Worldwide Tax News
The Guernsey government has updated its guidance page on BEPS and Country-by-Country (CbC) reporting with the publication of Bulletin 2017-8 CBC Reporting. The Bulletin clarifies the deadline for the submission of CbC reports in Guernsey, which is no later than 12 months after the last day of the Reporting Fiscal Year of the MNE Group. The Bulletin also notes that the Information Gateway Online Reporter (IGOR) will be updated shortly to enable registration and CbC reporting and that CbC reports will be required in an XML format using the schema provided by the OECD. The first CbC reports to be filed in Guernsey will be due 31 December 2017. The anticipated launch of the CbC element of IGOR is mid-December.
On 4 December 2017, the OECD has announced the release of the first peer review reports on individual jurisdictions' progress for the spontaneous exchange of tax rulings as per the minimum standard of BEPS Action 5. The report includes reviews of 44 jurisdictions, including all OECD members and all G20 countries. Four main elements are covered as part of the review, including:
- The information-gathering process - Involves assessing the processes in place in each of the jurisdictions for identifying past and future rulings that fall within the scope of the transparency framework, and for each of these rulings, identifying the jurisdictions with which the information should be exchanged.
- The exchange of information - Includes reviewing (i) that there is a sufficient domestic and international legal framework for the exchange information related to rulings; (ii) that the templates for information on rulings being exchanged are complete and in the appropriate form; and (iii) that the systems are in place to ensure that information on rulings is transmitted to the jurisdiction’s Competent Authority for exchange of information without undue delay and exchanged with relevant jurisdictions in accordance with the appropriate timelines.
- Confidentiality of information received - Includes a review to make sure that the international information exchange mechanisms being used by the jurisdictions include a confidentiality provision that restricts the use of information on rulings and there is the necessary domestic law and information security practices in place to give effect to such restrictions.
- Statistics - Includes a review of whether each jurisdiction reported statistics on the exchange of information under the transparency framework including (i) the total number of spontaneous exchanges sent, (ii) the number of spontaneous exchanges under each category of ruling and (iii) a list of jurisdictions with which the information was exchanged for each type of ruling.
In addition to the four main elements above, a fifth element applies to jurisdictions which offer IP regimes in relation to the modified nexus approach of BEPS Action 5. This element includes a review of the spontaneous exchanges of information on new entrants benefitting from grandfathered IP regimes (regardless of whether a ruling is provided), taxpayers which benefit from the third category of IP assets, and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption.
Of the 44 jurisdictions reviewed, the report provides recommendations for improvements for: Austria; China; Colombia; the Czech Republic; Estonia; Finland; France; Greece; Hungary; Iceland; India; Israel; Italy; Latvia; Luxembourg; the Netherlands; Poland; Portugal; Russia; South Korea; Spain; Sweden; Turkey; and the UK.
Russian Law Implementing Action 13 Documentation Requirements and the Exchange of Financial Account Information Signed and Published
On 28 November 2017, Russia announced that President Vladimir Putin has signed Federal Law No. 340-FZ on amendments to the Tax Code for the implementation of the international automatic exchange of information and documentation on international groups of companies, which provides for the three-tiered documentation requirements of BEPS Action 13 and the collection and exchange of financial account information under the OECD Common Reporting Standard (CRS), as well as provisions for tax monitoring and joint tax audits with foreign competent authorities. The Law was approved by the State Duma and Federation Council on 16 November and 22 November 2017, respectively, and entered into force on the day it was signed and published, 27 November 2017.
With respect to the Action 13 documentation requirements, the Law provides for the expansion of existing transfer pricing documentation requirement to include specified elements in line with the Action 13 Local file (National Documentation), as well as the introduction of documentation requirements in line with the Master file (Global Documentation) and CbC reports, including a CbC notification requirement (notification of participation in an MNE group). Main points of the Law regarding the new documentation requirements are as follows:
- The documentation/notification requirements apply for members of an MNE group meeting an RUB 50 billion consolidated group revenue threshold in the previous year, although for foreign parented groups, the threshold is the CbC reporting threshold in the foreign parent's jurisdiction (if applicable);
- The deadline to submit the notification of participation in an MNE group is 8 months following the end of the year, although an entity may be exempted if a notification is submitted by another member of the group and that notification reflects all members of the group;
- The Master file must be submitted within 3 months of request, but may not be requested earlier than 12 months after the end of the fiscal year or later than 36 months after the end of the fiscal year;
- The Local file must be submitted upon request as per current transfer pricing documentation submission requirements (no earlier than 1 June following year-end);
- The deadline for the CbC report is 12 months following the close of the reporting fiscal year, although if a report is required as a result of a systemic failure for exchange or where an ultimate parent fails to submit a CbC report in its jurisdiction of residence (and a requirement applies), the CbC report will be required 3 months after the Russian entity is notified of the obligation;
- CbC reports and notification are required to be submitted electronically in a prescribed format (to be issued);
- The voluntary filing of CbC reports is accepted in respect of the 2016 fiscal year (notification made with the voluntary filing);
- In general, the required language for the CbC Report, Master file, and Local file is Russian, although a CbC report may be submitted in a foreign language if the ultimate parent is not resident in Russia;
- With respect to currencies used, the values included in the Master file and CbC Report may be specified in the currency used in the consolidated financial statements of the ultimate parent company, while the values of controlled transactions in the Local file may be specified in the currency in which such transactions are denominated;
- The CbC Report, notification, and Master file requirements apply from 2017, and the Local file requirement generally applies from 2018; and
- The penalty for failing to comply with the notification obligation is RUB 50,000 and the penalties for failing to comply with CbC report, Master file, and Local file obligations are RUB 100,000 - However, the penalties for notification, CbC report, and Master file are waived for the years 2017, 2018, and 2019.
