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Approved Changes (2)

European Union-Gibraltar-United Kingdom

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European Commission Extends State Aid Investigation into Gibraltar Tax Ruling Procedure

On 7 October 2016, the European Commission published an invitation to comment on the decision to extend its State aid investigation into the tax rulings procedure under Gibraltar's corporate tax regime, which was designed in 2010 and entered into force in 2011. The regime subjects resident companies to corporate tax at the rate of 10% on the basis of the territoriality principle, and provides a tax rulings procedure for Gibraltar incorporated companies to ask in advance if they are liable to tax.

After reviewing 165 such rulings, the Commission is of the view that both the specific rulings and the tax rulings practice are in violation of State aid rules. The four main conditions for State aid and the Commission's general position that the conditions are met by Gibraltar's tax ruling practice are as follows:

  1. The measure has to be granted out of State resources: Condition met in terms of foregone tax revenues by the Gibraltar’s treasury;
  2. The measures has to confer an economic advantage to undertakings: Condition met since the tax rulings practice exempts from taxation certain companies that have been granted a tax ruling, which provides an economic advantage to the benefitting companies in comparison to other companies that do not benefit from such tax advantages;
  3. The advantage has to be selective and distort or threaten to distort competition: The rulings practice is selective because it constitutes a derogation from the corporate tax regime that favors a particular group of companies in receipt of a tax ruling, and leads to a discriminatory treatment between companies in a similar legal and factual situation; and
  4. The measure has to affect intra-Union trade: Condition met to the extent that Gibraltar companies, benefiting from the advantages of being exempted from taxation by virtue of a tax ruling, operate in sectors where intra-Union trade takes place, it would appear that the aid affects trade between Member States and threatens to distort competition.

Click the following link for the Invitation to submit comments.

Nigeria

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Nigeria Provides 45-Day Tax Amnesty Window

On 5 October 2016, the Nigerian Federal Inland Revenue Service (FIRS) issued a release announcing a 45-day tax amnesty window that runs from 5 October to 24 November 2016. The tax amnesty provides a waiver from penalties and interest for all taxpayers on outstanding tax liabilities from 2013 to 2015. When applying, taxpayers must present an acceptable tax payment plan to FIRS that includes an initial payment of at least 25% of the outstanding amount with the balance paid in installments.

Proposed Changes (3)
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OECD Approach for Beneficial Ownership Transparency

While speaking at a meeting of G20 Finance Ministers and Central Bank Governors on 6 October 2016, OECD Secretary-General Angel Gurría discussed the evolving challenges of transparency that undermine tax systems and erodes trust in governments.

Gurría outlined a three-pronged approach to complement the initiatives that focus on improving implementation and monitoring of the anti-money laundering (AML) and tax standards, and to provide a coordinated and comprehensive approach to beneficial ownership. In particular:

  • The OECD can provide a gap analysis that will determine whether there are gaps between civil and criminal tax compliance needs for beneficial ownership information, and the relevant FATF standards for AML, and where gaps are identified, the OECD will suggest possible solutions taking cost benefit considerations into account;
  • The OECD can use its unique experience in creating the Common Transmission System for automatic exchange of financial account information to explore the options for a model approach to collecting and storing beneficial ownership information for possible use by other repositories of ownership information; and
  • The OECD can map the current state of the legal ability of countries and jurisdictions to share or access beneficial ownership information to be certain that the right legal and procedural framework is in place.

Click the following link for the text of Gurría's remarks and the OECD G20 Report on ways to improve the implementation of the international standards on transparency, including for beneficial ownership.

Trin & Tobago

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Trinidad and Tobago 2017 Budget Statement Presented including New 30% Tax Bracket

On 5 October 2015, Trinidad and Tobago's Minister of Finance Colm Imbert presented the Budget Statement for 2017 to parliament. Main measures of the Budget Statement include:

  • The development of specific policy and legislation to govern transfer pricing (expected effective date not specified);
  • The full implementation of property tax collection in 2017 based on The Property Tax Act 2009, with minor amendments to the Valuation of Land Act;
  • The introduction of a new tax bracket of 30% on the chargeable income/profits of individuals/companies in excess of TTD 1 million per annum from 1 January 2017;
  • The introduction of a 7% tax on on-line purchases that arrive in Trinidad and Tobago through courier companies or are brought in directly by individuals via air freight with effect from 20 October 2016;
  • The introduction of Agro-Processing Tax Relief in the second quarter of 2017 that includes a full tax exemption where at least 75% of the processing of agricultural products is done in Trinidad and Tobago and at least 75%of the ingredients are produced or harvested locally; and
  • The introduction of Public Private Partnership (PPP) Business Tax Relief in the first half of 2017 that includes 50% tax relief for businesses that can mobilize private sector funding to provide public infrastructure and/or public facilities, and for certain projects that increase productivity and create meaningful employment.

