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Approved Changes (3)

Colombia

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Colombian Constitutional Court Rules the Offset of Losses Carried Forward to be allowed for CREE Tax Purposes

The Colombian Constitutional Court has issued its ruling on a recent case that challenged the constitutionality of the tax base determination for CREE tax purposes under Article 22 of Law 1607 (2012), as it does not provide for the offset of carried forward tax losses. In its decision, the Court found that Congress had committed a legislative omission in the definition of tax base for CREE purposes, resulting in an excessive tax burden for taxpayers with losses, which is unconstitutional.

However, given the importance of the collection of CREE using the tax base determination as provided for in the law, the Court decided to issue a conditional ruling that the existing definition for the tax base may continue to apply with the condition that taxpayers are allowed to offset losses against future profits.

European Union

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European Parliament Publishes List of Companies that have Refused to Meet with the Special Committee on Tax Rulings

On 9 June 2015, the European Parliament issued a press release expressing its disappointment that of the 15 companies invited to meet with the Special Committee on Tax Rulings, only 1 has accepted the invite, 7 have declined and 7 have not yet formally replied.

The Special Committee was approved by Parliament in February 2015, with the mandate to look into tax ruling practices as far back as 1 January 1991, and review how the European Commission treats State aid in Member States and the extent to which the States are transparent about their tax rulings. The committee is also tasked with the evaluation of the negative impact of aggressive tax planning on public finances and the development of recommendations for the future.

Click the following links for the press release and a list of the invited companies including their replies to date.

Uruguay

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Uruguay Delays Effective Date for Tax Payment Methods Requirements

Uruguay has delayed the effective date for new tax and social security payment method requirements from 1 June 2015 to 1 January 2016. The requirements are included under the Financial Inclusion Law (2014), which was enacted to promote the use of electronic payments methods in Uruguay. Under the law, such payments must be made electronically using debit/credit cards, electronic funds transfers and other electronic means, or through credit certificates issued by the tax administration or non-transferable checks.

Proposed Changes (5)

Belgium

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Belgian Program Law Presented to Parliament

On 2 June 2015, the Belgian government presented a Program Law Bill to parliament, which includes tax measures agreed upon during the budget control process in March. The main tax measures are summarized as follows.

Liquidation Reserve for SMEs

The transitory regime introduced with the increase in the withholding tax on liquidation gains from 10% to 25% and subsequently expanded for SMEs from 2015, is extended to also apply for 2013 and 2014. The regime for SMEs includes that up to 100% of after tax profits can be allocated to a liquidation reserve subject to a non-deductible tax of 10%. The reserve can then be distributed tax-free upon liquidation. However, if such reserve is distributed prior to liquidation, a 15% withholding tax will apply if distributed within 5 years of its creation, and a 5% withholding tax will apply if distributed after 5 years.

Transparency Tax

A transparency tax is introduced on the deemed income of certain legal structures in the hands of founders, including individuals and entities subject to legal entities tax. The deemed income is taxed under normal rules depending on the nature of the income, unless  it can be shown that the income has been paid or attributed to a beneficiary resident in an EEA Member State or resident in a jurisdiction with which Belgium has entered into a tax treaty or tax information exchange agreement. An exemption also applies if it can be shown that the legal structure has been taxed at an effective rate of at least 15%.

The structures to which the rules apply includes trusts, foundations and certain structures included in a black list to be issued by Royal Decree. Structures that will be included in the black list are generally those that are exempt from tax or subject to an effective tax rate under 15%. Collective investment vehicles, entities managing pension funds and employee participation, and companies listed on a stock exchange will not be considered.

Dividends Withholding Tax

A new dividends withholding tax rate of 1.69% is introduced for dividends paid by Belgian resident companies to shareholder's resident in EEA Member States, when the shareholder holds less than 10% of the capital of the paying company and the acquisition value of the participation is at least EUR 2.5 million.

The change is the result of a decision by the Court of Justice of the European Union that Belgium's participation exemption for resident shareholders but not non-resident shareholders was an infringement of the free movement of capital.

