Worldwide Tax News
Greece Publishes Law to Implement EU Directive on Exchange of CbC Reports
Greece has published Law No. 4484 in the 1 August 2017 edition of the Official Gazette. The law provides for the implementation of amendments made to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) by Council Directive (EU) 2016/881 concerning the exchange of Country-by-Country (CbC) reports, as well as various other amendments. The CbC reporting requirements are in line with Action 13 guidance and the EU Directive, including that:
- The CbC reporting requirements apply for fiscal year beginning on or after 1 January 2016 for MNE groups meeting the standard EUR 750 million consolidated group revenue threshold in the previous year (or equivalent in other currency as of January 2015), with the report due within 12 months following the close of the reporting fiscal year;
- The requirement to submit applies for ultimate parent entities resident in Greece, as well as non-parent constituent entities if standard secondary filing requirements are met: ultimate parent not required to submit a CbC report, parent's jurisdiction does not have a CbC exchange agreement with Greece, or there is a systemic failure for exchange;
- Where there are multiple constituent entities in Greece, one may be designated to submit the report;
- The secondary filing requirement will be waived if a surrogate parent entity has been designated to submit a report in another jurisdiction for the reporting fiscal year, the designation has been notified, and the report will be exchanged with Greece;
- Constituent entities in Greece must provide notification on the reporting entity for the group to the Greek tax authority by the end of the reporting fiscal year, although for the first year, the notification deadline is extended to the deadline for the CbC report (12 months after reporting fiscal year); and
- A fine of EUR 20,000 will apply for non-submission of a CbC report, and a fine of EUR 10,000 will apply for late or inaccurate submission.
Click the following link for Law No. 4484 as published (downloads PDF version). The CbC reporting provisions of the law are effective 5 June 2017 as required by Council Directive (EU) 2016/881.
Latvian Parliament Adopts Legislation for Implementation of Tax Policy Reform
The Latvian Parliament (Saeima) has announced the passage of legislation for the implementation of major tax reform measures on 28 July 2017. The main measures announced are summarized as follows:
A new corporate tax regime — the reinvested profit model — will be introduced, which includes that the payment of tax will be suspended until profits are distributed or used for purposes other than ensuring the company’s further development. Distributed profits will be subject to corporate income tax and the rate of 20% (15% tax rate under current regime), and reinvested profits are exempt. Further, corporate income tax will no longer have to be paid in advance.
In relation to the above, because dividends paid will be subject to 20% tax at the corporate level, natural persons will no longer be subject to personal income tax on dividends received. However, a transition period of two years has been set for the distribution of previously accumulated profits, to which a 10% personal income tax will be applied.
Other changes include:
- The 23% flat personal income tax will be replaced with progressive rates as follows:
- up to EUR 20,000 - 20%
- over EUR 20,000 up to 55,000 - 23%
- over EUR 55,000 - 31.4%
- The tax rate on income from capital and capital gains will be increased to 20%;
- The social contribution rate for both employers and employees will be increased by 0.5%; and
- Mandatory social insurance contributions will have to be made from royalties, with a 5% contribution payable by the royalty payer on behalf of the recipient.
VAT changes include:
- A reduction in the registration threshold from turnover EUR 50 000 per year to EUR 40 000; and
- The expansion of the VAT reverse charge to include delivery of gaming consoles and home appliances, delivery of construction materials and metal products, and related services.
Special rules have been adopted to allow natural and legal persons to repay outstanding tax debts with a waiver of accumulated late fees and fines.
In order to compensate lost tax revenue resulting from the reforms, increases will be made in the gambling tax, as well as excise duties on cigarettes, alcohol and fuel.
The reform measures are to apply from 1 January 2018. Additional details on their implementation will be published once available.
