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Approved Changes (11)

Austria

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Austria 2017 Tax Amendments Overview and Transfer Pricing Documentation Regulation

The Austrian Ministry of Finance has issued an overview of tax changes for 2017, including several resulting from various EU directives regarding transparency and information exchange. The main changes include:

  • A new beneficial ownership registration requirement through the Company Service Portal (USP);
  • The automatic exchange of financial account information between EU and non-EU countries;
  • The automatic exchange of tax rulings and advanced pricing agreements;
  • The standardization of VAT rules regarding real estate transactions in line with the EU.

Click the following link for the Ministry of Finance overview (German language).

In addition, the regulation setting out Austria's new Master and Local file requirements based on BEPS Action 13 has been published in the Official Gazette (previous coverage).

The Master file requirements are broken down into five main areas, including:

  • The organizational structure of the group;
  • The business activities of the group;
  • Documentation concerning intangible assets;
  • Documentation concerning financial activities; and
  • Documentation concerning the group financial and tax position.

The Local file requirements are broken down into three main areas, including:

  • A description of domestic business unit's business, including management structure and business activities;
  • Documentation concerning intragroup transactions involving the domestic business unit, including a description of transactions, identification of related parties involved, a comparability and functional analysis, etc.; and
  • Financial information, including annual financial statements and details of financial data used in transfer pricing.

The regulation also includes a brief provision regarding CbC reporting, which provides that the additional information included in the CbC report (table 3) should be in English.

Click the following link for the documentation regulation (German language), which applies for fiscal years beginning on or after 1 January 2016.

Brazil

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Brazil Opens New Tax Regularization Program

Provisional Measure 766/2017 was published in Brazil's Official Gazette on 5 January 2017. The measure opens a new program for the regularization of tax (Programa de Regularizacão Tributária – PRT). The PRT program is available for both individuals and legal entities with unpaid tax debts up to 30 November 2016. Under the program, taxpayers may settle their debts in one of four main ways:

  • A cash payment equal to 20% of the debt, and settlement of the balance with the use of tax loss carry forwards, the negative calculation base of the Social Contribution on Net Profit - CSLL,  or with other federal tax credits (any remaining balance may be paid in up to 60 monthly installments);
  • Payment of at least 24% of the debt in 24 monthly installments, and settlement of the balance with the use of tax loss carry forwards, the negative calculation basis of the CSLL, or with other federal tax credits (any remaining balance may be paid in up to 60 monthly installments);
  • A cash payments equal to 20% of the debt, and settlement of the balance in up to 96 monthly installments; or
  • Payment in up to 120 monthly installments, with the amount per month determined with fixed percentages.

Monthly payments are subject to a reference rate of interest. Minimum monthly payments are BRL 200 for individuals and BRL 1,000 for legal entities. For debts in dispute, taxpayers must give up appeals or objections to take part in the program.

Since the PRT program is introduced as a provisional measure, it must be approved or extended by the National Congress within 60 days to remain in effect.

Cyprus

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Cyprus Decree on CbC Reporting Issued

The Cyprus Ministry of Finance has reportedly issued a decree to transpose into domestic law the amendments made to the administrative cooperation Directive (Directive 2011/16/EU) concerning the exchange of Country-by-Country reports.

The amendments were made by Council Directive (EU) 2016/881 and require all EU member states to introduce standard CbC reporting requirements from 1 January 2016, with a standard reporting threshold of EUR 750 million in annual consolidated group revenue in the previous year and a standard reporting deadline of 12 months following the close of the ultimate parent fiscal year. The EU requirements also provide that notification of the reporting entity must be submitted either by the end of the fiscal year concerned, or with the tax return of the reporting entity. Cyprus has previously announced it will require notification by the end of the fiscal year concerned, but is providing an initial extension to 20 October 2017 for the first year.

Additional details of Cyprus' CbC requirements will be published once available.

Ecuador

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Ecuador Individual Income Tax Rates for 2017

The Ecuador individual income tax brackets and rates for 2017 are as follows:

  • up to USD 11,290 - 0%  
  • over USD 11,290 up to 14,390 - 5%  
  • over USD 14,390 up to 17,990 - 10%  
  • over USD 17,990 up to 21,600 - 12%  
  • over USD 21,600 up to 43,190 - 15%  
  • over USD 43,190 up to 64,770 - 20%  
  • over USD 64,770 up to 86,370 - 25%  
  • over USD 86,370 up to 115,140 - 30%  
  • over USD 115,140 - 35%

Click the following link for a copy of the resolution setting the rates (Spanish language).

