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Approved Changes (3)

Canada

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Canadian Supreme Court Holds Tax Information Requests Unconstitutional where Solicitor-Client Privilege Applies

On 3 June 2016, the Supreme Court of Canada issued two decisions concerning the constitutionality of demands for information and documents sent to lawyers and notaries by the Canada Revenue Agency (CRA) under Canada’s Income Tax Act (Act) as it relates to solicitor-client privilege. The cases involved legal action brought on by the Quebec Chamber of Notaries against CRA requests for information from various notaries and an appeal by an Alberta-based lawyer against a CRA request for client documentation.

Regarding the Quebec notaries case, the Supreme Court found that the requirement to furnish requested information and documentation to CRA under the Act is unconstitutional as it relates to lawyers and notaries because it is an unreasonable seizure in breach of section 8 of the Canadian Charter of Rights and Freedoms. Further, the Court found that the lawyers’ accounting records exception in the Act’s solicitor-client privilege definition is wholly unconstitutional. Regarding the Alberta lawyer case, the Court found that documentation containing client information is presumably privileged and therefore can only be disclosed if a court determines that solicitor-client privilege does not apply. Because the Supreme Court found the requirements unconstitutional for lawyers and notaries in the Quebec notaries case, the same applies in the Alberta lawyer case.

Denmark

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Denmark Approves Changes to Capital Gains and Dividends Taxation

On 2 June 2016, the Danish parliament approved law proposal (L 123), which changes certain aspects of the country's taxation of capital gains and dividends (previous coverage). Changes include:

  • The participation exemption regime is expanded to cover capital gains and dividends received from subsidiaries resident in jurisdictions with which Denmark has entered into a tax information exchange agreement, including the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters (under previous rules a tax treaty is required); and
  • The standard dividends withholding tax rate on outbound dividends is reduced from 27% to 22% (does not affect the reduced 15% rate or exemptions based on EU Parent-Subsidiary Directive or tax treaty, which are subject to certain conditions).

The participation exemption change is to apply retroactively from 2007, and the dividends withholding tax change is to apply from 1 July 2016.

Russia

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Russia Clarifies Independent Corresponding Adjustments for Controlled Transactions Involving Non-Resident Related Parties

The Russian Ministry of Finance recently published Letter No. 03-01-18/28673, which provides guidance for corresponding adjustments for controlled transactions involving non-resident related parties. According to the letter, transactions between resident and non-resident related parties are deemed controlled regardless of the amount of income. When a taxpayer is a party to a controlled transaction that is not at arm's length resulting in an adjustment to the taxpayer's tax base, the counter party to the transaction may make a corresponding adjustment (previous guidance). However, when the counter party is a non-resident, such corresponding adjustment is to be based on the provisions of the relevant income tax treaty between Russia and the jurisdiction of residence of the non-resident party.

Proposed Changes (1)

European Union-Austria-Belgium-France-Germany-Greece-Italy-Portugal-Slovak Republic-Slovenia-Spain

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EU Council Publishes Report on Status of Financial Transaction Tax

On 3 June 2016, the Council of the European Union published a report on the status of the ongoing enhanced cooperation procedure for the introduction of a Financial Transaction Tax (FTT). The enhanced cooperation procedure was started at the request of 11 EU Member States (Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain) after a Commission proposal for an EU-wide FTT was abandoned in 2012 due to a lack of consensus among all Member States. Since the enhanced cooperation procedure began, the 11 Member States supporting the FTT have had difficulty in reaching final agreement, and in December 2015, Estonia decided it would no longer support the initiative.

According to the report, the remaining 10 Member States taking part in the enhanced cooperation procedure are to make final decisions on the outstanding issues by 30 June 2016. The main issues to be resolved include:

  • The application of "issuance" and "residence" principles and the territorial scope for the FTT, including whether transactions in shares issued in non-participating Member States should be exempt;
  • An exemption from FTT of market making activities, including what the definition of market making activities for such exemption should be; and
  • The scope of transactions in derivatives contracts to be subject to the FTT, and whether there should be a (possibly temporary) list of derivatives exempt from FTT.

If agreement is not reached by 30 June, it is unclear what the future of the FTT will be. Click the following link for the report, which includes further details on the discussion of outstanding issues.

Treaty Changes (4)

Latvia-Iran

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Latvia to Negotiate Tax Treaty with Iran

The Latvian Ministry of Foreign Affairs has announced that Latvia has expressed the need to negotiate an income tax treaty with Iran during a meeting of officials from the two sides on 2 June 2016. Any resulting treaty would be the first of its kind between the two countries, and must finalized, signed and ratified before entering into force.

Morocco-Netherlands

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Protocol to SSA between Morocco and the Netherlands Signed

On 4 June 2016, officials from Morocco and the Netherlands signed a protocol to the 1972 social security agreement between the two countries. The protocol is the third to amend the agreement, and will enter into force after the ratification instruments are exchanged.

Morocco-Rwanda

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Tax Treaty between Morocco and Rwanda under Negotiation

Officials from Morocco and Rwanda met 30 May to 3 June 2016 for the first round of negotiations for an income tax treaty. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Somalia-Turkey

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Tax Treaty between Somalia and Turkey Signed

On 3 June 2016, officials from Somalia and Turkey signed an income tax treaty. The treaty is the first of its kind between the two countries, and the first ever for Somalia. It will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

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