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Approved Changes (3)

Australia

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Australia Publishes Q&A on Country-by-Country Reporting

The Australian Taxation Office (ATO) has published Q&A guidance on Country-by-Country (CbC) reporting requirements, including the ATO's transitional administrative practice. The Q&A guidance covers:

  • General issues and eligibility;
  • Country-by-Country report;
  • Master file; and
  • Local file.

Regarding certain transitional relief, the Q&A guidance states that when a foreign parent voluntarily files a CbC report in its jurisdiction of residence, Australia will consider that the local entity's obligation to file has been met, provided that the voluntarily-filed CbC report is filed by the time that the local entity would have been required to file, and the report will be exchanged with Australia.

Regarding Master file requirements, the Q&A guidance states that, in general, when a foreign parent is resident in a jurisdiction that does not have a Master file requirement, no exemption will be provided for local Australian entities. However, for the first reporting period, no Master file will be required if neither the parent nor any other foreign group entity has been or will be required to prepare or file a Master file outside Australia by the time the Master file would be due in Australia.

Click the following link for Country-by-Country reporting: Questions and Answers.

Brazil-Russia-India-China-South Africa

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BRICS Countries Reaffirm Commitment to BEPS Measures and Information Exchange

On 6 December 2016, India's Ministry of Finance published a joint communiqué issued at the end of the two-day meeting of officials from the BRICS countries (Brazil, Russia, India, China, and South Africa). The joint communiqué reaffirms the BRICS countries' commitment to:

  • The measures included in the various Actions of the BEPS Project and in particular the four minimum standards: Countering harmful tax practices (IP regimes/tax rulings exchange) (Action 5); Preventing treaty abuse (Action 6); Country-by-Country reporting (Action 13); and Dispute resolution (MAP) (Action 14);
  • The automatic exchange of financial account information under the OECD Common Reporting Standard (CRS) by 2018 at the latest; and
  • The support of developing countries to combat tax evasion and implement automatic exchange of information.

Click the following link for the full text of the joint communiqué.

European Union

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Council of the EU Adopts Directive on Access to Beneficial Ownership Information

During the 6 December 2016 meeting of the Council of the EU, the Council adopted a directive granting access for tax authorities to information held by authorities responsible for the prevention of money laundering (previous coverage). The directive will require member states to provide access to information on the beneficial ownership of companies. It will enable tax authorities to access that information in monitoring the proper application of rules on the automatic exchange of tax information and is meant to help prevent tax evasion and tax fraud.

The directive will apply from 1 January 2018, with EU Member States required to transpose the directive into national laws and regulations by 31 December 2017.

In addition to the directive on access to beneficial ownership information, other important issues discussed during the Council meeting include:

  • The proposed Common Corporate Tax Base (CCTB) and Common Consolidated Corporate Tax Base (CCCTB), which the Council welcomed (previous coverage);
  • Hybrid-mismatch rules with third countries, which will require additional consideration regarding carve-out clauses (previous coverage); and
  • The Financial Transactions Tax (FTT), which will require additional consideration/negotiation by the 10 EU Member States taking part in the enhanced cooperation procedure for implementation (previous coverage).

Click the following link for an overview of the outcome of the Council meeting.

Proposed Changes (1)
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Peru's Government Close to Finalizing Tax Measures for 2017

According to recent comments from Peru's Economy and Finance Minister Alfredo Thorne, the government is close to finalizing a number of tax measures for 2017. The measures are to be introduced through executive decree under a temporary 90-day power granted by the congress in October. Potential measures include:

  • Increasing the corporate tax rate from 28% to 30%;
  • Reducing the value added tax (IGV) rate from 18% to 17%;
  • Reducing the dividends withholding tax rate from 6.8% to 4.1% (currently scheduled to increase to 8% in 2017);
  • Introducing a voluntary disclosure scheme for undeclared income generated up to 31 December 2015 with a tax rate of 10% to 12% for income declared, and a tax rate of 5% to 8% for income declared that is also repatriated and invested in Peru; and
  • Adopting standards and recommendations issued by the OECD in relation to information exchange, base erosion, transfer pricing, and avoidance (unclear which specific measures are being considered, although as a member of the BEPS Inclusive Framework, Peru has committed to the implementation of the minimum standards, including CbC reporting).

Given the 90-day limit, it is expected that the decrees for the measures will be issued before the end of the year.

Treaty Changes (4)

Argentina-Mexico

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Argentina Approves Pending Tax Treaty with Mexico

On 23 November 2016, Argentina's Chamber of Deputies (lower house of parliament) approved the ratification of the pending income and capital tax treaty with Mexico (treaty details). The treaty, signed 4 November 2015, is the first of its kind between the two countries. It 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.

Bosnia Herz-Romania

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Tax Treaty between Bosnia and Herzegovina and Romania Signed

On 6 December 2016, officials from Bosnia and Herzegovina and Romania Signed an income tax treaty. The treaty will enter into force after the ratification instruments are exchanged, and once in force and effective will replace the 1986 tax treaty between Romania and the former Yugoslavia as it applies in respect of Bosnia and Herzegovina and Romania.

Chile-Switzerland

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Chile and Switzerland Sign Joint Declaration on the Automatic Exchange of Financial Account Information

The Swiss Federal Council has announced the signing of a joint declaration on the automatic exchange of financial account information with Chile on 29 November 2016. The information exchange will be carried out based on the OECD Common Reporting Standard (CRS). Chile and Switzerland intend to start collecting data in 2018 and to exchange it from 2019.

Cyprus-India

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Update - New Tax Treaty between Cyprus and India

The new income tax treaty between Cyprus and India was signed on 18 November 2016. Once in force and effective, the new treaty will replace the 1994 tax treaty between the two countries.

Taxes Covered

The treaty covers Cyprus income tax, corporation tax, special contribution for the defence of the Republic, and capital gains tax. It covers Indian income tax, including any surcharge thereon.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 90 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 10%
  • Royalties - 10%
  • Fees for technical services (managerial, technical or consultancy) - 10%

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 alienation of movable property forming part of the business property of a permanent establishment in the other State;
  • Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in the other State; and
  • Gains from the alienation of shares, other than the above, in a company resident 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.

Note - The final protocol to the treaty includes the transitional provision that gains from the alienation of shares that have been acquired at any time prior to 1 April 2017 will be taxable only in the Contracting State of which the alienator is a resident.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply in Cyprus from 1 January of the calendar year following its entry into force and in India from 1 April of the fiscal year following its entry into force. The 1994 tax treaty between the two countries will be terminated on the date the new treaty is effective.

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