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Approved Changes (6)

Argentina

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Argentina Forms Commission to Develop Simplified Financial Statement Requirements for the New Simplified Joint-Stock Company Form

On 1 September 2017, Argentina published General Resolution 4115-E in the Official Gazette. The Resolution provides for the formation of a commission to determine the required content for the financial statements to be prepared by a simplified joint-stock company (Sociedad por acciones simplificada - SAS), which was introduced by Law 27.349 in order to reduce the administrative burden of establishing and operating a business in Argentina (previous coverage). The commission will include members from the Ministry of Production, the Argentine Federation of Professional Councils in Economic Sciences, and the Federal Administration of Public Revenue. Until the commission finalizes the new requirements, SAS companies must prepare and submit financial statements in accordance with current accounting standards.

Brazil

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Brazil Extends Deadline for PERT Tax Regularization Program

On 31 August 2017, Brazil published Provisional Measure 798/2017, which extends the deadline from 30 August 2017 to 29 September 2017 for taxpayers to take part in the program for the regularization of tax (PERT) introduced by Provisional Measure 783/2017. The program is available for both individuals and legal entities with unpaid tax and non-tax debts up to 30 April 2017, and includes different options for the settlement of debts with varying interest/penalty relief (previous coverage). In addition to extending the deadline, Provisional Measure 798 also provides that for those taxpayers that apply to take part in the program in September, a cumulative payment must be made in September for both the first and second installments that would have been required for August and September with the previous deadline. Additional clarification on the payments is provided in Normative Instruction No. 1733, which was published on 1 September.

Ecuador

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Ecuador Publishes Resolution on Withholding Tax on the Alienation of Shares Listed on the Ecuador Stock Exchange

The Ecuador Internal Revenue Service (SRI) has published Resolution No. NAC-DGERCGC17-00000440, which amends the taxation of gains from the alienation of shares listed on the Ecuador stock exchange. The Resolution provides that for resident companies, gains from the alienation of listed shares are subject to a withholding tax of 0.2%, while for resident individuals, tax is to be withheld at the rates provided in article 36(a) of the Internal Tax Regime Law (standard progressive income tax rates). For non-resident companies and individuals, the Resolution provides that gains from the direct or indirect alienation of listed shares are subject to withholding tax at the general rate for companies.

Italy

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Italy Issues Rules on Foreign Permanent Establishment Exemption

On 28 August 2017, the Italian Revenue Agency issues Protocol No. 2017/165138, which provides rules for the exemption of profits and losses of foreign permanent establishments (branches) of Italian resident companies as introduced in Legislative Decree No. 147 in September 2015 (previous coverage). Some of the main points of rules include:

  • The election to exempt profits and losses of a foreign branch is made in the tax return for the first tax period in which the branch is established;
  • If a resident company owns one or more existing branches as of 7 October 2015, the election may be made in respect of those branches in the return for the second tax period following the period in progress on that date;
  • The election for the exemption applies for all foreign branches of the resident company at the time the election is made, as well as all subsequent branches without the need to make a further election, and once elected, cannot be revoked;
  • The election will cease to have effect following the closure, liquidation, or disposal of all foreign branches, and if a new foreign branch is subsequently established, a new election for the exemption will need to be made;
  • If, in the five tax periods preceding the election, the branch has incurred tax losses accruing to the resident company, future income of the branch will be attributed to the company up to the existing loss amount (determined on a per country basis);
  • In the event of a transfer of a foreign branch to another company in the same group, specific loss recapture rules will also apply, including where the other company has already made the exemption election or subsequently makes the election, where a company takes part in the tax consolidation regime, and certain other cases;
  • When a foreign branch would be subject to Italy's CFC rules (located in a country with a privileged tax regime), income of the foreign branch will be attributed to the resident company despite the exemption election, unless the conditions for the CFC exemption are met; and
  • In the case of extraordinary transactions, such as a merger or acquisition, the exemption will continue to apply if the resulting owner of the branch has already made the exemption election or makes the election in the return for the tax period in which the transaction took place.

Click the following link for Protocol No. 2017/165138 (Italian language).

