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Approved Changes (3)

Gabon

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Gabon Changes Certain Aspects of New Special Solidarity Contribution

The Gabon government has reportedly agreed to certain changes with regard to the implementation of the country's new special solidarity contribution (CSS), which was introduced as part of the Finance Law for 2017 (previous coverage). The CSS will be levied at a rate of 1% on sales of companies deriving gross income in excess of XAF 30 million. Changes agreed to include:

  • The CSS will enter into force on 15 March 2017 (originally 1 March);
  • The CSS will be deductible for corporate tax purposes (originally non-deductible); and
  • CSS and VAT will apply on the invoiced amount before tax (clarified).

Although the government has agreed to the deduction of CSS, a legislative amendment to the Finance Law is still required for the change.

Sweden

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Sweden General CbC Reporting Guidance Published

The Swedish Tax Agency (Skatteverket) has published general guidance for the country's new Country-by-Country (CbC) reporting requirements, which were approved by parliament on 1 March 2017 and will enter into force on 1 April (previous coverage). Some of the main points of the guidance are in relation to the notification of the reporting entity, which is due by the end of the fiscal year concerned. For fiscal years ending before 1 April 2017, however, the notification is due by 30 April 2017. For notification purposes, there are two types:

For a Swedish company that will be submitting a CbC report, the company must submit a notification that includes:

  • Name, address, and registration number of the Swedish company that will submit the CbC report;
  • Details of the contact person for the reporting company, including name, email, and phone number;
  • The beginning and end date of the fiscal year covered by the CbC report; and
  • Whether the company is submitting as ultimate parent, surrogate parent, or other.

For a Swedish company that will not be submitting a CbC report, but another group company will (Swedish or foreign), the company must submit a notification that includes:

  • Name and registration number of the Swedish company submitting the notification;
  • Name, address, and company/identification number of the Swedish or foreign company that will be submitting a CbC report;
  • The country of residence of the company submitting a CbC report; and
  • The beginning and end date of the fiscal year covered by the CbC report.

For both notification types, the guidance only provides that the notification should be sent to the mailing address: Skatteverket, 403 32 Gothenburg.

With regard to a CbC report itself, the guidance notes that submission in Sweden will only be done electronically via the transfer of the report in XML format. Submission will be via a file transfer service on the Tax Agency website that will be launched later in 2017. Additional technical guidance on submission is to be published on the guidance webpage in the future.

Click the following link for the CbC reporting guidance webpage (Swedish language).

Ukraine

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Ukraine Clarifies Taxpayer Transfer Pricing Adjustments

The Ukraine State Fiscal Service (SFS) recently published guidance letter 29/6/99-99-15-02-02-15 concerning taxpayer transfer pricing adjustments. According to the letter, taxable income from controlled transactions involving non-residents is to be adjusted on an annual basis with the taxpayer's financial result for the year increased by:

  • The amount by which the arm's length price exceeds the contract price for goods, works, or services sold in controlled transactions;
  • The amount by which the contract price exceeds the arm's length price for goods, works, or services purchased in controlled transactions; and
  • 30% of the of the price at which the goods, including fixed assets, works, or services purchased from non-residents registered in a jurisdiction listed in Ukraine's list of low-tax jurisdictions (does not apply if transaction is at arm's length supported by documentation).

In general, transfer pricing adjustments would be reflected in the tax return for the last quarter of the year since the determination of whether transactions are controlled for transfer purposes would be determined at the end of the year based on annual revenue and related-party transaction value amounts (except transactions with low-tax jurisdictions). From 1 January 2017, the controlled transaction thresholds are UAH 150 million annual revenue and UAH 10 million transaction value per counterparty. For prior years, the thresholds are UAH 50 million and UAH 5 million respectively.

Proposed Changes (3)

China

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China to Reduce VAT Rate on Essential Goods, Agricultural Products, Publications and Utilities

According to recent reports, the Chinese government is planning to reduce the VAT rate on essential goods, agricultural products, publications and utilities from 13% to 11%. The planned cut comes as China looks to simplify compliance and stabilize the economy. The government is also planning other changes to reduce the corporate tax burden and reduce administrative fees.

