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Approved Changes (5)

Colombia

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Colombia Minimum Interest Rate on Shareholder Loans for 2017

Colombia has published Decree 777 of 2017, which sets the deemed minimum annual interest rate (yield) at 6.86% for loans granted by a company to its partners or shareholders, or vice versa, for the 2017 tax year. The decree also sets the inflationary component rates for financial income/returns and costs for natural persons for the 2016 tax year.

Cyprus

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Cyprus Publishes Reissued Decree on CbC Reporting

The Cyprus Tax Department has published the Decree for the Automatic Exchange of Country-by-Country (CbC) Reports as reissued by the Ministry of Finance on 26 May 2017. The amended Decree replaces the original decree issued the end of 2016 in order to clarify certain aspects of the CbC reporting requirements. Key points of the amended Decree include:

  • CbC reporting obligations apply for MNE groups meeting the standard EUR 750 million revenue threshold in the previous year (or equivalent in other currency as of January 2015);
  • Ultimate parent entities and designated surrogate parent entities resident in Cyprus must submit a CbC report for fiscal years beginning on or after 1 January 2016;
  • Non-parent constituent entities resident in Cyprus must submit a CbC report for fiscal years beginning on or after 1 January 2017 if the standard secondary local filing conditions are met (not required if qualifying surrogate parent has been designated in another jurisdiction that will exchange reports with Cyprus);
  • When a non-parent entity is required to submit a CbC report, it must request all necessary information from the ultimate parent, and if not provided, must still submit a report with available information and notify that the ultimate parent refused to provide the information (in case of multiple local non-parent entities, one may be appointed to submit the report);
  • Any constituent entity of an MNE group resident in Cyprus must notify the competent authority by the end of the reporting fiscal year on whether it is the ultimate parent or surrogate parent, or if neither, the identity and tax residence of the ultimate parent entity and reporting entity (an initial extension to 20 October 2017 is provided for reporting fiscal years ending up to that date);
  • The deadline for the CbC report is 12 months after the end of the reporting fiscal year;
  • The content of the CbC report is in line with standard guidelines and is to be submitted in English;
  • Both the CbC notification and the CbC report are to be filed electronically - Government Gateway Portal (Ariadni) www.ariadne.gov.cy.

The Decree does not provide for CbC compliance penalties, although Cyprus is reportedly planning to introduce penalties of up to EUR 20,000 later in 2017.

Click the following link for the reissued Decree in English.

Ecuador

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Ecuador Reverts to Standard 12% VAT Rate

The Ecuador Internal Revenue Service (SRI) has announced that the standard value added tax rate has been reverted to 12% effective 1 June 2017. The rate was temporarily increased to 14% from 1 June 2016 as part of measures to fund reconstruction following the April 2016 earthquake. Taxpayers must make necessary adjustments to account for the 12% rate from 1 June.

Switzerland

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Swiss Federal Council Brings VAT Act Amendments into Force Affecting Foreign Suppliers

On 2 June 2017, the Swiss Federal Council announced that it has decided to bring into force the amendments made to the Value Added Tax (VAT) Act approved in 2016 (previous coverage), which are meant to provide equal treatment to domestic and foreign suppliers. One of the main changes is that the VAT registration threshold of CHF 100,000 will be based on global turnover instead of just Swiss turnover from 1 January 2018. As such, foreign companies making supplies to Swiss consumers will be much more likely to face a VAT obligation in Switzerland. Other VAT Act amendments also apply from 1 January 2018, except for the removal of the general exemption on B2C supplies of small consignments made by mail-order companies, which due to technical issues will not apply until 1 January 2019.

Ukraine

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Ukraine Amends Rules on APA Term and Effective Date

Ukraine has published Decree 194 as approved by the Cabinet of Ministers on 29 March 2017, which amends Decree 504 of 2015 (previous coverage) on the procedures for concluding advanced pricing agreements (APAs). Decree 194 makes two main changes, including an increase in the maximum term of an APA from three years to five years, and clarification that an approved APA will apply from 1 January of the year following its approval or from the date agreed to by the State Fiscal Service and the taxpayer, depending on the circumstance and characteristics of the controlled transactions covered.  

Proposed Changes (1)

Bahamas

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Bahamas Budget Communication 2017/18 Presented

On 31 May 2017, the Bahamas Deputy Prime Minister and Minister of Finance, K. Peter Turnquest, presented the 2017/18 Budget Communication to parliament. The tax-related measures of the budget are mainly limited to a reduction in the Business License tax rate from 1.5% to 1.25% of turnover, tax relief to consumers and businesses through customs and excise duty rate reductions for various goods, and measures to enhance tax administration and compliance, including amendments to the Customs Management Act to accommodate a paperless customs process.

