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Approved Changes (5)

Ecuador

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Ecuador Issues Shareholders Annex Form Requirements

Ecuador issued Resolution No. NAC-DGERCGC15-00003236 on 8 January 2016, which sets out the requirements for the filing of a shareholders annex form. This annex is in connection with Ecuador's increased tax rate for companies that have shareholders resident in tax havens or low-tax jurisdictions. The increased rate was approved in December 2014, and applies from the 1 January 2015 (previous coverage).

Annex Information Requirements

The shareholders annex must generally be submitted by all Ecuador resident entities with foreign shareholders and branches or permanent establishments of foreign companies in Ecuador. The required information is for each shareholder through the end of the reporting period and includes:

  • Individual or corporate name;
  • Tax ID number;
  • Whether the shareholder is an individual or an entity, and if an entity, its legal form;
  • The nationality if an individual, and the country/jurisdiction of tax residence if an entity;
  • The percentage of the shareholder’s participation;
  • Whether the shareholders, directors or administrators are related parties of the reporting entity; and
  • Other information the Ecuador tax authority or Superintendence of Companies may require.

The information included in the annex generally only covers the first level of the corporate structure (direct shareholders). However, if the shareholders are related to the reporting entity or resident in a tax haven or low-tax jurisdiction, all levels of the corporate structure must be reported including intermediary companies up to the final individual(s).

In addition, for companies listed on the stock exchange, at least 80% of their corporate structure must be reported, as well as information on any shareholders owning 2% or more of the corporate structure. For non-profit organizations, investment funds and trusts, other specific reporting requirements apply.

Annex Filing Deadlines

The annex requirements apply for the 2015 and subsequent fiscal years. For the first year (2015), the annex must be submitted by the end of April 2016. For subsequent years, the annex must generally be submitted between the 10th and 28th of February, with the exact date depending on the reporting entity's taxpayer ID number. If there is a direct or indirect change in the corporate capital composition, the information is to be reported between the 10th and 28th day of the following month depending on the taxpayer ID number.

For entities whose shares are traded on a foreign stock exchange, a shareholders annex must be submitted by 30 September following the first half of the year (January to June)  and by 31 March following the second half of the year (July to December).

Failure to submit the annex will result in the application of the increased 25% corporate tax rate on all taxable income of the entity. If submitted incomplete, the 25% rate will apply on a percentage of the entity's taxable income equal to the percentage of the entity's shareholders that are unreported. However, if the percentage unreported exceeds 50%, all taxable income of the entity will be subject to the 25% rate.

Hong Kong

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Hong Kong to Accept 2015/2016 Profits Tax Returns with Profits Computed on a Fair Value Basis

On 28 January 2016, the Hong Kong Inland Revenue Department (IRD) issued a press release announcing that 2015/2016 profits tax returns will be accepted with profits computed using the fair value basis.

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Profits Tax Return - Fair Value Accounting

Subsequent to the judgment of the Court of Final Appeal in Nice Cheer Investment Limited v CIR, the Department has agreed, as an interim administrative measure while pending review, to accept 2013/14 and 2014/15 profits tax returns in which the assessable profits are computed on a fair value basis.

The Department is prepared to extend the interim administrative measure further to the filing of 2015/16 profits tax returns. That is, the Department agrees to accept the 2015/16 returns in which the assessable profits are computed on a fair value basis.

Similarly, the Department agrees to re-compute the 2015/16 assessable profits computed on a fair value basis if the taxpayers subsequently adopts the realisation basis. However, any request for re-computation should be made within the time limits laid down in sections 60 or 70A of the Inland Revenue Ordinance.

Ireland

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Ireland Publishes Finance (Tax Appeals) Bill 2015

Ireland enacted the Finance (Tax Appeals) Act 2015 as Act Number 59 of 2015 on December 25 2015. The Act revises the law concerning the making of appeals in matters of taxation (including in respect of stamp duties and of duties relating to customs and excise) and establishes a new Tax Appeals Commission to handle taxpayer appeals of Revenue decisions. The Act will apply from a date to be set by order of the Minister of Finance.

Click the following link for the Finance (Tax Appeals) Act 2015 published on the Oireachtas (Irish legislature) website.

