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Approved Changes (3)

European Union

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EU Member States Agree to Automatic Exchange of Cross-Border Tax Rulings

On 6 October 2015, the Council of the European Union announced that Member States have agreed to a directive for the automatic exchange of advance cross-border tax rulings and advance pricing agreements (APA). The automatic exchange of rulings was proposed by the European Commission in March 2015 as part of a tax transparency package. Similar measures are also covered under the final report for Action 5 of the BEPS Project, which was released 5 October 2015 (previous coverage). The directive will amend the text of Directive 2011/16/EU on administrative cooperation in the field of taxation.

Under the new EU rules, national tax authorities will be required to send a report to all other Member States every six months on all advance cross-border tax rulings and APAs issued. Member States may then request additional information on particular rulings/APAs as needed.

The rules are to apply from 1 January 2017. For rulings and APAs issued prior to that date, the following rules will apply:

  • Rulings and APAs issued, amended or renewed between 1 January 2012 and 31 December 2013 should be exchanged if still valid on 1 January 2014;
  • Rulings and APAs issued, amended or renewed between 1 January 2014 and 31 December 2016 should be exchanged whether still valid or not; and
  • Member States will have the option to exclude information on rulings or APAs issued, amended or renewed before 1 April 2016 if the annual net revenue of the relevant group is less than EUR 40 million.

The directive will be adopted at an upcoming Council meeting, once the European Parliament has given its opinion and it has been finalized in all official languages. EU Member States will need to transpose the new rules into domestic law before the end of 2016.

France

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France Issues Interest Rate Limits for Shareholder Loan Interest Payment Deductions for Tax Years Ending in Q4 2015

On 25 September 2015, France published the interest rates used in determining the deductibility of interest payments to shareholders for companies whose tax year ends between 30 September 2015 and 30 December 2015.

The portion of interest payments exceeding the following rates are generally not deductible unless documentation is provided demonstrating that the interest rate applied is at arm's length. The period in which the tax year ends and the applicable rates are as follows:

  • Between 30 September 2015 and 30 October 2015 - 2.25%
  • Between 31 October 2015 and 29 November 2015 - 2.21%
  • Between 30 November 2015 and 30 December 2015 - 2.18%

The interest rate limits are determined by the Central Bank of France based on the average annual interest rates charged by financial institutions on medium-term variable rate loans of 2 years or more.

Ukraine

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Ukraine Clarifies VAT Exemption for Software

Ukraine's State Fiscal Service recently published guidance clarifying the application of the temporary value added tax (VAT) exemption for the supply of software and the VAT exemption for royalties.

According to the guidance, operations involving the supply of software are exempt from VAT from 1 January 2013 to 1 January 2023. In addition, royalty payments are exempt from VAT, which includes any payment received as consideration for the use of, or right to use, intellectual property (IP), including computer software. Certain payments, however, are not considered royalties for tax purposes, including:

  • Payments for the use of software if its use is restricted to the functional purpose of the software by the end user and is limited to a certain number of copies for such use;
  • Payments for copies of IP objects in electronic form for use by the end user according to their functional purpose;
  • Payments for the acquisition of items in which IP is stored; and
  • Payments for the transfer of ownership to IP if the conditions of transfer permit the person that obtains the rights to sell or otherwise alienate the IP or make it public.

As a result, the above payment types will not qualify for the royalty payments VAT exemption, but will qualify for the temporary VAT exemption on software through 1 January 2023. In the event there is a conflict between the above definitions and the definition for royalties provided in an applicable tax treaty, the tax treaty definition applies.

Proposed Changes (2)

Finland

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Finland to Implement Amendments to the EU Parent-Subsidiary Directive Regarding Participation Exemption

On 1 October 2015, the Finnish government presented to parliament proposed legislation to implement amendments made to the EU Parent-Subsidiary Directive into domestic law. The amendments include that the participation exemption provided for in the Directive will not be granted if:

  • Dividends paid by a subsidiary to its parent company are deductible in the Member State of the subsidiary (if partially deductible, the non-deductible portion will remain exempt); or
  • An arrangement or a series of arrangements are put in place with the main purpose or one of the main purposes of receiving a tax benefit and not for valid commercial reasons that reflect economic reality.

The amendments are to enter into force in Finland from 1 January 2016.

Ireland

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Ireland Commits to Implementation of BEPS Project Outcomes, Including CbC Reporting

Following the release of the final BEPS Project package by the OECD, Ireland's Finance Minister Michael Noonan announced that Ireland is committed to the implementation of the BEPS project outcomes (previous coverage). The first steps will be the implementation of country-by-country reporting requirements developed under Action 13, as well as the implementation of a knowledge box (IP) regime in line with Action 5.

Click the following link for the Finance Ministers announcement.

Treaty Changes (5)

Albania-Morocco

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Tax Treaty between Albania and Morocco Signed

On 5 October 2015, officials from Albania and Morocco 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.

Andorra-Liechtenstein

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Tax Treaty between Andorra and Liechtenstein Signed

On 30 September 2015, officials from Andorra and Liechtenstein 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. Once in force an effective, it will replace the 2009 tax information exchange agreement between the two countries.

Additional details will be published once available.

Liechtenstein-Untd A Emirates

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Tax Treaty between Liechtenstein and the U.A.E. Signed

On 2 October 2015, officials from Liechtenstein and the United Arab Emirates 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.

Lithuania-Moldova

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SSA between Lithuania and Moldova has Entered into Force

On 4 October 2015, the social security agreement between Lithuania and Moldova entered into force. The agreement, signed 1 October 2014, is the first of its kind between the two countries and generally applies from the date of its entry into force.

Panama-South Africa

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TIEA between Panama and South Africa under Negotiation

According to an update from the South African Revenue Service, negotiations for a tax information exchange agreement with Panama are underway. The agreement would be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

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