Click the following link for the Budget webpage.

Treaty Changes (5)

Cape Verde-Spain

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Tax Treaty between Cape Verde and Spain Signed

According to a release from the Spanish government, officials from Cape Verde and Spain signed an income tax treaty on 5 June 2017. The treaty is the first of its kind between the two countries and will enter into force three months after the ratification instruments are exchanged. Additional details will be published once available.

Egypt-OECD

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Egypt to Sign BEPS MLI

Egypt's Deputy Finance Minister Amr Al-Munir announced on 31 May 2017 that he will be signing the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The signing will take place during the official signing ceremony in Paris on 7 June 2017.

The BEPS MLI is for the purpose of implementing the treaty-related measures developed as part of the BEPS Project without needing to separately amend each bilateral treaty. This includes measures developed as part of BEPS Action 2 (Hybrid Mismatches), Action 6 (Preventing Treaty Abuse), Action 7 (Preventing Artificial Avoidance of a PE), and Action 14 (Improving Dispute Resolution).

India-Oman

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Indian Court Upholds Tribunal Ruling that a Tax Sparing Credit May be Claimed for Dividend Income Exempt in Oman

In a recent decision, the Delhi High Court ruled on whether a decision of the Income Tax Appellate Tribunal was correct in finding that an India recipient of dividends exempt from tax in Oman may claim a sparing credit as provided in the 1997 India-Oman tax treaty. The case involved India-based Krishak Bharati Cooperative Limited, which received Oman-source dividends through its Oman PE as a result of its 25% stake in Oman India Fertilizer Company S.A.O.C., a joint venture with Oman Oil Company S.A.O.C. In receiving the exempt dividends, Krishak Bharati claimed a foreign tax credit (FTC) based on the tax sparing credit provisions of Article 25 (Avoidance of Double Taxation) of the India-Oman tax treaty. Article 25 provides that tax paid shall be deemed to include the tax which would have been payable but for the tax incentives granted under the laws of the Contracting State and which are designed to promote economic development. The FTC claim was accepted in the initial years, but was later disallowed by the principle commissioner, which held the sparing credit can only be claimed if the dividends would have been taxable without an incentive, and that the exemption could not be considered an incentive as the dividends were never taxable under Oman domestic law. The disallowance was appealed, and made its way to the High Court

In its decision, the High Court upheld the decision of the Income Tax Appellate Tribunal. In particular, the decision included that in determining whether an exemption is an incentive for the purpose of the tax sparing credit, the only competent authority to clarify the matter is the competent authority of the country providing the exemption/incentive. In this case, a letter from the Sultanate of Oman has stated that the exemption of dividend income from income tax in Oman was for the promotion of economic development. As such, the Indian tax authority must recognize the exemption as an incentive and allow the tax sparing credit.

Turkey-Uzbekistan

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Protocol to Tax Treaty between Turkey and Uzbekistan Initialed

On 25 May 2017, officials from Turkey and Uzbekistan concluded negotiations with the initialing of an amending protocol to the 1996 income tax treaty between the two countries. The protocol will be the first to amend the treaty and must be signed and ratified before entering into force. Additional details will be published once available.

Note - This article has been updated to reflect that the protocol was initialed and not signed as originally indicated.

United States-South Africa

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U.S. Competent Authority Agreement on the Exchange of CbC Reports with South Africa Signed

On 5 June 2017, the U.S. IRS published the bilateral competent authority agreement on the exchange of Country-by-Country (CbC) reports with South Africa. The agreement as published by the IRS does not indicate the signed date, although according to an update from the South African Revenue Service, it was signed by South Africa on 8 May 2017 and by the U.S. on 26 May 2017.

The agreement provides that pursuant to the provisions of Article 26 (Exchange of Information and Administrative Assistance) of the 1997 South Africa-U.S. income and capital tax treaty, each competent authority will automatically exchange CbC reports received from each reporting entity resident for tax purposes in its jurisdiction, provided that, on the basis of the information provided in the CbC report, one or more constituent entities of the MNE group of the reporting entity are resident for tax purposes in the jurisdiction of the other competent authority, or are subject to tax with respect to the business carried out through a permanent establishment situated in the other jurisdiction.

With respect to fiscal years beginning on or after 1 January 2016, CbC reports are to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. With respect to fiscal years beginning on or after 1 January 2017, reports are to be exchanged no later than 15 months after the last day of the fiscal year.

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