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Approved Changes (7)

Argentina

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Argentina Publishes Law Setting Individual Income Tax Rates and Introducing VAT Requirements for Non-Resident Supplies

On 27 December 2016, Law No. 27346 was published in Argentina's Official Gazette. The law makes various amendments in relation to individual income tax, as well as new requirements in relation to value added tax (VAT) on certain supplies made by non-residents. The changes generally apply from 1 January 2017.

Individual Income Tax

The individual income tax rates and brackets for 2017 are amended as follows:

  • up to ARS 20,000 - 5%
  • over ARS 20,000 up to 40,000 - 9%
  • over ARS 40,000 up to 60,000 - 12%
  • over ARS 60,000 up to 80,000 - 15%
  • over ARS 80,000 up to 120,000 - 19%
  • over ARS 120,000 up to 160,000 - 23%
  • over ARS 160,000 up to 240,000 - 27%
  • over ARS 240,000 up to 320,000 - 31%
  • over ARS 320,000 - 35%

VAT on Non-Resident Supplies

Under prior rules, services and construction works supplied by non-residents persons in Argentina were generally not subject to VAT, as the non-resident persons were not considered taxable. In order to collect VAT on such supplies, Law No. 27346 introduces the concept of a substitute taxpayer, which includes the recipient or beneficiary of the supplies, as well as administrators, agents, or other intermediaries resident in Argentina. The function is essentially a reverse charge, where the substitute taxpayer withholds the amount of VAT due and remits payment. If it is not possible to withhold, the required amount is still due, but is treated as input VAT for the substitute taxpayer.

Brazil

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Brazil Issues Final CbC Normative Instruction

On 29 December 2016, Brazil's Federal Revenue Department (RFB) announced the issuance of RFB Normative Instruction No. 1681/2016 on the obligation to submit a Country-by-Country (CbC) report. The main aspects of the Normative Instruction include:

  • The CbC requirement applies for MNE groups meeting:
    • A BRL 2.26 billion consolidated group revenue threshold in the previous fiscal year if the ultimate parent is resident in Brazil; and
    • A EUR 750 million consolidated group revenue threshold in the previous year if the ultimate parent is not resident in Brazil (or equivalent as of 31 January 2015);
  • The obligation to submit a CbC report primarily applies for ultimate parent entities resident in Brazil;
  • Non-parent constituent entities resident in Brazil will be obligated to submit a CbC report if:
    • The ultimate parent is not required to submit a CbC report in its jurisdiction of residence;
    • The jurisdiction of residence of the ultimate parent does not have a competent authority agreement in effect with Brazil by the time the deadline for submission of the CbC report is due; or
    • An agreement is in place, but there has been a systemic failure for exchange, and the failure has been notified by the RFB to the constituent entity resident in Brazil;
  • If more than one constituent entity would be required to submit the report in Brazil as above, one entity may be designated, and the RFB must be notified of the designation;
  • The local constituent entity will not be required to submit a CbC report as above, provided a surrogate parent entity has filed a CbC report on behalf the group in another jurisdiction, subject to certain conditions, including that the report will be exchanged with Brazil;
  • The CbC report must be submitted electronically with the same deadline as the tax accounting return (Escrituração Contábil Fiscal -ECF), which from 2016 is due by the last working day of July following the end of the year (calendar year);
  • Constituent entities resident in Brazil must notify the RFB if it is the ultimate parent entity or surrogate parent entity, and if neither, must provide the identity and tax residence of the reporting entity (notification deadline uncertain - seems also connected with ECF);
  • The content of the CbC report is in line with the BEPS Action 13 guidelines;
  • Brazil will accept CbC reports filed voluntarily by ultimate parents in foreign jurisdictions, provided that:
    • The report is filed within 12 months from the last day of the fiscal year;
    • The foreign jurisdiction has CbC requirements in force by the filing deadline, even if they do not yet apply for the fiscal year concerned;
    • The foreign jurisdiction has a competent authority agreement with Brazil for the exchange of CbC reports by the filing deadline; and
    • There is no systemic failure for exchange; and
  • Penalties of up to BRL1500 per month will apply for failing to file or comply with RFB requests, and up to 3% of transaction value for submission of incomplete/inaccurate information.

