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Approved Changes (4)
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OECD BEPS Action 8-10 Consultation Meeting Videos Available

The OECD has made available the videos of the public consultation sessions held 6 to 7 July 2015 on Actions 8, 9 and 10 of the Base Erosion and Profit Shifting (BEPS) Project. The topics discussed and available videos include:

The public consultation is one of the last to be held before the OECD finalizes its work on the BEPS Project. The final deliverables will be completed before the end of 2015.

Spain

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Spain to Reduce Individual Income Tax Rates Earlier than Planned

On 2 July 2015, Spanish Prime Minister Mariano Rajoy announced that the planned reduction in individual income tax rates from 1 January 2016 will instead be pushed forward to 1 July 2015. The reduction was introduced as part of the 2015 Budget with an initial reduction in the number of tax brackets from 7 to 5 and reduction in rates effective 1 January 2015, and a further rate reduction as follows:

  • Up to €12,450 - 19%
  • Over €12,450 up to €20,200 - 24%
  • Over €20,200 up to €35,200 - 30%
  • Over €35,200 up to €60,000 - 37%
  • Over €60,000 - 45%

The savings income tax rates will also be reduced by 1%, and the professional withholding tax rate will be reduced from 19% to 15%, which is the rate previously reserved for professionals earning less than EUR 15,000.

Further details will be published when the regulation implementing the changes is published.

United States

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U.S. IRS Publishes Updated Publication on Withholding of Tax on Nonresident Aliens and Foreign Entities

The U.S. IRS has published updated guidance on Withholding of Tax on Nonresident Aliens and Foreign Entities (Publication 515). The updated Publication is for use in 2015, but also contains information for 2014. It covers a number of topics, including:

  • Withholding of tax, including agent requirements;
  • Persons subject to withholding;
  • Reporting obligations;
  • Documentation requirements;
  • Beneficial owners and the claiming of treaty benefits;
  • Foreign intermediaries and foreign flow-through entities;
  • Income subject to withholding, including specific income types;
  • Depositing withheld tax;
  • Return filing requirements; and
  • Tax treaty rate tables

Click the following link for Publication 515.

Vietnam

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Vietnam Issues Guidance on Corporate Income Tax Changes for 2015

On 22 June 2015, Vietnam issued Circular 96/2015/TT-BTC, which provides guidance on a number of changes for corporate income tax in 2015. Main changes are summarized as follow.

Revenue Recognition Timing

  • Income from offshore investment projects is to be declared in the year the income is remitted to Vietnam instead of the year it was derived or subsequent year; and
  • The timing for revenue recognition for services is changed from the date the invoice is issued to the time when the service provision is fully or partially completed

The Offset of Foreign Gains/Losses and Foreign Tax Credit Claims

  • Gains/Losses from offshore investment projects may not be offset against Gains/Losses in Vietnam; and
  • Documentation requirements for foreign tax credit claims are simplified to include only a copy of the tax declaration submitted overseas and a copy of the tax payment voucher or other document evidencing the tax payment

Investment Incentives

  • The general eligibility conditions for the new tax incentive of either a 10% reduced income tax rate for 15 years, or tax exemption for 4 years followed by a 50% reduction in tax for 9 years are clarified to include large-scale projects for the manufacture of products included in Prime Minister Decision 1483/QD-TTg, dated 26 August 2011; and
  • A corporate income tax exemption is introduced for income derived from the processing of agricultural and aquatic products in economically disadvantaged areas

Changes in Deductible Expenses

  • The 15% deduction cap for advertising and promotion expenses is abolished and such expenses are now fully deductible;
  • Fixed assets used for the benefit of employees and for vocational training, such as libraries, childcare facilities, sports facilities, and related equipment are added to the list of deductible depreciation expenses;
  • The requirement to provide supporting documentation in order to claim goods damaged due to force majeure causes as an expense is removed, although documentation must still be provided if requested; and
  • The VND 1 million per employee per month insurance contribution deduction cap no longer applies if evidenced by supporting documents

Circular No. 96/2015/TT-BTC will enter into force 6 August 2015 and generally applies from 1 January 2015.

Proposed Changes (1)

Italy

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Italian Cabinet Introduces Tax Administration Decrees on Penalties

The Italian Cabinet has issued a number of decrees for tax reforms before its ability to introduce measures without parliamentary approval under the special tax reform law expires. The main measures concern tax administration and penalties, including:

  • The undeclared income amount beyond which criminal sanctions are imposed is increased from EUR 1 million to EUR 1.5 million, while the threshold amount of tax unpaid remains at EUR 30,000;
  • The underpaid VAT amount beyond which criminal sanctions are imposed is increased from EUR 50,000 to EUR 200,000;
  • Penalties for late return filing is halved if filed before the following tax return deadline, but will be increased by 50% for cases of fraudulent misconduct;
  • Penalties for insufficient tax payment will be reduced to one-third if additional tax assessed is less than 3% of the original tax declaration;
  • Criminal sanctions that would otherwise be imposed for insufficient tax payments will not apply if paid before the tax authorities intervene; and
  • The maximum term for tax repayment that the tax officials may grant is extended from three years to four years

Although the decrees do not require parliamentary approval, they will be examined by a parliamentary commission and sent back to the Cabinet for a final decision on their implementation.

Treaty Changes (2)

Hong Kong-Japan

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Exchange of Notes to Tax Treaty between Hong Kong and Japan has Entered into Force

The exchange of notes to the 2010 income tax treaty between Hong Kong and Japan entered into force on 6 July 2015. The exchange of notes expands the taxes covered by Article 25 (Exchange of Information) of the tax treaty to include Japanese inheritance tax, gift tax, and consumption tax.

The exchange of notes applies from the date of its entry into force.

Hungary-Luxembourg

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Update - New Tax Treaty between Hungary and Luxembourg

On 23 June 2015, Hungary ratified the pending income and capital tax treaty with Luxembourg. The treaty was signed 20 March 2015, and once in force and effective will replace the 1990 income and capital tax treaty, which is currently in force.

Taxes Covered

The treaty covers Hungarian personal income tax, corporate tax, land parcel tax, and building tax. It covers Luxembourg individual income tax, corporation tax, capital tax and communal trade tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10%
  • 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;
  • Gains from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from 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.

Double Taxation Relief

Both countries generally apply the exemption method for the elimination of double taxation, although the credit method may apply in regard to income covered by Article 10 (Dividends) and paragraph 2 of Article 13 (Capital Gains - shares deriving value from immovable property). Luxembourg may also apply the credit method in regard to income covered by Article 16 (Artistes and Sportspersons).

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Once the new treaty is in force and effective, the 1990 income and capital tax treaty will terminate and cease to have effect.

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