China's standard VAT rate on goods is 17%, while services are subject to rates of 6%, 11% and 17% depending on type, and a 3% rate is available under the small-scale payer regime for all supplies (5% small-scale rate for real estate).

Romania

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Romania Formalizes Participation as Associate Member in BEPS Inclusive Framework

On 2 March 2017, the Romanian government announced the approval of a bill for Romania to take part as a BEPS associate in the Inclusive Framework for the global implementation of the BEPS Project. Although the bill formalizes Romania's participation, the government already announced it would participate when the Inclusive Framework was launched in July 2016 and has been listed as a member of the Framework by the OECD.

Members of the Inclusive Framework are 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). Members also take part in the monitoring and peer review process for the implementation of the minimum standards.

Russia

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Russia Consulting on Improvements to APA Procedures

On 3 March 2017, the Russian government launched a public consultation on improving procedures for advance pricing agreements. The initial consultation stage is meant to collect comments on issues with the current procedures and will run through 17 March 2017, after which draft amendments will be published for additional consultation. Final amendments to improve the procedures are planned to be implemented in January 2018.

Click the following link for the consultation (Russian language).

Treaty Changes (3)

India-Denmark

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India Supreme Court Holds Payments for Computer System Use Not Taxable FTS under Tax Treaty with Denmark

A decision of the Indian Supreme Court was recently published on whether payments for the use of a central computer system qualifies as taxable fees for technical services (FTS) under the 1989 tax treaty with Denmark. The case involved Denmark-based A.P. Moeller-Maersk A/S (Maersk) and the use of its communication system by Indian agents.

As part of its Indian business, Maersk has four Indian subsidiaries (agents) that book cargo and act as clearing agents. In order to assist its agents globally, Maersk set up and maintained a global telecommunication facility called Maersk Net, which is a vertically integrated communication system. The Indian agents paid for the use of Maersk Net on a pro-rata basis. Maersk considered the use of the system as a form of cost sharing and that the payments received were in the nature of reimbursement of expenses. In assessing Maersk, however, the assessing officer held that the amounts paid by the agents were fees for technical services rendered, which under the Denmark-India tax treaty may be assessed tax at a rate of up to 20%.

Maersk appealed the decision before the Commissioner of Income Tax, which dismissed the appeal, and then appealed before the Income Tax Appellate Tribunal, which found in favor of Maersk. The tax authority then appealed to the High Court, which also found in favor of Maersk, and then appealed to the Supreme Court.

In its decision, the Supreme Court upheld the decisions of the lower courts. The Court found that payments for the use of Maersk Net could not be considered FTS because the system is integral to Maersk's shipping business, it is available to all agents globally, no technical services are rendered for a particular user of the system, and there was no profit element embedded in the payments received. As such, the payments are found to be in the nature of reimbursement of expenses for the maintenance of the system, and cannot be considered income chargeable to tax. The decision also notes that after arguments were concluded, the tax authority made additional written submissions that the payments be treated as royalties. However, the Court found that this was a "desperate attempt" that cannot be allowed as no such case was brought before the High Court or in the appeals in the Supreme Court.

Click the following link for the full text of the decision as published.

Portugal-France

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Portugal Ratifies Pending Protocol to Tax Treaty with France

On 6 March 2017, Portuguese President Marcelo Rebelo de Sousa ratified the pending protocol to the 1971 income tax treaty with France. The protocol, signed 25 August 2016, makes the following changes:

  • Amends Article 2 (Taxes Covered) with respect to both countries;
  • Amends the term "competent authorities" for both countries under Article 3 (General Definitions);
  • Replaces Article 20 (Government Services);
  • Replaces Article 27 (Exchange of Information);
  • Adds Article 27 bis (Assistance in the Collection of Taxes); and
  • Adds Article 31 bis (Limitation on Benefits).

The protocol is the first to amend the treaty and will enter into force on the first day of the month following the exchange of the ratification instruments. It will generally apply in both countries from 1 January of the year following its entry into force.

Ukraine-Germany

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Ukraine to Sign SSA with Germany

On 4 March 2017, Ukrainian President Petro Poroshenko authorized the signature of a social security agreement with Germany. The agreement will be the first of its kind between the two countries, and will enter into force after it has been finalized, signed, and ratified.

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