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Approved Changes (5)

Bahamas

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Bahamas Changes VAT Payment Deadline

The Bahamas Department of Inland Revenue has issued a notice on a change in the value added tax (VAT) return and payment deadline. Effective 1 January 2017, registrants must file their VAT returns and remit the VAT due within 21 days after each period (previously 28 days).

Hong Kong

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Hong Kong Revised Practice Notes on Appeals Procedures

The Hong Kong Inland Revenue Department has published a revised version of Departmental Interpretation and Practice Notes (DIPN) No. 6, which replaces the notes issued in November 2006. DIPN No. 6 covers the provisions of the Inland Revenue Ordinance in relation to:

  • Objections to the Commissioner;
  • Appeals to the Board of Review; and
  • Appeals to the Courts.

It has been updated to reflect the legislative changes brought about by the Inland Revenue (Amendment) (No. 3) Ordinance 2015 which commenced on 1 April 2016. The four main amendments are as follows:

  • Allowing an appeal against the decision of the Board on a question of law to directly proceed to the Court of First Instance or, if applicable, the Court of Appeal;
  • Empowering the person presiding at the hearing of an appeal before the Board to give directions on the provision of documents and information for the hearing in order to address the situation of late submissions;
  • Providing privileges and immunities to the Chairman, Deputy Chairmen, other members of the Board, and the parties to a hearing, as well as other persons appearing before the Board; and
  • Raising the ceiling of costs to be paid by the appellant as may be ordered by the Board from HKD 5,000 to HKD 25,000 to strengthen the deterrent effect against frivolous appeals.

Click the following link for Departmental Interpretation and Practice Notes No. 6 (Revised).

Mexico

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Mexico 2017 Tax Reform Measures Published in the Official Gazette including New R&D and other Incentives

On 30 November 2016, the decree for Mexico's 2017 tax reform package was published in the Official Gazette. One of the main measures is a new incentive for research and development (R&D) activities.

Under the R&D incentive, companies are allowed a tax credit equal to 30% of the incremental increase in expenses and investment for R&D for the year. To determine the increase, the total amount for year is compared with the average total amount in the previous three years. If the credit exceeds taxable income in a year, it may be carried forward for up to 10 years. If a credit is available and not utilized in a year, it is lost.

Other measures include incentives for investment in electric vehicles and charging equipment, investment in specialized sport facilities, investments for fine arts, and others.

Click the following link for the reform package decree (Spanish language).

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OECD Webcast and Release of Additional Guidance on CbC Reporting and Country-Specific Information on CbC Implementation

On 5 December 2016, the OECD held a webcast to provide updates on recent and upcoming developments, including:

  • The Inclusive Framework on BEPS;
  • The Multilateral instrument for tax treaty-related BEPS measures (previous coverage); and
  • The work being done for the G20 and G7 tax policy agenda, including in relation to tax certainty and inclusive growth.

Inclusive Framework

Regarding the Inclusive Framework on BEPS for the implementation of the four minimum standards:

  • Currently, 90 jurisdictions are taking part in the Inclusive Framework with 100 expected by the end of January 2017;
  • Progress has been made on establishing peer review mechanisms for the four minimum standards, with separate working parties establishing terms of reference and methodologies to start the reviews, which will include:
    • A review of patent box/IP regime compliance and exchange of tax rulings as under Action 5;
    • A high-level review on preventing treaty abuse under Action 6, which will begin after implementation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI);
    • A review of the implementation of Country-by-Country (CbC) reporting requirements under Action 13, which will begin in 2017; and
    • A review of the Mutual Agreement Procedure (MAP) under Action 14, which began 5 December 2016 (previous coverage).

Also noted during the webcast was the release of additional guidance on CbC reporting implementation and country-specific information on the implementation of CbC requirements by members of the Inclusive Framework.

Additional CbC Guidance

The additional guidance relates to cases where a notification to the tax administration may be required to identify the reporting entity of an MNE Group. The guidance confirms that if such notifications are required, jurisdictions have flexibility as to the due date for the notification. This is particularly relevant for MNE Groups that may not yet have the necessary information to submit their notifications since jurisdictions are still completing their implementation of CbC reporting requirements and finalizing agreements for the exchange of reports.

