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Approved Changes (5)

Croatia-European Union

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Council Implementing Decision Published Approving Croatia Increased VAT Registration Threshold

The Council Implementing Decision to authorize Croatia's derogation from Article 287 of the VAT Directive (2006/112/EC) with an increased VAT registration threshold was published in Official Journal of the EU on 28 September 2017. The Decision authorizes Croatia to increase its VAT registration threshold to EUR 45,000 equivalent in national currency from 1 January 2018. The authorization is to apply until the earlier of 31 December 2020 or the entry into force of a Directive amending the provisions of the VAT Directive on a special scheme for small enterprises. As already approved by the Croatian Parliament in December 2016 (previous coverage), the VAT registration threshold will increase from HRK 230,000 to HRK 300,000 effective 1 January 2018.

Ireland

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Ireland Publishes Guidance on Dividend Withholding Tax

On 26 September 2017, Irish Revenue published new guidance on dividend withholding tax (DWT) that, subject to certain exemptions, must be withheld by Irish resident companies on dividend payments and other distributions. The guidance covers

  • Who should withhold DWT;
  • Payment and filing a return;
  • Exemptions for residents;
  • Refunds for residents;
  • Exemptions for non-residents;
  • Refunds for non-residents; and
  • Qualifying intermediaries (QI) and authorized withholding agent (AWA).

Under current rules, dividend distributions from an Irish resident company to a non-resident company are generally exempt, provided that the non-resident company is resident in EU or a treaty country and is not directly or indirectly controlled by an Irish resident; the non-resident company is controlled by persons resident in the EU or a treaty country; or the non-resident company's principal class of shares are substantially and regularly traded on a recognized stock exchange. Exemption may also apply when the non-resident company is 75% owned by a company whose shares are traded on a recognized stock exchange and when the non-resident company is wholly owned by two or more companies whose shares are traded on a recognized stock exchange. Where an exemption does not apply, Ireland's current DWT is 20%.

Netherlands

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Netherlands Clarifies Implementation of Hybrid Mismatch Amendment to Parent-Subsidiary Directive for Real Estate Investment Companies

In a recent letter to parliament, the Dutch Ministry of Finance clarified the implementation of the hybrid mismatch amendment to the Parent-Subsidiary Directive, which was approved as part of the Dutch Tax Plan for 2016 (previous coverage). The amendment to the Directive provides that the participation exemption will not be granted for dividends if deductible for the distributing subsidiary. The letter clarifies that the Dutch companies receiving dividends from a foreign real estate investment company will not be eligible for the participation exemption if the foreign company is eligible for a tax exemption in its country of residence when distributing most of its income annually. In such case, the dividends are deemed deductible for the distributing company and trigger the anti-Hybrid amendment to the Directive as implemented by the Netherlands.

United States

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South Dakota Petitions U.S. Supreme Court on Economic Nexus Law

On 2 October 2017, South Dakota Attorney General Marty Jackley announced that he has petitioned the U.S. Supreme Court to review whether retailers can be required to collect sales taxes in states where they don't have a physical presence. The petition follows a 14 September South Dakota Supreme Court ruling against an economic nexus law introduced in 2016 that required sellers without a physical presence in South Dakota to remit sales tax if their sales exceed USD 100,000 or involve 200 or more transactions (previous coverage). The ruling was welcomed by state legislators, however, because the law was designed to be challenged so that it could reach the U.S. Supreme Court with the hope that the Supreme Court will review and overturn its 1992 decision in Quill Corp. v. North Dakota that limited the collection of sales and use tax to vendors with a physical presence in a state.

Untd A Emirates

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UAE Cabinet Decisions on Tax Procedures and Excise Tax Regulation Released

On 30 September 2017, the United Arab Emirates Ministry of Finance announced the release of cabinet decisions on the executive regulations on tax procedures and on excise tax, as well as the cabinet decision on excise goods, excise tax rates, and the method of calculating the excise price. The following are the summaries of each cabinet decision as provided by the Ministry of Finance.

The Cabinet Decision No. (36) of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures

The executive regulation outlines procedures with regards to registration and de-registration for tax purposes and amending details of registration, tax obligations, voluntary disclosure, tax notification, and tax agents. It also specifies the various elements involved in tax audits, rights to conduct tax audit, and audit notice, as well as the power to remove and retain original documents or assets or make copies, and the power to mark assets and record information.

The regulation clarifies the rules for tax and administrative penalties assessments, tax refund, bankruptcy cases, disclosure of information, and the reduction in or exemption from administrative penalties. This decision shall be published in the Official Gazette and shall come into effect from the date of its issuance.

Cabinet Decision No. (37) of 2017 on the Executive Regulation of the Federal-Law no (7) on the Excise Tax

The Cabinet issued Decision No. (37) of 2017 on the Executive Regulation of the Federal Decree-Law No (7) of 2017 on Excise Tax. The law outlines provisions with regards to liability to tax, tax registration and exception methods, rules of tax payment, and exemption for selective goods.

The law also outlines the rules towards designated zones, mechanism of calculation of due tax, tax returns, tax period, and payment of tax. In addition, it specifies the rules related to other tax refund, requirements for keeping tax records, as well as the repeal of conflicting provisions. The decision shall be implemented as of 1 October 2017 and shall be published in the Official Gazette.

