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Approved Changes (3)

Brazil

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Brazilian Measure Increasing PIS/COFINS on Imports has been Approved

On 28 May 2015, the Brazilian Senate approved Provisional Measure (PM) 668/2015, which increased the rates of the Program for Social Integration Contribution (PIS) and Contribution for the Financing of Social Security (COFINS) on imports. This completes the approval process, as the Chamber of Deputies approved the measure on 19 May, although it must still be published in the Official Gazette. The measure has already been in effect since 1 May 2015, but needed to be approved to remain so.

According to PM 668/2015, the rates on imports are generally increased from 1.65% to 2.1% for PIS and from 7.6% to 9.65% for COFINS. Rates for certain specific goods are increased as follows:

  • Certain pharmaceuticals - PIS is increased from 2.1% to 2.76%, and COFINS is increased from 10.3% to 13.03%;
  • Perfumes and hygiene products - PIS is increased from 2.2% to 3.52%, and COFINS is increased from 10.3% to 16.48%;
  • Machinery and vehicles - PIS is increased from 2.0% to 2.62%, and COFINS is increased from 9.6% to 12.57%;
  • Rubber tires and inner tubes - PIS is increased from 2.0% to 2.88%, and COFINS is increased from 9.5% to 13.68%;
  • Auto parts - PIS is increased from 2.3% to 2.62%, and COFINS is increased from 10.8% to 12.57%; and
  • Certain press paper - PIS is increased from 0.8% to 0.95%, and COFINS is increased from 3.2% to 3.81%

Imported services are unaffected by the measure.

Chile

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Chilean Congress Approves New Foreign Investment Statute Ending Rate Freeze Option

Proposed legislation for a new Foreign Investment Statute was approved by the Chilean congress on 20 May 2015. This follows the 2014 Tax Reform, which included that the old Foreign Investment Statue under Decree Law 600 is to be abolished with the introduction of a new regime.

One of the main differences between the old and new regimes is that a rate freeze option will no longer be available for foreign investors. Under the old regime, foreign investors could opt to freeze the rate at 42% for 10 years for new investments of USD 5 million or more, and for 20 years for new investment of USD 50 million or more in industrial or extractive projects.

As part of a transition the fixed rate for new projects will be increased to 44.45% in 2016, and will no longer be available from 2020. The changes are not retroactive, and investors that have elected for the fixed rate prior to the change will continue to enjoy the benefit.

Other aspects of the new regime include that foreign investors will be able to repatriate invested capital and net profits after complying with Chilean tax obligations; will have access to the formal exchange market; and will be eligible for VAT exemption on the import of capital assets subject to certain conditions.

Additional details of the new Foreign Investment Statute will be published once available.

Italy-European Union

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European Commission Rejects Italian Request to apply the Reverse-Charge for Supplies of Goods to the Large Retail Sector

On 22 May 2015, the European Commission published a communication to the EU Council objecting to Italy's request for authorization from the Council to implement a special measure applying the VAT reverse-charge mechanism for supplies of goods to hypermarkets, supermarkets and food discounters in order to counter fraud. The measure was included as part of Italy's Stability Law for 2015, which entered into force 1 January 2015.

According to the communication, the Commission objects to the request based on a number of grounds, including:

  • The Commission doubts that such a broad application of the reverse charge mechanism to a high number of products could still be regarded as a special measure within the meaning of Article 395 of the VAT Directive;
  • Neither the nature nor the extent of possible specific fraud in relation to supplies to the large retail sector has been demonstrated, and it is not ascertained that the reverse-charge mechanism would be an appropriate measure or have the positive impact expected by the Italian authorities; and
  • The Italian authorities did not demonstrate that the relevant goods at stake are of a nature that would make auditing through conventional control means impossible

Click the following link for the full Communication to the EU Council

Treaty Changes (11)

Azerbaijan-OECD

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Azerbaijan Deposits Ratification Instrument for the Protocol to the Mutual Assistance Convention

On 29 May 2015, Azerbaijan deposited the ratification instrument for the 2010 protocol to the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters. The protocol brings the convention in line with OECD standard for information exchange, and will enter into force and apply in Azerbaijan on 1 September 2015.

Azerbaijan signed the original convention in 2003, and it entered into force in the country on 1 October 2004.

Brazil-China

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Revisions to the Tax Treaty between Brazil and China to be Negotiated

On 19 May 2015, officials from Brazil and China agreed to negotiate revisions to the income tax treaty between the two countries. Any resulting amendments will be the first to the treaty, which was signed 5 August 1991, and has been effective since 1 January 1994.

