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Worldwide Tax News

Approved Changes (3)

India

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India GST Council Agrees on Rate Structure

The Indian Goods and Services Tax (GST) Council (previous coverage) has agreed on the GST rate structure during its last meeting on 3 November 2016. The rate structure includes:

  • A zero rate for essential goods;
  • A 5% reduced rate for certain commonly used goods;
  • An 18% standard rate for most goods and services; and
  • A 28% increased rate for luxury goods.

The council also agreed on the levy of an additional cess on luxury cars, tobacco, and certain drinks. This additional cess will be used to compensate the states for the lost revenue resulting from the replacement of several taxes by GST.

Although a few issues still need to be worked out, India's new GST regime is to apply from 1 April 2017.

South Africa

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South Africa Issues Final Notice on Transfer Pricing Record-Keeping Requirements

The South African Revenue Service (SARS) has issued a final notice on additional record-keeping requirements for transfer pricing purposes. The new requirements apply for years of assessment commencing on or after 1 October 2016 and are largely based on the Local file requirements developed as part of BEPS Action 13. In terms of items required, the final notice is generally in line with the prior draft notice (previous coverage), and includes:

  • The records, books of account, or documents to be kept in respect of structure and operations, which include details of:
    • The ownership structure;
    • The related parties with which affected transactions are carried out; and
    • A business operations summary, including description of the business, details of senior management, relevant business restructurings, intangibles transfers, etc.
  • The Records, books of account, or documents to be kept in respect of transactions, which contains 15 main items, including:
    • The nature and terms (including pricing policy) of the related party transactions;
    • Copies of the related contracts/agreements;
    • Indication and details of the tested parties;
    • A description of the functions performed, risks assumed, and assets employed;
    • A description of the intangible assets involved;
    • The assumptions, strategies, policies, and price negotiations, if any;
    • Details of the adjustments made, if any;
    • Additional information for financial assistance transactions; and
    • Copies of relevant unilateral, bilateral, and multilateral advance pricing agreements, and other tax rulings to which SARS is not a party.

In general, a person is required to keep the specified records, books of account, or documents if:

  • They have entered into a potentially affected (related-party) transaction; and
  • The aggregate of the person’s potentially affected transactions for the year of assessment, without offsetting any potentially affected transactions against one another, exceeds or is reasonably expected to exceed ZAR 100 million (~USD 7.4 million).

However, for the records, books of account, or documents to be kept in respect of transactions, the requirement applies for a transaction that exceeds or is reasonably expected to exceed ZAR 5 million (~USD 368,000).

Click the following link for the notice, Duty to Keep the Records, Books of Account or documents in Terms of Section 29 of the Tax Administration Act, 2011 (Act no. 28 of 2011).

Venezuela

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Venezuela Increases Minimum Monthly Salary

The Venezuelan government has increased the country's minimum monthly salary from VEF 22,576.73 to VEF 27,092.10 effective 1 November 2016. This is the fourth increase so far in 2016, and is the result of major inflation problems in the country.

The minimum salary is used in determining the basis cap for social security contributions, unemployment insurance, and other benefits. For employer social security contributions, the rates are 9%, 10% or 11% based on the risk qualification of the company with a basis cap of five minimum monthly salaries. For employer unemployment insurance contributions, the rate is 2% with a basis cap of ten minimum monthly salaries.

Proposed Changes (2)

Australia

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Australia Launches Consultation on CIV Non-resident Withholding Taxes

On 3 November 2016, the Australian Minister for Revenue and Financial Services released a collective investment vehicle (CIV) non-resident withholding taxes paper for public consultation. The consultation includes three proposals:

  • No policy change to the existing tax settings;
  • Single non-resident withholding tax rate of 5% for CIVS and MITS under the Asia Region Funds Passport (ARFP); and
  • Uniform non-resident withholding tax rate of 5% for all CIVS and MITS, excluding rental income and taxable Australian real property capital gains.

Click the following link for the consultation page. Submissions are due by 2 December 2016.

Panama-OECD

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Panama Joins Inclusive Framework for Implementation of BEPS Measures

According to a 4 November 2016 update from the OECD, Panama has joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 87. As a member of the Framework, Panama has committed to the implementation of four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse) and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).

Click the following link for the list of participants.

Treaty Changes (4)

China-Malaysia

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Exchange of Notes to Tax Treaty between China and Malaysia Signed

China's State Administration of Taxation has announced that officials from China and Malaysia have signed an exchange of notes to the 1985 income tax treaty between the two countries. According to the announcement, the exchange of notes further clarifies the tax treaty exemptions-related issues that will effectively reduce the tax burden of taxpayers and cross-border financing costs.

Additional details will be published once available.

Hungary-Oman

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Tax Treaty between Hungary and Oman Signed

On 2 November 2016, officials from Hungary and Oman signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Latvia-Switzerland

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Protocol to Tax Treaty between Latvia and Switzerland Signed

On 2 November 2016, officials from Latvia and Switzerland signed a protocol to the 2002 income tax treaty between the two countries. According to a release on the signing from the Swiss Federal Council, the protocol updates Article 26 (Exchange of Information) to bring it in line with the OECD standard for information exchange, lowers taxation of levies and distributed profits on qualified participations, and adds a principal purpose anti-abuse clause.

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.

United Kingdom-Uruguay

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TIEA between the UK and Uruguay has Entered into Force

According to an update from Uruguay's General Directorate of Taxation, the tax information exchange agreement with the UK entered into force on 20 October 2016. The agreement, signed 24 October 2013, is the first of its kind between the two countries and generally applies from the date of its entry into force.

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