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Approved Changes (7)

Australia

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Australia Decides Not to Implement Bank Deposit Tax

Australian Prime Minister Tony Abbott and Treasurer Joe Hockey have announced that a proposed bank deposit tax will not be implemented. The controversial tax was initially proposed in 2013 and would have been levied at a rate of 0.05%. Observers had expected the tax to be implemented, as its projected revenue of AUD 1.5 billion was included in the most recent Budget issued in May 2015. However, it was ultimately decided that the negative impacts of its implementation would be too great.

Chile

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Chile Issues Reporting Requirements for Non-resident Indirect Transfers of Chilean Assets

On 5 August 2015, Resolution No. 65 (dated 30 July 2015) was published in Chile's Official Gazette. The resolution sets out the reporting requirements for non-residents involved in the transfer of shares, bonds or other securities or rights with underlying assets in Chile. According to the resolution, when such transfers are made, a declaration (Form 1921) must be submitted to the Chilean tax authority. The declaration includes:

  • The identification of the buyer, the seller, their representatives in Chile if applicable, and the relevant Chilean entity if part of the underlying assets;
  • A description of the assets transferred;
  • A descriptions of the underlying assets in Chile;
  • The price and payment for the transaction;
  • The determination of income for the transaction and applicable tax; and
  • Any other relevant information.

If the seller, buyer and Chilean entity (if applicable) all agree on the information included in the declaration, only the seller is required to make the submission. Otherwise, each should submit.

The requirement applies retroactively from 1 January 2013. For indirect transfer that have occurred from that date up to the date the Resolution was published (5 August 2015), the declaration must be submitted by 30 October 2015. For indirect transfers after 5 August 2015, the declaration must be submitted by the last working day of the month following the transfer.

Click the following links for Form 1921 and the instructions for submitting (both in Spanish).

France-European Union

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CJEU Rules French Group Dividend Tax Rule Violates Freedom of Establishment

On 2 September 2015, the Court of Justice of the European Union (CJEU) ruled on an issue referred to the Court by the Versailles Administrative Court of Appeal concerning a French company seeking to deduct the 5% proportion for costs and expenses related to dividends received from subsidiaries established in other EU Member States. This would be allowed for dividends received from a French subsidiary under the French tax integration regime, but not for dividends received from a non-resident subsidiary. The question referred to the CJEU was whether the French tax integration regime was consistent with the freedom of establishment and the corporation tax legislation of the European Union.

In its decision, the CJEU followed the Advocate General opinion on the matter issued in June (previous coverage), finding that the French integration regime is in violation of freedom of establishment and stated the following:

Article 49 TFEU must be interpreted as precluding rules of a Member State that govern a tax integration regime under which a tax-integrated parent company is entitled to neutralisation as regards the add-back of a proportion of costs and expenses, fixed at 5% of the net amount of the dividends received by it from tax-integrated resident companies, when such neutralisation is refused to it under those rules as regards the dividends distributed to it from subsidiaries located in another Member State, which, had they been resident, would have been eligible in practice, if they so elected.

Click the following link for the full text of the CJEU decision.

India

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India Decides Not to Levy Minimum Alternate Tax on Foreign Investors

On 1 September 2015, the Indian Ministry of Finance announced that it would not retroactively levy Minimum Alternate Tax (MAT) on foreign institutional and portfolio investors (FIIs/FPIs) that do not have a place of business/ permanent establishment in India.

Under Finance Act 2015, from 1 April 2015 foreign investors are exempted from MAT in relation to long-term capital gains from securities transactions and short-term gains if subject to securities transactions tax. However, the Indian government had previously stated its intent to pursue MAT claims arising prior to 1 April 2015, and a MAT committee was formed to examine the issue and develop methods to resolve disputes.

As part of its work, the committee drafted a report on the matter, in which it concluded that MAT does not apply to FIIs and FPIs, and that Section 115JB of the Income Tax Act, 1961 should be amended to clarify the inapplicability. After reviewing the report, the government accepted the recommendations.

Click the following links for the Ministry of Finance announcement and the committee report.

Malaysia

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Malaysia Publishes Guidance on Qualifying Expenditure and Computation of Capital Allowances

On 27 August 2015, the Inland Revenue Board of Malaysia published Qualifying Expenditure and Computation of Capital Allowances - Public Ruling (PR) No. 6/2015, which provides guidance on tax treatment in relation to qualifying expenditure on plant and machinery for claiming capital allowances and the computation of capital allowances.

The main areas covered, with several examples, include:

  • Qualifying Expenditure, including details for:
    • Incidental expenditures;
    • Vehicles;
    • Hire purchase assets;
    • Assets previously used for non-business purposes;
    • Asset installation services;
    • Expenditure on dismantling and removing assets; and
    • Foreign exchange differences arising from foreign loans taken to fund the purchase of plant and machinery;
  • Persons Eligible to Claim Capital Allowances;
  • When the Qualifying Expenditure is Incurred; and
  • Rules for assets with a expected life span of less than two years.

PR No. 6/2015 replaces PR No. 2/2001 and may be referred to in conjunction with PR No. 12/2014, published 31 December 2014 (previous coverage).

Click the following link for PR No. 6/2015 on the Inland Revenue Board of Malaysia website.

Thailand

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Thailand Increases Research and Development Tax incentive

On 11 August 2015, the Thai Cabinet approved an increased incentive for research and development (R&D) of technology and innovation. The incentive is increased from a deduction of 200% of qualifying R&D expenditure to 300% of qualifying expenditure. This increased deduction is capped at a percentage of the gross revenue of the taxpayer. The cap percentage is:

  • 60% for gross revenue up to THB 50 million;
  • 9% for gross revenue over THB 50 million up to 200 million; and
  • 6% for gross revenue over THB 200 million.

The incentive applies for R&D expenditure incurred from 1 January 2015 to 31 December 2019.

United States

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U.S. IRS Updates General and ICMM FATCA FAQs

On 25 August 2015, the U.S. IRS updated the general frequently asked questions (FAQ) on the Foreign Account Tax Compliance Act (FATCA), and on 27 August 2015, updated the FAQ on the International Compliance management Model (ICMM) system. The general FAQ covers several FATCA topics related to compliance and other matters. The ICMM FAQ covers issues related to the ICMM system, which is used by the IRS for the collection and storage of FATCA information including FATCA reports received both electronically and in paper form. The updates are as follows:

  • The General FAQ update clarifies that, unless a specified exception applies, a branch in a Model 1 IGA jurisdiction must register as a branch of its owner and not as a separate entity.
  • The ICMM FAQ update adds two new questions concerning field level errors when using the ICMM system.

Click the following links for the FATCA - FAQs General page and the ICMM Frequently Asked Questions (FAQs) page on the IRS.Gov website.

Treaty Changes (1)

Switzerland-Andorra-Greenland-Seychelles

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TIEAs between Switzerland and Andorra, Greenland and Seychelles have Entered into Force

According to an update from the Swiss government, the tax information agreements (TIEA) between Switzerland and Andorra, Greenland and Seychelles have entered into force. The date of signing and entry into force of each are as follows:

  • The TIEA with Andorra was signed 17 March 2014, and entered into force on 27 July 2015;
  • The TIEA with Greenland was signed 7 March 2014, and entered into force on 22 July 2015; and
  • The TIEA with Seychelles was signed 26 May 2014, and entered into force on 10 August 2015

Each of the TIEAs generally apply for requests regarding tax periods beginning on or after 1 January 2016.

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