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Worldwide Tax News

Approved Changes (4)

China

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China Consults on Regulations for Environmental Protection Tax Law

China's State Administration of Taxation has announced a public consultation on the draft implementing regulations for the Environmental Protection Tax Law, which was approved the end of 2016 and will become effective 1 January 2018 (previous coverage). The draft regulations provide clarification on the general provisions, definitions of terms, the tax basis and tax payable, applicable tax breaks, collection management, and other relevant matters for the implementation of the law.

Click the following link for the consultation draft (Chinese language). The consultation period ends 26 July 2017.

Greece

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Greece Extends Deadline for 2016 Tax Returns

The Greek Ministry of Finance has announced a one-off extension to the tax return deadlines for 2016. For both individual and corporate taxpayer's the deadline is extended to 17 July 2017.

OECD-G20

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OECD Publishes Secretary-General Report to G20 Leaders

The OECD has published the Secretary-General report that will be presented at the upcoming G20 Leaders Summit on 7 to 8 July 2017. The report is broken up into two parts, with part I providing a general overview on:

  • Tax transparency efforts, including activation of automatic exchange of information (AEOI) relationships for the Common Reporting Standard (CRS), progress on identification of non-cooperative jurisdictions, and work on beneficial ownership;
  • The Inclusive Framework on BEPS, with a detailed progress report included in Annex I of the report on the implementation of the BEPS measures and the move towards monitoring BEPS implementation and further refinement of international tax rules;
  • Tax policy, including efforts to improve tax certainty and address tax challenges of the digital economy; and
  • Tax and Development, including assistance programs for developing countries on transfer pricing and other BEPS issues, tax audits, and financial crime issues.

Part II provides a progress report focused on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, including:

  • Adoption/implementation of CRS for the exchange of financial account information;
  • The exchange of information on request (EOIR), including overall compliance ratings following first round of peer reviews and the Fast-Track procedure;
  • Participation in the Convention on Mutual Administrative Assistance in Tax Matters;
  • Ongoing work on beneficial ownership; and
  • Technical assistance supporting EOIR an AEOI implementation and other targeted assistance.

Click the following links for the full report and the related OECD release.

Pakistan

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Pakistan Budget 2017/18 Measures Enacted

Pakistan has reportedly enacted the Finance Bill 2017 as the Finance Act 2017. The Finance Act includes measures proposed in the Budget 2017/18 (previous coverage), including certain changes and additional measures:

  • The introduction of an online marketplace concept, which is an IT platform run be an e-commerce entity to facilitate transactions between buyers and sellers - such online marketplaces are eligible for a 0.5% minimum tax instead of 1.25% and the rate of collection of tax at source is 5% instead of 12%;
  • The new three-year tax exemption for qualifying tech start–ups with annual turnover up to PKR 100 million is adjusted so that qualifying start-ups include those that commenced on or after 1 July 2012 instead of incorporated or registered on or after that date;
  • The 10% tax on the amount of retained earnings (undistributed reserves) is reduced to 7.5% and it clarified that the tax is levied on accounting profit before tax;
  • For the 2018 tax year, the standard dividends tax rate is increased from 12.5% to 15%, but instead of increasing the rate for dividends received from mutual funds to a flat 12.5%, the 12.5% rate applies for dividend amounts in excess of PKR 2.5 million, while dividends at or below that amount remain subject to a 10% rate;
  • The rate structure for capital gains tax on listed securities is simplified from a three-tier structure based on holding period to a flat /single rate of tax of 15% for filers and 20% for non-filers from the 2018 tax year, but instead of applying the new rates for securities acquired on or after 1 July 2013, the new rates apply for shares acquired on or after 1 July 2016 (securities held more than 48 months remain exempt).

With respect to income tax rates, the individual income tax rates are unchanged for the 2018 tax year, the corporate tax rate is reduced from 31% to 20% for the 2018 tax year as already planned, and the standard minimum tax on turnover is increased from 1.0% to 1.25%

Additional details will be published once available.

Proposed Changes (1)

United Kingdom

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UK OTS Issues Report on Simplifying Corporation Tax Computation

On 3 July 2017, The UK Office of Tax Simplification (OTS) published and laid before parliament its report on the simplification of the Corporation Tax computation. The report includes seven main simplification recommendations:

  1. Build a five-year Corporation Tax Roadmap, alongside the Business Tax Roadmap, to include a commitment on earlier and more open consultation;
  2. For the smallest companies: simple accounts = simple tax:
    • FRS 105 adopters, tax to follow accounts; otherwise
    • A minimum number of essential tax adjustments to accounting profit;
  3. Align capital / revenue tax definitions with accounting definitions;
  4. Align definitions between management expenses and trading deductions;
  5. Replace the schedular system with a whole business approach;
  6. Explore use of accounting depreciation instead of capital allowances; and
  7. For the largest companies: embed the Customer Relationship Manager (CRM) role in line with HMRC’s published strategy, to provide greater certainty in a complex system.

