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Approved Changes (3)

Italy-European Union

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CJEU Holds Italy May Penalize both Companies and Legal Representatives for VAT Noncompliance

In its judgment dated 5 April 2017, the Court of Justice of the European Union (CJEU) ruled on whether Italy is allowed in the context of the Charter of Fundamental Rights of the European Union and the European Convention for the Protection of Human Rights and Fundamental Freedoms to initiate criminal proceedings for individuals responsible for VAT noncompliance after penalties were already imposed on their companies. The case involved two Italian companies that had failed to pay VAT due in excess of EUR 1 million each, and were issued an assessment along with a 30% penalty. The assessment and penalties were not contested. After the assessment, criminal proceedings were initiated against the legal representatives of each company on the grounds that they failed in their capacity as legal representatives to ensure timely payment of the VAT due. This was challenged as amounting to double prosecution.

In its judgment, the CJEU found that the issue in the case did fall within Article 50 of the Charter, which provides that no one may be tried or punished in criminal proceedings for the same offence. However, because the companies have legal personality distinct from the individuals, the protection from double prosecution does not apply, and Italy may therefore initiate criminal proceedings in addition to the penalties imposed on the companies.

Jamaica

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Jamaica Amends Property Tax Rate Schedule and Increases Personal Income Tax Threshold

The Jamaican Ministry of Finance and the Public Service has announced an increase in the personal income tax-free threshold from JMD 1,000,272 to JMD 1,500,096 per annum effective 1 April 2017. Because it is a mid-year change, the effective threshold for the 2017 tax year is prorated at JMD 1,375,140. The annual threshold for the 30% personal income tax rate is unchanged at JMD 6 million.

In addition, The Ministry has published the Property Tax (Amendment of Schedules) Order 2017, which amends the property tax rate schedule as follows:

  • up to JMD 400,000 - JMD 1,000 (fixed)
  • over JMD 400,000 up to 800,000 - 0.8%
  • over JMD 800,000 up to 1.5 million - 0.85%
  • over JMD 1.5 million up to 3.0 million - 0.90%
  • over JMD 3.0 million  up to 4.5 million - 1.05%
  • over JMD 4.5 million up to 7.0 million - 1.10%
  • over JMD 7.0 million up to 12 million - 1.15%
  • over JMD 12 million up to 30 million - 1.25%
  • over JMD 30 million - 1.30%

The rates apply based on the unimproved land value and are effective 1 April 2017.

Taiwan

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Taiwan Notice on R&D Tax Credit Incentive for 2016

The Taiwan Ministry of Finance has published a notice on the R&D tax credit incentive provided under the Statute for Industrial Innovation. For 2016, qualifying taxpayers may opt for a tax credit equal to 15% of qualified R&D expense with a credit cap equal to 30% of tax payable for the year, or instead opt for a 10% credit for three years, subject to the same 30% cap. In order to apply the credit for 2016, applications must be submitted by 1 June 2017.

Proposed Changes (2)

Latvia

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Latvia Preparing for Implementation of CbC Reporting

On 4 April 2017, the Latvian Cabinet of Ministers began their review of draft legislation to transpose into domestic law the amendments made to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) concerning the exchange of Country-by-Country (CbC) reports (Council Directive (EU) 2016/881). As an EU Member State, Latvia is required to implement CbC reporting requirements that apply for fiscal years beginning on or after 1 January 2016 with a standard MNE group revenue threshold of EUR 750 million in the previous year. Latvia may also elect to apply a one year deferral for MNEs with a non-EU ultimate parent, in which case local filing for such groups will only be required from 1 January 2017.

As per the Directive, Latvia must complete the legislative process for the CbC reporting requirements by 4 June 2017. Additional details will be published once available.

New Zealand

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New Zealand Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill Introduced in Parliament

On 6 April 2017, the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill was introduced in the New Zealand Parliament. The legislation proposes measures relating to the collection of employment and investment income information, reforms to the taxation of employee share schemes, as well as several other policy and remedial changes to tax legislation.

Click the following links for the Minister’s media statement, the legislation, the commentary, and the regulatory impact statements.

Treaty Changes (4)

Azerbaijan-Ireland-Malaysia-Morocco-Singapore-Slovak Republic-

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Azerbaijan Update on Tax Treaty Negotiations

According to recent comments from Zaur Fatizadeh, the Director General of the Azerbaijan's Tax Ministry Department for International Cooperation and Tax Monitoring at Financial Institutions, Azerbaijan is ready to sign income tax treaties with Ireland, Malaysia, Morocco, Singapore, and the Slovak Republic. Negotiations are also underway with tax treaties with Albania, Bangladesh, Kyrgyzstan, Syria, India, Turkmenistan, Portugal, and Oman. The treaties will all be the first of their kind between Azerbaijan and the respective countries.

Colombia-Japan

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Tax Treaty between Colombia and Japan to be Negotiated

On 4 April 2016, officials from Colombia and Japan met to discuss bilateral relations, including the negotiation of an income tax treaty. 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.

Kenya-Korea, Rep of

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Tax Treaty between Kenya and South Korea has Entered into Force

The income tax treaty between Kenya and South Korea entered into force on 3 April 2017. The treaty, signed 8 July 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Kenyan income tax chargeable in accordance with the provisions of the Income Tax Act, and Korean income tax, corporation tax, special tax for rural development, and local income tax.

Withholding Tax Rates

  • Dividends - 8% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 12%
  • Royalties - 10%

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. In respect of dividends received by a Korean resident company that owns at least 10% of the voting shares or capital stock of the paying company, South Korea will also provide a credit for the Kenyan tax payable on the profits out of which the dividends are paid.

Limitation on Benefits

Article 28 (Limitation on Benefits) provides that in respect of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), 13 (Capital Gains) and 22 (Other Income), a resident of a Contracting State will not be entitled to the benefits otherwise provided if:

  • The resident is directly or indirectly controlled by one or more persons that are not resident of that State; and
  • The main purpose or one of the main purposes of any person concerned with the creation or assignment of a share, debt-claim, or right in respect of which the income is paid is to take advantage of these Articles by means of that creation or assignment.

Effective Date

The treaty applies from 1 January 2018.

Malawi-Zambia

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Tax Treaty between Malawi and Zambia Initialed

On 6 April 2017, officials from Malawi and Zambia concluded negotiations with the initialing of an income tax treaty. The treaty is the first of its kind between the two countries, and must be signed and ratified before entering into force.

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