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Approved Changes (5)

China

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China State Council Approves Formal Repeal of Business Tax Regulations

According to a Chinese government release, China's State Council has approved the formal repeal of the regulations and related notices on the business tax regime, which has been replaced by the value added tax (VAT) regime. The transition from business tax to VAT began in 2012 as a pilot program, with most sectors transitioning to VAT in 2014 and the remaining sectors making the change from 1 May 2016. The business tax regulations effectively ceased to apply from that date, but their formal repeal is seen as needed to maintain the rule of law and allow for further reform to optimize the VAT regime.

Colombia

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Colombia Finalizing Submission Requirements and System for CbC Reports

The Colombian Tax Authority (DIAN) has announced that it is working on the final requirements and related computer systems for taxpayers to comply with the country's Country-by-Country (CbC) reporting requirements. For this purpose, the announcement references the guide for the OECD's XML schema for the format of CbC reports.

Colombia's CbC reporting requirements were introduced as part of Law No. 1819 of 2016 and apply for fiscal years beginning on or after 1 January 2016 (previous coverage).

Finland

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Finland Property Tax Rate Ranges Amended

On 7 November 2017, Finnish Law HE 133/2017 entered into force. The law amends the property tax rate ranges within which local authorities are allowed to set rates. The rate ranges are as follows:

  • General property tax rate: 0.93% to 2.00%
  • Tax rate for buildings used for permanent housing: 0.41% to 1.00%
  • Tax rate for other residential buildings: 0.93% to 2.00%

The rate range for general property and buildings used for accommodation other than permanent housing applies from 2018, while the rate range for buildings used for permanent housing applies from 2019.

Myanmar

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Myanmar Changes Fiscal Year to Year Ending 30 September

According to recent reports, the Myanmar government has approved a change in the standard fiscal year from the 12-month period ending 31 March to the 12-month period ending 30 September. As a result, the standard tax return deadline will be shifted from 30 June to 31 December (3 months following year-end).The change is to apply with an initial transition for the period 1 April 2018 to 30 September 2018.

United Kingdom

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UK Guidance on Soft Drinks Industry Levy

UK HMRC has published guidance on the registration and return requirements for the new Soft Drinks Industry Levy that will apply from 6 April 2018. The levy generally applies for packaged drinks that contain at least 5 grams (g) of added sugar per 100 milliliters (ml) in its ready to drink or diluted form, subject to certain other conditions and exemptions. The levy rate is 18p per liter if the drink has 5g of sugar or more per 100ml and 24p per liter if the drink has 8g of sugar or more per 100ml. Returns and payment are made on a quarterly basis for the quarters ending June, September, December, and March, with the first returns due in July 2018.

Proposed Changes (1)

United States

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Summary of U.S. Tax Reform Markup Amendments

The U.S. House Ways and Means Committee has published a summary of the amendments agreed to as part of the markup of the Tax Cuts and Jobs Act Bill, H.R. 1. The amendments were agreed to on 6 November by a vote of 24 to 16, with the markup process to continue through the end of the week as necessary. The main business-related amendments as provided in the summary are as follows:

Section 3314 - Partnership interest held in connection with the performance of services

The amendment imposes a three-year holding period requirement for qualification as long-term capital gain (carried interest) with respect to certain partnership interests received in connection with the performance of services.

Section 3804 - Stock options

The amendment provides that certain employees who receive stock options or restricted stock units as compensation for the performance of services and later exercises such options or units may elect to defer recognition of income for up to 5 years, if the corporation’s stock is not publicly traded.

Section 4004, 4301, 4303 - International base-erosion rules

The amendment modifies the bill’s international base erosion rules in several respects. First, the provision taxing affiliated payments is revised to provide for a foreign tax credit, to exempt foreign affiliates’ routine returns, to exclude acquisitions of property priced on a public exchange, to compute a foreign affiliate’s profits based on foreign profit margins instead of global profit margins, and to coordinate with existing withholding tax rules. Second, the amendment modifies the provision taxing foreign high returns to clarify the scope of existing exceptions for certain local active financing and extraction activities. The amendment also clarifies the computation of the deemed repatriation tax on grossed-up foreign taxes deemed paid.