Also included are 25 more specific recommendations for consideration, including several with regard to areas specific to large and complex companies:

  • UK transfer pricing – explore whether the scope can be limited to instances where there is an actual tax difference arising.
  • Dormant companies and transfer pricing generally – explore whether the existing exemption for pre-2004 dormant companies can be extended to all dormant companies.
  • Deferred remuneration - consider adjusting the time limit to harmonize with accounts; as part of this also whether this legislation is still needed given the changes in accounting rules.
  • Pensions - undertake a review of the application of the 'paid' basis of deduction to the various types of expenses associated with pension schemes, with a view to clarifying the rules.
  • Share based payments - consider whether the existing rules for mobile, international employees are unnecessarily complex.
  • Intangibles - consider whether the current three-tier regime for goodwill is necessary and whether new expenditure on pre 2002 goodwill could be brought into the income–based regime.
  • Group relief arrangements – consider relaxing the current rule that denies access to group relief for a company which does not in fact leave the group but in respect of which there are 'arrangements' during the relevant accounting period.
  • Surplus Advance Corporation Tax (ACT) - quantify the number of companies with, and the amount of, unrelieved surplus ACT, with a view to providing the remaining relief in a less complex way.
  • Review of anti-avoidance legislation to consider consistent de minimis limits and motive tests, testing the compliance burden and removing duplication.
  • Aggregated returns – consider the introduction of voluntary aggregated returns, giving HMRC the powers to refuse admission of an entity to such an arrangement.
  • Materiality – consider introduction of de minimis levels.
  • Group relief and tax payments - existing arrangements to be reviewed in the light of Making Tax Digital for companies with a view to digitizing and simplifying.

Click the following link for the full report and a related press release.

Treaty Changes (7)

Aruba-Germany

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TIEA between Aruba and Germany Signed

On 29 June 2017, officials from Aruba and Germany signed a tax information exchange agreement. The agreement is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Bahrain-Thailand

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Bahrain Approves Protocol to Tax Treaty with Thailand

On 3 July 2017, the Bahrain Cabinet approved the law for the ratification of the pending protocol to the 2001 income tax treaty with Thailand. The protocol, which is the first to amend the treaty, clarifies that the State of Bahrain became known as the Kingdom of Bahrain as of 14 February 2002 and adds a new Article 26A (Exchange of Information) in line with the OECD standard for information exchange (original treaty has no exchange provisions). The protocol will enter into force once the ratification instruments are exchanged and will apply from the first day of the month following the month in which it enters into force.

Bermuda-United Kingdom

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Bermuda and the UK Sign Competent Authority Agreement for Exchange of Financial Account Information

Bermuda and the UK have signed a competent authority agreement for the automatic exchange of financial account information based on the OECD Common Reporting Standard (CRS). The agreement was signed by the UK on 20 June 2017 and by Bermuda on 27 June. Under the agreement, Bermuda will automatically exchange information on reportable accounts of UK residents held in Bermuda.

Brazil-Vietnam

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Tax Treaty between Brazil and Vietnam under Negotiation

According to recent reports, officials from Brazil and Vietnam met 29 to 30 June 2017 and agreed to move forward with the negotiation and signing of an income tax treaty. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Mauritius-OECD

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Mauritius Signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS

The OECD has announced that on 5 July 2017, Mauritius signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) as the 69th jurisdiction covered. According to the provisional list of reservations and notifications, Mauritius wishes to have 23 tax treaties covered by the MLI. For the MLI to become effective for a particular treaty, the other jurisdiction must also include the treaty as a covered agreement, and both sides must have completed the required procedures for the ratification of the MLI (previous coverage).

Morocco-Ethiopia-Ghana-South Sudan

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Morocco Approves Pending Tax Treaties with Ethiopia, Ghana, and South Sudan

The Moroccan Council of Ministers has reportedly approved the pending income tax treaties with Ethiopia, Ghana, and South Sudan. Morocco signed the treaty with Ethiopia on 19 November 2016 (previous coverage), signed the treaty with Ghana on 17 February 2017 (previous coverage), and signed the treaty with South Sudan on 1 February 2017 (previous coverage). Each treaty will enter into force after the ratification instruments are exchanged and will generally apply from 1 January following their entry into force, although with respect to the Ethiopia-Morocco treaty, the treaty will apply in Ethiopia from 8 July following its entry into force.

United States-Korea, Rep of

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US Publishes CbC Exchange Arrangement with South Korea

The U.S. IRS has published the bilateral competent authority arrangement signed with South Korea on the exchange of Country-by-Country (CbC) reports. The agreement was signed 22 June 2017 and is effective from that date.

The arrangement provides that pursuant to the provisions of Article 28 (Exchange of Information and Administrative Assistance) of the 1976 income tax treaty between the two countries, 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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