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Worldwide Tax News

Approved Changes (2)

Jersey

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Jersey Publishes Notice on Enhanced Beneficial Ownership Policy and Register of Directors

On 2 November 2016, the Jersey government published a notice on the development of an enhanced policy on beneficial ownership and a register of directors. According to the notice, the enhanced policy is meant to ensure that Jersey fulfills its obligation as a responsible international finance centre. The policy is mainly relevant to trust and company service providers, which will be required to update the central registry within 21 days of knowledge of a change of beneficial ownership of companies that they administer. Additionally, the Government will create a central register of directors of Jersey companies, with information exchanged with law enforcement and tax authorities on request, on the same basis that beneficial ownership information is exchanged.

Click the following link for the notice.

Malawi

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New Malawi Tax Measures for 2016/17

The Malawi Revenue Authority (MRA) recently announced that new tax measures for 2016/17 have been published in the Official Gazette. The measures were included in the Amendment Bills to the Taxation Act, Value Added Tax (VAT) Act, and Customs and Excise Act, which were approved in August 2016. The main measures include:

  • The introduction of specific taxation regime for the mining sector that includes:
    • The ring-fencing of mining projects in regard to income and expenses for tax purposes, with each mining project required to file a separate tax return;
    • Mineral royalties are allowable as a deduction for tax purposes;
    • A preferential non-resident tax at the rate of 10% on payments by a mining project by way of interest, royalty and management fees;
    • A minimum resource rent tax of 15%;
    • Separate rules and regulations for the determination of income, deductions and capital allowances ; and
    • Separate rules for the administration of mineral royalties;
  • An increase in the Corporate Tax rate from 21% to 30% for companies involved in life assurance business;
  • The requirement that persons obtain a tax clearance certificate from the MRA when supplying goods and services to the Malawi government and its agencies, with an increase in the penalty for failing to obtain a certificate from MWK 50,000 to MWK 2 million;
  • The amendment of the scope of the standard 16.5% VAT rate to cover tap water, newspapers, periodicals, journals and magazines, milk (infant milk exempt), and certain other supplies; and
  • The introduction of increased administrative powers and penalties to address non-compliance with excise taxes.

The VAT amendments became effective from 1 October 2016, while the other amendments became effective from 1 July 2016.

Proposed Changes (2)

Qatar

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Qatari Council Approves Draft Foreign Investment Law

According to recent reports, Qatar's Council of Ministers has approved a draft investment law intended to replace the Foreign Capital Investment Law 13 of 2000. Under the draft law, foreign investors will be allowed to invest up to 100% of the project capital in all economic sectors, as long as a Qatari national acts as a services agent. In addition, foreign investors will be allowed to own up to 49% of companies listed on the Qatari stock exchange, which may be increased with government approval. In determining foreign ownership, residents of all Gulf Cooperation Council (GCC) Member States will be treated as Qatari residents (i.e. foreign restrictions do not apply).

The draft law must be approved by both the Shura Council and Qatari Emir and published in the Official Gazette to enter into force.

United States

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Congressional Research Service Issues Report on U.S. Corporate Tax Integration

On 31 October 2016, the U.S. Congressional Research Service (CRS) published a summary report on corporate tax integration, which is an approach being considered as part of possible U.S. tax reform (previous coverage 4.28.2016 P2). The report covers:

  • Corporate tax differentials under current law, including how the corporate tax produces differential effective tax rates and estimates of differential effective tax rates;
  • Methods to address corporate tax distortions through full integration, including:
    • Taxing at the Shareholder Level: Modified Partnership;
    • Taxing at the Shareholder Level: Mark to Market;
    • Taxing Corporate Income at the Corporate Level;
    • Taxing Dividends at the Shareholder Level and Retained Earnings at the Corporate Level;
  • Methods to address corporate tax distortions through partial integration (dividend relief), including:
    • Taxing at the Shareholder Level: Dividend Deductions; and
    • Taxing at the Firm Level: Dividend Exclusion;
  • Approaches addressing debt; and
  • The main issues with corporate tax integration, including the revenue impacts, the administrative concerns, and the economic efficiency effects.

Click the following links for the CRS corporate tax integration summary report and the full report.

Treaty Changes (5)

Bahrain-Spain

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Bahrain to Sign Tax Treaty with Spain

On 31 October 2016, Bahrain's Council of Ministers approved the signing of a draft income tax treaty with Spain. The treaty will be the first of its kind between the two countries, and must be signed and ratified before entering into force.

China-France

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SSA between China and France Signed

On 31 October 2016, officials from China and France signed a social security agreement. The agreement is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Colombia-United Kingdom

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Tax Treaty between Colombia and the UK Signed

According to an announcement from the UK government, officials from Colombia and the UK signed an income tax treaty on 2 November 2016. The treaty is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Additional details of the treaty will be published once available.

Finland-Turkmenistan

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Finland Approves Pending Tax Treaty with Turkmenistan

On 20 October 2016, the Finnish government approved the pending income tax treaty with Turkmenistan. The treaty, signed 12 December 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Finnish state income tax, communal tax, church tax, tax withheld from interest, and tax withheld at source from non residents' income. It covers Turkmen tax on profits (income) of juridical persons and tax on income of individuals.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 10%

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 shares or other corporate rights in a company whose assets consist of more than 50% 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 generally apply the credit method for the elimination of double taxation. However, Finland will apply the exemption method for dividends received by a Finnish company that directly controls at least 10% of the voting power in the paying company.

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Saudi Arabia-Uruguay-OECD

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Saudi Arabia and Uruguay Sign Multilateral Agreement on Automatic Exchange of Financial Account Information

According to an update from the OECD on 2 November 2016, Saudi Arabia and Uruguay have signed the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information. The MCAA provides for the exchange of information as part of the Common Reporting Standard (CRS) developed by the OECD. Both Saudi Arabia and Uruguay intend for their first exchange of information to take place by September 2018.

Click the following link for the 87 jurisdictions that have signed the MCAA to date.

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