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Approved Changes (4)

Brazil

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Brazil Publishes Annual Individual Income Tax Bracket Thresholds for 2015

On 1 April 2015, Brazil published in the Official Gazette Normative Instruction 1,558/2015, adjusting the annual individual income tax bracket thresholds for 2015. The number of brackets and rates are not changed.

The new annual income brackets and rates are as follows:

  • up to BRL 22,499.13 - 0%
  • 22,499.14 up to 33,477.72 - 7.5%
  • 33,477.73 up to 44,476.74 - 15.0%
  • 44,476.75 up to 55,373.55 - 22.5%
  • over BRL 55,373.55 - 27.5%

The new bracket thresholds apply from 1 April 2015 through 31 March 2016.

France

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France Issues Interest Rate Limits for Shareholder Loan Interest Payment Deductions for Tax Years Ending Q2 2015

On 27 March 2015, France published the interest rates used in determining the deductibility of interest payments to shareholders for companies whose tax year ends between 31 March 2015 and 29 June 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 rate are as follows

  • Between 31 March 2015 and 29 April 2015 - 2.62%
  • Between 30 April 2015 and 30 May 2015 - 2.57%
  • Between 31 May 2015 and 29 June 2015 - 2.51%

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.

Mexico

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Mexico Pushes Back Deadline for First Mandatory Filing of Electronic Accounting Records (Again)

On 6 April 2015, Mexico's Tax Administration Services (Servicio de Administración Tributaria) published press release 043/2015, announcing that the deadline for the first mandatory filing of electronic accounting records through the tax administration portal has been pushed back to 30 April 2015. The first filing includes the initial chart of accounts and the monthly trial balance for January and February 2015. The deadline had already been pushed back to 3 April 2015 for the January filing.

The electronic filing requirements were introduced with Mexico's 2014 tax reform, and include an initial submission of the chart of accounts and the submission of monthly trial balances. Aside from the delayed filing for January and February 2015, monthly trial balances should be submitted by the third day of the second month following each month, while subsequent submissions of the chart of accounts is required only when there are changes.  Taxpayers are also required to submit additional information electronically if requested by the tax authorities, such as vouchers and subsidiary ledgers.

Taiwan

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Taiwan's Amended Transfer Pricing Assessment Rules

Taiwan's Ministry of Finance promulgated amendments to the country's transfer pricing assessment rules on 6 March 2015. The main amendments are summarized below.

Business Restructuring

Rules are introduced in line with the OECD transfer pricing guidelines in regard to business restructuring. Companies involved in restructuring must now disclose in the annual transfer pricing report whether the restructuring was in compliance with the arm's length principle, and include supporting documentation. In evaluating the arm's length compliance of a restructuring, the following factors should be considered:

  • Special consideration of risk, including:
    • Whether the contractual allocation of risk in the restructuring is consistent with the economic substance,
    • Whether the attribution of profits before and after the restructuring is in compliance with the arm’s length principle given the allocation of assets, functions and risk, and
    • Whether the risk-bearers have the capability to control the risk, and financially assume the risk
  • The arm's length compensation, including:
    • The business reasons and expected benefit of the restructuring,
    • The rights and obligations of each participant before and after the restructuring,
    • Whether the transfer of profit potential and reallocation of risk is appropriate,
    • Whether the consideration for the transfer of tangible and intangible assets and activities resulting from the restructuring is appropriate, and
    • The indemnification provided to the restructured enterprise in regard to the termination of renegotiation of existing arrangements
  • The compensation for post-restructuring controlled transactions, including:
    • The transfer pricing methods used for post-restructuring controlled transactions based on comparability analysis, and
    • A comparison of the relationship between compensation for the business restructuring and remuneration for the operations before and after the business restructuring

For the purpose of the new requirements, the amendments define restructuring as situations where a multinational enterprise group is involved in organizational structure adjustment activities including the redeployment of functions, assets and/or risks among related parties, and termination or renegotiation and transfer of contractual terms or arrangements. Specific transaction types considered as restructuring include, but are not limited to:

  • Conversion from full-fledged distributors to limited risk distributors,
  • Conversion from full-fledged manufacturers to contract manufacturers or toll manufacturers,
  • Centralizing or decentralizing of the ownership or management of intangible property rights across different entities within the group,
  • Downsizing or closing of operations, and
  • Any other arrangements announced by the Ministry of Finance

The reporting requirements generally apply for tax returns for the 2014 and subsequent tax years, although documentation substantiating the arm's length compliance of profit allocation of business restructuring in prior years may be requested.

