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Approved Changes (3)

Romania

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Romania Publishes Order on Transfer Pricing Documentation Preparation and Submission Requirements

On 2 February 2016, Romania published Order No. 442/2016 in the Official Gazette concerning transfer pricing documentation preparation and submission requirements.

Transaction Thresholds

Under the order, large taxpayers should prepare transfer pricing documentation annually if annual aggregate transactions with related parties meet the following thresholds, excluding VAT:

  • EUR 200,000 for interest received or paid for financial services;
  • EUR 250,000 for services received or provided; and
  • EUR 350,000 for acquisition or sale of tangible or intangible assets.

For large taxpayers not meeting the above thresholds and SMEs, transfer pricing documentation should be prepared upon request by the tax authorities if annual aggregate transactions with related parties meet the following thresholds, excluding VAT:

  • EUR 50,000 for interest received or paid for financial services;
  • EUR 50,000 for services received or provided; and
  • EUR 100,000 for acquisition or sale of tangible or intangible assets.

To determine if the thresholds are met for non-EUR transactions, the exchange rate is the exchange rate of the National Bank of Romania on the last day of the fiscal year concerned.

Documentation Preparation and Submission Requirements

The order includes amendments and additions to the documentation requirements based on the new OECD Transfer Pricing Guidelines developed under Action 13 of the OECD BEPS project, as well as the EU Code of Conduct for transfer pricing documentation. This includes the Master/Local file concept for group-level documentation and taxpayer-specific documentation.

For large taxpayers with transactions meeting the higher thresholds, the transfer pricing documentation should be prepared by the annual tax return deadline. If requested by the tax authorities, the documentation should be should be submitted within 10 days of request, but no sooner than 10 days after the deadline for preparation.

For large taxpayers and SMEs with transactions meeting the lower thresholds, transfer pricing documentation is to be prepared upon request by the tax authorities. The documentation submission deadline is set by the tax authorities, and may be within 30 to 60 days of the request, with the possibility for a 30-day extension.

If a taxpayer fails to submit documentation by the applicable deadline or the documentation is incomplete, the tax authorities will proceed to make an estimation of the appropriate transfer price and make any necessary adjustments.

Note - Documentation is not required for transactions covered by an advanced pricing agreement.

Effective Date

Order No. 442/2016 applies for related party transactions carried out from 1 January 2016.

Russia

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Russia Clarifies APA Application Procedures

The Russian Federal Tax Service (FTS) recently published Guidance Letter No. 03-01-18/73021, which clarifies advance pricing agreement (APA) application procedures. According to the letter, only Russian legal entities treated as large taxpayers may enter into APAs with the FTS (criteria for determination as large vary at regional and federal level). In order to apply for an APA, a petition must be submitted to FTS along with the following documentation:

  • A draft APA;
  • Details of the controlled transactions and related activities the APA would cover
  • Copies of the taxpayer's constituent documents, state registration and tax registration certificates;
  • The taxpayer's accounting/financial statements for the most recent reporting period;
  • Proof of payment of the application fee; and
  • Other relevant documentation for the price determination.

Once the APA petition has been examined, the FTS will issue its decision to either conclude the APA, refuse to conclude the APA, or request modification of the APA to comply with the Tax Code. If modifications are requested, the taxpayer must resubmit an amended draft agreement along with the required documentation outlined above, except for the proof of payment of the application fee. Required modifications may be drafted by the FTS independently or through consultation with the taxpayer.

United States

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U.S. IRS Issues Additional Inflation Adjustments for 2016 for the Election to Expense Certain Depreciable Assets and Others

On 5 February 2015, the U.S. IRS issued Revenue Procedure 2016-14, which includes additional inflation adjustments for 2016 resulting from the enactment of the Protecting Americans from Tax Hikes (PATH) Act (tax extenders) on 18 December 2015.

The main adjustment concerns the election to expense certain depreciable assets (§ 179 property). For taxable years beginning in 2016, the aggregate cost of any § 179 property that the taxpayer elects to treat as an expense is subject to a limit of USD 500,000, with the limit reduced by the amount of the cost of all § 179 property placed in service during the 2016 taxable year exceeding USD 2,010,000.

Revenue Procedure 2016-14 also includes adjustments for certain expenses of elementary and secondary school teachers and the qualified transportation fringe benefit.

Click the following link for Revenue Procedure 2016-14 on the IRS website.

Proposed Changes (2)

Portugal

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Portugal's Budget for 2016 Approved by European Commission

On 5 February 2016, Portugal's Cabinet adopted a revised Budget for 2016 after being approved by the European Commission as being compliant with Portugal's obligations under the Stability and Growth Pact. The revised budget maintains some reductions in austerity measures, while certain spending cuts and increases in certain consumption taxes have been included to meet deficit reduction requirements. No major tax reform measures have been announced.

The budget measures must now be introduced to parliament and adopted before entering into force.

Singapore

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Singapore Income Tax and GST Amendments Bills Introduced in Parliament

On 25 January 2016, the Income Tax (Amendment) Bill (3/2016) and the Goods and Services Tax (Amendment) Bill (2/2016) were introduced in the Parliament of Singapore. The bills include several of the measures included in the 2015 Budget.

Income Tax Bill

The Income Tax Bill includes over 50 amendments. Some of the main amendments concern the extension of several incentives, including:

  • The shipping investment enterprise exemption and the concessionary rate for shipping-related support services are extended to 31 may 2021;
  • The deduction of capital expenditure incurred on qualifying share acquisitions and the relief from associated stamp duty are extended to 31 March 2020; and
  • The deduction of qualifying investments in start-ups is extended to 31 March 2020.

Other changes include:

  • The 30% rebate for corporate tax payable is extended to apply for the year of assessment 2016 and 2017, with the cap reduced from SGD 30,000 per year of assessment to SGD 20,000; and
  • The standard income tax rate for non-resident individuals is increased from 20% to 22%.

GST Bill

The GST amendments include:

  • The definition of “aircraft” is revised for the purpose of zero-rating supplies so that it relates only to aircraft wholly used or intended to be wholly used for international travel and military aircraft, and the Ministry of Finance is empowered to extend zero-rating to specific supplies made in relation to aircraft no longer qualifying under the revised definition;
  • Technical amendments are made to clarify that zero-rating in relation to merchandise for sale on board an aircraft or ship only applies for merchandise for retail sale; and
  • The Comptroller of GST is allowed to impose a Travel Restriction Order on a person who fails to repay a tourist refund wrongly claimed under the Tourist Refund Scheme.

Effective Date

The amendments will generally apply from the year of assessment 2017 unless otherwise specified.

Click the following links for the Income Tax (Amendment) Bill and the Goods and Services Tax (Amendment) Bill. Additional information can be found in the explanatory statements included at the end of each bill.

Treaty Changes (3)

Argentina-Untd A Emirates

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TIEA between Argentina and the U.A.E. Signed

On 5 February 2016, officials from Argentina and the United Arab Emirates 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.

Armenia-Montenegro

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Tax Treaty between Armenia and Montenegro to be Signed

On 4 February 2016, the Armenian government approved the signing of a draft income tax treaty with Montenegro. The treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Japan-Iran

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Japan Signs Investment Agreement with Iran

Japan's Ministry of Finance has announced that on 5 February 2016, officials from Japan and Iran signed an agreement for the reciprocal promotion and protection of investment. The agreement will enter into force 30 days after the ratification instruments are exchanged, and will remain in force for a period of 10 years, after which it will remain in force unless either Contracting Party provides notice for termination.

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