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Approved Changes (5)

Belgium

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Belgium Individual Income Tax Brackets for 2016

Belgium's Ministry of Finance has published the individual income tax brackets and rates for 2016. Although the tax rates for each bracket remain the same, each bracket is increased as follows:

  • up to EUR 10,860 - 25%
  • over EUR 10,860 up to 12,470 - 30%
  • over EUR 12,470 up to 20,780 - 40%
  • over EUR 20,780 up to 38,080 - 45%
  • over EUR 38,080 - 50%

In addition to the bracket threshold increases, the various personal allowances that apply in determining tax payable are generally increased for 2016 as well.

China

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China Expands Cross Border E-Commerce Zone Pilot Project

On 12 January 2016, China's State Council announced that the cross border e-commerce zone pilot project will be expanded from a single zone, Hangzhou, to twelve additional zones in order to further promote e-commerce in the country. The additional zones include Chengdu, Chongqing, Dalian, Guangzhou, Hefei, Ningbo, Qingdao, Shanghai, Shenzhen, Suzhou, Tianjin, and Zhengzhou.

For businesses operating in one of the designated cross border e-commerce zones, a number of benefits apply, including streamlined cross-border e-commerce transactions, payment, logistics, customs clearance, tax refunds and exchange settlement. In addition, for imported e-commerce goods, a parcel tax is levied at a favorable rate instead of the customs duties, value added tax and consumption tax levied on imported goods in the rest of the country. While the pilot project has been a success for the affected zones, the State Council is reportedly considering countrywide cross border e-commerce policies to address the competition imbalance created between e-commerce businesses located in the new zones and those outside.

Taiwan

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Taiwan Publishes Guidance on Simplified APA Application Procedures

On 29 January 2016, the Taiwan Ministry of Finance published Guidance on advanced pricing agreement application procedures, which were simplified as part of amendments to Taiwan's transfer pricing assessment rules in March 2015 (previous coverage).

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The National Taxation Bureau of Northern Area, Ministry of Finance (NTBNA, MOF) recently was inquired by a Taiwan subsidiary of a multinational company: How do we apply for an Advance Pricing Agreement (APA) for related parties’ transactions?

According to the Bureau’s statement with respect of an amendment to Article 23 of the Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing issued by the MOF dated March 6, 2015, the conditions and period for applying for an APA have been amended. The new rules include broadening the qualifications of applying for an APA, extending the period of providing completed transfer pricing documentation (TPD), and adding a scheme of a preparation meeting for the APA application procedure.

The Bureau gives a further explanation as follows:

  1. Regarding the qualification of applying for an APA, the amount of related parties’ transactions was reduced from above TWD 1 billion (gross amount) or above TWD 500 million (annual amount) to above TWD 500 million (gross amount) or TWD 200 million (annual amount). Decreasing the threshold can encourage enterprise taxpayers to apply APAs;
  2. Regarding the period of providing a completed TPD, the time limit for filing a completed TPD is extended from one month to three months if the APA case is accepted by the NTB. The original rule of a one-month extension has been cancelled. Increasing the period can give taxpayers sufficient time to prepare a completed TPD;
  3. Regarding the scheme of a preparation meeting for the APA application procedure, enterprises can request a preparation meeting with the NTB by providing simplified TPD three months before the end of the first fiscal year covering the applicable related parties’ transactions (i.e., the time limit of applying for an APA). The simplified TPD includes global organization structure, the main objectives of business, types of controlled transactions, analysis of functions and risks, and the reason for applying for an APA. Once the NTB accepts the application after the preparation meeting, enterprises can file the formal application by providing completed TPD. Such a preparation meeting can give more flexibility for processing an APA application, promote enterprises’ intention to apply for APAs, and effectively reduce double taxation risks of multinational enterprises.

The Bureau reminds enterprises that they should notice the above new amendment. If enterprises have any further questions with respect of the APA application procedure, they can visit the Bureau website at http://www.ntbna.gov.tw to check relevant regulations or use our toll-free service number at 0800-000321.The Bureau will sincerely provide comprehensive advice services.

Ukraine

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Ukraine Clarifies Controlled Transactions Reporting and Transfer Pricing Documentation Requirements

Ukraine's State Fiscal Service (SFS) recently published guidance letter 27432/6/99-99-19-02-02-15, which covers the reporting and transfer pricing documentation requirements for controlled transactions. Under Ukraine's transfer pricing rules, which were amended 15 July 2015 (previous coverage), transactions are deemed controlled for transfer pricing purposes when:

  • The taxpayer's annual income exceeds UAH 50 million; and
  • The value of the annual transactions with a related party exceeds UAH 5 million.

