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Worldwide Tax News

Approved Changes (2)

Argentina

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Argentina Relaxes Restrictions on Cross Border Debt Payments

On 22 April 2016, the Argentine Central Bank issued a Communication that eliminates payment schedules for the repayment of outstanding foreign debts related to the import of goods and services into the country. The change is part of government reforms that began in December 2015 to relax the foreign exchange controls implemented in Argentina in the past. With the change, Argentine companies are no longer subject to monthly caps on the amount that can be paid for outstanding foreign debts from 22 April.

India

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Indian Court Holds that No Withholding Tax Due on Cross-Border Commissions

A decision of the Madras High Court was recently published on whether commissions paid to overseas agents are subject to withholding tax. The case involved Farida Leather Company, an Indian resident producer of leather goods. In the 2010-11 tax year, Farida paid commissions to overseas agents to find buyers for its products and deducted the payments from its taxable income. In auditing Farida, the assessing officer determined that tax should have been withheld on the payments, and because Farida failed to do so, the deductions were disallowed. Farida appealed and the case made its way to the Income Tax Appellate Tribunal, which sided with Farida. The tax authority then appealed to the High Court.

In reviewing the case, the High Court focused on where the agent services were provided and whether the overseas agents had a permanent establishment in India. Because the agent services were provided outside India, the income could not be deemed to have accrued in India. In addition, the High Court found that the overseas agents' activities did not constitute a PE in India to which income could be attributed. Based on these findings, the High Court upheld the Tribunal decision that Farida has no withholding obligation for the commission payments and that the deductions are to be allowed.

Proposed Changes (3)

Korea, Rep of

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South Korea Announces Planned Incentives for Industrial Restructuring with a Focus on R&D

On 28 April 2016, Korea's Ministry of Strategy and Finance published a press release on the government's plans to support industrial restructuring, which includes incentives for research and development (R&D) and other support measures. The plans include:

  • Up to 30% tax reduction for R&D investment in new growth engines;
  • Up to 10% tax reduction for facilities investment to commercialize new technologies;
  • Expanded tax reduction for R&D investment in new medicines;
  • Expanded support for service sector job creation;
  • New tax incentives to promote the content industry; and
  • KRW 1 trillion in new funding to support high-risk investment in new technologies and products.

Click the following link for the press release on the Ministry of Strategy and Finance website.

Puerto Rico

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Puerto Rican Legislative Assembly Considering Blocking Switch to VAT

Several members of Puerto Rico's Legislative Assembly are currently considering the introduction of legislation to block the upcoming change from sales and use tax (SUT) to value added tax (VAT). The move reportedly has bipartisan support, including support from the presidents of both the House of Representatives and the Senate.

The change from SUT to VAT was approved in May 2015 following stiff opposition from both houses of the Legislative Assembly. The change included a transition that involved increasing Central SUT rate from 6% to 10.5% from 1 July 2015, and introducing a 4% SUT on business-to-business and professional services from 1 October 2015. The final switch from SUT to VAT at the rate of 10.5% plus 1% municipal SUT was to be effective 1 April 2016, but was delayed to 1 June 2016 (the latest the change can occur under law).

United States

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U.S. Legislation Introduced to Ensure that Corporate Tax Rate Cuts would Apply for Pass-through Entities

On 27 April 2016, U.S. Representative Vern Buchanan R-FL announced the introduction of the Main Street Fairness Act. The legislation is meant to ensure that any cuts in the corporate tax rate as part of business tax reform would also apply for income received through pass-through entities, such as partnerships and S corporations.

Treaty Changes (3)

Azerbaijan-Malta

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Tax Treaty between Azerbaijan and Malta Signed

On 29 April 2016, officials from Azerbaijan and Malta signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

France-Panama

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France Intends to Revise Tax Treaty with Panama

French Finance Minister Michel Sapin met with Panamanian Finance Ministry Dulcidio de la Guardia to discuss France's intent to revise the 2011 income tax treaty between the two countries. In particular, France wants to update the provisions regarding information exchange to ensure that information concerning French taxpayers or assets or income taxable in France is provided without any restrictions.

Singapore-Uganda

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Tax Treaty between Singapore and Uganda to be Negotiated

During a meeting held 25-26 April 2016, officials from Singapore and Uganda agreed to begin negotiations for an income tax treaty. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

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