Saudi Arabia Consults on VAT Implementing Regulations
The Saudi General Authority of Zakat and Tax has announced the launch of a public consultation on the draft Implementing Regulations for Value Added Tax (VAT). The VAT Law was adopted by the Shura Council on 13 July 2017 and VAT will become effective in Saudi Arabia from 1 January 2018 with a standard rate of 5% (previous coverage). The draft regulations are broken down into 12 chapters, including:
- Chapter 1: Definitions
- Chapter 2: Taxable Persons
- Chapter 3: Supplies of Goods and Services
- Chapter 4: Place of Supply
- Chapter 5: Exempt Supplies
- Chapter 6: Zero-rated Supplies
- Chapter 7: Taxable Value of Supplies
- Chapter 8: Imports
- Chapter 9: Calculation of Tax Payable
- Chapter 10: Procedure and Administration
- Chapter 11: Refunds of Tax
- Chapter 12: General Provisions
Click the following link for the English-language version of the consultation page, which includes links to bilingual versions of both the VAT Law and the Implementing Regulations. The consultation ends 19 August 2017.
Singapore Publishes New Rules for Estimates Of Chargeable Income Filing Obligation
The Singapore Government published the Income Tax (Filing Of Estimates Of Chargeable Income) Rules 2017 on 21 July 2017. The Rules include the following:
- The revenue of a company or a partnership in a year of assessment for the purpose of the rules is the gross amount of its income derived from its principal activities in the accounting period relating to that year of assessment.
- Companies must electronically furnish the estimate of chargeable income as follows:
- Companies with revenue of more than SGD 10 million in YA 2017 must electronically file from YA 2018;
- Companies with revenue of more than SGD 1 million in YA 2018 must electronically file from YA 2019; and
- All companies must electronically file from YA 2020.
- Companies are exempt from furnishing the estimate of chargeable income in respect of a year of assessment if:
- Its revenue in that year of assessment:
- Does not exceed SGD 1 million with respect to years of assessment ending before 1 July 2017; or
- Does not exceed SGD 5 million with respect to years of assessment ending on or after 1 July 2017; and
- The estimate of its chargeable income for that year of assessment is nil.
- Its revenue in that year of assessment:
- A person is exempt from furnishing an estimate of chargeable income in relation to a partnership for a year of assessment if:
- The accounting period relating to that year of assessment ends in the month of October, November or December; or
- The revenue of the partnership in the year of assessment immediately before the year of assessment is less than SGD 500,000.
The new Rules also provide for the revocation of the Income Tax (Electronic Filing of Estimates of Chargeable Income) Rules 2017, although the electronic furnishing requirement itself is not changed (is included in the new Rules).
The provisions of the Income Tax (Filing Of Estimates Of Chargeable Income) Rules 2017 are generally deemed to have come into operation on 29 December 2016, although the rules regarding electronic furnishing came into operation on 21 July 2017.
U.S. to Delay Documentation Requirements under Earnings Stripping Rules
The U.S. IRS has issued IRS Notice 2017-36, which announces and invites comments on a change to be made to the timing of application of certain portions of the final and temporary regulations (T.D. 9790) under section 385 that relate to the documentation necessary to determine whether an interest in a corporation is treated as stock or indebtedness for all purposes of the Code (Documentation Regulations). The final and temporary regulations, which are meant to address corporate inversions and earnings stripping, were published 21 October 2016 (previous coverage). The Documentation Regulations provide guidance regarding the documentation and other information that must be prepared, maintained, and provided, and establishes certain operating rules, presumptions, and factors to be taken into account in making the determination of treatment as stock or indebtedness.
In order to give taxpayers sufficient time to prepare, the deadline for required documentation was initially extended to 1 January 2018 with respect to interests issued or deemed issued on or after that date. However, in response to continued taxpayer concerns and the required review of potentially burdensome regulations under an executive order from the Trump Administration, the Treasury Department and the IRS intend to amend the Documentation Regulations to apply only to interests issued or deemed issued on or after 1 January 2019. Pending the issuance of those regulations, taxpayers may rely on the delay in application of the Documentation Regulations set forth in Notice 2017-36.
