanged, and will generally apply from the date of its entry into force.

Cyprus-South Africa

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Protocol to the Tax Treaty between Cyprus and South Africa Signed

On 1 April 2015, officials from Cyprus and South Africa signed a protocol to the 1997 income and capital tax treaty between the two countries. The protocol is the first to amend the treaty, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

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