Germany-Netherlands

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Update - New Tax Treaty between Germany and the Netherlands

The new income tax treaty between Germany and the Netherlands was signed 12 April 2012. Once in force and effective it will replace the 1959 income and capital tax treaty between the two countries, which currently applies.

Taxes Covered

The treaty covers German income tax, corporation tax and trade tax. It covers Dutch income tax, wages tax, company tax and dividend tax.

Offshore PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise of one Contracting State carries on offshore activities in the territorial sea of the other State for a period or periods aggregating 30 days or more in any 12-month period. In determining the period, activities performed by an associated enterprise as a continuation of the same project are included.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; 10% if the beneficial owner is a pension fund resident in the Netherlands, subject to certain conditions; otherwise 15%
  • Interest - 0%
  • Royalties - 0%

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 or comparable interests in a company, not listed in a recognized stock exchange, deriving more than 75% of their value directly or indirectly from immovable property situated in the other State, other than immovable property in which that company or the holders of those interests carry on their business. An exemption also applies when:
    • The alienator owned less than 50% of the shares or comparable interests prior to the first alienation; or
    • The gains are derived in the course of a corporate reorganization, amalgamation, division or similar transaction

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 may apply the exemption or credit method for the elimination of double taxation depending on the type of income and the applicable provisions of the domestic law of each country.

Territorial Extension

The provisions of the treaty may be extended to any part of the Kingdom of the Netherlands which is not situated in Europe and imposes taxes substantially similar to those covered by the treaty.

Entry into Force and Effect

The treaty will enter into force on the first day of the second month following the exchange of the ratification instruments, and will apply from 1 January of the year following its entry into force.

The 1959 income and capital tax treaty between the two countries will cease to have effect once the new treaty enters into force, but will continue to be applied to taxes, taxable years and periods for which the new treaty does not yet apply.

Hungary-Iran

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Tax Treaty between Hungary and Iran under Negotiation

According to a recent announcement by the Hungarian Ministry of Foreign Affairs, officials from Hungary and Iran met on 18 May 2015 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.

Hungary-Singapore

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Revisions to the Tax Treaty between Hungary and Singapore to be Negotiated

On 27 May 2015, officials from Hungary and Singapore agreed to negotiate revisions to the income tax treaty between the two countries. Any resulting amendments will be the first to the treaty, which was signed 17 April 1997, and has been effective in Hungary since 1 January 1999 and in Singapore since 1 January 2000.

Iraq-Russia

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Tax Treaty between Iraq and Russia under Negotiation

According to recent reports, officials from Iraq and Russia met on 21 May 2015 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.

Kyrgyzstan-Qatar

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Tax Treaty between Kyrgyzstan and Qatar has Entered into Force

The income tax treaty between Kyrgyzstan and Qatar entered into force on 4 May 2015. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Kyrgyz tax on profits and income of legal persons and individual income tax, and covers Qatari taxes on income.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting State furnishes services in the other State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 5%

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

Both countries apply the credit method for the elimination of double taxation.

Effective Date

The treaty applies from 1 January 2016.

Norway-Switzerland

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Norway to Sign Protocol to the Tax Treaty with Switzerland

On 22 May 2015, the Norwegian government authorized the signing of a protocol to the 1987 income and capital tax treaty with Switzerland. The protocol will be the third to amend the treaty, and must be finalized, signed and ratified before entering into force.

Oman-Portugal

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Update - Tax Treaty between Oman and Portugal

The income tax treaty between Oman and Portugal was signed on 28 April 2015.The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Omani income tax, and Portuguese personal income tax, corporate income tax and surtaxes on corporate income tax.

Withholding Tax Rates

  • Dividends - 10% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 8%

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 or comparable interest directly or indirectly deriving more than 50% of their value 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 apply the credit method for the elimination of double taxation.

Limitation on Benefits

A protocol to the treaty, signed the same date, includes the provision that the benefits provided by the treaty will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of the benefits.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Saudi Arabia-Sweden

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Tax Treaty between Saudi Arabia and Sweden under Negotiation

Negotiations are underway for an income tax treaty between Saudi Arabia and Sweden according to a recent update published by the Swedish tax authorities. 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.

United States-Uruguay

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SSA between the U.S. and Uruguay Initialed

On 15 May 2015, officials from the United States and Uruguay initialed a social security agreement. The agreement is the first of its kind between the two countries, and must be signed and ratified before entering into force.

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