Click the following link for RFB Normative Instruction No. 1681/2016 (Portuguese language), which entered into force the day it was published and applies for fiscal years beginning on or after 1 January 2016.

Chile

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Chile Publishes Resolution Introducing CbC Reporting Requirement

On 27 December 2016, the Chilean tax authorities (Servicio de Impuestos Internos - SII) issued Resolution No. 126. The resolution updates the current annual transfer pricing return (affidavit) requirements to introduce an associated Country-by-Country (CbC) reporting requirement. The new CbC requirements include:

  • The CbC requirement applies for MNE groups meeting a EUR 750 million annual consolidated group revenue threshold in the previous year (or equivalent in other currency based on official exchange rate at the end of the year as published by the Chilean Central Bank);
  • The reporting requirement applies for ultimate parent entities resident in Chile, as well as constituent entities designated to file (notification of designation must be submitted);
  • The deadline to submit the CbC report is last day of June following the year reported on;
  • The CbC report is submitted using a new Form 1937 along with the transfer pricing return (Form 1907);
  • The content of the CbC report includes:
    • Details of the reporting entity;
    • Aggregated tax information by jurisdiction in line with BEPS Action 13 guidance;
    • Details of all constituent entities and their business activities by jurisdiction; and
    • Additional information.

Click the following link for Resolution No. 126 (Spanish language), which also includes links to the related annexes. The new requirements apply in 2017 with respect to the 2016 fiscal year.

China

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China Approves Environmental Protection Tax Law

China's State Administration of Taxation has announced that the Environmental Protection Tax Law was approved by the National People's Congress and promulgated on 25 December 2016. The law includes the introduction of new taxes that will replace the current system of pollution fees, which have proved ineffective. The forms of pollution covered include water, air, solid waste and noise. The standard rates are as follows:

  • Air pollution: CNY 1.2 per pollution equivalent value unit;
  • Water pollution: CNY 1.4 per pollution equivalent value unit;
  • Hazardous solid waste: CNY 1,000 per metric ton
  • Other solid waste: CNY 5 to 25 per metric ton depending on type; and
  • Noise pollution: CNY 350 to 11,200 depending on level of decibels exceeding set limits.

For air and water pollution, a pollution equivalent value unit is determined by dividing the pollution amounts (in kilograms) by a value assigned to the pollutant. This is then multiplied by the applicable rate, resulting in higher tax on more toxic pollutants. For example, lead has an assigned value of 0.02, while carbon monoxide has an assigned value of 16.7.

The rates applied for all pollution types may be adjusted within set ranges by provincial governments as needed to meet economic, social, and ecological development goals. In cases where the level of pollutants emitted is higher than set limits, the rate of tax may be doubled or tripled.

The Environmental Protection Tax Law will apply from 1 January 2018.

Malaysia

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Malaysia Publishes CbC Reporting Rules

On 23 December 2016, the Income Tax (Country-by-Country Reporting) Rules 2016 was published in Malaysia's Federal Gazette. The main aspects include:

