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Worldwide Tax News

Approved Changes (2)

Canada

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Canada's Yukon Territory to Cut Corporate Tax Rates

The government of the Yukon Territory of Canada has tabled its Budget for 2017/18 including cuts in the corporate tax rates. Effective 1 July 2017, the standard corporate tax rate will be reduced from 15% to 12%, and the small-business tax rate will be reduced from 3% to 2%. The rates are prorated for tax years straddling the effective date, so for the 2017 calendar year the standard effective rate will be 13.5% and the small-business rate will be 2.5%.

Ukraine

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Ukraine Clarifies Interest Deduction Restriction

The Ukraine State Fiscal Service has published guidance letter No. 6986/6/99-99-15-02-02-15 concerning the country's interest deduction restriction for related-party debt. The letter clarifies that where a Ukraine taxpayer's average debt-to-equity ratio exceeds 3.5:1 (10:1 for financial institutions and companies engaged exclusively in leasing) for a period, the amount of its pre-tax profits for the period must then be increased by the amount of non-resident related-party interest expense for the period exceeding 50% of EBITDA. The excess amount may then be carried forward to offset pre-tax profit in future periods, but the residual amount carried forward is reduced annually by 5%. When carried forward, the residual amount (reduced by 5%) is added to the related-party interest expense for the current period and the aforementioned restriction is applied accordingly. The letter also clarifies that if the financial results for a period are negative, the residual amount not used as of the beginning of the period may be deducted.

Proposed Changes (4)

Austria

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Austria Looking to Tax Online Services Including those Provided Free of Charge

According to recent reports, Andreas Schieder of the Social Democratic Party of Austria has put forward a plan to deal with aggressive tax practices of MNEs operating in the digital economy. The plan includes proposals to extend Austrian tax on advertising revenue to digital formats, to tax purely digital services that are acquired by Austrian customers from companies with no physical presence in the country, and most interestingly, to subject free online services to VAT, such as those provided by Facebook, Google, Twitter, etc. The rational for subjecting free services to VAT is that the use of the free services is essentially a bartering arrangement between the providers and the users, whereby providers allow users to use the services for free in exchange for the users allowing the providers to provide usage data to advertisers. According to Schieder, users are essentially paying with their personal data and such transactions can be subject to tax.

The proposal must still be approved by the Finance Minister before moving forward and it is uncertain if the VAT on free services would even be in accordance with EU Law. Additional details will be published once available.

Philippines

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Update - Philippines Comprehensive Tax Reform Program Bill

The Philippines Department of Finance (DOF) has published a release announcing that substantial progress has been made in passing the Comprehensive Tax Reform Program (CTRP) bill after a House ways and means committee vote was made to pass a substitute bill with only moderate changes to the original proposed by the DOF (previous coverage). According to the release, key measures of the substitute bill include:

  • The lowering of personal income tax (PIT) rates as originally proposed, but indexed to cumulative Consumer Price Index (CPI) inflation every three years;
  • A flat rate of 6% for the estate and donor’s taxes;
  • The broadening of the tax base by removing special laws on VAT exemptions, including those for cooperatives, housing and leasing, but retaining exemptions for seniors and persons with disabilities;
  • A staggered "3-2-1" excise tax increase for petroleum products from 2018 to 2020;
  • A five-bracket excise tax structure for automobiles with a two-year phase-in period for the tax increases; and
  • The earmarking of 40% of the proceeds from the fuel excise tax increase for social protection programs for the first three years of the tax reform measure’s implementation.

The release also notes that the VAT registration threshold will be increased to PHP 5 million and will be indexed for inflation every three years. In relation to the threshold increase, a flat 8% tax will apply on gross sales or receipts of the self-employed and professionals up to the VAT threshold, while those exceeding the threshold will be subject to the standard corporate tax rate of 30%.

According DOF Undersecretary Karl Kendrick Chua, it is hoped that the substitute reform bill can be passed in a full vote of the House before the Legislature adjourns on 2 June.

Qatar

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Qatar Cabinet Approves Draft Laws for Income Tax, VAT, and Selective Tax

According to a recent report from the Qatar News Agency, the Qatar Cabinet approved on 3 May 2017:

  • The draft law to replace the current Income Tax Law promulgated by Law No. (21) of 2009 and Law No. (17) of 2014;
  • The draft law and regulations to implement the GCC VAT; and
  • The draft law and regulations for the GCC selective tax scheme.

The main aspects of the draft replacement of the Income Tax law include no longer exempting the share of non-Qatari investors in the profits of certain companies and investment funds, measures to strengthen the collection of tax revenue, and the simplification of tax procedures. Although not specified in the report, the VAT law and selective tax law are expected to be in line with the respective agreements made between the GCC Member States, including a 5% VAT rate with registration threshold of approximately USD 100,000, and a selective tax on products deemed harmful to health at a rate of 100% on tobacco and tobacco products and 50% on energy and carbonated drinks. Additional details will be published once available.

Singapore

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Singapore Consulting on Proposed Changes to Property Tax Act

The Singapore Ministry of Finance has launched a public consultation on proposed changes to the Property Tax Act. The proposed changes will:

  • Clarify that machinery that is used for providing the setting / controlled environment for business and industrial processes to take place in the building or for storage of articles is to be assessed, together with the land or building on which it has been affixed, for property tax. (In other words, such machinery is not exempted from property tax.) If approved by the Parliament, this change is to take effect from 1 January 2018.
  • Make digital tax notices the standard while allowing taxpayer to opt out of digital notices and receive hard copies, instead of the current system which requires that taxpayers specifically provide consent for digital tax notices in lieu of hard copies
  • Enhance the information gathering powers of the Comptroller of Property Tax, the Chief Assessor and their authorized officers by allowing them to:
    • Require persons to attend personally before the Comptroller, Chief Assessor or an officer authorized by them, to provide information at a time and place specified by them;
    • Require any person to be examined orally and provide information for investigation if the person appears to be acquainted with the facts and circumstances concerning the person’s or another person’s properties; and
    • Enhance the penalties for failure to comply with a request of information.

Click the following link for the consultation page. The consultation runs to 19 May 2017.

Treaty Changes (5)

Albania-Czech Rep

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SSA between Albania and the Czech Republic has Entered into Force

According to recent reports, the social security agreement between Albania and the Czech Republic entered into force on 1 February 2017. The agreement, signed 13 October 2015, is the first of its kind between the two countries and generally applies from the date of its entry into force.

Brazil-Russia

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Brazilian Senate Committee Approves Pending Tax Treaty with Russia

On 4 May 2017, the Brazilian Senate Committee on Foreign Relations and National Defense approved the pending income tax treaty with Russia (previous coverage). The treaty, signed 22 November 2004, is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.

Italy-Romania

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Italian Parliament Approves Ratification of Tax Treaty with Romania

On 4 May 2017, the Italian Senate announced the definitive approval of the bill for the ratification and implementation of the pending income tax treaty with Romania (previous coverage). The treaty, signed 25 April 2015, will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. Once in force and effective, it will replace the 1977 tax treaty between the two countries.

Kuwait-OECD

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Kuwait Signs Mutual Assistance Convention

The OECD has announced that on 5 May 2017, Kuwait signed the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The Convention must now be ratified by Kuwait and the ratification instrument deposited before entering into force in the country.

Click the following link for the signatories to the Mutual Assistance Convention to date.

Moldova-Turkey

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SSA between Moldova and Turkey Signed

On 5 May 2017, officials from Moldova and Turkey signed a social security agreement. The agreement is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

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