The Belgium participation exemption is 95% when shareholding is less than 10% and the participation value is EUR 2.5 Million or more, resulting in an effective rate of 1.69% (100 x 5% x 33.99%).

New Start-up Incentives

New incentives for start-ups in the digital sector are introduced, including an individual income tax reduction of up to 45% for investment in the shares of SMEs and micro enterprises, an exemption from wage withholding tax for the first 4 years, an investment tax credit of 13.5% for digital assets, and others.

Malawi

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Malawi Budget 2015/2016 Presented to the National Assembly

On 22 May 2015, the Malawi Ministry of Finance presented the draft Budget 2015/2016 to the National Assembly. The main tax-related measures of the Budget include:

  • The taxation of deemed interest in respect of interest free loans in the hands of the lender;
  • Setting the interest rate on tax debts at the central bank lending rate plus 5%; and
  • Introducing a penalty of 20% on unpaid tax amounts due by non-residents

Pending approval by the National Assembly, the measures will apply from 1 July 2015.

Pakistan

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Pakistan Budget 2015/16 Presented to Parliament

On 5 June 2015, the Pakistan Minister of Finance presented the 2015/2016 Budget to parliament. The main measures proposed are as follows:

  • The corporate tax rate will be reduced to from 33% to 32%;
  • The 15% tax credit for companies for listing on a registered stock exchange will be increased to 20%;
  • The individual income tax rate for salaried taxpayers earning taxable income from PKR 400,000 to PKR 500,000 will be reduced from 5% to 2%, and the rate for non-salaried individual taxpayers and associations of persons earning taxable income in that range will be reduced from 10% to 7%;
  • The capital gains tax rate on securities will be increased from 12.5% to 15% if held for up to 12 months, increased from 10% to 12.5% if held for up to 24 months, and a new rate of 7.5% will be introduced for securities held more than two years up to 4 years (currently gains are exempt if held more than 2 years);
  • The scope of increased withholding tax for non-compliant taxpayers will be expanded, and a 0.6% advance tax will be introduced on banking instruments and other transfers of funds through banks for taxpayers that have not filed tax returns;
  • The dividends tax rate will be increased from 10% to 12.5%, and for non-compliant taxpayers the rate is increased from 15% to 17.5% (the extra 5% is adjustable);
  • A 10% final withholding tax will be introduced on renting of machinery and for the use of, or right to use, commercial, scientific, or industrial equipment for residents;
  • A tax on retained earnings of listed companies is introduced at a rate of 10% on the amount of retained earnings in excess of 100% of a company's paid up capital;

Pending approval of the Finance Bill for 2015/2016, the measures will generally apply from 1 July 2015.

Click the following link for an overview of the Budget measures provided by the Pakistani government.

Tunisia

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Tunisia Planning Changes to the Investment Code

The Tunisian Council of Ministers is currently considering draft changes to the country's Investment Code. One of the key changes being considered is a reduction in the corporate tax rate from 25% to 15%, while abolishing the reduced tax rate of 10% for export companies. The increased 35% rate for hydrocarbon, financial and telecommunication activities would be maintained. Other measures include relaxing restrictions on foreign investment and real estate ownership, and simplifying repatriation of dividends and capital.

Additional details will be published as the legislative process progresses.

United States

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U.S. Senate Tax Reform Working Groups Developing Tax Reform Proposals Including IP and Corporate Integration Regimes

According to recent reports, the U.S. Senate Finance Committee Tax Reform Working Group for International Tax is developing detailed policy proposals including an innovation (IP) box, while the Working Group for Business Income Tax is working on proposals for corporate integration and removing the tax advantages of debt over equity. The proposal will be recommended to the larger Finance Committee for development of legislative proposals, which may include a single tax reform bill.

The Groups were formed in January 2015 along with Tax Reform Working Groups for Individual Income Tax, Savings and Investment, and Community Development and Infrastructure. Final reports from each Group were to be delivered near the end of May, although at this point it is unclear when the work will be completed.

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