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Worldwide Tax News

Approved Changes (3)

International Monetary Fund

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IMF Publishes Paper on Taxation and the Peer-to-Peer Economy

The International Monetary Fund (IMF) has published a working paper entitled, Taxation and the Peer-to-Peer Economy. The IMF paper provides an overview of the peer-to-peer (P2P) economy, the tax relevant features of the P2P economy, and how the P2P economy could be taxed. The report does not provide recommendations, but rather an analysis of possible approaches and policy considerations for governments. With respect to how the P2P economy could be taxed, the report covers five main areas:

  • A Neutral or Targeted Treatment of P2P Businesses;
  • Tax Thresholds;
  • Cross-Border Taxation of P2P Services;
  • Treatment of Capital and Labor;
  • A Presumptive Tax System for the P2P Economy; and
  • Exploiting Technology to Improve Tax Administration.

Click the following link for the full IMF paper.

Puerto Rico

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Puerto Rico Introduces Biweekly Sales and Use Tax Payment Requirement

On 7 August 2017, Puerto Rico's Treasury Department published a notice on the approval of Law 46-2017 and the issuance of Administrative Determination 17-07, which introduced a new biweekly payment requirement for sales and use tax (SUT). The new requirement includes that for taxpayers whose average monthly SUT payments in the previous year exceeded USD 2,000, SUT installment payments must be made on the 15th of each month and the last day of the month. Payment is made via the SURI electronic system (Sistema Unificado de Rentas Internas).The requirement does not apply in relation to Municipal SUT, which remains due on the 20th of the following month.

To be considered compliant, taxpayers must pay at least 80% of the SUT due for the month in the two installments, or pay at least 70% of the SUT paid in the same month in the previous year. If the two installments amount to less than the lower of the two conditions, the difference will be subject to a 10% penalty, which is in addition to any other penalties.

The new requirement applies from August 2017 for large taxpayers, and from September 2017 for other taxpayers meeting the USD 2,000 condition.

United States

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U.S. Senators Call on Treasury to Maintain Section 385 Debt-Equity Regulations

U.S. Senator Dick Durbin (D-IL) has announced that he and 11 of his Senate colleagues have sent a letter to Treasury Secretary Steven Mnuchin to urge him to reject calls to eliminate, undermine, or scale back the Section 385 debt-equity regulations, which are meant to address corporate inversions and earnings stripping. Treasury and the IRS recently delayed the documentation requirements under the rules to 2019 and noted that the regulations as a whole are under review as significant tax regulations requiring additional review pursuant to an executive order to identify and reduce tax regulatory burdens (previous coverage).

Click the following link for the full text of the letter.

Treaty Changes (5)

Bermuda-United Kingdom

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New TIEA between Bermuda and the UK Signed

UK HMRC has published a new tax information exchange agreement with Bermuda that was signed through the exchange of letters by the UK on 19 June 2017 and by Bermuda on 27 June. The new agreement will replace the 2007 exchange agreement between the two jurisdictions and will apply retroactively for tax periods beginning on or after 4 December 2008, although automatic exchange will apply from 1 January 2016.

One of the main purposes of the new agreement is in relation to the automatic exchange of financial account information under the OECD Common Reporting Standard, for which a separate competent authority agreement was also signed in June (previous coverage).

Bulgaria-Azerbaijan

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Bulgaria and Azerbaijan to Sign SSA

Bulgaria's Ministry of Labor and Social Policy has announced a recent meeting with Azerbaijan officials to discuss bilateral relations, including the ongoing negotiations and signing of a social security agreement. The agreement will be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

China-Romania

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New Tax Treaty between China and Romania has Entered into Force

According to a recent update to the treaty status table of Romania's National Agency for Fiscal Administration, the new income tax treaty between China and Romania entered into force on 17 June 2017. The treaty, signed 4 July 2016, replaces the 1991 income tax treaty between the two countries.

Taxes Covered

The treaty covers Chinese individual income tax and enterprise income tax, and covers Romanian tax on income and tax on profit.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when 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 - 3%
  • Interest - 0% for interest paid in respect of a sale on credit of any equipment, merchandise or services, or on any loan granted by a financial institution; otherwise 3%
  • Royalties - 3%

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 comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares substantially and regularly traded on a stock exchange).

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 22 (Other Income) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the income is paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation. In respect of Romania-source dividends received by a Chinese resident company that owns at least 20% of the shares of the paying company, China will also provide a credit for the Romanian tax paid on the profits out of which the dividends are paid.

Effective Date

The treaty applies from 1 January 2018. The 1991 tax treaty between the two countries ceases to apply from that date.

New Zealand-India-San Marino

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New Zealand Ratifies Pending Protocol to Tax Treaty with India and the Pending TIEA with San Marino

On 8 August 2017, New Zealand Inland Revenue announced that two Orders in Council have been signed to ratify the pending protocol to the 1986 tax treaty with India and the pending tax information exchange agreement with San Marino.

The protocol, signed 26 October 2016, is the third to amend the treaty and will enter into force once the ratification instruments are exchanged. It replaces Article 26 (Exchange of Information) to bring it in line with the OECD standard for information exchange and adds Article 26A (Assistance in the Collection of Taxes). The tax information exchange agreement, signed 1 April 2016, is the first of its kind between the two countries, and will enter into force once the ratification instruments are exchanged.

Vietnam-Tanzania

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Vietnam Looking to Conclude Tax Treaty Negotiations with Tanzania

According to a recent release from the Vietnam Government, Vietnam's Prime Minister Nguyễn Xuân Phúc met with officials from Tanzania on 2 August 2017 and recommended that both sides promptly finalize negotiations for the signing of an income tax treaty and an investment protection agreement in order to strengthen bilateral trade and investment relations. The treaty will 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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