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Worldwide Tax News

Approved Changes (6)

Cyprus

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Cyprus Announces Procedures for Settlement Program for Outstanding Tax Debts

On 7 July 2017, the Cyprus Tax Department published a notice announcing the entry into force of the law on the procedures for the program for settling outstanding tax debts. The procedures apply for outstanding tax debts up to 31 December 2015, provided that all returns due up to that date have been filed and any taxes due after that date have been paid or arranged to be paid. The new procedures apply from 3 July 2017, but during the first two weeks, only single lump sum payments will be accepted, in which case a 95% reduction of additional financial charges is provided. For taxpayers not making a lump sum payment, the outstanding tax debt may be paid in up to 54 monthly installments if the amount is up to EUR 100,000, and in 60 monthly installments if over EUR 100,000.

The program covers most Cyprus taxes, including income tax, special contribution for the defence of the republic, property tax, capital gains tax, stamp duty, value added tax, and certain other contributions. Regardless of the method of payment, application for tax payment procedures should be made within three months, and if a tax debt is in dispute, the dispute must be dropped in order to take advantage of the program.

European Union

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EU Parliament Approves Directive on the Protection of EU Financial Interests

On 5 July 2017, the European Parliament gave final approval for the Directive on the fight against fraud to the Union's financial interests by means of criminal law. The Directive, which was already adopted by the Council of the EU in April 2017, provides common definitions of a number of offences against the EU budget, including:

  • Active and passive corruption;
  • Misappropriation of funds; and
  • VAT fraud, when there are at least two Member States involved and the damage amounts to at least EUR 10 million.

It also includes:

  • A minimum prescription period of at least 5 years, within which a case must be investigated and prosecuted;
  • A maximum penalty that must be punishable with at least 4 years of imprisonment when damage is at least EUR 100,000; and
  • A mandate for the new European Public Prosecutor Office (EPPO), which will be able to prosecute people or organizations committing crimes against the EU budget and is expected to be operational between 2020 and 2021.

The Directive will enter into force 20 days after it is published in the Official Journal of the EU and Member States will have two years to adopt the necessary laws, regulations and administrative provisions necessary to comply. However, Denmark and the United Kingdom have opted out of the application of the directive.

Click the following link for the text of the Directive and a related press release.

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G20 Leaders' Declaration Published following Hamburg Summit

The G20 Leaders' Declaration has been published following Summit held 7 to 8 July 2017 in Hamburg, Germany. With respect to tax and transparency, the declaration includes the following:

International Tax Cooperation and Financial Transparency: We will continue our work for a globally fair and modern international tax system and welcome international cooperation on pro-growth tax policies. We remain committed to the implementation of the Base Erosion and Profit Shifting (BEPS) package and encourage all relevant jurisdictions to join the Inclusive Framework. We look forward to the first automatic exchange of financial account information under the Common Reporting Standard (CRS) in September 2017. We call on all relevant jurisdictions to begin exchanges by September 2018 at the latest. We commend the recent progress made by jurisdictions to meet a satisfactory level of implementation of the agreed international standards on tax transparency and look forward to an updated list by the OECD by our next Summit reflecting further progress made towards implementation. Defensive measures will be considered against listed jurisdictions. We continue to support assistance to developing countries in building their tax capacity. We are also working on enhancing tax certainty and with the OECD on the tax challenges raised by digitalisation of the economy. As an important tool in our fight against corruption, tax evasion, terrorist financing and money laundering, we will advance the effective implementation of the international standards on transparency and beneficial ownership of legal persons and legal arrangements, including the availability of information in the domestic and cross- border context.

Click the following for the full text of the G20 Leaders' Declaration.