Romania

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Romania Publishes Order Approving new APA Procedures including Expanded Documentation Requirements

Romania published Order 3735/2015 in the Official Gazette on 29 December 2015, approving the procedures for the issuance and amendment of advance pricing agreements (APA).

Under the new procedures, the documentation requirements for the issuance or amendment of an APA have been expanded and largely harmonized with the additional documentation requirements recommended by Action 13 of the OECD BEPS Project. The required documentation includes:

  • Details of the taxpayer;
  • Details of the related parties;
  • A description of the organizational, legal, and operational structure of the group of companies to which the taxpayer belongs;
  • A description of the main functions performed, risks assumed, and assets used by the group;
  • A general description of the taxpayer's research and development activity, if any;
  • Presentation of any cost contribution agreements concluded by the taxpayer with related parties;
  • A description of transactions concerning any business restructuring that involve the taxpayer in the period preceding the application;
  • A list of any transactions to be undertaken with other related parties, including their values;
  • Functional and comparability analyses; and
  • Other relevant documentation.

In addition to the new documentation requirements, the new procedures also introduce the possibility for a taxpayer to argue its position in cases where an APA application is rejected. In such case, the taxpayer will have 60 days from the clarification request date or from the notification of the agreement project to argue its position. Furthermore, if a taxpayer disagrees with an APA that has been issued, it will have 30 days to notify the tax authorities, and the APA will have no legal effect.

If an APA is issued and accepted by the taxpayer, it will be binding an enforceable only if its terms and conditions are met, including the submission by the taxpayer of an annual report, the contents of which will be specified in the APA.

The provisions of Order 3735/2015 apply for APA application submitted on or after 1 January 2016. Applications made prior to that date remain subject to the provisions in force at the time the application was submitted.

United States-India

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U.S. Ends Suspension of Bilateral APAs with India

On 1 February 2016, the U.S. IRS announced that the Advance Pricing and Mutual Agreement office will accept applications for bilateral advance pricing agreements between the United States and India beginning 16 February 2016. This formally ends the suspension of transfer pricing dispute resolution relations between the two countries in effect since 2013.

According to the announcement, the decision to begin accepting APA applications is based on the significant progress the U.S. has made with India under a frame work agreed to in January 2015 for resolving competent authority cases involving Indian-resident affiliates performing information technology-enabled services or software development services. Under that framework, over 100 of approximately 200 cases have already been resolved.

Click the following link for the IRS announcement.

Proposed Changes (2)

Netherlands-Brazil

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Netherlands to Request Removal from Brazil's Grey List

According to a letter dated 25 January 2016 from the Dutch State Secretary for Finance Eric Wiebes to parliament, Wiebes stated that he will formally request the removal of the Netherland's from Brazil's grey list. The Netherland's was effectively added to Brazil's grey list through Executive Declaratory Act No. 3/2015, which repealed the exclusion of Dutch holding companies without sufficient economic substance. A number of tax issues are triggered by the inclusion in the list, including the application of Brazil's thin capitalization and transfer pricing rules, whether the parties are related or not.

United States

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House Ways and Means Committee to Draft U.S. International Tax Reform Bill

Following a House Ways and Means Committee retreat held 1 February 2016, Committee Chair Kevin Brady R-TX announced that Tax Policy Subcommittee Chair Charles W. Boustany Jr. R-LA has been tasked with the drafting of an international tax reform bill. The legislation will reportedly focus on countering corporate Inversions, the introduction of an innovation (IP) box regime with a reduced tax rate, and lowering the barriers for the reinvestment in the U.S. of profits earned overseas. Although no timeline has been set, Boustany has indicated that a discussion draft is to be prepared by July 2016.

Treaty Changes (2)

Australia-Hong Kong

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Tax Treaty between Australia and Hong Kong to be Negotiated

Officials from Australia and Hong have reportedly agreed to begin negotiations for an income tax treaty. Any resulting treaty would be the first of its kind between the two jurisdictions, and will need to be finalized, signed and ratified before entering into force.

Bulgaria-Montenegro

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SSA between Bulgaria and Montenegro Signed

On 1 February 2016, officials from Bulgaria and Montenegro signed a social security agreement. The agreement will enter into force after the ratification instruments are exchanged, and once in force and effective, will replace the 1957 social security agreement between Bulgaria and the former Yugoslavia as it applies in respect of Montenegro.

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