Worldwide Tax News
Belgium Issues New Forms for CbC Report, Master File, and Local File, and Extends First CbC Notification Deadline
Belgium has published in the Official Gazette the decrees setting the forms for Country-by-Country (CbC) reports, CbC reporting notification, Master file and Local file, as well as the explanatory notes for each. The new forms are required as part of Belgium's new transfer pricing documentation requirements, which are based on BEPS Action 13 and the EU requirements under Council Directive (EU) 2016/881. The new requirements generally apply for fiscal years beginning on or after 1 January 2016 for Belgian resident entities, with specific requirements applying based on whether the entity or its group meets certain thresholds.
The CbC reporting requirements apply for fiscal years beginning on or after 1 January 2016 for MNE groups meeting a EUR 750 million consolidated group revenue threshold in the previous year. The CbC report must be submitted within 12 months following the end of the ultimate parent entity's fiscal year using Form 275 CBC (Dutch and French language). The requirement applies mainly for ultimate (or surrogate) parent entities resident in Belgium, but may also apply for Belgian non-parent entities if the foreign parent is not required to file or the report is not exchanged with Belgium.
In addition, Belgian resident entities must provide notification on whether it is the ultimate parent of the group or a surrogate parent, or if neither, the identity and residence of the entity submitting a CbC report on behalf of the group. This notification must be submitted by the end of the fiscal year concerned using Form 275 CBC NOT (Dutch and French language). However, the Belgian authorities have extended the first notification deadline to 30 September 2017. For fiscal years ending on or after that date, the standard end-of-the-year deadline applies.
The Master and Local file requirements apply for Belgian resident entities and permanent establishment in Belgium of MNE groups when meeting any of the following thresholds based on the financial statements of the Belgian entity:
- EUR 50 million operational and financial income;
- EUR 1 billion balance sheet total; or
- 100 annual average full-time equivalent employees.
The Master file must be submitted within 12 months following the end of the entity's reporting period using Form 275 MF (Dutch and French language). The content is in line with Action 13 guidelines, and includes group structure, main activities, description of intangible assets, etc.
The Local file must be submitted as an attachment to the annual tax return using Form 275 LF (Dutch and French language). The content of the local file is broken down into three parts:
- Part A concerns information on the Belgian entity, and includes eight sections covering management structure, organizational structure, activities, competitors, etc.;
- Part B concerns detailed information of the transfer pricing applied for cross border transactions, and includes 12 sections covering the nature of operations, transaction details; transfer pricing methods, etc.; and
- Part C (optional) is for other documents.
Part A (and optional Part C) is required from all Belgian entities meeting any of the above thresholds for fiscal years beginning on or after 1 January 2016. Part B is required if any business unit of the Belgian entity has cross border transactions exceeding EUR 1 million in the previous year for fiscal years beginning on or after 1 January 2017.
Click the following link for the issue of the Official Gazette containing the forms and explanatory notes (Dutch and French language).
Croatian Parliament Adopts Tax Reform Legislation Including Tax Rate Cuts and CbC Reporting
On 2 December 2016, the Croatian parliament adopted a number of laws as part of Croatia's tax reform. Key measures include:
- The standard corporate tax rate is reduced from 20% to 18%, and a reduced corporate tax rate of 12% is introduced for small business with annual revenue up to HRK 3 million;
- The number of individual income tax brackets for employment income is reduced from three to two as follows:
- annual income up to HRK 210,000 - 24%
- annual Income in excess of HRK 210,000 - 36%
- The VAT registration threshold is increased to HRK 300,000 from 1 January 2018;
- Measures are adopted to implement the automatic exchange of financial account information under the OECD Common Reporting Standard (CRS) as well as under U.S. FATCA; and
- Measures are adopted to harmonize domestic legislation with EU law, including the amendments made to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) concerning the exchange of cross border tax rulings as per Council Directive (EU) 2015/2376 and the exchange of Country-by-Country (CbC) reports as per Council Directive (EU) 2016/881.
As per the EU Directive, Croatia's CbC reporting requirements will apply for fiscal years beginning on or after 1 January 2016 for MNE groups meeting a EUR 750 million consolidated group revenue threshold in the previous year. The specific rules for the submission of CbC reports and other requirements are not included in the adopted law and will be regulated by the Minister of Finance in the future.
The respective laws will enter into force after being published in the Official Gazette and will generally apply from 1 January 2017 unless otherwise specified.
Eurodad Report on Transparency and Taxation Finds Some Improvements as well as Growing Problems
On 7 December 2016, the European Network on Debt and Development (Eurodad) published a report on the current state of affairs regarding transparency and taxation. The report, entitled "Survival of the Richest: Europe’s role in supporting an unjust Global Tax System 2016", finds that while there have been positive developments in terms of transparency, issues of tax dodging by multinational corporations are getting worse by way of tax rulings and tax treaties.
The following is a summary of the report's findings regarding transparency and taxation as provided by Eurodad.
- Following the Panama Papers scandal, a soft breeze of growing political will in favour of transparency seems to be blowing, at least over some parts of Europe. Compared with 2015, there has been a significant increase in the amount of countries that have either expressed support for public registers of beneficial owners (Finland, the Netherlands, Norway), or already started introducing them at the national level (UK, France, Denmark, Slovenia). The group of countries opposed to ownership transparency is now significantly smaller than the group of countries in favour. And it seems the positive development might continue in future. In both Germany and the Czech Republic, there are clear signs of movement towards increased support for transparency.
