Worldwide Tax News
On 8 May 2016, the Greek parliament approved legislation that includes increases to individual income tax rates, special solidarity tax rates and dividends withholding tax rates. The changes include:
- The individual income tax rates are increased overall with a top rate of 45%, and an additional middle income bracket is added;
- The solidarity tax rates that apply for individual income are increased overall with a top rate of 10%, and the threshold for the top rate is reduced;
- The dividends withholding tax rate for both individual and legal entity recipients is increased from 10% to 15%.
The changes are generally effective from 1 January 2016, although the changes in solidarity tax will not apply until published in the Official Gazette.
Click the following link for previous coverage of the details.
On 9 May 2016, the International Consortium of Investigative Journalists (ICIJ) published a searchable database including the nearly 214,000 offshore entities included in the "Panama Papers" investigation, as well as the more than 100,000 offshore entities disclosed in the 2013 offshore leaks investigation. Users can search the database by name or country/jurisdiction.
On 5 May 2016, the Australian Treasury published the government response to the Senate Economics References Committee report concerning the goods and services tax (GST) treatment of digital currency. In general, the government agrees with the recommendations included in the report, including that digital currency should be treated as money for the purposes of the goods and services tax.
Currently, digital currencies are treated as intangible property subject to GST when acquired, which may result in double taxation when the digital currency is then used to make a purchase also subject to GST. Treating digital currency as money would address the double taxation issue by making digital currencies outside the scope of GST. In addition to treating digital currencies as money, Treasury has also put forward two other options in a discussion paper to address the double taxation issue. These include treating digital currency as an input taxed financial supply, which is not subject to GST but would not allow for input tax credits, or making digital currencies GST exempt, which would allow for input tax credits.
Click the following links for the government response to the Senate Committee report and the discussion paper on the GST treatment of digital currency.
On 3 May 2016, the Luxembourg Minister of Finance submitted legislation to parliament for a temporary tax exemption for capital gains from the alienation of real estate. If approved, the exemption would apply for alienations made from 1 July 2016 to 31 December, provided the real estate had been held for at least two years at the time of alienation.
On 28 April 2016, Ukrainian President Petro Poroshenko signed a decree for the development of legislation to implement the outcomes of the OECD BEPS Project and established a working group for the task. The working group held its first meeting on 5 May, during which it discussed the implementation of a number of BEPS related measures including:
- VAT requirements for non-resident online suppliers based on Action 1;
- Controlled foreign company rules based on Action 3;
- Interest deduction limitations based on Action 4;
- Anti-avoidance rules to counter treaty abuse based on Action 6;
- Permanent establishment rules based on Action 7;
- Transfer pricing rules based on Actions 8-10; and
- Country-by-country reporting requirements based on Action 13.
Initial proposals for the amendments to implement the BEPS measures are to be completed in June 2016. Additional details will be published once available.
On 16 to 19 May 2016, officials from the Czech Republic and South Korea will meet for the third round of negotiations for an income tax treaty. Any resulting treaty will be the first of its kind directly between the two countries, and will need to be finalized, signed and ratified before entering into force. Once in force and effective, the new treaty would replace the 1992 tax treaty between South Korea and the former Czechoslovakia, which currently applies in respect of the Czech Republic.
On 28 April 2016, officials from Finland and Sri Lanka reportedly concluded negotiations with the initialing of a new tax treaty. The treaty must be signed and ratified before entering into force, and once in force and effective, will replace the 1982 tax treaty between the two countries, which is currently in force.
According to an announcement from the Indian Ministry of Finance, officials from India and Mauritius signed a protocol to the 1982 income and capital tax treaty between the two countries on 10 May 2016. The protocol is the first to amend the treaty.
One of the main changes is the granting of taxation rights to India on gains from alienation of shares in Indian resident companies acquired on or after 1 April 2017. However, a transition period applies for shares acquired between 1 April 2017 and 31 March 2019, during which the tax rate is reduced by 50%, subject to limitation on benefits (LoB) provisions. Under the LoB provisions, the 50% reduction will not apply if the Mauritius resident fails the main purpose test and bonafide business test, and where total expenditure on operations by the Mauritius resident in Mauritius is not at least INR 2.7 million (MUR 1.5 million). Shares acquired before 1 April 2017 are unaffected by the change.
Other changes include:
- Interest arising in India to Mauritian resident banks will be subject to withholding tax in India at the rate of 7.5% in respect of debt claims or loans made after 31 March 2017 (currently exempt); and
- The exchange of information article is updated in line with the OECD standard for information exchange.
The protocol will enter into force after the ratification instruments are exchanged.
On 27 April 2016, the Swedish parliament ratified the pending tax information exchange agreement with the United Arab Emirates. The agreement, signed 5 November 2015, is the first of its kind between the two countries and is in line with the OECD standard for information exchange. It will enter into force 30 days after the ratification instruments are exchanged, and will apply for criminal tax matters from the date of its entry into force and for other matters from 1 January of the year following its entry into force.