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Worldwide Tax News

Approved Changes (3)

Czech Rep

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Change in Responsible Payer for Czech Immovable Property Transfer Tax Effective

The Czech Ministry of Finance has announced that the change in the responsible payer for immovable property transfer tax is effective from 1 November 2016. From that date, the buyer of Czech immovable property is required to pay the transfer tax due, and in no case may the tax obligation be contractually assigned to the seller. Under prior rules, the seller was required to pay the transfer tax while the buyer was only required to act as a guarantor in certain cases.

Italy

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Italy Publishes Law on Amended Returns and Voluntary Disclosure

On 24 October 2016, Law Decree No. 193/2016 was published in Italy's Official Gazette. The Law Decree provides new rules for the filing of amended returns and the settling of tax debts, reopens the voluntary disclosure program, and changes the authority for the collection of taxes. It entered into force the date it was published.

Amended Returns

Taxpayers are now allowed to file amended tax returns to correct mistakes or adjust taxable income at any time before the expiration of the standard statute of limitations for the year the return was originally filed (5 years from the 2016 tax year, 4 years for prior years). Previously, taxpayers generally had 2 years to file an amended return.

The change applies for corporate tax (IRES), regional production tax (IRAP), and withholding tax. If an amended return results in a tax credit, the credit may be used to offset any tax liability in subsequent years.

Tax Debt Settlement

For outstanding tax debts incurred between 2000 and 2015, taxpayers are allowed to settle their tax debt in a single lump sum or in four installments plus interest. The taxpayer is required to pay the tax due with interest, but does not incur the usual penalties for late payment.

Voluntary Disclosure

The voluntary disclosure program for financial and non-financial assets is reopened for violations made up until 30 September 2016. Taxpayers must submit an initial application by 31 July 2017 and submit all required documentation and payment of the resulting taxes, penalties and interest by 30 September 2017. Payment may be made in a lump sum or in three installments, in which case the first installment is due by 30 September. The level of penalties will depend on the level of cooperation of the taxpayer.

Tax Collection

From 1 July 2017, tax collection activities will be transferred from Equitalia S.p.A. to the Collection Department of the Revenue Agency, which is supervised by the Ministry of Economy and Finance. On that date, Equitalia S.p.A. will be dissolved.

Click the following link for Law Decree No. 193/2016 as published in the Official Gazette.

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OECD Invites Comments for First Batch of MAP Peer Reviews

On 31 October 2016, the OECD released the assessment schedule for the Mutual Agreement Procedure (MAP) peer review and monitoring process under BEPS Action 14. The first batch of reviews will begin in December 2016 and includes reviews of Belgium, Canada, the Netherlands, Switzerland, the United Kingdom, and the United States. In connection with the reviews, the OECD is seeking input from taxpayers regarding their experience with the MAP process in the respective countries.

Click the following link for the OECD announcement, which includes links to the peer review schedule and the questionnaire for the first batch. The deadline to submit the questionnaire is 28 November 2016.

Proposed Changes (4)

Croatia

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Croatia Tax Reform Legislation Presented Including Corporate, Individual, and VAT Rate Cuts

Croatia's Minister of Finance Zdravko Marić has announced tax reform plans that include a number of major tax rate cuts and other measures to simplify the tax system. Proposed changes include:

  • Reducing the corporate tax rate from 20% to 18%;
  • Introducing a reduced corporate tax rate of 12% for small business and farmers;
  • Reducing the tax rates for the middle and top individual income tax brackets from 25% to 20% and from 40% to 36% respectively;
  • Reducing the standard value added tax (VAT) tax rate from 25% to 24%; and
  • Replacing the current reduced VAT rates of 5% and 13% with a single reduced rate of 12%.

The proposed measures are to be finalized and submitted to parliament by 9 December 2016. If approved, it is expected that the proposed changes would apply from 1 January 2018. Additional details will be published once available.