Click the following links for the full amendment text and the summary.

Treaty Changes (6)

Antigua-Canada

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TIEA between Antigua and Barbuda and Canada Signed

On 31 October 2017, officials from Antigua and Barbuda and Canada reportedly signed a tax information exchange agreement. The agreement is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Belgium-Macedonia

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Tax Treaty between Belgium and Macedonia has Entered into Force

According to a recent update from the Belgian government, the income and capital tax treaty between Belgium and Macedonia entered into force on 17 July 2017. The treaty, signed 6 July 2010, replaces the 1980 tax treaty between Belgium and the former Yugoslavia as it applies in respect of Belgium and Macedonia.

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 Macedonian personal income tax, profit tax, and property tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company that has directly or indirectly held at least 25% of the paying company's capital for an uninterrupted period of at least 12 months at the moment the dividends are paid; 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 0% for interest paid in respect of a loan granted or a credit extended by an enterprise to another enterprise; otherwise 10%
  • Royalties - 10%

Note - The final protocol to the treaty clarifies that payments for technical assistance and technical services are not considered to be payments for information concerning industrial, commercial, or scientific experience (i.e., not considered royalty payments), but are taxable in accordance with the provisions of Article 7 (Business Profits).

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; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State.

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

Double Taxation Relief

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

Limitation on Benefits

Article 26 (Limitation on Benefits) provides that no reduction in or exemption from tax provided for in the treaty will apply to income paid in connection with an artificial arrangement. An arrangement will not be considered as artificial if it meets legitimate financial or economic needs and is entered into for valid commercial reasons.

Effective Date

The treaty applies from 1 January 2018. The 1980 Belgium-Yugoslavia tax treaty ceases to apply in respect of Belgium and Macedonia from the date the provisions of the new treaty are effective.

Jersey-China-India-South Africa-Uganda

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Jersey Negotiating Tax Treaties with China, India, South Africa, and Uganda

According to recent reports, Jersey has begun negotiations for income tax treaties with China, India, South Africa, and Uganda. Any resulting treaties would be the first of their kind between Jersey and the respective countries, and must be finalized, signed, and ratified before entering into force.

Moldova-Korea, Rep of

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Tax Treaty between Moldova and South Korea under Negotiation

According to a release from the Moldovan Ministry of Economy and Infrastructure, negotiations are underway for an income and capital tax treaty with South Korea. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Romania-Bosnia Herz

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Update - Romania Approves Pending Tax Treaty with Bosnia and Herzegovina

On 1 November 2017, the Romanian Government approved the draft law for the ratification of pending income tax treaty with Bosnia and Herzegovina. The treaty was signed 6 December 2016 and, once in force and effective, will replace the 1986 tax treaty between Romania and the former Yugoslavia as it applies in respect of Bosnia and Herzegovina and Romania.

Taxes Covered

The treaty covers Bosnia and Herzegovina individual income tax and enterprise profit tax, and covers Romanian tax on income and tax on profit.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 7%
  • Royalties - 5%

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.

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

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. Once in force and effective, the 1986 tax treaty between Romania and the former Yugoslavia will cease to apply in respect of Bosnia and Herzegovina and Romania.

Turkey-Uzbekistan

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Protocol to Tax Treaty between Turkey and Uzbekistan Signed

According to a release from Turkey's Revenue Administration, officials from Turkey and Uzbekistan signed an amending protocol to the 1996 income tax treaty between the two countries on 25 October 2017. The protocol is the first to amend the treaty and includes provisions to more effectively address tax evasion issues. It will enter into force after the ratification instruments are exchanged. Details of the protocol will be published once available.

Note - A previous report that the protocol has been signed on 25 May 2017 has been updated to reflect that the protocol had been initialed (negotiations concluded) at that time.

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