- A similar, but weaker, tendency is seen on the issue of whether multinational corporations should publish data on a country by country basis showing the amount of business activity taking place, and tax payments made, in each country where they operate. On this issue, the group of countries opposing such a proposal (Austria, Czech Republic, Denmark, Germany, Latvia, Slovenia and Sweden) remains larger than the group that have expressed support for it (France, Netherlands, Spain and potentially the UK). However, compared with 2015, support has grown substantially, and it seems this will become one of the major political battles of 2017.
- Contrary to the developments on transparency, the picture remains bleak when it comes to taxation.
- Following the LuxLeaks scandal and several ongoing state aid cases concerning so-called ‘sweetheart deals’, which governments have made with multinational corporations, one might have thought that fewer deals would be signed by European governments. But on the contrary, the number of sweetheart deals in the EU has soared from 547 in 2013, to 972 in 2014, and it finally reached 1444 by the end of 2015 – which is an increase of over 160 per cent between 2013 and 2015 (and an increase of almost 50 per cent from 2014 to 2015). The most dramatic increases have occurred in Belgium and Luxembourg, where the amount of sweetheart deals skyrocketed after the LuxLeaks scandal, increasing by 248 per cent and 50 per cent respectively in just one year.
- While the LuxLeaks scandal does not seem to have placed a constraint on the number of sweetheart deals in the EU, it has had another consequence. The two whistleblowers, together with one of the journalists, who brought the scandal to the public, are on trial in Luxembourg. This trial serves as a stark reminder of the fact that Europe is still much more committed to protecting dirty corporate secrets than those who act in the public interest and expose injustice.
- European governments continue to sign very problematic tax treaties with developing countries. An analysis of the countries covered by this report shows that they on average have 42 treaties with developing countries, and that these treaties on average reduce developing country tax rates by 3.8 per cent. Of all the countries analysed, Ireland has on average introduced the highest amount of reductions of developing country tax rates – 5.2 percentage points. Analysis by ActionAid has also revealed that even among the countries that do not, on average, have treaties which impose high restrictions on developing country taxing rates, there are a significant amount of ‘very restrictive’ tax treaties which impose strong constraints on the individual developing countries that have signed them. Among the countries covered by this report, Italy, the UK and Germany are the countries with the highest amount of those very problematic tax treaties with developing countries.
Jamaica Continues Work on Implementation of Transfer Pricing Regime with OECD Technical Visit
According to an announcement from Tax Administration Jamaica (TAJ), the TAJ is hosting Ian Wood, an Advance Pricing Agreement (APA) expert affiliated with the OECD, for a technical visit from 6 to 9 December 2016. The visit is part an on-going collaboration with the OECD to train TAJ staff for the implementation of Jamaica's transfer pricing regime. The regime was adopted in 2015 and was to apply from that year, but was subsequently delayed (previous coverage).
U.S. Final and Temporary Regs on Foreign Currency Gains/Losses Published
On 8 December 2016, final regulations (TD 9794) were published in the U.S. Federal Register that provide guidance under section 987 of the Internal Revenue Code (Code) regarding the determination of the taxable income or loss of a taxpayer with respect to a qualified business unit (QBU) subject to section 987, as well as the timing, amount, character, and source of any section 987 gain or loss. Taxpayers affected by these regulations are corporations and individuals that own QBUs subject to section 987.
Also published on 8 December are temporary regulations (TD 9795) under section 987 of the Code relating to the recognition and deferral of foreign currency gain or loss under section 987 with respect to a QBU in connection with certain QBU terminations and certain other transactions involving partnerships. Temporary regulations are also provided for:
- An annual deemed termination election for a section 987 QBU;
- An elective method, available to taxpayers that make the annual deemed termination election, for translating all items of income or loss with respect to a section 987 QBU at the yearly average exchange rate;
- Rules regarding the treatment of section 988 transactions of a section 987 QBU;
- Rules regarding QBUs with the U.S. dollar as their functional currency;
- Rules regarding combinations and separations of section 987 QBUs;
- Rules regarding the translation of income used to pay creditable foreign income taxes; and
- Rules regarding the allocation of assets and liabilities of certain partnerships for purposes of section 987.
Lastly, temporary regulations are provided under section 988 requiring the deferral of certain section 988 losses that arise with respect to related-party loans.
The final regulations (TD 9794) and the temporary regulations (TD 9795) are effective 7 December 2016 with a one-year transitional provision. Also published is a notice of proposed rulemaking regarding the temporary regulations (TD 9795). Comments and requests for a public hearing are due by 8 March 2017.
Belarus Approves Pending Protocol to Tax Treaty with Armenia
On 29 November 2016, the Belarus Chamber of Representatives approved the law to ratify the pending protocol to the 2000 income tax treaty with Armenia. The protocol, signed 19 May 2016, reportedly amends Article 2 (Taxes Covered), Article 3 (General Definitions), and Article 26 (Exchange of Information), and adds an article on assistance in the collection of taxes.
The protocol is the first to amend the treaty and will enter into force after the ratification instruments are exchanged.
SSA between Brazil and India to be Negotiated
Officials from Brazil and India are scheduled to meet in March 2017 for the first round of negotiations for a social security agreement. Any resulting agreement would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.
Iraq to Negotiate Tax Treaty with South Korea
On 29 November 2016, the Iraq Council of Ministers authorized the negotiation and signing of an income 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.