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Approved Changes (6)

Japan

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Japan's Cross Border E-Service Consumption Tax Requirements

The Japan National Tax Agency has published requirements for foreign suppliers of e-services to Japanese customers, such as e-books, streaming music and video, games, etc., which will be subject to 8% consumption tax from 1 October 2015. The levy of consumption tax on such cross border supplies was included as part of Japan's tax reform approved in March 2015.

For B2B supplies, the tax is paid via reverse charge (paid by the customer). For B2C supplies, the foreign supplier is required to register for consumption tax if the registration threshold is met, and make payments and file returns. The registration threshold is taxable B2C sales of JPY 10 million; B2B supplies are not considered.

If the foreign supplier keeps an office in Japan, the office should register if the registration threshold is met and is responsible for tax return, payments, etc. If the foreign supplier has no office, registration is required but a tax agent must be appointed to handle the requirements.

When making e-service supplies, the supplier must provide an invoice stating:

  • Its name and registration number;
  • The date of provision of the services;
  • The content of the services;
  • The payment amount;
  • Indication that the registered foreign supplier is liable for consumption tax (tax amount does not need to be stated separately); and
  • The name of the customer receiving the invoice

Electronic invoices are acceptable.

Click the following link for additional information and registration forms provided on the National Tax Agency website.

Kenya

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Kenya Launches Alternative Dispute Resolution and Audit Governance Framework

On 17 June 2015, the Kenya Revenue Authority (KRA) launched a new alternative dispute resolution and audit governance framework in order to save time and reduce costs. Under the new frame work, taxpayers will be allowed to first dispute decisions with the KRA instead of having to appeal through the tribunal or courts. In addition, when a taxpayer is selected for an audit, the notice of audit must include the reasons for the audit and the taxpayer is allowed to dispute the need for an audit before it begins. When disputes arise, they are to be resolved with 90 days, and if cannot be resolved in that time frame, the taxpayers must be clearly notified of any delay.

Malawi

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Malawi Budget Measures 2015/2016 Adopted

On 25 June 2015, the Malawi parliament adopted measures included in the Budget 2015/2016. The main tax-related measures of the Budget include:

  • The taxation of deemed interest in respect of interest free loans in the hands of the lender;
  • Setting the interest rate on tax debts at the central bank lending rate plus 5%; and
  • Introducing a penalty of 20% on unpaid tax amounts due by non-residents

The measures have entered into force and apply from 1 July 2015.

Mexico

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Mexico Publishes Third Amendment to the Miscellaneous Tax Resolution for 2015

On 2 July 2015, Mexico published the Third Amendment to the Miscellaneous Tax Resolution for 2015 in the Official Gazette. Main measures in the Third Amendment include:

  • Take-away foods prepared at convenience stores, minimarkets, etc. are re-categorized as subject to the 16% VAT rate (previously exempt);
  • The immediate 100% deduction incentive made available for business located in areas affected by torrential rains that invest in new fixed assets is extended to 31 October 2015 (fixed assets must be used exclusively and permanently in the affected area to be eligible);
  • Language requirements for accounting records are relaxed and any language may be used, although the tax authorities may still request a translation into Spanish by an authorized expert;
  • The deadline for the informative return (DIEMSE) that must be filed by Maquiladora companies is extended to 31 December 2015 (annual filing deadline is usually 30 June);
  • The filing of the fiscal situation informative return (DISIF) is made optional for taxpayers that would otherwise be required to file but whose transactions with non-residents during the year is less than MXN 30 million; and
  • Specific information to be included in the DISIF in order to meet the obligation is clarified to include information on:
    • Derivative financial transactions with non-residents;
    • Permanent investments in non-resident subsidiaries, associated and affiliated companies;
    • Partners or shareholders;
    • Transactions with related parties; and
    • Transactions with non-residents

The changes introduced by the Third Amendment to the Miscellaneous Tax Resolution for 2015 entered into force on 3 July 2015.

Netherlands

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Netherlands Cancels Plans for Reducing Application of Reduced VAT Rate

The Dutch lower house of parliament has reportedly adopted a resolution to not implement the planned changes in the scope of goods and services subject to the reduced VAT rate (6%). Under the plan, the rate applicable for most goods and services would have been increased to the standard VAT rate of 21%, while basic foodstuffs would remain subject to the reduced rate.

Pakistan

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Pakistan Budget 2015/16 Approved

The 2015/2016 Budget was approved by the Pakistan parliament on 23 June 2015 and has received assent of the President as Finance Act, 2015. The main measures in the Budget include:

  • The corporate tax rate is reduced to from 33% to 32%;
  • The 15% tax credit for companies listing on a registered stock exchange is increased to 20%;
  • The individual income tax rate for salaried taxpayers earning taxable income from PKR 400,000 to PKR 500,000 is reduced from 5% to 2%, and the rate for non-salaried individual taxpayers and associations of persons earning taxable income in that range is reduced from 10% to 7%;
  • The capital gains tax rate on securities is increased from 12.5% to 15% if held for up to 12 months, increased from 10% to 12.5% if held for up to 24 months, and a new rate of 7.5% is introduced for securities held more than two years up to 4 years (under prior rules gains are exempt if held more than 2 years);
  • The scope of increased withholding tax for non-compliant taxpayers is expanded, and a 0.6% advance tax is introduced on banking instruments and other transfers of funds through banks for taxpayers that have not filed tax returns;
  • The dividends tax rate is increased from 10% to 12.5%, and for non-compliant taxpayers the rate is increased from 15% to 17.5% (the extra 5% is adjustable);
  • A 10% final withholding tax is introduced for the renting of machinery and for the use of, or right to use, commercial, scientific, or industrial equipment for residents; and
  • A tax on retained earnings of listed companies is introduced at a rate of 10% on the amount of retained earnings in excess of 100% of a company's paid up capital

The measures generally apply from 1 July 2015.

Click the following link for an overview of the Budget measures provided by the Pakistani government.

Proposed Changes (1)

European Union-Austria-Bulgaria-Hungary-Slovak Republic-Czech Rep-Germany

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EU Member States Call for Broad Introduction of Domestic VAT Reverse Charge Mechanism

A group of five EU Member States is calling for the broad introduction of the VAT reverse charge mechanism for all domestic transaction exceeding EUR 10,000 in order to reduce instances of fraud. Currently the reverse charge mechanism is often used for cross border transactions, but its use domestically is limited by the European Commission to specific sectors where fraud is clearly prevalent and other solutions to counter fraud are not available.

The five Member States include Austria, Bulgaria, Hungary, Slovakia and the Czech Republic. Germany is expected to join the group as well.

Treaty Changes (1)

Malta-Moldova

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Tax Treaty between Malta and Moldova has Entered into Force

The income tax treaty between Malta and Moldova entered into force on 17 June 2015. The treaty, signed 10 April 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers the income taxes of both countries.

Withholding Tax Rates

  • Dividends - 5% if paid by a Moldovan company to a Maltese beneficial owner; when paid by a Maltese company to a Moldovan beneficial owner, the withholding tax rate is limited to the amount of Maltese tax on the profits out of which the dividends are paid
  • Interest - 5%
  • Royalties - 5%

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 movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares directly or indirectly deriving more than 50% of their value from immovable property situated 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.

Effective Date

The treaty applies from 1 January 2016.

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