France

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France Issues Interest Rate Limits for Shareholder Loan Interest Deductions for Fiscal Years Ending 31 December 2016 to 30 March 2017

On 27 December 2016, France published the interest rates used in determining the deductibility of interest payments to shareholders for companies whose fiscal year ends between 31 December 2016 and 30 March 2017.

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 fiscal year ends and the applicable rates are as follows:

  • Between 31 December 2016 and 30 January 2017 - 2.03%
  • Between 31 January 2017 and 27 February 2017 - 2.00%
  • Between 28 February 2017 and 30 March 2017 - 1.97%

The interest rates 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.

Iceland

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Iceland Individual Income Tax Changes in 2017

Iceland's Ministry of Finance has published the individual income tax rates and brackets for 2017. Changes include a reduction in the number of brackets from three to two (middle bracket removed), a reduction in the lower rate from 22.68% to 22.50%, and a reduction in the municipal tax rate from 14.45% to 14.44%. The changes result in the following tax brackets for 2017:

  • up to ISK 10,016,484 (834,707 per month) - 36.94%
  • over ISK 10,016,484 (834,707 per month) - 46.24%

The 14.44% municipal rate is the rate of tax withheld, while the rate applied in the final assessment varies from 12.44% to 14.52%.

Netherlands

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Netherlands Transposes EU Exchange of Information Amendments Regarding Tax Rulings

The Netherlands has published in the Official Gazette the legislation transposing into domestic law the amendments made by Council Directive (EU) 2015/2376 to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) concerning the automatic exchange of cross border tax rulings and advance pricing agreements (APAs) (previous coverage).

Poland

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Poland 2017 Tax Measures for R&D Incentives, Investment Fund Exemption Restrictions, and VAT

The following is a summary of the tax measures Poland has recently enacted for 2017.

Increased R&D Incentives

Poland's R&D incentives are improved in 2017, including:

  • An increase in the R&D expense deduction to 150% of all eligible expenses for SMEs and micro-enterprises (from 120%);
  • An increase in the R&D expense deduction to 150% of R&D employee expenses and 130% of all other eligible expenses for large companies (from 110%);
  • An expansion of eligible expenses to include the costs of obtaining and maintaining patents, protection rights, and similar costs;
  • An extension of the carry forward of unused R&D deductions from three years to six years; and
  • The introduction a cash refund for unused deductions for startups.

Investment Fund Exemption Restrictions

In general, the tax exemption for open-ended investment funds (FIOs) and specialized open-ended investment funds (SFIOs) is maintained. However, for closed-ended investments funds (FIZs) and SFIOs that apply the rules and limitations prescribed for FIZs, the general exemption no longer applies in relation to income from transparent entities, including income derived from:

  • Participations in transparent Polish and foreign entities with no legal personality, if such entities are not subject to income tax on their income, regardless of where the income is earned;
  • Interest on loans granted by FIZs to such transparent entities and interest on other forms of debt due from such entities;
  • Interest on equity in such transparent entities;
  • Any free or partially free benefits received from such transparent entities;
  • Interest or income of a similar nature on securities issued by such transparent entities; and
  • The sale of securities issued by such transparent entities or from the sale of a stake in such entities.

Value Added Tax (VAT) Changes to Counter Fraud

VAT rules are amended to counter fraud and abuse, including:

  • New VAT-related penalties:
    • A penalty equal to 30% of any understatement of VAT due or overstatement of VAT refund (may be reduced to 20% if self-corrected after control proceedings begin, or 0% if self-corrected before); and
    • A penalty equal to 100% of any understatement/overstatement resulting from the use of "blank invoices" used for fictitious transactions;
  • New electronic return filing requirements that initially apply for taxpayers transacting with other EU Member states and will be expanded to all taxpayers;
  • Increased scrutiny of VAT registration applications, which will no longer be automatically approved;
  • New rules in relation to the deregistration of taxpayers engaged in fraudulent activity;
  • A new rule making VAT agents assisting in registration jointly liable for VAT (up to PLN 500,000); and
  • The extension of the domestic reverse charge to gold and silver, and construction services.