Romania

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Romania Publishes Final Ordinance for Introduction of VAT Split Payment System

On 30 August 2017, Government Ordinance No. 23/2017 was published in Romania's Official Gazette. The Ordinance introduces the country's new split payment system for value added tax (VAT). Key points of the split payment system include:

  • All VAT registered persons must use separate VAT accounts for receiving and making VAT payments;
  • The split system applies for all supplies of goods and services considered made in Romania, with the exception of supplies under special VAT schemes, such as the scheme for travel agents and second-hand goods, as well as supplies subject to reverse charge;
  • VAT accounts will be opened with the treasury unit of the tax office where the taxpayer is registered, or taxpayers may opt to open a VAT account with a commercial bank if the bank can support the new system;
  • VAT registered persons should communicate their VAT account details to their suppliers and customers for the purpose of the split payment, although details of accounts opened with the tax office will also be made publically available;
  • Funds deposited in the VAT accounts may generally only be used to pay VAT to the tax authority and to supplier's VAT accounts, and certain other limited situations; and
  • VAT registered person that make VAT payment in the wrong account will have 7 days to correct the error or be subject to a fine equal to 0.06% of the VAT due per day until corrected.

The split payment system is optional from 1 October 2017 and is mandatory from 1 January 2018. Registered persons that opt to adopt the split payment system from 1 October to 31 December are eligible for certain benefits, including a 5% reduction in corporate income tax and the waiver of any late VAT payment penalties for VAT payable as of 30 September 2017.

Spain

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Spain Publishes Final Order on New Form 232 for Disclosure of Transactions with Tax Havens

On 30 August 2017, Spain published Order HFP/816/2017, approving Form 232, which replaces Form 200 for the purpose of reporting transactions with related parties in tax havens. The final order is similar to the initial draft issued in May 2017 (previous coverage), but with certain changes to what transactions must reported and the annual deadline to submit the form.

Transactions to be reported in Form 232 include:

  • Transactions carried out with the same related person or entity, if the aggregate amount of transactions exceeded EUR 250,000 (market value) in the period;
  • Specific transactions (see below), if the aggregate amount of each type of transaction exceeded EUR 100,000 in the tax period, regardless of the valuation method; and
  • Any transactions with the same related person or entity that are of the same type and use the same valuation method, if the aggregate transaction amount exceeded 50% of the taxpayer's turnover for the period.

With respect to the second reporting condition, specific transactions are those excluded from simplified documentation, which refers to the documentation requirements for taxpayers whose annual turnover is below EUR 45 million. Excluded transactions include intangible asset transactions, real estate transactions, and certain others.

The new Form 232 applies for tax periods beginning on or after 1 January 2016 and must be submitted electronically in the month following a ten-month period after the end of the tax period to which the information relates. For the 2016 tax period, however, the deadline for submission is specifically set at 1 to 30 November 2017.

Treaty Changes (2)

Gambia-Untd A Emirates

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Update - Tax Treaty between Gambia and the U.A.E.

The income and capital tax treaty between Gambia and the United Arab Emirates was signed 27 July 2015. It is the first of its kind between the two countries.

Taxes Covered

The treaty covers Gambian taxes on income and on capital, and covers U.A.E. income tax and corporate tax.

Income from Hydrocarbons

Article 3 (Income from Hydrocarbons) provides that the treaty will not affect the right of the U.A.E. to apply its domestic laws and regulations related to the taxation of income and profits derived from hydrocarbons and its associated activities situated in its territory.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel in a Contracting State if the activities continue for a period or periods aggregating more than 9 months.

Withholding Tax Rates

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

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, but the tax charged will be reduced by 50%; 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.

Double Taxation Relief

Gambia applies the credit method for the elimination of double taxation, while the U.A.E. applies the exemption method.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year in which it was signed (1 January 2015).

Malaysia-Ukraine

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Update - Tax Treaty between Malaysia and Ukraine

The income tax treaty between Malaysia and Ukraine was signed on 4 August 2016. Once in force and effective, it will replace the 1987 tax treaty between Malaysia and the former Soviet Union, which Ukraine generally continues to apply.

Taxes Covered

The treaty covers Malaysian income tax and petroleum income tax, and covers Ukraine individual income tax and tax on profits of enterprises.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 20% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 8%
  • Fees for technical services (technical, managerial, or consultancy) - 8%

Limitation on Benefits

Articles 11 (Interest) and 12 (Royalties) include provisions that the benefits of the Articles will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claims or rights in respect of which the income is paid to take advantage of the Article by means of that creation or assignment.

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 the alienation of shares or comparable interests in a company deriving more than 50% of their value directly or indirectly from 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.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation. In respect of dividends received by a Malaysian resident company that owns at least 10% of the voting shares of the paying company, Malaysia will also provide a credit for the Ukrainian tax payable on the profits out of which the dividends are paid.

In addition, provisions are included for a tax sparing credit, whereby Ukraine will treat as Malaysian tax paid any tax that would have been payable but was reduced or exempted through special incentives under Malaysia law. The tax sparing credit provisions are to apply for a period of 12 years, but may be further extended.

Entry into Force and Effect

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

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