Transfer Pricing Report for Merged or Dissolved Companies

The amendments introduce the requirement that that companies that are merged or dissolved must include transfer pricing reports with their final tax return.

Expanded Use of the Profit Split Method

Prior to the amendments, the profit split method could only be used when activities carried out by the parties in a controlled transaction were highly integrated. With the recent amendments, the profit split method may also be used when the relevant parties to a controlled transaction make unique and valuable contributions.

Application of Profit Standard

The amendments allow the tax authorities to use the prescribed Profit Standard of the Same Trade if reliable revenue information cannot be obtained. Previously, the Profit Standard could only be used if reliable cost and expense information could not be obtained.

The Profit Standard of the Same Trade is issued by the Taiwan Ministry of Finance and includes prescribed gross and net margins for various industries.

Safe Harbor

In regard to the safe harbor rule for contemporaneous transfer pricing documentation requirements, the amendments specify that transactions amounts covered by an APA will not be taken into account. The general safe harbor threshold is annual revenue of NTD 300 million.

APA Applications

The threshold amount requirements for apply for an advanced pricing agreement applications have been reduced. Prior to the amendment, one of the conditions to apply was that the total amount of the transactions to be covered was at least NTD 1 billion or the annual transaction amount was at least NTD 500 million. The thresholds are now NTD 500 million total transaction amount or NTD 200 million annual transactions

The timing of the APA application process has also been modified. The time allowed for submitting the necessary documentation following the acceptance of an application is extended from 30 days to 3 months. However, the availability of a 30 day extension no longer applies. In addition, companies may now apply for a pre-filing meeting and the tax authorities must notify the company within 3 months whether an application will be accepted.

Treaty Changes (3)

Kazakhstan-OECD

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Kazakhstan Deposits Ratification Instrument for Mutual Assistance Convention

On 8 April 2015, Kazakhstan deposited the ratification instrument for the Council of Europe-OECD Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The convention will enter into force for Kazakhstan on 1 August 2015.

Liechtenstein-Guernsey

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Liechtenstein Ratifies Tax Treaty with Guernsey

According to recent reports, the Liechtenstein Parliament ratified the pending income and capital tax treaty with Guernsey on 4 March 2015. The treaty was signed 5 June 2014 by Guernsey and 11 June 2014 by Liechtenstein. It is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Guernsey income tax, and Liechtenstein personal income tax, corporate income tax, corporation taxes, real estate capital gains tax, wealth tax, and coupon tax.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 0%
  • Capital gains - generally exempt except for gains from the alienation of immovable property, gains from the alienation of movable properly forming part of the business property of a permanent establishment, and gains from the alienation of shares directly or indirectly deriving more than 50% of their value from immovable property situated in a Contracting Party

Double Taxation Relief

Guernsey applies the credit method for the elimination of double taxation, while Liechtenstein generally applies the exemption method. However, in the case of income from employment, directors' fees, and income by entertainers and sportsmen, Lichtenstein applies the credit method.

Entry into Force and Effect

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

New Zealand-Luxembourg-Portugal-Samoa-Slovak Republic-Australia-China-Norway-Korea, Rep of

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New Zealand Announces Tax Treaty and Protocol Negotiation Plans

The government of New Zealand has recently announced its plans for the negotiation of new tax treaties and the negotiation of protocol to existing treaties. New treaties will be negotiated with Luxembourg, Portugal, Samoa and Slovakia, and will be the first of their kind between New Zealand and the respective countries. Protocols amending existing treaties will be negotiated with Australia, China, Norway and South Korea. Any resulting treaties or protocols will need to be finalized, signed and ratified before entering into force.

Additional details for each will be published once available.

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