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Approved Changes (4)

Brazil

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Brazilian Supreme Court Holds Exemption Granted to Non-Profits Does not Extend to ICMS

In a decision issued 23 February 2017, the Brazilian Supreme Federal Court ruled on whether the constitutional exemption for non-profit organizations extends to the state value added tax (ICMS) on supplies made to a non-profit organization. The case involved supplies made to a hospital in Muriaé, Brazil.

According to the Court, the exemption granted to non-profits does not extend to ICMS. The Court found that constitutional exemption for non-profits applies to the taxpayer in law (legal taxpayer) and not the tax payer in fact (factual taxpayer). In this case, the factual taxpayer is the hospital because the ICMS is included in the cost of the supplies, but the legal taxpayer is the supplier, for which no constitutional exemption applies.

Canada

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Canada Publishes CbC Reporting Guidance

The Canada Revenue Agency (CRA) has published Guidance on Country-By-Country Reporting in Canada. The guidance covers the particulars of Canada's CbC reporting requirements using form RC4649 Country-by-Country Report, which is required to be filed for fiscal years beginning on or after 1 January 2016 for MNE groups meeting a consolidated group revenue threshold of EUR 750 million in the previous year. The requirement to file applies for ultimate parent entities resident in Canada, surrogate parent entities if appointed, and constituent entities if conditions for secondary reporting mechanism are met. In general, the CbC report must be filed no later than 12 months after the last day of the fiscal year to which the report relates. However, in the event secondary reporting is required due to a systemic failure for exchange with a foreign jurisdiction in which a group's CbC report is filed, the CbC report will be due by a constituent entity in Canada within 30 days of receiving a notification of systemic failure.

In addition to covering the main requirements of CbC reporting in Canada, the guidance also covers various other CbC reporting issues, including the impact of currency fluctuations on the EUR 750 million filing threshold, requirements for fiscal years less than 12 months, change of ultimate parent during the fiscal year, and voluntary filing (parent surrogate filing) in other jurisdictions. With respect to voluntary filing, Canada will accept such filing in other jurisdictions as meeting its CbC reporting requirements provided certain conditions are met, including that a qualified competent authority agreement for CbC exchange is in effect between Canada at the jurisdiction of residence of the ultimate parent by the first deadline for the CbC report in Canada.

Ecuador

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Ecuador Publishes Procedure for Refund of Advance Tax Paid for 2016

The Ecuador Internal Revenue Service (SRI) has published an overview of the procedure for the refund of overpaid advance tax for 2016. According to the procedure, the availability of a refund depends on the taxpayer's effective rate of advance tax (TIE) in comparison with the average TIE, which for 2016 is set at 1.7% for companies and 1.2% for individuals. Where the actual tax due exceeds the average amount due (based on average TIE), the refund is equal to the difference of advance tax paid and the actual tax due. Where the actual tax due is less than the average amount due, the refund is limited to the difference between the advance tax paid and the average amount due.

A refund may be claimed once the tax return is filed.

European Union-Poland

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CJEU Holds Restriction on Reduced VAT Rates for Digital Publications does Not Violate Principle of Equal Treatment

On 7 March 2017, the Court of Justice of the European Union (CJEU) issued its judgment regarding questions referred by the Polish Constitutional Court concerning the differing VAT treatment of printed publication and digital publication under EU law, and whether that differing treatment is compatible with the principle of equal treatment. Under the EU VAT Directive, Member States may apply a reduced rate of VAT to printed publications such as books, newspapers and periodicals, while digital publications must be subject to the standard rate of VAT, with the exception of digital books supplied on a physical support (for example a CD-ROM).

In its judgment, the CJEU found that restriction on applying a reduced rate for digital publications is consistent with the principle of equal treatment. In particular, the CJEU examined whether the difference in treatment is justified where it relates to a legally permitted objective. In this regard, it was found that the difference was justified based on the objective of the specific VAT regime for e-commerce for which it was deemed necessary to make electronic services subject to clear, simple and uniform rules so that the applicable VAT rate may be established with certainty. Further, by restricting the application of a reduced rate, taxable persons and national tax authorities are spared an obligation to examine whether a particular electronic service supplied qualifies for a reduced rate. If Member States were allowed to apply a reduced rate for digital publications, it would effectively compromise the overall coherence of the measure.

Click the following link for the CJEU press release on the judgment.

Treaty Changes (5)

Croatia-Kosovo

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Tax Treaty between Croatia and Kosovo Signed

On 6 March 2017, officials from Croatia and Kosovo signed an income and capital 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. According to an announcement on the signing from the Croatian Ministry of Finance, the treaty provides for the following withholding tax rates:

  • Dividends - 5% if the beneficial owner is a company holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 5%
  • Royalties - 5%

Additional details of the treaty will be published once available.

Ecuador-Argentina

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Ecuador Approves Pending SSA with Argentina

On 7 March 2016, Ecuador's National Assembly approved the pending social security agreement with Argentina. The agreement, signed 9 December 2015, is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Germany-Switzerland

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Arbitration Agreement between Germany and Switzerland Signed

On 3 March 2017, the German Ministry of Finance announced that a consultation agreement on arbitration was signed 21 December 2016 with Switzerland. The agreement provides for the uniform application and interpretation of Article 26 (5) to (7) of the 1971 German-Swiss tax treaty as amended by the 2010 protocol, including in relation to communication procedures, commencement of arbitration, the suitability of cases for arbitration, expenses and fees, arbitration decisions, and other related issues.

The agreement generally applies to arbitration proceedings that became effective after the date of the 2010 protocol's entry into force, 21 December 2011.

Saudi Arabia-Mexico-Mauritania

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Saudi Arabia Approves Pending Tax Treaty with Mexico and Draft Tax Treaty with Mauritania

On 6 March 2017, the Saudi Cabinet approved the pending income tax treaty with Mexico. The treaty, signed 17 January 2016, is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged. The Cabinet also approved the signature of a draft tax treaty with Mauritania, which will be the first of its kind between the two countries and must be signed and ratified before entering into force.

Additional details of each treaty will be published once available.

Sweden-Untd A Emirates-Vanuatu

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Sweden's TIEAs with the U.A.E. and Vanuatu to Enter into Force

Sweden's pending tax information exchange agreements with the United Arab Emirates and Vanuatu will enter into force on 1 April 2017. Both agreements are the first of their kind between Sweden and the respective countries. The agreement with the U.A.E. was signed 5 November 2015 and will apply for criminal tax matters from 1 April 2017 and for other matters from 1 January 2018. The agreement with Vanuatu was signed 13 October 2010 and generally applies from 1 April 2017.

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