Morocco

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Morocco Budget for 2017 New Anti-Avoidance Rules and Tax Incentives

Morocco's Ministry of Economy and Finance has published the draft budget for 2017. The main tax-related aspects of the budget include:

  • An anti-avoidance rule that allows the authorities to recharacterize transactions that have been undertaken for the main purpose of evading or reducing taxes, or to obtain benefits from tax incentives;
  • A tax exemption for dividends, interest, and rental income for real estate collective investment undertakings, subject to the following conditions:
    • The sole activity of the undertaking is the lease of immovable properties used for professional purposes;
    • The assets contributed to the undertaking are assessed by a certified contributions assessor and kept for a minimum of 10 years; and
    • At least 85% of the annual rental profits are distributed;
  • A five-year tax exemption for profits derived from export operations followed by a reduced tax rate of 17.5%;
  • A five-year tax exemption for profits derived from other industries selling goods to export companies;
  • A capital gains tax exemption for assets transferred between qualifying members of a group (95% ownership); and
  • A three-year VAT suspension for the acquisition of equipment acquired for investment projects of at least MAD 100 million under an investment agreement with the government.

Click the following link for the draft budget (French language). Subject to parliamentary approval, the draft budget measures will generally apply from 1 January 2017.

New Zealand

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New Zealand Extends Submission Deadline for Comments on Hybrid Mismatch Discussion Document

New Zealand Inland Revenue has announced that the closing date for submissions on the discussion document addressing hybrid mismatch arrangements has been extended to 11 November 2016. The discussion document provides an overview of the policy and principles regarding hybrid mismatch arrangements and the OECD recommendations, and seeks input on addressing specific mismatch issues.

Click the following links the discussion document.

South Africa

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South African Medium Term Budget Policy Statement Delivered and Tax Amendment Bills Tabled

South African Minister of Finance Pravin Gordhan has delivered the 2016 Medium Term Budget Policy Statement (MTBPS) and tabled the 2016 amendment bills before parliament. The MTBPS sets out the economic context, the trends in revenue and debt, and the framework of spending plans. The amendment bills give effect to the measures announced as part of the main budget delivered in February, including:

  • The special voluntary disclosure program, which already commenced 1 October 2016;
  • Adjustments to the individual income tax brackets and tax brackets for qualifying small companies;
  • Measures to prevent tax avoidance through the use of trusts;
  • Refinement of the anti-avoidance rules dealing with cross-border hybrid debt instruments; and
  • Extension of the employment and learnership tax incentives.

According to Gordhan, consultations are ongoing for the proposed carbon tax and sugar tax, and will be dealt with in future legislation.

Click the following links for the MTBPS documents and the amendment bills before parliament.

Treaty Changes (3)

Armenia-Serbia-Slovak Republic

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Armenia Ratifies Pending Tax Treaties with Serbia and Slovakia

On 26 October 2016, Armenia's National Assembly ratified the pending income and capital tax treaty with Serbia and Slovakia.

The treaty with Serbia was signed 10 March 2014 and is the first of its kind between the two countries (previous coverage). It 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 treaty with Slovakia was signed 15 May 2015 and is the first of its kind between the two countries (previous coverage). It will enter into force on the first day of the third month after the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.

Ethiopia-Saudi Arabia

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Tax Treaty between Ethiopia and Saudi Arabia has Entered into Force

The income tax treaty between Ethiopia and Saudi Arabia reportedly entered into force on 1 October 2016. The treaty, signed 28 February 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Ethiopian tax on income and profit imposed by the Income Tax proclamation, and the tax on income from mining, petroleum, and agricultural activities. It covers Saudi Zakat and the income tax including the natural gas investment tax.

Withholding Tax Rates

  • Dividends - 5%
  • Interest - 5%
  • Royalties - 7.5%

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 that constitute a share in a company that is a resident 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 apply the credit method for the elimination of double taxation.

Limitation on Benefits

Article 27 (Miscellaneous Provisions) includes that nothing in the treaty will affect the application of domestic anti-evasion/avoidance provisions concerning the limitation of expenses and any deductions arising from transactions between enterprises of a Contracting State and enterprises of the other State, if the main purpose or one of the main purposes of the creation of such enterprises or of the transactions undertaken between them, was to obtain the benefits under the treaty that would not otherwise be available.

Effective Date

The treaty applies in Ethiopia from 8 July 2017 and in Saudi Arabia from 1 January 2017.

Romania-Serbia

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SSA between Romania and Serbia Signed

On 28 October 2016, officials from Romania and Serbia signed a social security agreement. The agreement is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

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