When the thresholds are met, a controlled transactions report must be submitted electronically to the SFS by 1 May of the year following the tax year concerned. In addition, the taxpayer must prepare transfer pricing documentation and submit to the SFS within 30 days of a request. The documentation must include:

  • Details of affiliated persons involved in the controlled transaction, including those with a 20% or greater direct or indirect participation in the taxpayer;
  • A description of the business and other activities of the group involved in the controlled transaction, as well as its organizational structure and transfer pricing policy;
  • A description of the relevant controlled transaction, including the goods, works and services involved, and the terms and conditions;
  • Information about the functions and risks of the affiliated persons involved in the relevant controlled transaction, and the assets used;
  • A description of the factors that affected the determination of the transaction price;
  • A description of the transfer pricing methods used, including the reasoning for their use;
  • A description of the comparables used, including their source (taxpayers and tax authorities may use any publicly available sources of information);
  • The results of a comparability analysis of commercial and financial conditions; and
  • Other relevant documentation.

No mandatory form for the transfer pricing documentation has been prescribed, and the information may be contained in a single document or in a series of documents.

United States

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U.S. IRS Publishes Practice Units on Intercompany Interest Rates, Cost Sharing Arrangements, and other Issues

The U.S. IRS has published four international practice units, including:

International practice units are developed by the Large Business and International Division of the IRS to provide staff with explanations of general international tax concepts as well as information about specific transaction types. They are not an official pronouncement of law, and cannot be used, cited or relied upon as such.

Click the following link for the International Practice Units page on the IRS website.

Treaty Changes (3)

Chile-Czech Rep

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Update - Tax Treaty between Chile and the Czech Republic

The income and capital tax treaty between Chile and the Czech Republic was signed on 2 December 2015. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Chilean taxes imposed under the Income Tax Act, and Czech tax on income of individuals, tax on income of legal persons, and tax on immovable property.

Residence

The treaty includes the provision that if a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to any relief or exemption from tax provided by the treaty.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged persons if the activities continue for a period or periods aggregating more than 183 days within any 12-month period. In determining if the 183 days limit has been met, activities of associated enterprises in a Contracting State will be considered if substantially the same and in connection with the same project.

Withholding Tax Rates

  • Dividends - 15% (the rate set in the treaty will not limit Chile's application of the additional tax payable on dividends (35%) provided that the first category tax is fully creditable in computing the amount of the additional tax)
  • Interest - 5% for interest derived from loans or credits granted by banks or insurance companies; otherwise 15%
  • Royalties - 5% for royalties for the use of, or the right to use, any industrial, commercial or scientific equipment; otherwise 10%

MFN Clause

Article 11 (Interest) includes the provision that if any agreement or convention between Chile and a third State that is a member of the OECD provides for an exemption on interest or provides a lower rate than provided for in the Chile-Czech treaty, such exemption or lower rate will automatically apply under the Chile-Czech treaty from the date such other agreement or convention is effective.

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 alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the direct or indirect alienation of shares, comparable interests or other rights in a company resident 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

Article 28 (Miscellaneous Rules) includes the provision that the beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if one of the main purposes of any person concerned with the creation or assignment of the right or debt-claim in respect of which the dividends, interest or royalties are paid, is to obtain the benefits of those Articles by means of that creation or assignment.

Article 28 (Miscellaneous Rules) also includes the provision that the benefits of the treaty will not apply when:

  • A resident of one Contracting State derives income from the other State and the income is attributable to a permanent establishment of that resident in a third State or jurisdiction; and
  • The total tax paid on the income in the first mentioned State and the third State or jurisdiction is less than 60% of the tax that would have been paid in the first-mentioned State had the income not been attributable to the permanent establishment.

In such case, the other State may tax the income under the provisions of its domestic law.

Entry into Force and Effect

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

Germany-Trin & Tobago

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Germany and Trinidad and Tobago Conclude Tax Treaty Negotiations

According to an update from the German Ministry of Finance, officials from Germany and Trinidad and Tobago concluded income tax treaty negotiations with the initialing of a treaty on 19 January 2016. The treaty must be signed and ratified before entering into force, and once in force and effective, will replace the 1973 income tax treaty between the two countries, which currently applies.

Senegal-OECD

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Senegal Signs Mutual Assistance Convention and MCAA for Exchange of CbC Reports

The OECD has announced that on 4 February 2016, Senegal signed the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol, as well as the Multilateral Competent Authority Agreement (MCAA) for the exchange of Country-by-Country (CbC) reports. Although Senegal has not yet adopted requirements for CbC reporting, the signing of the two agreements is a clear indication that requirements will be adopted in the near future.

The Mutual Assistance Convention must now be ratified by Senegal and the ratification instrument deposited before entering into force in the country. The MCAA will apply after the Convention is in force and Senegal has adopted CbC reporting requirements.

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

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