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Approved Changes (5)


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Belarus Expense Deduction Restriction from 2017

A general cost deduction restriction has been introduced for Belarus corporate tax purposes. The general restriction provides that costs for the production of goods, works, and services will not be deductible unless economically justified as determined on the basis of accounting documents, with possible tax accounting adjustments or other adjustments in accordance with the tax code. In particular, the new rules specify that costs will not be considered economically justified if any one of the following conditions is met:

  • The goods were not shipped, the works were not performed, the services were not rendered, or the property rights were not transferred;
  • The works were performed or the services were rendered by an individual entrepreneur that has an employment relationship with the taxpayer, and such works or services are related to the employment obligations of the individual; and
  • The works were performed or the services were provided to the taxpayer (except a joint stock company), by the taxpayer's parent company, or its subsidiary, and such works or services are related to the employment obligations of an individual that has an employment relationship with the taxpayer.

The new restriction applies from 1 January 2017.


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Luxembourg Individual Income Tax Rates for 2017 (Updated)

Luxembourg has published the annual individual income tax brackets and rates for 2017, including the new top tax rates of 41% and 42%. The brackets and rates are as follows (updated based on fin:

  • up to EUR 11,265 - 0%
  • EUR 11,265 up to 13,137 - 8%
  • EUR 13,137 up to 15,009 - 9%
  • EUR 15,009 up to 16,881 - 10%
  • EUR 16,881 up to 18,753 - 11%
  • EUR 18,753 up to 20,625 - 12%
  • EUR 20,625 up to 22,569 - 14%
  • EUR 22,569 up to 24,513 - 16%
  • EUR 24,513 up to 26,457 - 18%
  • EUR 26,457 up to 28,401 - 20%
  • EUR 28,401 up to 30,345 - 22%
  • EUR 30,345 up to 32,289 - 24%
  • EUR 32,289 up to 34,233 - 26%
  • EUR 34,233 up to 36,177 - 28%
  • EUR 36,177 up to 38,121 - 30%
  • EUR 38,121 up to 40,065 - 32%
  • EUR 40,065 up to 42,009 - 34%
  • EUR 42,009 up to 43,953 - 36%
  • EUR 43,953 up to 45,897 - 38%
  • EUR 45,897 up to 100,002 - 39%
  • EUR 100,002 up to 150,000 - 40%
  • EUR 150,000 up to 200,004 - 41%
  • over EUR 200,004 - 42%

In addition to the standard tax rates, an additional employment fund contribution of 7% applies on the tax amount, which is increased to 9% for single taxpayers (class 1 or 1a) with taxable income exceeding EUR 150,000 and for married taxpayers (class 2) with taxable income exceeding EUR 300,000. This results in a top effective rate of 45.78% for 2017.

Update - above bracket thresholds have been updated to reflect modifications by the tax administration  for tax calculation purposes (slightly different from brackets published in law).

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OECD Publishes Discussion Draft on Interaction between BEPS Action 6 and Treaty Benefits for non-CIV Funds

On 6 January 2017, the OECD published a discussion draft on the follow-up work on the interaction between the tax treaty provisions of the report on BEPS Action 6 and the treaty entitlement of non-CIV funds.

The discussion draft has been prepared to provide stakeholders with information on the subsequent developments in the work on the interaction between the treaty provisions of the report on BEPS Action 6 and the treaty entitlement of non-CIV funds, including the conclusions reached at the May 2016 meeting of Working Party 1 and the subsequent work on the development of examples related to the application of the principal purposes test (PPT) rule included in the Report on Action 6 with respect to some common transactions involving non-CIV funds. The discussion draft invites comments on three draft examples under consideration by the Working Party for inclusion in the Commentary on the PPT rule.

Click the following links for the OECD announcement and the BEPS Action 6 Discussion Draft on non-CIV examples. Comments are due by 3 February 2017.


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Panama Decree on Application of the Arm's Length Principle and Transfer Pricing Documentation Requirements Enters into Force

On 1 January 2017, Executive Decree No. 390 entered into force regarding Panama's transfer pricing regime. The decree confirms and clarifies certain aspects of the regime, and introduces additional information and documentation requirements. The main aspects of the decree include:

