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Approved Changes (5)

Kenya

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Kenya Makes E-Filing Mandatory from August 2015

The Kenya Revenue Authority (KRA) has announced that from 1 August 2015, all tax returns must be filed using the country's iTax System. This includes returns for value added tax, pay as you earn (PAYE) and income tax.

Registration and filing can be completed through the KRA iTax Portal.

Malaysia

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Malaysia Issues Updated Guidance for Entertainment Expense Deductions

On 29 July 2015, the Inland Revenue Board of Malaysia published Entertainment Expense Public Ruling (PR) No. 4/2015. PR No. 4/2015 sets out the tax treatment of entertainment expense as a deduction against gross income of a business, and steps to determine the amount of entertainment expense allowable as a deduction. It replaces PR 3/2008.

Click the following link for PR No. 4/2015 as published.

OECD-Albania-Burkina Faso-Cameroon-Dominican Rep-Lesotho-Pakistan-Uganda-Marshall Isl-Lithuania-Sint Maarten-Austria-B Virgin Isl

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OECD Publishes Peer Review Reports on Transparency and Information Exchange for 12 Jurisdictions

On 3 August 2015, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes published new peer review reports for 12 jurisdictions. The reports and their results are as follows:

The reports are part of a review process for compliance with the international standard for information exchange. Phase 1 reports include an evaluation of a jurisdiction's legal and regulatory framework for transparency and exchange of information, and provide recommendations for improvement. Jurisdictions deemed to have a sufficient framework in place move on to the Phase 2 report, which looks at the actual implementation of the standard for information exchange, and provides a compliance rating as well as recommendations for improvement. The compliance ratings include non-compliant, partially compliant, largely compliant or compliant.

Click the following link for an overview of the compliance ratings provided for the 37 jurisdictions that have completed Phase 1 and the 80 jurisdictions that have completed Phase 2.

In addition to the peer review reports, the OECD also announced that the Global Forum has launched a multilateral process to evaluate confidentiality and data safeguards frameworks in more than 90 jurisdictions that have committed to begin automatic information exchange by 2017 or 2018.

Russia

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Russia Clarifies Input VAT Deduction on Mixed Supplies

On 8 July 2015, the Russian Ministry of Finance issued Guidance Letter 03-07-11/39228, which clarifies the deduction of input VAT on goods or services purchased for use in providing both VAT-taxable and non-taxable supplies. According to the letter, in such case the amount of input VAT that is deductible must be determined based on the proportion of VAT-taxable supplies to non-taxable supplies. The proportion must be based on the value of goods shipped or property rights transferred in connection with VAT-taxable operations of the taxpayer in the relevant period, and cannot include income from any participation in subsidiaries or associated companies.

Taiwan

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Taiwan Introduces 12% Contribution Rate for Non-Residents Operating in Free Trade Zones

The Taiwan Ministry of Finance has recently announced the introduction of a standard 12% contribution rate for non-residents performing business activities in Taiwan Free Trade Zones (FTZ), including a simplified method for calculating the contribution rate when there are onshore and offshore costs. The new rate and calculation applies for non-residents that are resident in countries that have not entered into a tax treaty with Taiwan. For tax treaty countries, the provisions of the treaty regarding permanent establishment apply.

The 12% rate applies for non-residents engaged in the import, storage and sale of products in an FTZ. If also engaged in manufacturing/processing of goods, the rate is increased by the percentage of local costs attributed to the activity to the total cost. For example, if the non-resident incurred costs of TWD 20 domestically and TWD 80 abroad, the contribution rate would be 32% = 12% + 20% (20/100). The contribution rate for activities involving manufacturing/processing cannot exceed 100%.

In determining the amount of taxable income from FTZ activities, the total revenue from the goods is multiplied by the contribution rate and the deemed profit rate. For example, using the above determined contribution rate and a deemed profit rate of 10%, total revenue 200 x 32% x 10% = taxable income of TWD 6.4.