U.A.E. Sets Foundation of Tax System with Issuance of Tax Procedures Law
On 31 July 2017, The United Arab Emirates Ministry of Finance announced the issuance of Federal Law No. (7) of 2017 for Tax Procedures. The law sets the foundation for the planned U.A.E. tax system, including the procedures related to the administration, collection, and enforcement of tax by the Federal Tax Authority (FTA), which was established by decree in October 2016. The Law applies in relation to any "Tax Law", which is defined as any federal law pursuant to which a federal tax is imposed. In particular, the law will apply in relation to the new value added tax and excise tax to be implemented from 2018 as agreed to by the Gulf Cooperation Council (GCC) member states.
Some of the main provisions of the Tax Procedures Law include:
- Any person conducting any business must keep accounting records, commercial books, and any tax related information as determined by the Tax Law;
- Tax returns, data, information, records, and documents submitted to the FTA must be in Arabic, although the FTA may accept documentation in other languages, provided that a translated copy is provided in Arabic;
- A non-registered taxable person or any other person who has the right to register must apply for registration under the relevant provisions of the Tax Law;
- Each taxable person must prepare and submit a tax return for each tax period for each tax, and settle any payable tax in accordance with the Tax Law;
- If a taxable person pays more than the payable tax amount, the FTA will have the right to allocate the difference to a later tax period, unless such taxable person submits a refund application;
- A taxable person may appoint a tax agent to act on their behalf with regard to tax affairs with the FTA - a register of tax agents will be established for this purpose that will include persons licensed by the Ministry of Economy and the competent local authority;
- The FTA may perform a tax audit on any person to ascertain the extent of that person’s compliance;
- The FTA may issue tax assessments (including estimated assessments) to determine tax payment in cases where a taxable person fails to register, fails to submit a tax return by the specified deadline, fails to settle payable tax, submits an incorrect return, and certain others cases;
- Administrative penalties will apply for a number of violations, including for failing to keep or submit required records, failing to register or notify the FTA of changes, failing to submit the tax return or submitting an incorrect return, and several others;
- Tax evasion penalties include a prison sentence and/or monetary penalties up to five times the amount of evaded tax;
- Taxable persons may submit requests for reconsideration of FTA decisions, and may make further objection to a Tax Disputes Resolution Committee if not satisfied with a decision following reconsideration - decisions of the Committee are final if involving disputes that do not exceed AED 100,000, while disputes exceeding that amount may be further challenged before the competent court;
- The general statute of limitation for a tax assessment is five years from the end of the relevant period, except in the case of proven tax evasion (15 years from and end of the period) and failure to register (15 years from the date the taxable person should have registered); and
- No time limit applies with respect to the FTA's right to claim payable tax and administrative penalties that have been notified to a taxable person.
Click the following links for Federal Law No. (7) of 2017 for Tax Procedures (Arabic language) and the unofficial English translation published by the Ministry of Finance. The Law will be published in the Official Gazette and will come into force 30 days from the date of publication.
Ireland Tax Strategy Group Papers for 2018 Budget Published
Ireland's Department of Finance has published a series of Tax Strategy Group (TSG) papers, which are produced annually for consideration while drafting the Budget. The papers do not include specific proposals, but provide an overview of issues and related developments, as well as options for certain measures and the related impacts for consideration.
