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Approved Changes (3)

Nigeria

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Nigeria Revises List of Eligible Industries for Pioneer Status Incentives

According to recent reports, the Nigerian Government released on 7 August 2017 a final revised list of eligible industries for the country's pioneer status incentives, as well as new pioneer status application guidelines. Pioneer status incentives include, among others, a three-year tax holiday that may be extended up to five years. The list includes the following 27 industries:

  1. Mining and processing of coal;
  2. Processing and preservation of meat/poultry and production of meat/poultry products;
  3. Manufacture of starches and starch products;
  4. Processing of cocoa;
  5. Manufacture of animal feeds;
  6. Tanning and dressing of Leather;
  7. Manufacture of leather footwear, luggage and handbags;
  8. Manufacture of household and personal hygiene paper products;
  9. Manufacture of paints, vanishes and printing ink;
  10. Manufacture of plastic products (builders' plastic ware) and moulds;
  11. Manufacture of batteries and accumulators;
  12. Manufacture of steam generators;
  13. Manufacture of railway locomotives, wagons and rolling stock;
  14. Manufacture of metal-forming machinery and machine tools;
  15. Manufacture of machinery for metallurgy;
  16. Manufacture of machinery for food and beverage processing;
  17. Manufacture of machinery for textile, apparel and leather production;
  18. Manufacture of machinery for paper and paperboard production;
  19. Manufacture of plastics and rubber machinery;
  20. Waste treatment, disposal and material recovery;
  21. E-commerce services;
  22. Software development and publishing;
  23. Motion picture, video and television programme production, distribution, exhibition and photography;
  24. Music production, publishing and distribution;
  25. Real estate investment vehicles under the Investments and Securities Act;
  26. Mortgage backed securities under the Investments and Securities Act; and
  27. Business process outsourcing.

The revised list will become effective once published in the Official Gazette. For industries removed, pioneer status will continue to apply for a period of three years. Additional details will be published once available.

Taiwan

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Taiwan Publishes Notice on Services to Overseas Related Parties and Transfer Pricing Rules

The Taiwan Ministry of Finance has published a notice concerning the application of transfer pricing rules to services provided by Taiwan enterprises to foreign related enterprises. The notice reminds taxpayers that the provision of marketing and technical services to overseas related parties are considered controlled transactions for transfer pricing purpose, and as such, the income received should be determined at arm's length based on comparable information and taxed accordingly.

United States

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U.S. Provides Delay for Certain Dividend Equivalent Rules

The U.S. IRS has issued Notice 2017-42, which announces a delay in the effective/applicability date of certain rules in the section 871(m) regulations concerning dividend equivalents from sources within the United States, as well as an extension for the phase-in period for certain provisions. The delay/extensions are in relation to the final and temporary regulations (TD 9734) issued in September 2015 (previous coverage) for the dividend equivalent rules, as well as the additional notices on the regulations issued in 2016 and the final and temporary regulations (TD 9815) published in January 2017, which finalized the 2015 notice of proposed rulemaking issued in conjunction with the 2015 temporary regulations (previous coverage).

In particular, Notice 2017-42 includes:

  • The extension of the phase-in year for delta-one and non-delta-one transactions, including that section 871(m) regulations will not apply to non-delta-one transactions issued before 1 January 2019, and that the good faith efforts standard will be applied for delta-one transactions in 2017 and 2018 and to non-delta-one transactions in 2019  
  • The extension of the simplified standard for determining whether transactions are combined transactions to include 2018
  • The extension of phase-in relief for qualified derivatives dealers (QDD), including that a QDD will not be subject to tax on dividends and dividend equivalents received in 2017 and 2018 in its equity derivatives dealer capacity or withholding on dividends (including deemed dividends), QDD will not be required to compute its section 871(m) amount using the net delta approach until 2019, and a QDD is not required to perform a periodic review with respect to its QDD activities for calendar year 2017 and 2018.

Further, the Notice notes that consistent with Executive Order 13777 (82 FR 12285), the Treasury Department and the IRS will continue to evaluate the section 871(m) regulations and consider possible agency actions that may reduce unnecessary burdens imposed by the regulations.

