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Approved Changes (4)

Brazil

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Brazil Law Published Amending the Municipal Services Tax

Brazil has published Complementary Law 157/2016 in the Official Gazette, which includes amendments to the municipal services tax (ISS). Although some provisions were vetoed by the president, the main amendments as approved by the Senate are maintained. These include setting the minimum rate at 2% and disallowing municipalities from granting exemptions, reductions, or other benefits with regard to the levy of ISS. In addition, application of ISS has been extended to additional services, including digital and audio streaming and advertising.

Colombia

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Colombia Return Filing Deadlines in 2017

The Colombia tax authority (DIAN) has published Decree No. 2105 of 2016, which sets out the deadlines for tax return (declaration) filing and payment in 2017 and certain other obligations. The standard deadlines for legal entities, which depends on the last digits of the taxpayer's tax number (NIT), are as follows:

  • Returns and first payment are due between 11 April and 11 May 2017, with taxpayers filing first if NIT ends in 96 to 00 and taxpayers filing last if NIT ends in 01 to 05;
  • The second payment is due between 8 June and 22 June 2017, with taxpayers filing first if NIT ends in 0 and taxpayers filing last if NIT ends in 1.

For large taxpayers, the initial payment is due between 8 February and 21 February 2017 depending on tax number, the return and declaration is due between 11 April and 26 April 2017, and the third payment is due between 8 June and 22 June 2017.

Click the following link for Decree No. 2105 (Spanish language).

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Peru Implements New Transfer Pricing Documentation Requirements and Rules on Intragroup Services

Peru has published Legislative Decree No. 1312, which implements a number of new transfer pricing documentation requirements and rules based on the OECD BEPS project. The main aspects of the decree include:

  • A Local Report (file) requirement for taxpayers whose accrued income in the taxable year exceeded 2,300 tax units (UIT) (~USD 2.75 million), which must be submitted annually with respect to transactions that generate income and/or deductible costs or expenses for tax purposes (tax authority may also require with respect to transactions that generate exempt income and/or non-deductible costs or expenses);
  • A Master Report (file) requirement for taxpayers who are part of an MNE group whose accrued income in the taxable year exceeded 20,000 tax units (UIT) (~USD 23.9 million), which must be submitted annually and must contain, among other items, the organizational structure, the description of the group business, the transfer pricing policies regarding intangibles, details of group financing, and the group's financial and fiscal position;
  • A Country-by-Country (CbC) Report requirement for taxpayers who are part of an MNE group, which must be submitted annually and must contain, among other items, information related to the global distribution of income, taxes paid, and business activities of each of the entities belonging to the group (threshold not specified - standard EUR 750 million or near equivalent expected);
  • Provisions regarding intragroup services, including:
    • A benefits test and related documentation requirements for the purpose of deducting costs/expenses related to such services;
    • A maximum 5% profit margin for the provider of low value adding services; and
    • The general characteristics for qualification as a low value adding service, including that the service:
      • Has an auxiliary or supportive nature;
      • Does not constitute the principal activities of the taxpayer or the group, as appropriate;
      • Does not require the use of unique and valuable intangibles, or lead to the creation of unique and valuable intangibles; or
      • Does not entail assuming or controlling a high or significant level of risk, or generate a significant level of risk to the service provider;
  • Provisions regarding the use of the comparable uncontrolled price (CUP) method, including that the CUP method is the most appropriate method for determining the arm’s-length price in commodity transactions between associated enterprises; and
  • A provision allowing the use of other transfer pricing methods in cases where it would not be appropriate to apply any of the prescribed methods due to the nature and characteristics of a transaction or transactions.

Legislative Decree No. 1312 (Spanish language) entered into force on 1 January 2017. The filing of the Local Report is enforceable from 2017, and the filing of the Master Report and CbC Report is enforceable from 2018. Additional regulations will be issued for the new rules, including regulations regarding the specific information required, forms, deadlines, etc. for the new documentation requirements.

Note - The Peruvian tax unit (Unidad Impositiva Tributaria - UIT) is equal to PEN 4,050 (~USD 1,195) for 2017. It is generally adjusted upward each year by PEN 50 or PEN 100.

Ukraine

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Ukraine Tax Measures for 2017 include Major Transfer Pricing Changes

An overview from the Ukraine State Fiscal Service has been published covering the country's tax changes for 2017. Changes are made with regard to value added tax, corporate tax, excise tax, transfer pricing, and other areas. Some of the most important measures are related to transfer pricing as included in the Law on Amendments to the Tax Code to Improve the Investment Climate in Ukraine (No. 1797-VIII), which entered into force on 1 January 2017. These changes include:

  • The scope of transactions deemed controlled for transfer pricing purposes is expanded to include transactions with non-residents:
    • Not subject to tax in the country in which they are based or not resident for tax purposes in the country in which they are registered; and
    • Any commission agent involved in the provision of services (previously only in relation to goods).
  • The conditions for jurisdictions to be included in tax haven list (transactions considered controlled) are expanded to include jurisdictions that are non-cooperative with regard to information exchange (not timely or full exchange);
  • The general thresholds for transfer pricing purposes are increased, so that transactions are deemed to be controlled if:
    • The taxpayer's annual revenue exceeds UAH 150 million (increased from UAH 50 million); and
    • The value of the annual transactions with a related party exceeds UAH 10 million (increased from UAH 5 million).
  • The deadline for submission of the annual controlled transactions report is extended from 1 May following the tax year concerned to 1 October;
  • The sources taxpayers may use for comparables are clarified to include any sources, provided the taxpayer provides the source and the information to the tax authorities;
  • Required transfer pricing documentation content is expanded to include:
    • Details of the counterparties to controlled transactions, and persons that directly or indirectly control the taxpayer (20% ownership or rights), including name, jurisdiction of residence, identifying code, etc.
    • A general description of the group, including the organizational structure, description of business activities, the group transfer pricing policy, and information on persons to whom the taxpayer provides local management reports
    • A description of the management and organizational structure of the taxpayer;
    • A description of the strategy and business activity carried out by the taxpayer, including economic conditions, analysis of the markets, and main competitors;
    • Information on any restructuring or transfer of intangible assets that impact or affect the taxpayer;
    • A description of the controlled transactions and copies of relevant agreements/contracts;
    • A description of goods, works, or services involved in the controlled transactions, including physical characteristics, quality and reputation in the market, the country of origin, and other relevant information;
    • Information on payments made in controlled transactions, including amount, currency, date of payment, and related payment documents;
    • The factors that influenced the pricing, including business strategies affecting the prices of the goods, works, or services;
    • A functional analysis of the controlled transaction, including information on the assets used and risk assumed by the parties involved; and
    • An economic and comparability analysis, including the selected methods used to determine the arm's length and justification of the comparables used and their source; and
  • The deadline to submit the transfer pricing document is change to within 30 days of request (wording changed from "1 month").

Click the following link for the SFS overview of measures for 2017 (Ukrainian language), which generally apply from 1 January 2017.

Proposed Changes (1)

European Union-Ireland-Denmark-Luxembourg-Malta-Netherlands-Sweden-United Kingdom

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Seven EU National Parliaments Oppose Commission Proposal for Common Consolidated Corporate Tax Base

Irish parliament member Brian Hayes has published a release confirming that seven national parliaments in the EU have objected to the European Commission’s proposal for a Common Consolidated Corporate Tax Base. The proposal includes a two-step approach for major EU-wide tax reform that would begin with a Council Directive on a Common Corporate Tax Base (CCTB), followed by a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) (previous coverage).

The national parliaments opposed to the proposal are Ireland, Sweden, Denmark, Malta, and Luxembourg, as well as two chambers of the Dutch Parliament. The UK House of Commons also published a report criticizing the proposal but did not issue a formal objection. The number of objections is not enough to trigger the formal yellow card procedure for EU legislation (requires at least 33% objection), but according to Hayes, there is a serious onus on the Commission to understand the concerns of the various Member States, especially given that the Commission failed to get CCCTB "over the line" in the past.

Treaty Changes (5)

Canada-Peru

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SSA between Canada and Peru to Enter into Force

The social security agreement between Canada and Peru will enter into force on 1 March 2017. The agreement, signed 10 April 2014, is the first of its kind between the two countries and generally applies from the date of its entry into force.

China-Macao

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Protocol to Tax Arrangement between China and Macau has Entered into Force

According to an implementation notice from China's State Administration of Taxation, the new protocol to the 2003 income tax arrangement with Macau entered into force on 12 December 2016. The protocol, signed 19 July 2016, is the third to amend the tax arrangement. The protocol includes:

  • An amendment to Article 8 (Shipping, Air and Land Transport) to clarify that the tax exemption granted is extended to Chinese value added tax;
  • A provision in respect of Article 12 (Royalties) that provides that the withholding tax on royalties paid in the leasing of aircraft and ships must not exceed 5%; and
  • A main purpose test limiting benefits with respect to Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 13 (Capital Gains).

The protocol generally applies from the date of its entry into force.

Cyprus-Bangladesh

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Cyprus to Negotiate Tax Treaty with Bangladesh

During a recent meeting between officials from Bangladesh and Cyprus to discuss bilateral relations, Cyprus expressed its intent to begin negotiations for 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.

Kazakhstan-Serbia

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Tax Treaty between Kazakhstan and Serbia has Entered into Force

The income tax treaty between Kazakhstan and Serbia reportedly entered into force on 24 November 2016. The treaty, signed 28 August 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Kazakhstan corporate income tax, individual income tax, and tax on property of legal entities. It covers Serbian corporate income tax, personal income tax, and property tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 10% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 10%
  • Fees for technical services (technical, managerial, or consultancy) - 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.

Effective Date

The treaty applies from 1 January 2017.

Taiwan-Korea, Rep of

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Taiwan to Negotiate Tax Treaty with South Korea

During a recent meeting between officials from South Korea and Taiwan, Taiwan expressed its intent to begin negotiations for an income tax treaty (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.

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