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Approved Changes (2)
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OECD Holding Public Consultations on Revised Guidance on Profit Splits and Attribution of Profits to Permanent Establishments

The OECD will hold two public consultations on transfer pricing matters on 6 and 7 November 2017 at the OECD Conference Centre in Paris, France. The public consultations will cover the discussion drafts on Revised Guidance on Profit Splits and Attribution of Profits to Permanent Establishments.

The meetings will be broadcast live via http://video.oecd.org/

Singapore

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Singapore Publishes e-Tax Guide to Clarify GST Zero-Rating of International Services

The Inland Revenue Authority of Singapore (IRAS) has published an e-Tax guide to provides guidance on the interpretation and application of the two expressions, "directly in connection with" and "directly benefit" as used in certain GST provisions on the zero-rating of services. Under the GST Act, a supply of services is generally zero-rated if the services are international services. However, there are two categories of supplies of services for which the zero-rating relief may not apply:

  • Where there is a direct connection between the supply of services and goods or land situated in Singapore; and
  • Where there are local persons who derive direct benefits from the services.

The e-Tax guide provides examples and illustrations using common business scenarios to give further clarity on the application of these rules.

Proposed Changes (1)

Morocco

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Morocco Draft Finance (Budget) Law for 2017 Published

Morocco's Ministry of Economy and Finance has published the draft Finance (Budget) Law for 2018. The main tax-related measures include:

  • The removal of the 30% corporate tax rate bracket (MAD 1 million to 5 million), resulting in the following progressive corporate tax rates:
    • up to MAD 300,000 - 10%
    • MAD 300,001 up to MAD 1,000,000 - 20%
    • over MAD 1,000,000 - 31%
  • The introduction of an exemption from registration duty on company formation, capital increases, and the transfer of non-listed company shares;
  • Amendment to the company reorganization regime to allow the carry forward of losses derived from the depreciation of fixed assets in the case of a merger; and
  • New rules for advance private tax rulings to enable ruling requests in respect of legal and financial arrangements relating to planned investment projects; restructuring of companies and groups of companies situated in Morocco; and operations between directly or indirectly related companies situated in Morocco.

Click the following link for the draft Finance Law (French language). Subject to parliamentary approval, the draft measures will generally apply from 1 January 2018.

Treaty Changes (4)

Australia-Estonia

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SSA between Australia and Estonia to Enter into Force

The social security agreement between Australia and Estonia will enter into force on 1 January 2018. The agreement, signed 14 September 2015, is the first of its kind between the two countries and applies from the date of its entry into force.

Barbados-Italy

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Tax Treaty between Barbados and Italy has Entered into Force

The income tax treaty between Barbados and Italy entered into force on 17 October 2017. The treaty, signed 24 August 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Barbados income tax, corporation tax, and petroleum winning operations tax. It covers Italian personal income tax, corporate income tax and the regional tax on productive activities (IRAP).

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 5%
  • Royalties - 5%

Note - A maximum rate of 5% is included in Article 10 (Dividends) for the additional taxation of repatriated profits attributed to a permanent establishment.

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 deriving more than 50% of their value directly or indirectly from immovable property situated 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 generally apply the credit method for the elimination of double taxation. In respect of dividends received by a Barbados resident company that owns at least 5% of the paying company's capital, Barbados will also provide a credit for the Italian tax payable on the profits out of which the dividends are paid.

Special Tax Regimes Limitation

Article 29 (Miscellaneous Provisions) includes the provision that the benefits of the treaty will not apply if a company is entitled to a tax benefit under a special tax regime in either Contracting State.

Effective Date

The treaty applies from 1 January 2018.

Brazil-Czech Rep

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SSA between Brazil and the Czech Republic under Negotiation

From 23 to 27 October 2017, officials from Brazil and the Czech Republic met for the first round of negotiations for a social security agreement. Any resulting agreement would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Hungary-Sri Lanka

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Tax Treaty between Hungary and Sri Lanka under Negotiation

According to recent reports, officials from Hungary and Sri Lanka have agreed to the negotiation of an income tax treaty. Any resulting treaty would 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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