Thresholds Increased for Simplified Accounting and Tax Rates

  • The net-income threshold for the option to keep simplified accounting records for individual entrepreneurs and partnerships is increased from EUR 1.2 million to EUR 2.0 million (~PLN 8.76 million Jan 2017); and
  • The income threshold for optional flat tax rate (20%, 17%, 8.5%, 5.5% or 3% depending on activity type) for small businesses is increased from EUR 150,000 to EUR 250,000 (~PLN 1.1 million Jan 2017).

The measures generally apply from 1 January 2017.

Spain

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Spain Publishes Order Approving CbC Report Form and Instruction

Spain has published Order HFP/1978/2016 of 28 December 2016 in the Official Gazette. The order approves Spain's Country-by-Country (CbC) reporting form; Model 231 Declaration of CbC Information (modelo 231 de Declaración de información país por país). The order also sets out the general instructions for completion and submission of the form, including:

  • The required content, which is line with BEPS Action 13;
  • The deadline for submission, which is within months 12 following the close of the fiscal year concerned; and
  • The form and method of submission, which is required electronically (Sede Electronica)

Click the following link for Order HFP/1978/2016 (Spanish language).

Sweden

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Sweden Tax Measures for 2017

The following are the main Swedish tax measures as approved as part of the Budget for 2017:

  • An increase in the individual income tax lower and upper bracket thresholds as follows:
    • up to SEK 438,900 - 0%
    • over SEK 438,900 up to SEK 638,500 - 20%
    • over SEK 638,500 - 25%
  • The disallowance of deductions for interest expense on certain subordinated debt securities in the financial sector governed by Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms;
  • Amendments to the calculation for interest on advance tax payment accounts so the rate may be reduced to 0% - the previous minimum of 0.5625% was being taken advantage of by some taxpayers given the low Swedish interest rate (currently negative);
  • The introduction of an SEK 30,000 turnover threshold for small business VAT registration; and
  • Minor repair services for bicycles, shoes, clothes, etc. are brought within the scope of the reduced 12% VAT rate (standard 25%).

The measures generally apply from 1 January 2017.

Venezuela

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Venezuela Introduces Short-Term Reduced VAT Rate for Electronic Purchases

In order to promote the use of electronic payments by individuals, Venezuela has introduced a value added tax rate of 10% for purchases made by end-consumers through electronic means, such as credit cards, debit cards, or electronic transfers (standard tax rate is 12%). The reduced rate applies for purchases of up to VEF 200,000 paid for exclusively through electronic means. The reduced rate does not apply for purchases of precious metals and stones or for the import of goods.

The reduced rate was introduced in Decree No. 2,602, which entered into force on 24 December 2016, and is scheduled to expire 24 March 2017.

Treaty Changes (4)

Cyprus-Russia

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Cyprus and Russia Postpone Application of 2010 Protocol Capital Gains Provisions and Negotiating New Protocol

The Cyprus Ministry of Finance has announced that agreement has been reached with the Russian authorities to postpone the application of the 2010 protocol amending Article 13 (Capital Gains) of the 1998 income and capital tax treaty between the two countries. In parallel, an additional protocol is being finalized to provide for the application of the revised provisions.

The 2010 protocol makes a number of amendments, including the addition of provisions regarding the taxation rights of gains from the alienation of shares or similar rights deriving value from immovable property situated in a Contracting State. The capital gains provisions were to apply from 1 January 2017.

Philippines-Singapore

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Philippines and Singapore to Negotiate Revisions to Tax Treaty

Singapore has requested a review and update of the income tax treaty with the Philippines. The request was made during a recent meeting of officials from the countries on increasing investment and trade. The treaty was signed and entered into force in 1977 and has never been amended.

Samoa-Korea, Rep of

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TIEA between Samoa and South Korea in Force

The tax information exchange agreement between Samoa and South Korea entered into force on 22 November 2016. The agreement, signed 15 May 2015, is the first of its kind between the two countries and generally applies from the date of its entry into force.

United Kingdom-Isle Of Man-Jersey

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Amendments to UK Tax Arrangements with the Isle of Man and Jersey have Entered into Force

The amending arrangements to the UK's 1955 income tax arrangement with the Isle of Man and the 1952 income tax arrangement with Jersey entered into force on 29 November and 2 December 2016 respectively. The tax arrangements are amended to clearly allocate the primary taxing right over profits from immovable property to the territory in which the property is situated. The amending arrangements apply retroactively from 16 March 2016.

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