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Approved Changes (3)

Colombia

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Colombian Constitutional Court Holds CREE Tax Credit Balances may Offset other Tax Debts

The Colombian Constitutional Court has issued its decision on a recent case that challenged the constitutionality of the offset rules for the CREE tax and CREE surtax under Article 20 of Colombia's Tax Reform Act (Act 1739), passed at the end of 2014 (previous coverage). Under the offset rules, neither CREE tax nor CREE surtax credit balances may offset other tax debts or vice versa. This inability to offset CREE credit balances against other tax debts was challenged based on the constitutional principle of tax equity.

In its decision, the Court agreed that the offset restriction unfairly limits a taxpayer's ability to offset its tax debts. As such, the restriction under Article 20 is found to be unconstitutional and is repealed.

India-Israel

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Indian Tribunal Holds Maintenance Charges for Equipment Outside India Not Subject to Withholding Tax

The Delhi Income Tax Appellate Tribunal recently issued a decision on whether payments for equipment maintenance services provided outside India are subject to withholding tax. The case involved India-based HCL Comnet Ltd. (HCL), a provider of network solutions and services for related equipment.

In the 2003-04 fiscal year, HCL made payments to an Israeli company for routine repairs, replacement, and maintenance services for equipment that was sent outside India and then returned after the work was completed. HCL withheld no tax on the payments, and in its tax return for the year, claimed the payments as a deductible expense. However, in reviewing the return, the assessing officer determined that the fees were fees for technical service (FTS) for which tax should have been withheld. As a result, the deductions were denied and HCL appealed.

In its decision, the Delhi Tribunal sided with HCL. The Tribunal found that the payments could not be considered FTS under the Income Tax Act, 1961, since they were for routine services performed outside of India. Further, the Tribunal found the payments could not be considered FTS under the 1996 India-Israel tax treaty, since the services did not make available any technical knowledge to HCL.

Latvia

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Latvia Amends Taxable Base Cap for 2017 Social Security Contributions

Latvia has issued a regulation amending the taxable base cap for social security contributions. According to the regulation, the annual taxable base (income) cap per employee for social security contributions will be increased from EUR 48,600 to EUR 52,400 effective 1 January 2017.

The employer portion of social security contributions in Latvia is 23.59% calculated on the employee's gross salary up to the cap. The employee portion is 10.5%.

Proposed Changes (3)

Denmark

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Denmark Tax Reform Plans include Notional Interest Deduction, R&D Super Deduction and Start-Up Tax Holiday

On 30 August 2016, the Danish government presented its tax reform plan for 2017 through 2025. The plan includes a number of major measures, including:

  • The introduction of an equity investment allowance in 2019 in the form of a notional interest deduction that will be based on equity in excess of the amount existing at the end of 2018, with an annual rate based on the average two-year Central Bank interest rate capped at 3%;
  • The introduction of an additional 50% deduction for qualifying R&D expenses from 2017 to 2025 for SMEs and an additional 25% for large enterprises (150% and 125% total deduction respectively);
  • The introduction of a three-year tax holiday exemption for new entrepreneur start-ups with a taxable income cap of DKK 7 million, which is to be available from 2017 and set to expire in 2021, but may be extended; and
  • A reduction in individual income taxation overall, with a reduction in the maximum tax burden, including state, municipal and health contributions, from the current 51.95% to 46.98%.

The reform measures must be approved by parliament, and are subject to change.

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OECD VAT Policy Advisor Says Countries Need to Simplify Compliance to Tackle VAT Issues for Digital Supplies

While speaking at a recent international tax conference in Toronto, Canada, OECD VAT policy adviser Stéphane Buydens has stated that in order to address VAT issues for digital supplies, countries need to adopt an approach that includes simplifying VAT registration and compliance, while making evasion more difficult through technology and administrative cooperation to detect noncompliance. The goal of countries should not be to achieve 100% collection, but rather to employ a simple system that targets the majority of supplies and high-risk areas. According to Buydens, the issues may only be effectively addressed through coordinated international efforts and a consistent set of rules, and will be considered as part of a VAT action plan to be released by the OECD's indirect tax unit sometime next year.

Slovenia

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Slovenian Legislation submitted to parliament for Corporate and Individual Income Tax Reform and Tax Procedures Reform

Slovenia's government has submitted to parliament the bills for corporate and personal income tax reform and tax procedures reform. The corporate and personal income tax reform includes increasing the corporate tax rate to 19%, amending the individual income tax brackets, and various other amendments to current tax provisions (previous coverage). The tax procedures reform includes transposing the EU Directives on the exchange of tax rulings and Country-by-Country reports, as well as amendments to tax debt payment options and penalties (previous coverage).

Additional details of the reforms will be published once approved.

Treaty Changes (3)

Norway-Switzerland-Untd A Emirates

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Norwegian Government Approves Pending Protocol to Tax Treaty with Switzerland and TIEA with the U.A.E.

On 26 August 2016, the Norwegian government approved for ratification the pending protocol to the 1987 income and capital tax treaty with Switzerland and the tax information exchange agreement with the United Arab Emirates.

The protocol, signed 4 September 2015, is the third to amend the Norway-Swiss treaty. It amends Article 3 (General Definitions) regarding the competent authority, amends Article 25 (Mutual Agreement Procedure) to add arbitration provisions, and replaces Article 26 (Exchange of Information) to bring it in line with the OECD standard for information exchange. The protocol will enter into force once the ratification instruments are exchanged, and will generally apply from that date. However, the protocol provisions regarding Articles 25 and 26 will apply from 1 January of the year following its entry into force.

The tax information exchange agreement, signed 4 November 2015, is the first of its kind between Norway and the United Arab Emirates, and will enter into force 30 days after the ratification instruments are exchanged. It will apply for criminal tax matters from the date of its entry into force, and for other matters from 1 January of the year following its entry into force.

Panama-Vietnam

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Tax Treaty between Panama and Vietnam Signed

On 30 August 2016, officials from Panama and Vietnam signed an income tax treaty. The treaty is the first of its kind between the two countries, although a previous draft had been initialed in June 2014, but was never signed. The treaty signed will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Uganda-OECD

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Mutual Assistance Convention has Entered into Force for Uganda

On 1 September 2016, the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol entered into force for Uganda. The Convention, signed by Uganda on 26 October 2015, generally applies from 1 January 2017. However, it may apply for earlier periods between Uganda and another signatory if agreed to, and applies in relation to any period regarding criminal matters.

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