- TSG 17/01 Corporation Tax - includes a review of recent domestic and international developments, including in relation to BEPS, the EU Anti-Tax Avoidance Directives, the Common Consolidated Corporate Tax Base, and others
- TSG 17/02 Income Tax and Universal Social Charge (USC) - includes a review of recent developments and policy considerations, including the impact of potential changes in the income tax rates (increase/decrease), increasing the USC entry point, reducing USC rates (possible increase in top rate), and other possible changes;
- TSG 17/03 Tax and Fiscal Treatment of Landlords - includes potential options for changes to the tax and fiscal treatment of rental accommodation providers in the short-, medium-, and long-term;
- TSG 17/04 Pay Related Social Insurance – Budget 2018 Issues - includes the impact of a potential increase in the entry threshold and increase in PRSI rates;
- TSG 17/05 Social Protection Package – Budget 2018 Issues - includes the impact of various options to increase welfare payment amounts;
- TSG 17/06 Selected VAT Issues - includes options to introduce a 9% VAT rate on residential construction and retain the 9% rate for tourism services, as well as the impact of possible rates changes broadly, the increase of the cash basis threshold for SMEs, and the increase of the VAT registration threshold;
- TSG 17/07 General Excise - includes options to increase the minimum rate of duty for tobacco products, a possible excise on e-cigarettes, the tapering of alcohol products tax (APT) relief for microbreweries, and an increase in APT overall;
- TSG 17/08 Energy and Environmental Taxes - includes options to equalize the excise rates for transport fuels over a 5-year period, increase the rate of carbon tax, equalize electricity tax rates for business and non-business, and update and commence benefit in kind legislation to promote environmentally friends vehicles;
- TSG 17/09 Brexit Taxation Issues - includes an overview of the impact of Brexit, which is not expected to have much impact with respect to direct taxes, but will likely increase the administrative burden with respect to indirect taxes given that the UK will become a third country for VAT purposes and all supplies to and from the UK will change from intra-Community supplies/acquisitions to exports/imports;
- TSG 17/10 Joint Research Programme on The Macroeconomy and Taxation - includes an overview of the joint research programme between the Department of Finance and the Economic and Social Research Institute (ESRI) on The Macroeconomy and Taxation, which outlines the objectives of the programme, its governance structure, and a brief summary of its outputs to date;
- TSG 17/11 Capital and Savings Taxes - includes the impact of changing the capital gains tax rate and possible introduction of progressive rates;
- TSG 17/12 Capital Taxes - Stamp Duty - includes options for the possible reduction/elimination of Stamp Duty on share sales and abolishing the life assurance levy; and
- TSG 17/13 Tax Expenditures Review - covers the official policy on tax expenditures, definition of tax expenditures, the merits and demerits of tax expenditures, the evolution of analysis and overview of most significant tax expenditures in Ireland, the evaluation of tax expenditures, and conclusions.
The above will be considered in developing the 2018 Budget, which is due in October.
New SSA between Canada and France has Entered into Force
The new social security agreement between Canada and France entered into force on 1 August 2017. The new agreement, signed 14 March 2013, generally applies from the date of its entry into force and replaces the agreement between the two countries signed in 1979.
Italy and Panama Sign Competent Authority Agreement for Exchange of Financial Account Information
According to recent reports, officials from Italy and Panama signed a competent authority agreement for the automatic exchange of financial account information on 16 June and 21 June 2017 respectively. The first exchanges are to take place by September 2018.
U.S. Publishes CbC Exchange Arrangement with Belgium
The U.S. IRS has published the bilateral competent authority arrangement signed with Belgium on the exchange of Country-by-Country (CbC) reports. The agreement was signed 20 July 2017 and is effective from that date.
The arrangement provides that pursuant to the provisions of Article 25 (Exchange of Information and Administrative Assistance) of the 2006 income tax treaty between the two countries, each competent authority will automatically exchange CbC reports received from each reporting entity resident for tax purposes in its jurisdiction, provided that, on the basis of the information provided in the CbC report, one or more constituent entities of the MNE group of the reporting entity are resident for tax purposes in the jurisdiction of the other competent authority, or are subject to tax with respect to the business carried out through a permanent establishment situated in the other jurisdiction.
With respect to fiscal years beginning on or after 1 January 2016, CbC reports are to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. With respect to fiscal years beginning on or after 1 January 2017, reports are to be exchanged no later than 15 months after the last day of the fiscal year.