Click the following link for Federal Law No. 340-FZ as published (Russian language).
The European Parliament has announced its approval for the proposed expansion of the Mini One Stop Shop (MOSS) for value added tax (VAT) so that it may be used for the payment of VAT on cross-border online sales of tangible goods and non-electronic services. Currently, the MOSS system may be used by suppliers of telecommunications, broadcasting, and electronic services to account for value added tax (VAT) on supplies made to non-VAT taxable consumers (B2C) in the EU without the need to register and account for VAT in each EU country. With the proposed expansion, the same will be available for online suppliers of tangible goods and non-electronic services.
The expansion of the MOSS system is part of the European Commission's proposed VAT Measures to support e-commerce and online businesses in the EU. The proposal will now be passed to the European Commission and Council for final consideration.
According to recent reports, the European Tax Commissioner, Pierre Moscovici, said on the 30 November 2017 that a proposal is being prepared to change the voting requirements for EU tax measures, so that qualified majority approval can be used instead of the unanimous approval currently required. Such a change is meant to enable implementation of measures lacking unanimous support, such as measures to address the taxation of the digital economy, public Country-by-Country reporting, and others. Under qualified majority voting, a measure may be approved with the support of at least 55% of Member States representing at least 65% of the EU population.
The UK Parliament has published the Finance (No.2) Bill 2017-19, which provides for the implementation of the Autumn Budget 2017 tax measures (previous coverage). Also published is the Finance (No. 2) Bill Explanatory Notes, which provides a summary and explanation for each of the measures.
The bill is currently before the House of Commons, with the second reading scheduled for 11 December 2017.
The income and capital tax treaty between Belarus and Hong Kong entered into force on 30 November 2017. The treaty, signed 16 January 2017, is the first of its kind between the two jurisdictions.
The treaty covers Belarusian tax on income, tax on profits, income tax on individuals, and tax on immovable property. It covers Hong Kong profits tax, salaries tax, and property tax.
- Dividends - 5%
- Interest - 5%
- Royalties - 3% for royalties paid for the use of, or the right to use, aircraft; otherwise 5%
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 shares in a company deriving more than 50% of its asset value directly or indirectly from immovable property situated in the other Party, with an exception for shares quoted on the Stock Exchange of Hong Kong Limited, JSC Belarusian Currency and Stock Exchange, or any other stock exchanges as may be agreed between the competent authorities of the Contracting Parties.
Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.
Both jurisdictions apply the credit method for the elimination of double taxation.
Article 27 (Anti-Abuse Rules) provides that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit would be in accordance with the object and purpose of the relevant provisions of the treaty.
The treaty applies in Belarus from 1 January 2018 and in Hong Kong from 1 April 2018.
According to a recent update from the Brunei Ministry of Finance, the income tax treaty with Qatar entered into force on 26 August 2016. The treaty, signed 17 January 2012, is the first of its kind between the two countries.
The treaty covers Brunei income tax imposed under the Income Tax Act and petroleum profits tax imposed under the Income Tax (Petroleum) Act, and covers Qatari income tax.
The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected projects for a period or periods aggregating more than 183 days within any 12-month period.
- Dividends - 0%
- Interest - 0%
- Royalties - 5%
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; 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.
Both countries apply the credit method for the elimination of double taxation. The treaty also provides for a tax sparing credit for tax that is exempted or reduced in accordance with the laws and regulations of a Contracting State.
The treaty applies generally from 1 January 2017.
Note - A prior report that Qatar ratified the treaty in July 2017 has been corrected to reflect that Qatar had approved a decree to give it the force of law under the Qatar legal system, while the actual ratification of the treaty by Qatar occurred in March 2012.
According to a recent update to the list of signatories, Bulgaria and Monaco signed the Multilateral Competent Authority Agreement on the exchange of Country-by-Country reports (CbC MCAA) on 17 November and 2 November 2017, respectively. The two countries must now activate the CbC MCAA in order for it to be effective for the exchange of CbC reports with other signatories.
On 30 November 2017, the Latvian Parliament (Saeima) approved for ratification the pending protocol to the 1999 income tax treaty with Singapore. The protocol, signed 20 April 2017 (previous coverage), is the first to amend the treaty. It will enter into force once the ratification instruments are exchanged and will generally apply in Latvia from 1 January of the year following its entry into force and in Singapore in respect of withholding taxes from 1 January of the year following its entry into force and for other taxes from 1 January of the second year following its entry into force.
On 1 December 2017, the Luxembourg Cabinet approved for ratification the pending income tax treaty with Cyprus. The treaty, signed 8 May 2017 (previous coverage), is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.