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Approved Changes (6)

Croatia

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Croatia Clarifies Employment Level Conditions for the Tax incentive for Reinvested Profits

Croatia's Tax Administration has published guidance that clarifies the application of tax relief (exemption) for reinvested profits from 2015. The exemption for reinvested profits was introduced in 2012, with the conditions expanded with effect from 2015, including that:

  • The profits must be reinvested in long-term assets used in business activities to preserve existing jobs; and
  • The total number of employees as established at the beginning of the period in which the incentive is claimed must not be reduced for at least two years.

The guidance clarifies that for the purpose of the employment condition, employers must monitor the total number of employees from the first day of the period in which the incentive is claimed until two year after the end of that period. If during the monitoring period the total number of employees dips below the established level, the employer will still generally be eligible for the reinvestment incentive, provided it is a short-term reduction, it was not the employer's intention to reduce the number of employees, and that action is taken to increase the number of employees back to or in excess of the established level.

Greece

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Greek Parliament Approves Transfer Pricing Documentation and APA Deadline Amendments

On 27 July 2016, the Greek Parliament reportedly approved legislation amending the country's transfer pricing documentation and advance pricing agreement (APA) deadlines. The changes include:

  • The deadline for the preparation of transfer pricing documentation is extended from four months after the taxpayer's year-end to the tax return due date (generally six months);
  • The deadline for submitting the Summary Information Table (SIT) of related-party transactions is also extended to the tax return due date;
  • The standard deadline for the issuance of a decision for an APA is extended to 18 months (36 months if extended by a decision of the General Secretary of Public Revenue); and
  • The General Secretary is authorized to introduce simplified documentation requirements for small and very small enterprises, and/or an exemption for very small enterprises.

The changes are effective for fiscal years beginning on or after 1 January 2015. As such, calendar year taxpayers that have failed to prepare documentation or submit the SIT for 2015 by the previous deadline (four months) will generally be exempt from related penalties as long as the new deadline has been met.

Italy

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Italy Implements Hybrid Mismatch and Anti-Abuse Amendments to EU Parent-Subsidiary Directive

On 23 July 2016, Italian Law No. 122 of 7 July 2016 entered into force. The law includes a number of amendments to Italian tax law concerning compliance with EU law, including implementation of the hybrid mismatch and anti-abuse amendments to the EU Parent-Subsidiary Directive. The Law provides that with effect from 1 January 2016, the 95% participation exemption for payments from other EU Member States will not apply if the payments are deductible for the paying entity (hybrid mismatch). Regarding the anti-abuse amendment, reference is made to the general anti-avoidance rule (GAAR) introduced in Legislative Decree No. 128, which entered into force in 2015 (previous coverage).

Romania

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Update - Romania's Income Tax Exemption for R&D Personnel

Romania's income tax exemption for R&D personnel approved 30 June 2016 (previous coverage) is effective from 1 August. Individuals employed in Romania in R&D and technological development fields can benefit from a full exemption from the flat 16% individual income tax on their salary income. Although specific qualifying activities have not been issued, employers may apply for a binding ruling from the tax authority to confirm that their employees are eligible.

United Kingdom

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UK Parliament Publishes Briefing Paper on Corporate Tax Reform

On 25 July 2016, the UK Parliament published a briefing paper on corporate tax reform that covers the Coalition Government’s approach to corporate tax reform since 2010, the debate over corporate tax avoidance and the efforts to tackle BEPS, and the developments in both these areas following the establishment of the new Conservative Government after the 2015 General Election.

Click the following link for the Briefing Paper: Corporate tax reform (2010-16).

United States

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Facebook Facing Tax Liability of up to USD 5 Billion due to Intangibles Transfer Pricing Issues

On 27 July 2016, Facebook received a statutory notice of deficiency from the IRS relating to its 2010 tax year. In examining Facebook's transfer pricing for the year, the IRS found issues with Facebook's transfer of intangibles to its Ireland subsidiary, which included property rights relating to its online platform, online marketing intangibles and online communities. According to the IRS, the intangibles had been undervalued by billions of dollars by valuing closely related intangibles on a stand-alone basis rather than in the aggregate. As a result, Facebook faces a potential tax liability of USD 3 to 5 billion. In response, Facebook has stated that it does not agree with the position of the IRS and will file a petition in the U.S. Tax Court challenging the notice.

Note - The notice is part of a larger examination of Facebook's federal income tax liability for tax years 2008 to 2013, which according to the IRS, Facebook has failed to fully cooperate with.

Proposed Changes (1)

Luxembourg

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Luxembourg 2017 Tax Reform Legislation Submitted to Parliament

The Luxembourg government has submitted the 2017 tax reform legislation to parliament. In addition to the measures previously covered, other key measures of the reform include:

  • The proposed limit on the amount taxable income that may be offset by carried forward losses is abandoned, but the 17-year limit for carry forwards is maintained;
  • The availability of investment tax credits is expanded to investments made in other EU/EEA Member States;
  • The investment tax credit for assets approved for the special depreciation regime is increased from 8% to 9%;
  • The tax credit for hiring of unemployed persons is extended through 2019;
  • An optional deferral is introduced for the deduction of annual depreciation, which may be carried forward and must be used by the end of the asset's useful life;
  • The requirement to electronically file corporate tax returns is introduced;
  • An administrative fine of 5% to 25% of underpaid tax or undue refunds is introduced for the filing of incorrect/incomplete tax returns and non-filing;
  • The maximum penalty for late filing of returns is increased to EUR 25,000;
  • Directors, liquidators and trustees are made jointly and personally liable for the value added tax liabilities of taxable persons they manage/administrate; and
  • The 0.5% Budget Balancing Tax on individual income is repealed.

Subject to approval, the tax reform measures will generally apply from 1 January 2017.

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