Pending the promulgation of the amendments, taxpayers may rely on the provisions of Notice 2017-42.

Proposed Changes (1)

Estonia-European Union

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Estonian Presidency Tables Four EU Tax Initiatives

The Estonian Presidency of the Council of the EU has announced four tax initiatives on the table during the Estonian Presidency. The Estonian Presidency began 1 July 2017 and will run for six months, after which Bulgaria will take over. The four initiatives include:

  • Taxation of the digital economy in general, including the development of new international tax rules that take into account the development of digital solutions and re-establish the equal taxation of corporate profits irrespective of how they were earned
  • Simpler and more transparent e-Commerce rules, which include:
    • Allowing companies to declare their turnover generated in another country, while paying VAT via the tax authority of their country of registration, with sellers whose turnover is less than EUR 10,000 allowed to calculate their VAT on the basis of just one country's regulations; and
    • Abolishing the VAT exemption for goods received from outside the EU;
  • An overview of third countries that do not cooperate enough in taxation, which includes an assessment process that has been initiated to review the tax regulations of countries with significant economic ties to member states, and assess their compliance with international standards, which is to be completed with a final list by the end of 2017;
  • Disclosure of tax avoidance schemes, which includes a requirement that tax advisers (and in certain cases, taxpayers themselves) to give authorities information about the cross-border arrangements that are recommended and used for tax planning, with the information exchanged among EU countries.

Click the following link for additional details on the four initiatives on the Estonian Presidency website.

Treaty Changes (3)

Belgium-Uruguay

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Tax Treaty between Belgium and Uruguay has Entered into Force

The income and capital tax treaty between Belgium and Uruguay entered into force on 4 August 2017. The treaty, signed 23 August 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Belgian individual income tax, corporate income tax, income tax on legal entities, and income tax on non-residents. It covers Uruguayan tax on business income, personal income tax, non-residents income tax, tax for social security assistance, and capital tax.

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 that are present in that State for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 10 %

Note - with respect to royalties for the use of, or the right to use, industrial, commercial or scientific equipment, derived by a resident of a Contracting State from the other Contracting State, such resident may elect to be taxed on a net basis as if resident of the other Contracting State. The election may be exercised after the application of the 10% withholding tax on the gross amount.

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 the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other State, with an exemption for:
    • Shares listed on an approved stock exchange of either Contracting State;
    • Shares alienated in the course of a merger or division of the company holding the shares; and
    • Shares deriving value from immovable property in which an active trade or business is carried on.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Belgium generally applies the exemption method for the elimination of double taxation, while Uruguay applies the credit method. However, subject to the provisions of Belgian law, Belgium will apply the credit method for interest and royalty income and in certain cases for dividend income.

MFN Clause

The final protocol to the treaty provides that if either Contracting State signs an agreement with an EU Member State that provides for lower rates of taxation or other exemptions than those provided in Articles 10 (Dividends), 11 (Interest), or 12 (Royalties), then the competent authorities of the Contracting States shall consult with each other.

Effective Date

The treaty applies from 1 January 2018.

Kuwait-Brunei-India

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Kuwait Approves Pending Protocols to Tax Treaties with Brunei and India

On 7 August 2017, the Kuwait Council of Ministers approved the ratification of the pending protocols to the 2009 income tax treaty with Brunei and the 2006 income tax treaty with India. The protocol to the treaty with Brunei, signed 11 October 2016, is the first to amend the treaty and will enter into force 30 days after the ratification instruments are exchanged (previous coverage). The protocol to the treaty with India, signed 15 January 2017, is the first to amend the treaty and will enter into force once the ratification instruments are exchanged (previous coverage).

Turkey-Guernsey

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Turkey Ratifies Pending TIEA with Guernsey

On 2 August 2017, the decree ratifying Turkey's pending tax information exchange agreement with Guernsey was published in the Turkish Official Gazette. The agreement, signed 13 March 2012, is the first of its kind between the two jurisdictions and will enter into force 30 days after the ratification instruments are exchanged. It will apply for criminal tax matters on the date of its entry and for other matters for tax periods beginning on or after that date.

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