Ivory Coast

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Ivory Coast Extends Transfer Pricing Disclosure Deadline for 2017

The Ivory Coast Ministry of Finance has reportedly issued a notice extending the transfer pricing disclosure deadline for 2017 for certain taxpayers. The disclosure requirement was introduced as part of the Finance Law for 2017 for all taxpayers; with the disclosure due with the tax return (expansion of quarterly disclosures already required for natural resources sectors). For the 2017 disclosure in respect of the 2016 tax year, the deadline is extended to 30 September 2017. However, for taxpayers required to file certified accounts, the tax return deadline still applies.

Turkey

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Turkey Publishes Law to Support the Development of Industry and Production

On 1 July 2017, Turkey published Law No. 7033 on the Amendment of Certain Laws and Decrees to Support the Development of Industry and Production. Changes in the law include:

  • New registration requirements for industrial enterprises with the Ministry of Science, Industry and Technology, including pre-registration prior to commencing operations;
  • Higher education institutions are allowed to establish a business association with the public and private sector in relation to R & D and innovation;
  • New provisions regarding the establishment of Turkish organized industrial zones (OIZs) and other industrial and technology development zones;
  • Employment costs for R&D personnel employed in technology development zones placed in the budget of the Ministry of Science, Industry and Technology for a period of two years (limited to 10% of the total number of personnel);
  • Stamp duty and other transaction fee exemptions in relation to the allocation of land for organized industrial zones, free zones, industrial zones, technology development zones, and industrial estates, as well as real estate tax exemption for buildings located in such zones;
  • General tax exemption for organized industrial zones, as legal entities, for the purposes of the Law on Organized Industrial Zones; and
  • New penalties for related non-compliance.

The provisions of Law no. 7033 generally entered into force on the date it was published. Additional details will be published once available.

Venezuela

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Further Increase in Venezuela Minimum Monthly Salary

On 2 July 2017, the Venezuelan government announced a further 50% increase in the country's minimum monthly salary from VEF 65,021 to VEF 97,531. This follows several increases in recent years, including two other increases just in 2017. The increase is the result of major inflation problems in the country, and although increased by 50%, the minimum wage is actually effectively down 17% based on the USD exchange rate.

The minimum salary is used in determining the basis cap for social security contributions, unemployment insurance, and other benefits. For employer social security contributions, the rates are 9%, 10%, or 11% based on the risk qualification of the company with a basis cap of five minimum monthly salaries. For employer unemployment insurance contributions, the rate is 2% with a basis cap of 10 minimum monthly salaries.

Proposed Changes (3)

France

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French Government Announces Plans to Make Paris Europe’s Leading Financial Hub after Brexit

On 7 July 2017, the French Government issued a press release on its plans to make Paris Europe’s leading financial hub after Brexit. The following is from the release regarding tax policy:

PROVIDING CLARITY AND CERTAINTY TO INVESTORS AND BUSINESSES ON TAX POLICY

Economic operators need stable and predictable tax policy. In the autumn, the Government will put forward a public finance bill setting out our tax policy for the new term and presenting a tax policy trajectory for businesses with the gradual reduction of corporate taxes by 2020 to 25%, within the European average, and capital taxation reform (solidarity tax on wealth and flat tax on savings and investment products). Our aim is to boost incentives to do business and develop activities in our country and to invest in equity capital of French companies. The Government will also abolish the extension of the financial transaction tax to include intraday operations voted in 2016 without preparation because it is not applicable and would penalize the Paris financial centre and the coherence of our tax policy.

Hong Kong

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Hong Kong Government Response on Possible Tax Concessions including Two-Tier Profit Tax and R&D Incentive

In a release published 5 July 2017, the Hong Kong Government responds to questions posed in the Legislative Council on possible tax concessions proposed by the Chief Executive, which include:

  • Introducing a two-tier profits tax rate system and lowering the profits tax rate for the first  HKD 2 million of profit from the current 16.5% to 10% so as to reduce the tax burden on small and medium enterprises; and
  • Providing additional tax deductions for research and development expenditure to encourage enterprises to invest in the research and development of new products.