The guidance also confirms that jurisdictions may wish to consider other transitional relief for MNE Groups with respect to these notifications that would be consistent with the minimum standard. Such transitional relief could include allowing preliminary notification that may be updated prior to filing the CbC report, and/or providing transitional relief from penalties in connection with MNE Groups updating their notification.

The additional guidance also includes an updated list of jurisdictions that have confirmed that they will accept voluntary filing by ultimate parent entities resident in their jurisdiction for fiscal years beginning on or after 1 January 2016, despite not having rules in place that are effective from that date. This includes:

  • Hong Kong;
  • Japan;
  • Liechtenstein;
  • Nigeria;
  • Russia;
  • Switzerland; and
  • United States.

Country-Specific Information on CbC Implementation

The country-specific information provides a high-level overview of the status of certain Inclusive Framework members' CbC legislation, first reporting periods, availability of surrogate filing and voluntary filing, and whether local filing can be required. The information will be updated as the members continue to finalize their CbC reporting requirements.

Click the following links for the OECD webcast, the additional guidance, and the country-specific information.

Slovak Republic

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Slovak Parliament Approves Tax Law Amendments including Corporate and Dividends Tax Changes

The Slovak parliament has approved several amendments to the income tax law as part of the 2017 Budget. The main changes affecting corporate taxpayers include:

  • The corporate tax rate is reduced from 22% to 21%;
  • A 35% withholding tax is introduced for dividend payments to non-treaty/TIEA jurisdictions (dividend payments to jurisdictions that have a treaty/TIEA with Slovak Republic generally remain exempt);
  • A 35% tax is introduce on dividends received from non-treaty/TIEA jurisdictions; and
  • Unilateral, bilateral, and multilateral advance pricing agreements will all be explicitly allowed.

Click the following link for the legislation as approved (Slovak language). The legislation must be published in the Official Gazette before entering into force and will generally have effect from 1 January 2017.

Proposed Changes (1)

India

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India to Introduce Increased Tax Rate for Unexplained Income and a New Voluntary Disclosure Scheme

India's Lok Sabha (lower house of parliament) has approved Bill No. 299-C of 2016, which introduces amendments to Income Tax Act, 1961 concerning taxes on unexplained income and amendments to the Finance Act, 2016, concerning a new voluntary disclosure scheme.

Unexplained Income

Any income in relation to unexplained credits, investments, cash, etc. will be subject to tax at an increased rate of 60%, including such income reflected in tax return or determined by the assessing officer. Such income will also be subject to a penalty of 10%.

Voluntary Disclosure Scheme

A new voluntary disclosure scheme will be introduced—the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. Under this scheme, any person may make a declaration in respect of any income, in the form of cash or deposit in an account maintained by the person with a specified entity. The declared income will be subject to:

  • A 30% tax on the declared amount;
  • A 33% surcharge on the resulting tax amount; and
  • A 10% penalty on the declared amount.

In determining the declared amount, no deduction of related expenditure, allowance, or loss will be allowed. In addition, 25% of the amount declared must be deposited in a non-interest bearing account for four years.

Click the following link for Bill No. 299-C of 2016, which now goes to the Rajya Sabha (upper house) for consideration.

Treaty Changes (2)

Canada-China

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SSA between Canada and China to Enter into Force

The social security agreement between Canada and China will reportedly enter into force on 1 January 2017. The agreement, signed 2 April 2015, is the first of its kind between the two countries and generally applies from the date of its entry into force.

Peru-Japan-Singapore-Spain

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Peru Negotiating Tax Treaties with Japan, Singapore, and Spain

The Peruvian government has announced that negotiations are underway for income tax treaties with Japan, Singapore, and Spain. Any resulting treaties with Japan and Singapore would be the first of their kind with Peru. Any resulting treaty with Spain would replace the pending 2006 tax treaty between the two countries, which has not been ratified.

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