Proposed Changes (2)

Canada

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Canada launches Consultation on Legislative Proposals for Measures Included in Economic Action Plan 2015

On 31 July 2015, the Canadian Department of Finance announced the launch of a public consultation on draft legislation to implement certain tax measures from Economic Action Plan 2015. The measures as summarized in the announcement are as follows.

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Personal Income Tax

  • Amending the repeated failure to report income penalty to apply for a taxation year only if a taxpayer fails to report at least $500 of income in the year and for any of the three preceding taxation years. The penalty is also amended to ensure that it is proportionate in relation to other penalties.

Charities

  • Providing an exemption from capital gains tax for certain dispositions involving private corporation shares or real estate where the cash proceeds are donated to a registered charity within 30 days.
  • Providing rules to enable registered charities to acquire or hold interests in limited partnerships in certain circumstances.

Business Income Tax

  • Modifying the dividend rental arrangement rules to deny the inter-corporate dividend deduction on dividends received by a taxpayer on a Canadian share where there is a synthetic equity arrangement. The draft legislative proposals include adjustments to the effective date of this measure.
  • Strengthening an existing anti-avoidance rule that prevents corporations from converting their capital gains into tax-deductible inter-corporate dividends.

International Taxation

  • Providing an exception to the withholding requirements for payments by qualifying non-resident employers to qualifying non-resident employees. The draft legislative proposals reflect comments received since the announcement of this measure in Economic Action Plan 2015.
  • Amending an existing anti-avoidance rule in Canada's foreign accrual property income rules to ensure that profits of a Canadian taxpayer derived from the insurance of Canadian risks remain taxable in Canada.

Other Measures

The draft legislative proposals also include the following income tax measure that was announced on March 1, 2015 and referenced in Economic Action Plan 2015:

  • Ensuring that the costs associated with undertaking environmental studies and community consultations that are required in order to obtain an exploration permit will be eligible for treatment as Canadian Exploration Expenses.

References to "Announcement Date" in the draft legislative proposals refer to today's date. Explanatory notes are included with the draft legislative proposals.

Interested parties are invited to provide comments on the draft legislative proposals by September 30, 2015. Please send your comments to legislation-taxation@fin.gc.ca or to:

Tax Policy Branch

Department of Finance

90 Elgin Street

Ottawa, Ontario

K1A 0G5

Related Products

Additional Links

Economic Action Plan 2015

Contacts

Stéphanie Rubec

Media Relations

Department of Finance

613-369-4000

Vietnam

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Vietnam to Introduce Travel Restrictions in Cases of Tax Debts

The Vietnam Ministry of Finance (MoF) has issued a press release on a draft decision for foreign travel restrictions on legal representatives of enterprises including chairpersons, presidents, general directors and directors, if there is an outstanding tax balance of VND 1 billion or more for over 90 days. A travel restriction would also apply for individuals with an outstanding tax balance VND 50 million or more for over 90 days.

According to the draft, persons subject to the restriction would be banned from traveling overseas for up to three years unless the tax debt is paid or otherwise guaranteed. In certain cases, the restriction may be extended.

Treaty Changes (2)

Jersey-Seychelles

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Tax Treaty between Jersey and Seychelles Signed

On 28 July 2015, officials from Jersey and Seychelles signed an income tax treaty. The treaty is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Jersey income tax and Seychelles business tax, income and non-monetary benefits tax act, and petroleum income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting Party furnishes services in the other Party through employees or other engaged personnel if the activities continue for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

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

Capital Gains

The following capital gains derived by a resident of one Contracting Party may be taxed by the other Party:

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other Party; and
  • Gains from the alienation of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in the other Party

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

Double Taxation Relief

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

Entry into Force and Effect

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

Kazakhstan-OECD

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Mutual Administrative Assistance Convention Enters Into Force in Kazakhstan

The OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol entered into force in respect of Kazakhstan on 1 August 2015. The amended convention, signed by Kazakhstan on 23 December 2013, will generally apply in the country from 1 January 2016.

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