UAE Cabinet Decision No. (38) of 2017 on Excise Goods, Excise Tax rates and the methods of calculating the Excise price

The UAE Cabinet issued the Decision No. (38) of 2017 on excise Goods, excise tax rates and the methods of calculating excise price. The decision outlines the rules of excise goods including tobacco and tobacco products, carbonated drinks, and energy drinks, in addition to its tax rates. The provisions also specify the excise price, designated retail sales price, and the rules with regards to contradicting provisions. The Decision shall come into effect as of 1 October 2017 and shall be published in the Official Gazette.

Proposed Changes (3)

European Union

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EU Draft Directive on Dispute Resolution

On 2 October 2017, the Council of the European Union published a draft Council Directive on Tax Dispute Resolution Mechanisms in the European Union. The draft directive is meant to ensure effective resolution of disputes concerning the interpretation and application of such bilateral tax treaties and the Union Arbitration Convention, and in particular, disputes leading to double taxation. The directive provides that complaints should be submitted within three years from the receipt of the first notification of the action resulting in, or that will result in, the question in dispute. Complaints accepted by the competent authorities of the Member States concerned should be resolved by mutual agreement within two years, with a possible extension up to one year. The directive also provides that disputes may be resolved through an advisory commission or alternative dispute resolution commission for cases not resolved through mutual agreement.

As provided in the draft, Member States should bring into force the laws, regulations, and administrative provisions necessary to comply with the directive by 30 June 2019. The Directive will apply to any complaint submitted from 1 July 2019 onwards relating to questions of dispute relating to income or capital earned in a tax year commencing on or after 1 January 2018.

Sweden

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Swedish Tax Agency Publishes Response Document to Proposed Interest Deduction Restriction Measures

On 25 September 2017, the Swedish Tax Agency (Skatteverket) published a response document to the Ministry of Finance's proposed tax measures on interest deductions restrictions (previous coverage). According to the document, the Tax Agency:

  • Recommends adopting an EBIT-based interest deduction restriction model instead of an EBITDA-based model;
  • Recommends the introduction of rules limiting interest expense deductions in cases of hybrid mismatches, but with additional clarifications regarding jointly taxed persons;
  • Recommends targeted interest deduction limitation rules for interest payments to EEA and treaty countries, but proposes that interest deduction would be disallowed if the transaction is "mainly" for the purpose of obtaining a tax benefit instead of "exclusively" or "virtually exclusively" as proposed;
  • Recommends the introduction of tax rules for financial leasing agreements, but proposes that the rules need clarification regarding a voluntary simplification rule, the definition of a finance lease agreement, non-guaranteed residual value, and accounting depreciation.

In addition, the response document also notes the need to revise/clarify the CFC rules in relation to the interest restriction measures, as well as in relation to the proposal to reduce the corporate tax rate from 22% to 20% (CFC rules triggered when foreign company taxed at rate lower than 55% of Swedish rate).

Trin & Tobago

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Trinidad and Tobago 2018 Budget Statement Presented

On 2 October 2017, Trinidad and Tobago's Minister of Finance Colm Imbert presented the Budget Statement for 2018 to parliament. The main tax-related measures of the Budget Statement include:

  • Establishing a new Revenue Authority in 2018 that will bring together into one entity the Customs and Tax Administration;
  • Increasing the base corporate tax rate from 25% to 30% effective 1 January 2018 (harmonizing with the increased rate of 30% for companies with chargeable profits in excess of TTD 1.0 million);
  • Introducing a new corporate tax bracket of 35% for commercial banks, effective 1 January 2018;
  • Introducing a 12.5% royalty rate on the extraction of all gas, condensate and oil, effective 1 December 2017;
  • Increasing taxes for the gambling industry, including an increase in rate of duty on mechanical games of chance to 40%, the introduction of a 10% all cash winnings, and the increase of other gaming taxes (varying effective dates);
  • Re-establishing export allowances to manufacturers that would allow a reduction on tax for revenues generated from incremental exports to existing markets from 1 January 2018; and
  • Fully implementing a property tax system in 2018.

Click the following link for the Budget Statement 2018 and additional information.

Treaty Changes (3)

Botswana-Malta

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Tax Treaty between Botswana and Malta Signed

According to a 2 October 2017 statement from Malta's president, an income tax treaty has been signed with Botswana. The treaty is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged. Details of the treaty will be published once available.

Italy-Philippines

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Italian Chamber of Deputies Approves Protocol to Tax Treaty with the Philippines

On 27 September 2017, the Italian Chamber of Deputies approved the bill for the ratification of the pending protocol to the 1980 income tax treaty with the Philippines. The protocol, signed on 9 December 2013, is the first to amend the treaty. It amends Articles 2 (Taxes Covered), 3 (General Definitions), and 22 (Methods for Elimination of Double Taxation), and replaces Article 25 (Exchange of Information). It will enter into force and apply from the date the ratification instruments are exchanged.

Morocco-Bahrain-Ethiopia-Ghana-Madagascar-Rwanda-South Sudan

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Morocco Ratifies Tax Treaties with Ethiopia, Ghana, Madagascar, Rwanda, South Sudan, and Protocol to Tax Treaty with Bahrain

On 21 September 2017, Morocco published in the Official Gazette the decrees for the ratification of the following tax treaties:

In addition, the decree for the ratification of the amending protocol to the 2000 income tax treaty with Bahrain was also published (previous coverage). The treaties and the protocol will enter into force after the ratification instruments are exchanged.

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