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Approved Changes (3)

G20-OECD

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G20 Issues Communiqué Following the Recent Meeting in Istanbul Reiterating its Full Support for the OECD Base Erosion and Profit Shifting (BEPS) Project

Following the recent G20 Finance Ministers and Central Bank Governors Meeting held 9-10 February 2015 in Istanbul, a communiqué was issued covering several issues, including the G20's support of the G20/OECD Base Erosion and Profit Shifting (BEPS) Project. The part of the communiqué concerning the BEPS Project is as follows:

"We reiterate our full support to the G20/OECD Base Erosion and Profit Shifting (BEPS) Project, showing our resolve to tackle cross-border tax avoidance by modernizing international tax rules. We will finalize the deliverables under the BEPS Action Plan by year-end. We endorse the mandate to develop a multilateral instrument to streamline the implementation of the tax treaty-related BEPS measures. We also reaffirm our commitment to strengthen tax transparency to prevent cross-border evasion. With respect to the exchange of information on request, we urge all jurisdictions to fully comply with the Global Forum standards and join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. We will work towards completing the necessary legislative procedures to begin the automatic exchange of information (AEoI) within the agreed timeframe. We look forward to the practical and full implementation of the new standard on a global scale and reiterate our commitment to making AEoI attainable by all countries, including all financial centers, and support the pilot projects. We welcome the direct engagement of developing countries in the BEPS Project ensuring that their concerns are addressed and acknowledge that their timing of application may differ from other countries. We will closely monitor progress in preparation of toolkits to assist developing countries in implementing the BEPS actions. |P We will continue to support developing countries in strengthening their capacity. We will implement the G20 High-Level Principles on Beneficial Ownership Transparency."

Click the following link for the full G20 Communiqué.

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OECD Publishes Discussion Draft Comments on BEPS Action 4: Interest Deductions and Other Financial Payments

On 11 February 2015, the OECD published comments received in response to the public discussion draft on the Base Erosion and Profit Shifting (BEPS) Project Action 4: Interest Deductions and Other Financial Payments.

The Action 4 discussion draft focuses on the need to address BEPS resulting from using deductible payments such as interest that can give rise to double non-taxation in both inbound and outbound investment scenarios. It examines existing approaches to tackling these issues and sets out different options for approaches that may be included in a best practice recommendation.

The OECD received over 1000 pages of comments, which are broken up into 2 parts:

A public consultation meeting for Action 4 will be held 17 February 2015, from 10 am to 6 pm, CET. The meeting will be broadcast live via http://video.oecd.org/.

Russia

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Russia Issues Guidance on the VAT Liability of Online Sales of a Nonresidents Goods by a Russian Agent

In a recently published Guidance Letter N 03-07-14/65171, Russia's Ministry of Finance clarifies the value added tax (VAT) liability when goods of a nonresident not registered for VAT are sold through an online shop by a contracted Russian agent. According to the guidance, because the goods are not in Russia when sold and not shipped from inside Russia, they are not considered supplied in Russia and not subject to VAT. However, the commission for the agent resulting from the sales is considered a taxable supply of service and the agent is required to pay VAT (standard rate 18%).

Proposed Changes (2)

Hungary

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Hungary Considering Reduction in Advertising Tax

The Hungarian government is reportedly considering a reduction in its highly controversial Advertising Tax following pressure from major media groups and the European Commission, which has launched a preliminary probe. The tax was introduced in August 2014 with a top rate of 40% levied on advertising income from various media, including TV, print, online and other ad space/time. The top rate was later increased to 50% effective 1 January 2015. The current rates are progressive as follows:

  • up to HUF 500 million - 0%
  • over HUF 500 million up to 5 billion - 1%
  • over HUF 5 billion up to 10 billion - 10%
  • over HUF 10 billion up to 15 billion 20%
  • over HUF 15 billion up to 20 billion - 30%
  • over HUF 20 billion - 50%

The tax legislation was amended shortly after its initial adoption to include that if a taxpayer receiving advertising revenue has failed to declare its liability and fulfill its tax payment obligations, the advertiser will be subject to a 20% tax on monthly aggregate advertising expenditure exceeding 2.5 million HUF. In addition, the consideration paid for ad services received where the tax liability was not declared will be non-deductible.

The legislation was also amended to limit loss offset. Under the original legislation, up to 50% of losses carried forward may be used to offset the tax, but this was later limited to only apply for taxpayers whose pre-tax profit in the tax period beginning in 2013, was zero or negative.

United States

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Proposed Invest in Transportation Act of 2015 Includes Reduced U.S. Tax Rate for Repatriated Foreign Earnings

Senators Rand Paul and Barbara Boxer have announced proposed legislation, the Invest in Transportation Act of 2015, which would provide for a reduced tax rate on repatriated foreign earnings. The resulting tax revenue from the reduced rate would all be transferred to the Highway Trust fund.

The reduced tax rate would be equal to 6.5%, and would only apply to foreign earnings repatriated that exceed the average amount of repatriated earnings of a company in previous years. Only foreign income earned in 2015 or prior years would qualify, and companies would have up to five years to complete the transfer. Any company inverting within 10 years after participating in the program would be required to repay the tax difference between the amount resulting from the reduced rate and what the result would have been had the standard rate applied with interest.

Additional provisions include that a portion of repatriated foreign earnings must be used for increased hiring, wages, R&D investment, capital improvements, and others. None of the repatriated earnings may be used for increased executive compensation, increased dividends or stock buybacks for three years after the end of the program.

Treaty Changes (2)

Italy-Guernsey

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Italy has Approved the TIEA with Guernsey for Ratification

On 4 February 2015, the Italian Senate approved for ratification the pending tax information exchange agreement with Guernsey. The agreement, signed 5 September 2012, is the first of its kind between the two jurisdictions, and will enter into force once the ratification instruments are exchanged.

It will apply for criminal tax matters from the date of its entry into force, and for other tax matters for tax periods beginning on or after that date.

Italy-Isle Of Man

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Italy has Approved the TIEA with the Isle of Man for Ratification

On 4 February 2015, the Italian Senate approved for ratification the pending tax information exchange agreement with the Isle of Man. The agreement, signed 16 September 2013, is the first of its kind between the two jurisdictions, and will enter into force once the ratification instruments are exchanged.

It will apply for criminal tax matters from the date of its entry into force, and for other tax matters for tax periods beginning on or after that date.

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