Click the following link for the Budget Statement 2017.

Vietnam

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Vietnam Draft Decree on Transfer Pricing

The Vietnamese Ministry of Finance is consulting on a draft decree to update the country's transfer pricing regulations. Some of the main aspects of the draft decree include:

  • The definition of related parties, including an increase in the direct or indirect ownership threshold from 20% to 25% and certain other changes;
  • Principles and procedures for comparative analysis;
  • The acceptable transfer pricing methods, which include:
    • Comparable uncontrolled price method;
    • Resale price method;
    • Cost plus method;
    • Comparable profit method;
    • Profit split method;
  • An interest expense deduction limit equal to 20% of EBITDA;
  • Principles for determining the deductible expenses for services provided between related parties;
  • Exemptions from preparing a transfer pricing report where related party transactions are only with parties in Vietnam that are subject to corporate income tax, and where revenue does not exceed VND50 billion and total related party transactions do not exceed VND 30 billion; and
  • The requirement that a transfer pricing report must be prepared by the deadline of the annual tax return, and must be submitted within 15 working days of request with a possible 15-day extension.

Click the following links for an English-language release on the draft decree and the text of the draft decree (Vietnamese language). An English language version of the draft decree is being prepared.

Treaty Changes (6)

B Virgin Isl-Isle Of Man

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TIEA between the British Virgin Islands and the Isle of Man has Entered into Force

The tax information exchange agreement with the British Virgin Islands and the Isle of Man entered into force on 9 October 2016. The agreement, signed in March 2016, is the first of its kind between the two jurisdictions and is generally in line with the OECD standard for information exchange. It applies for criminal tax matters from the date of its entry into force and for other matters from 1 January 2016.

Belarus-Pakistan

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Protocol to Tax Treaty between Belarus and Pakistan Signed

According to recent reports, officials from Belarus and Pakistan signed an amending protocol to the 2004 Belarus-Pakistan tax treaty on 5 October 2016. The protocol is the first to amend the treaty, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Brazil-Canada

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SSA between Brazil and Quebec has Entered into Force

The social security agreement between Brazil and Quebec, Canada entered into force on 1 October 2016. The agreement, signed 26 October 2011, is the first of its kind the two jurisdictions and generally applies from the date of its entry into force.

Brazil-Sweden

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SSA between Brazil and Sweden under Negotiation

According to information published by the Brazilian Ministry of Social Security, officials from Brazil and Sweden held the first round of negotiations for a social security agreement on 26 to 30 September 2016. 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.

India-Korea, Rep of

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Tax Treaty between India and South Korea has Entered into Force

The new income tax treaty between India and South Korea entered into force on 12 September 2016. The treaty, signed 18 may 2015, replaces the 1985 tax treaty between the two countries.

Taxes Covered

The treaty covers Indian income tax, including any surcharge thereon, and Korean income tax, corporation tax, and the special tax for rural development.

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 - 15%
  • Interest - 10%
  • Royalties - 10%
  • Fees for technical services (managerial, technical 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 alienation of movable property forming part of the business property of a permanent establishment in the other State;
  • Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally (more than 50%) of immovable property situated in the other State; and
  • Gains from the alienation of shares, other than the above, in a company resident in the other State if the alienator held directly or indirectly at least 5% of the capital of the company at any time during the 12-month period preceding the alienation

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.

Limitation on Benefits

Article 28 (Limitation on Benefits) includes the general provision that no person will be entitled to the benefits of the treaty if its affairs were arranged with the main purpose or one of the main purposes of avoiding taxes to which the treaty applies.

Article 28 also includes the provision that a resident of a Contracting State will not be entitled to the benefits of Articles 10 (Dividends), 11 (Interest), 12 (Royalties and Fees for Technical Services), 13 (Capital Gains) and 22 (Other Income), if:

  • The resident is directly or indirectly controlled by one or more persons that are not resident of that Contracting State; or
  • 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.

Effective Date

The treaty applies in India from 1 April 2017 and in South Korea from 1 January 2017. The 1985 tax treaty between the two countries ceases to have effect on the dates the new treaty is effective.

Liechtenstein-OECD

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Liechtenstein Approves CbC Multilateral Exchange Agreement

On 29 September 2016, Liechtenstein's parliament approved the Multilateral Competent Authority Agreement (MCAA) on the exchange of Country-by-Country (CbC) reports. Liechtenstein signed the CbC MCAA during the initial signing ceremony on 27 January 2016.

Click the following link for the list of the CbC MCAA signatories to date.

Note- Pending a possible referendum, Liechtenstein's CbC reporting requirements will apply from 1 January 2017, with voluntary filing to be accepted for 2016.

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