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Worldwide Tax News

Approved Changes (1)

United States

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U.S. IRS Updates General FATCA FAQ

On 31 July 2015, the U.S. IRS updated the general frequently asked questions (FAQ) on the Foreign Account Tax Compliance Act (FATCA). The FAQ covers several FATCA topics related to compliance and other matters. The latest update provides information concerning registration of entities listed on the Office of Foreign Asset Control's Specially Designated Nationals (SDN) list.

Click the following link for the FATCA - FAQs General on the IRS.Gov website.

Proposed Changes (1)

Australia

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Australia Issues Draft Legislation for Tougher Anti-Avoidance Penalties and New TP Documentation Requirements including CbC Reports

On 6 August 2015, the Australian government issued exposure drafts of legislation to implement tougher anti-avoidance penalties for large companies and new transfer pricing documentation requirements based on guidelines developed as part of Action 13 of the OECD BEPS Project. The measures were introduced in the 2015 Budget (previous coverage).

Tougher Anti-Avoidance Penalties

The anti-avoidance amendments include a doubling of the penalties imposed for large companies that have entered into tax avoidance or profit shifting schemes. The increased penalties will apply for taxpayers with global revenue exceeding AUD 1 billion in the tax year concerned. However, the penalties will not apply for taxpayers that adopt a reasonably arguable tax position.

The penalties, based on the relevant scheme shortfall amount, are as follows:

Tax avoidance schemes:

  • Base penalty amount - 100%
  • Aggravating factors apply - 120%
  • Disclosure during examination - 80%
  • Disclosure before examination - 20%

Profit shifting schemes:

  • Base penalty amount - 50%
  • Aggravating factors apply - 60%
  • Disclosure during examination - 40%
  • Disclosure before examination - 10%

The penalties will apply for benefits obtained, or that would be obtained, on or after 1 July 2015, regardless of when the scheme was entered into or carried out.

Transfer Pricing Documentation Requirements

For tax years beginning on or after 1 January 2016, multinationals with annual global revenue of AUD 1 billion or more will be required to provide a statement to the Australian Taxation Office (ATO) Commissioner that includes one or more of the following:

  • A country-by-country (CbC) report;
  • A master file; and
  • A local file

The statement requirement will apply to Australian headquartered multinational enterprises, Australian subsidiaries of multinational enterprises headquartered outside of Australia, and foreign resident entities with a permanent establishment in Australia. Entities required to provide a statement will be required to do so using an approved form, which allows the Commissioner to specify the information that is required from the entity.

CbC Report

In general, only an Australian headquartered multinational will be required to include the CbC report in its statement. However, an Australian subsidiary of a multinational would also be required to include a CbC report unless the following conditions are met:

  • The subsidiary's worldwide parent entity is resident in another jurisdiction;
  • The parent provides a CbC report to the tax authority of its jurisdiction;
  • Arrangements are in place for the automatic exchange of CbC reports between that authority and the ATO; and
  • The ATO is, in practice, able to obtain CbC reports from that tax authority

Master File

Australian resident entities and foreign residents with an Australian PE will generally be required to provide the master file as part of the statement. However, where there are multiple Australian entities that are part of the same multinational group, the Commissioner may specify that only one of the entities provide the master file.

Local File

Every Australian resident entity and foreign residents with an Australian PE will generally be required to provide the local file in its statement.

Exclusions

The ATO Commissioner will have the right to exclude certain entities from the statement requirements in one or more tax years, such as entities with no or insignificant cross border transactions. In addition, legislation may be introduced to exclude specified classes of entities in order to reduce compliance costs.

Click the following link to the Australian Treasury website for the exposure drafts, explanatory materials, and instructions for submitting comments. Comments must be submitted by 2 September 2015.

Treaty Changes (4)

Belgium-Qatar

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Update - Protocol to the Tax Treaty between Belgium and Qatar

On 22 March 2015, officials from Belgium and Qatar signed a protocol to the pending 2007 income tax agreement between the two countries. The protocol amends the competent authority in respect of Belgium and replaces Article 26 (Exchange of Information) to bring it in line with the OECD standard for information exchange.

The treaty will enter into force the day after the date the ratification instruments are exchanged and the protocol will enter into force on the date the ratification instruments are exchanged. Both will generally apply from 1 January of the year following their entry into force.

Brazil-South Africa

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Protocol to the Tax Treaty between Brazil and South Africa Signed

On 31 July 2015, officials from Brazil and South Africa signed a protocol to the 2003 income tax treaty between the two countries. The protocol is the first to amend the treaty, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Cyprus-Guernsey

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Tax Treaty between Cyprus and Guernsey in Force

The income and capital tax treaty between Cyprus and Guernsey entered into force on 4 March 2015. The treaty was signed 15 July 2014 in Nicosia and 29 July in St. Peter Port. It is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Guernsey income tax, and the following Cyprus taxes:

  • Income tax;
  • Corporate income tax;
  • Special contribution for the defense of the republic; and
  • Capital gains tax

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; 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.

Offshore PE

The treaty includes an article concerning Offshore Activities (Article 20). Under the provisions of Article 20, a permanent establishment will be deemed constituted if an enterprise of one Contracting Party carries on offshore activities in the other Party in connection with the exploration or exploitation of the seabed or subsoil or their natural resources situated in that other Party if such activities continue for a period or periods aggregating more than 30 days in any 12 month period.

Double Taxation Relief

Both jurisdictions apply the credit method for the elimination of double taxation.

Effective Date

The treaty applies from 1 January 2016.

Indonesia-Netherlands

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Protocol to the Tax Treaty between Indonesia and the Netherlands Signed

On 30 July 2015, officials from Indonesia and the Netherlands signed a protocol to the 2002 income tax treaty between the two countries. The protocol is the first to amend the treaty, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

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