In the response, Secretary for Financial Services and the Treasury, James Lau, informed the Council that the tax policy unit of the Financial Services and the Treasury Bureau has commenced work on researching both concessions, and once specific proposals have been drawn up, the Government will consult with the stakeholders concerned.

Montserrat-OECD

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Montserrat Joins Inclusive Framework for Implementation of BEPS Measures

According to a 6 July 2017 update to the list of members, Montserrat has joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of members to 102. As a member of the Framework, Montserrat has committed to the implementation of four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse), and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).

Treaty Changes (3)

Austria-Kosovo

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Austria and Kosovo to Negotiate Social Security Agreement

According to a release from the Kosovo Ministry of Labour and Social Welfare, officials from Austria and Kosovo met 6 July 2017 to discuss issues related to the well-being of citizens, including the initiation 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.

Indonesia-Netherlands

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Protocol to Tax Treaty between Indonesia and the Netherlands to Enter into Force

The pending protocol to the 2002 income tax treaty between Indonesia and the Netherlands will enter into force on 1 August 2017. The protocol, signed 30 July 2015, is the first to amend the treaty.

Dividends

Paragraph 2 of Article 10 (Dividends) is replaced. The new provisions provide for a 5% withholding tax on dividends if the beneficial owner is a company directly holding at least 25% of the paying company's capital; 10% if the beneficial owner is a recognized pension fund; otherwise 15% (originally just a 10% rate applied in all cases).

Interest

Paragraph 4 of Article 11 (Interest) is replaced. The new provisions provide for a 5% withholding tax on interest if paid on a loan made for a period of more than 2 years, or paid in respect of a sale on credit of any industrial, commercial or scientific equipment (originally exempt); otherwise the rate remains 10%.

Elimination of Double Taxation

References to income covered by Articles 11 (Interest) and Article 16 (Dependent Personal Services) in Article 24 (Elimination of Double Taxation) are amended with respect to Dutch tax relief when taxed in Indonesia.

Exchange of Information

Article 28 (Exchange of Information) is replaced to bring it in line with the OECD standard for information exchange.

Assistance in the Collection of Taxes

Article 28A (Assistance in the Collection of Taxes) is added to the treaty.

2002 Final Protocol

A few changes are made to the final protocol that was signed along with the original treaty:

  • A provision is added that the Contracting States will interpret the provisions of the treaty based on the OECD Commentary on the OECD Model Tax Convention on Income and on Capital including any clarifying modifications of the Commentary, especially in respect of the term 'beneficial owner';
  • Article XI is added, which provides that the provisions of Article 28 (Exchange of Information) also apply to information that is relevant for carrying out income-related regulations that the Netherlands tax administration is in charge of implementing and enforcing; and
  • Article VIII of the Protocol is replaced to include that in addition to the three-year limit to make refund claims in respect of tax withheld in excess of the amount chargeable under the provisions of Articles 10 (Dividends), 11 (Interest), and 12 (Royalties), it is also understood that no mutual agreement on the mode of application of Articles 10, 11, and 12, is required for the application of these Articles.

Effective Date

The protocol applies for amounts paid or credited on or after 1 October 2017.

Oman-Portugal

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Tax Treaty between Oman and Portugal has Entered into Force

On 6 July 2017, Portugal published Notice no. 80/2017 in the Official Gazette, announcing the entry into force of the income tax treaty with Oman on 26 July 2017. The treaty, signed 28 April 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Omani income tax, and Portuguese personal income tax, corporate income tax, and surtaxes on corporate income tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is the government or the central bank of either Contracting State; 10% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 10% (exempt if paid to and beneficially owned by the government or central bank of either Contracting State)
  • Royalties - 8%

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 or of a comparable interest directly or indirectly deriving more than 50% of their value 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.

Limitation on Benefits

The final protocol to the treaty, signed the same date, includes the provision that the benefits provided by the treaty will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of the benefits by means of such creation or assignment.

Effective Date

The treaty applies from 1 January 2017.

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