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Worldwide Tax News

Approved Changes (3)

Brazil

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Brazil's Chamber of Deputies Approves Provisional Measure on Changes in Interest on Equity and Suspension of Certain R&D Incentives

On 2 March 2016, Brazil's Chamber of Deputies approved Provisional Measure (PM) 694/2015, which was initially published on 30 September 2015 and subsequently extended. PM 694 introduced changes in the Interest on equity capital (JCP) deduction, increased the withholding tax rate on JCP to 18%, and suspended certain R&D incentives (previous coverage). In addition to the measures originally included, the Chamber of Deputies has also added a proposed change in the taxation of pension income paid to foreign individuals from a 25% withholding tax to the progressive rates that apply for resident individuals.

PM 694 must now be approved by the Senate and converted into law to remain in effect.

Canada

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New Brunswick Increasing Corporate Tax Rate and HST Rate in 2016

The government of New Brunswick, Canada has announced in its 2016 Budget that it will increase the higher corporate tax rate from 12% to 14%, while the lower rate for the first CAD 500,000 in qualifying active income is unchanged (4%). In addition, the province's harmonized sales tax (HST) rate will be increased from 13% to 15% (including 5% federal GST).

The corporate tax rate change is effective 1 April 2016, and the HST change is effective 1 July 2016.

Puerto Rico

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Puerto Rico Delays Implementation of VAT

On 7 March 2016, Puerto Rico's Treasury Department issued a press release announcing that the change from sales and use tax (SUT) to value added tax (VAT) will be made effective 1 June 2016 instead of 1 April 2016 as originally planned. The delay is meant to provide businesses more time to prepare and ensure that the change goes as smoothly as possible. Additional guidance was issued the following day.

The final change to VAT at the rate of 10.5% will end an 11-month transition that began with an increase in the standard Central SUT rate to 10.5% in July 2015 and the introduction of a 4% Central SUT rate for previously exempt B2B services in October 2015 (previous coverage). These SUT rates, including a 1% Municipal SUT, will apply through 31 May 2016. Once the final change to VAT is made on 1 June, the Municipal SUT will continue to apply, resulting in an effective rate of 11.5%.

Click the following link for the press release (Spanish language) and the additional guidance (Spanish language).

Proposed Changes (1)

Sri Lanka

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Sri Lanka Planning to Increase VAT Rate to 15% and Reintroduce a Capital Gains Tax

On 8 March 2016, the Sri Lankan government announced plans to increase the value added tax (VAT) rate from 11% to 15%. This follows the reversal of a change from a single VAT rate to a 12.5% rate for services and an 8% rate for goods in January. In addition to the VAT increase, the government is also planning to reintroduce a capital gains tax, which has not applied in the country since 1987.

The plans are part of Sri Lanka's efforts to balance its budget and secure a potential loan agreement with the IMF.

Treaty Changes (4)

Botswana-Sweden

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Protocol to the Tax Treaty between Botswana and Sweden has Entered into Force

According to a recent update from the Swedish Tax Agency, the protocol to the 1992 income tax treaty with Botswana entered into force on 1 December 2015. The protocol, signed 20 February 2013, replaces Article 26 (Exchange of Information to bring it in line with the OECD standard for information exchange. It also amends Article 28 (Limitation on Benefits) by adding provisions limiting treaty benefits for companies of a Contracting State that derive income primarily from other states from banking, shipping, financing or insurance activities, or from being a headquarters, co-ordination centre or similar entity providing administrative services or other support, as well as companies entitled to special tax benefits in Botswana.

The protocol generally applies from 1 January 2016, although the new exchange of information provisions apply from the date of its entry into force.

Finland-Uzbekistan

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Protocol to the Tax Treaty between Finland and Uzbekistan Signed

On 8 March 2016, officials from Finland and Uzbekistan signed a protocol to the 1998 income tax treaty between the two countries. The protocol is the first to amend the treaty, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Georgia-Saudi Arabia

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Tax Treaty between Georgia and Saudi Arabia to be Signed

On 7 March 2016, the Saudi Cabinet authorized the Ministry of Finance to sign an income tax treaty with Georgia. The treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Romania-Untd A Emirates

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Update - New Tax Treaty between Romania and the U.A.E.

The new income tax treaty between Romania and the United Arab Emirates was signed 5 May 2015. Once in force and effective, the treaty will replace the 1993 tax treaty between the two countries, which is currently in force.

Taxes Covered

The treaty covers Romanian tax on income and tax on profit, and covers U.A.E. income tax and corporation tax.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine its residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to claim any relief or exemption from tax provided for by the treaty.

Withholding Tax Rates

  • Dividends - 3%
  • Interest - 3%
  • Royalties- 3%

Limitation on Benefits

The provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of the Articles.

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

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

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

The 1993 tax treaty between the two countries will terminate and cease to have effect from 1 January of the year following the new treaty's entry into force.

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