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Approved Changes (5)

Brazil-United Kingdom

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Brazil Commits to Exchange of Beneficial Ownership Information

According to a recent update from UK HM Treasury, Brazil has committed to the initiative for the automatic exchange of beneficial ownership information, which was originally proposed by Finance Ministers from France, Germany, Italy, Spain, and the UK (G5) in April (previous coverage). To date, 48 jurisdictions have committed to exchange beneficial ownership information, although a global standard must still be developed and implemented before exchanges can begin.

France

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France Issues Interest Rate Limits for Shareholder Loan Interest Deductions for Fiscal Years Ending 30 September 2016 to 30 December 2016

On 27 September 2016, France published the interest rates used in determining the deductibility of interest payments to shareholders for companies whose fiscal year ends between 30 September 2016 and 30 December 2016.

The portion of interest payments exceeding the following rates are generally not deductible unless documentation is provided demonstrating that the interest rate applied is at arm's length. The period in which the fiscal year ends and the applicable rates are as follows:

  • Between 30 September 2016 and 30 October 2016 - 2.09%
  • Between 31 October 2016 and 29 November 2016 - 2.08%
  • Between 30 November 2016 and 30 December 2016 - 2.07%

The interest rates are determined by the Central Bank of France based on the average annual interest rates charged by financial institutions on medium-term variable rate loans of 2 years or more.

Ireland

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Ireland Updates Bilateral APA Guidelines

On 29 September 2016, Irish Revenue published eBrief No. 81/2016, announcing an update to the bilateral advance pricing agreement (APA) guidelines. The guidelines were initially published in June 2016 for Ireland's new bilateral APA program, which is effective from 1 July 2016 (previous coverage).

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Bilateral Advance Pricing Agreements

Tax and Duty Manual Part 35-02-07 (353KB) contains Ireland's Bilateral Advance Pricing Agreement ("APA") Guidelines. Paragraph 32 sets out the term, or period, for which an APA will be granted - typically between 3 and 5 years. The guidelines have been updated to indicate that in no case will Revenue agree to a period that extends more than 5 years beyond the date of agreement of the bilateral APA with the competent authority of the other tax administration.

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Upcoming OECD Public Consultation on Transfer Pricing Matters: Attribution of Profits to PEs and Guidance on Profit Splits

The OECD will hold a public consultation on transfer pricing matters on 11 and 12 October 2016 at the OECD Conference Centre in Paris. The consultation will cover issues related to BEPS Action 7 and Actions 8-10, and in particular, the discussion drafts on:

Persons wishing to attend the public consultation may click the following link to register. The public consultation may also be viewed via http://video.oecd.org/, with no registration required.

Singapore

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Singapore Publishes Guide on Treatment of Expenses Incurred Prior to Commencement of Business

On 30 September 2016, the Inland Revenue Authority of Singapore (IRAS) published an e-Tax guide on the treatment of certain expenses incurred prior to the commencement of a business activity. In particular, the guide covers the rules for the deduction of the following expenses:

  • Pre-commencement expenses, which are deemed to be incurred on the actual date of commencement of the business activity, including:
    • Costs for protecting Intellectual Property;
    • Expenditure on research and development;
    • Expenditure on renovation or refurbishment; and
    • Design expenditure.
  • Section 14U (s14U) expenses, which include expenses incurred on or after the deemed date of commencement but before the first dollar of business is received as well as revenue expenses incurred up to 12 months prior to the deemed date of commencement.

Under new rules introduced as part of the 2016 Budget, the pre-commencement expenses and s14U expenses that are directly attributable to normal income, concessionary income and tax exempt income will be offset against the respective income streams, with the remaining expenses allocated to the respective income streams based on income apportionment. The rules apply for pre-commencement expenses and s14U expenses incurred on or after 25 March 2016. For expenses incurred prior to that date, allocation is not required.

Click the following link for the e-Tax guide Income Tax: Treatment of Certain Expenses Incurred Prior to the Commencement of a Business Activity for additional details and examples.

Proposed Changes (1)

South Africa

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South Africa Publishes 2016 Draft Taxation Laws Amendment Bill (Second Batch) for Public Comment

On 25 September 2016, the South African National Treasury published the 2016 Draft Taxation Laws Amendment Bill (Second Batch), which includes revisions and additions for public comment. The main measures include:

  • Extending the employment tax incentive for another two years to 28 February 2019, with the introduction of a monetary cap of ZAR 20 million on the value of the incentive claims per employer per year;
  • Extending the learnership tax incentive for another five year to 31 March 2022, with adjustments to the value of the deduction based on the qualification level of the learner when entering into a learnership agreement;
  • Treating interest not paid by a trust on an interest-free or low-rate loan as a donation in the hands of the lender, as opposed to deemed income (the amount is the difference between the amount actually incurred and the amount that would be incurred based on the official rate of interest for the year);
  • Introducing specific anti-avoidance measures to deal with instances of abuse in relation to dividend payments derived from restricted equity shares (a prior proposal would have taxed such payments at marginal personal income tax rates, instead of at the dividend withholding tax rate).

Click the following link for additional information, including the media statement, the draft legislation, and other related documentation.

Treaty Changes (5)

Andorra-Austria-Belgium-Cyprus-Netherlands

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Andorra Negotiating Tax Treaties with Austria, Belgium, Cyprus, and the Netherlands

According to a recent update from the Andorran government, negotiations are underway for income tax treaties with Austria, Belgium, Cyprus, and the Netherlands. Any resulting treaties would be the first of their kind between Andorra and the respective countries, and must be finalized, signed and ratified before entering into force.

Australia-Luxembourg

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Tax Treaty between Australia and Luxembourg under Negotiation

Official from Australia and Luxembourg reportedly agreed during a 29 September 2016 meeting 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.

Brazil-Nauru-Niue-OECD

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Mutual Assistance Convention has Entered into Force for Brazil, Nauru and Niue

On 1 October 2016, the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol entered into force for Brazil, Nauru and Niue. The Convention generally applies in the respective countries from 1 January 2017. However, it may apply for earlier periods with another signatory if agreed to, and applies in relation to any period regarding criminal matters.

Colombia-United States

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Tax Treaty between Colombia and the U.S. under Negotiation

According to a recent update from the Colombia government, negotiations for an income tax treaty with the U.S. are in their final stage. The treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Luxembourg-Ukraine

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Protocol to Tax Treaty between Luxembourg and Ukraine Signed

On 30 September 2016, officials from Luxembourg and Ukraine signed a protocol to the 1997 income and capital tax treaty between the two countries, which is not yet in force. The protocol reportedly replaces Article 26 (Exchange of Information) to bring it in line with the OECD standard for information exchange. Both the protocol and the treaty will enter into force after the ratification instruments are exchanged, and will generally apply from 1 January of the following year.

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