  • The CbC reporting requirement applies for MNE groups meeting an MYR 3 billion consolidated revenue threshold in the previous financial year;
  • The content of the CbC report is in line with BEPS Action 13 guidelines;
  • The financial information should be in denominated in Malaysian ringgit;
  • The report should be filed on an electronic medium or through electronic transmission in XML format;
  • The requirement to file a CbC report primarily applies to the ultimate holding (parent) company that is resident in Malaysia;
  • The requirement to file a CbC report will also apply for a surrogate holding company (constituent entity resident in Malaysia appointed as a sole substitute for the ultimate holding company to file the report), if:
    • The ultimate holding company is not resident in Malaysia and is not obligated to file a CbC report in its jurisdiction of residence;
    • The ultimate holding company's jurisdiction of residence does not have a qualifying competent authority agreement in effect with Malaysia by the time the CbC report is due; or
    • An agreement is in place, but there has been a systemic failure for exchange with the ultimate holding company's jurisdiction of residence, and the failure has been notified by the Malaysian tax authority to the constituent entity resident in Malaysia;
  • Constituent entities resident in Malaysia must notify the tax authority by the last day of the reporting financial year if it is the ultimate holding company or surrogate holding company, and if neither, must provide the identity and tax residence of the reporting entity; and
  • The deadline to file the CbC report is 12 months after the last day of the reporting financial year.

Note, unlike most other countries that have implemented CbC reporting requirements, Malaysia's CbC rules do not include general provisions for local non-parent constituent entity filing, except for local constituent entities appointed as a surrogate holding company. The Malaysian tax authority has indicated it will not require general local filing, but based on the wording of the rules, it is unclear if an MNE group would be required to appoint a surrogate if any of the three abovementioned conditions are met. Any additional guidance from the tax authority on local filing requirement will be published once available.

Click the following link for the CbC Rules (Malay and English language). The rules came into operation on 1 January 2017.

Turkey

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Turkey Individual Income Tax Brackets and Rates for 2017

On 27 December 2016, the Turkish Ministry of Finance issued the individual income tax brackets and rates applicable for 2017. The brackets and rates for employment income are as follows:

  • up to TRY 13,000 - 15%
  • over TRY 13,000 up to 30,000 - 20%
  • over TRY 30,000 - up to 110,000 - 27%
  • over TRY 110,000 - 35%

For all other non-employment income, the brackets and rates are as follows:

  • up to TRY 13,000 - 15%
  • over TRY 13,000 up to 30,000 - 20%
  • over TRY 30,000 - up to 70,000 - 27%
  • over TRY 70,000 - 35%

The new brackets and rates are effective 1 January 2017.

United States

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U.S. IRS Updates Guidance on Available Advice for Taxpayers

On 3 January 2017, the U.S. IRS published Internal Revenue Bulletin: 2017-1. The bulletin includes a number of revenue procedures concerning advice provided by the IRS to taxpayers, including letter rulings, closing agreements, determination letters, and other forms. Also covered are the areas in which the IRS will not provide rulings or determination letters. The guidance is updated annually, and generally supersedes the guidance issued in past years.

Click the following link for Internal Revenue Bulletin: 2017-1.

Treaty Changes (2)

Luxembourg-Serbia

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Tax Treaty between Luxembourg and Serbia has Entered into Force

The income and capital tax treaty between Luxembourg and Serbia reportedly entered into force on 27 December 2016. The treaty, signed 15 December 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Luxembourg income tax on individuals, corporation tax, capital tax, and communal trade tax. It covers Serbian corporate income tax, personal income tax, and tax on capital.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 10%
  • Royalties -
    • 5% for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for radio or television broadcasting;
    • 10% for the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience

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; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment 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

Serbia applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption with progression method. However, in respect of income covered by Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 17 (Artistes and Sportspersons income), Luxembourg applies the credit method.

MFN Clause

The final protocol to the treaty includes the provision that if Serbia signs a tax treaty with a third State that is a member of the EU and such treaty provides for a lower rate of tax in respect of income covered by Articles 11(Interest) and 12 (Royalties), then negotiations will begin for the revision of the rates provided for under the Luxembourg-Serbia tax treaty.

Effective Date

The treaty applies from 1 January 2017.

Switzerland-OECD

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Mutual Assistance Convention has Entered into Force for Switzerland

On 1 January 2017, the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol entered into force for Switzerland. The Convention generally applies in Switzerland from 1 January 2018. However, it may apply for earlier periods with another signatory if agreed to, and applies in relation to any period regarding criminal matters.

Click the following link for the signatories to the Mutual Assistance Convention to date.

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