  • Transactions should be analyzed individually according to the methods set in the tax code, although two or more transactions may be grouped if integrated economically or continuous and cannot be assessed separately;
  • Multiple-year data may only be used for comparability analysis if it adds value to the analysis or improves reliability in relation to relevant economic cycles and the life cycle of comparable products;
  • Comparability adjustments may be made to increase the accuracy of analysis or account for differences in geographical markets;
  • In determining comparability, the following five factors must be considered in accordance with the tax code:
    • The characteristics of the goods or services, including the nature of the operation and type of assets in the case of intangible assets;
    • The functions performed, assets used, and risks assumed by the parties involved;
    • The contractual terms of the transactions, including how the responsibilities, risks, and benefits are shared between the parties;
    • The relevant economic circumstances; and
    • The relevant business strategies;
  • The use and identification of internal and external comparables (those not involving the taxpayer) are clarified, including that while Panamanian comparables are preferred, foreign comparables are allowed, provided they meet the conditions for comparability;
  • The application of the comparable uncontrolled price method, the cost plus method, the resale price method, and the transactional net margin method is clarified;
  • The acceptable arm's length range includes the first quartile as the lower limit, and the third quartile as the upper limit, with the second quartile as the median (prices outside the limit should be adjusted to the median);
  • The required information and documentation for the transfer pricing study are expanded to the extent it is economically relevant with regard to the facts and circumstances of the operations, and should be prepared in the Spanish language;
  • The required information and documentation related to the taxpayer's group are confirmed to include:
    • an overview of the organizational and legal structure of the group, including identification of the related parties with which transactions are performed; and
    • A  description of the transfer pricing policy of the group; and
  • The required information and documentation related to the taxpayer's group are expanded to include:
    • A description of factors generating benefits for the group;
    • A general description of the value chain of the five main products and/or services offered by the group, as well as a description of the geographical markets where it operates;
    • The financial statements of the group or an equivalent report for the last financial year;
    • A list and brief description of the intragroup services agreements that impact the taxpayer’s transactions, including the transfer pricing policy for the attribution of costs;
    • A list of intangibles or groups of intangibles that impact the taxpayer’s transactions, as well as the related party owners;
    • An overview of the group transfer pricing policies related to financing arrangements and/or leverage between related parties that have an impact on the taxpayer’s transactions;
    • A list of advance pricing agreements on transfer prices concluded by the members group related to transactions in which the taxpayer participates;
    • Detailed information on any corporate restructuring that the taxpayer was involved in or affected by;
    • Details of intangible transfers the taxpayer has participated in and an explanation of how the transactions affected the taxpayer;
    • A general description of the nature and value of related party transactions in which the taxpayer participates; and
    • A description of the functions, assets, and risks of group companies affecting transactions carried out by the taxpayer.

Click the following link for Executive Decree No. 390 (Spanish language).


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Swiss Insurance Agency Determines Uber Responsible for Social Security Contributions

Swiss insurance agency Suva has determined that Uber drivers are not independent contractors, but rather employees for which Uber is responsible to make social security contributions. The decision was in regard to an individual driver who had sought clarification on his status and the associated work-related accident insurance obligations, which Suva administers. Suva found that the driver is not an independent contractor due to the control of Uber's company policies, including the fact that drivers are not able to set their own fares. Uber is reportedly planning to appeal the decision.

Proposed Changes (2)

Bermuda-Ivory Coast-Kazakhstan-OECD

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Bermuda, Ivory Coast, and Kazakhstan Join Inclusive Framework for Implementation of BEPS Measures

According to a 6 January 2017 update from the OECD, Bermuda, Ivory Coast, and Kazakhstan have joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 94. As members of the Framework, the three countries have 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).

Click the following link for the list of participants.

United Kingdom-Anguilla-Bermuda-B Virgin Isl-Cayman Islands-Gibraltar-Montserrat-Turks Caics

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UK to Increase Beneficial Ownership Transparency in Overseas Territories

An amendment to the UK Criminal Finances Bill 2017 is currently before parliament that would require the creation of publically accessible registers of beneficial ownership of companies registered in UK overseas territories.

The provisions of the amendment would require the Secretary of State to provide all reasonable assistance to the governments of overseas territories to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in that government’s jurisdiction. Such assistance is to be provided by 31 December 2018 at the latest. As a second step, the Secretary of State would be required to prepare an order by 31 December 2019 that would require an overseas territory to adopt such a register if it has not yet done so.

UK overseas territories include Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat, and the Turks & Caicos Islands among others.

Treaty Changes (4)


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Andorra to Negotiate Tax Treaties with Hungary, Ireland, and Slovenia

According to a recent release from the Andorran government, Andorran officials have met with officials from Hungary, Ireland, and Slovenia to discuss the negotiation of income tax treaties with each country. Any resulting treaties would be the first of their kind between Andorra and the respective countries, and must be finalized, signed, and ratified before entering into force.

Updated to reflect negotiations with Ireland and not Iceland as initially reported.

Canada-United Kingdom

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Exchange of Notes to the Tax Treaty between Canada and the UK has Entered into Force

The exchange of notes to the 1978 income tax treaty between Canada and the UK entered into force on 21 December 2016 and applies from that date. The exchange of notes, signed 11 August 2015, adds extra rules to the provisions on arbitration that were inserted into the treaty by the 2014 protocol.


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Protocol to Tax Treaty between India and Kazakhstan Signed

On 6 January 2017, officials from India and Kazakhstan signed a protocol to the 1996 income tax treaty between the two countries. According to a release from the Indian Ministry of Finance on the signing, the protocol:

  • Provides internationally accepted standards for effective exchange of information on tax matters;
  • Inserts a Limitation of Benefits Article, to provide a main purpose test to prevent misuse of the treaty, and to allow application of domestic law and measures against tax avoidance or evasion;
  • Inserts specific provisions to facilitate relieving of economic double taxation in transfer pricing cases in line with India’s commitment to meet the BEPS minimum standard on Mutual Agreement Procedure (MAP) access in transfer pricing cases;
  • Inserts service PE provisions with a threshold and also provides that the profits to be attributed to PE will be determined on the basis of apportionment of total profits of the enterprise; and
  • Replaces existing Article on Assistance in Collection of Taxes with a new Article to align it with international standards.

The protocol is the first to amend the treaty and will enter into force after the ratification instruments are exchanged. Additional details will be published once available.


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Malaysia Deposits Ratification Instrument for Mutual Assistance Convention

On 3 January 2017, Malaysia deposited the ratification instrument for the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. Malaysia signed the convention as amended on 25 August 2016.

According to the OECD overview of signatories to the convention, the convention will enter into force for Malaysia on 1 May 2017.


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