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Approved Changes (4)

Ireland

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Ireland Finance Act 2016 Signed into Law

Ireland's Finance Act 2016 (Act No. 18 of 2016) was signed into law by President Michael D. Higgins on 25 December 2016. The Finance Act includes measures announced as part of the 2017 Budget (previous coverage), as well as certain other measures. The main measures include:

  • Changes to the rates and rate bands of the Universal Social Charge (USC) (Revenue eBrief);
  • Amendments to Section 110, including measures to ensure the taxation of profits derived from Irish real estate held by Section 110 companies that are financed through profit participation loans;
  • Amendments to provide for a 20% withholding tax on certain property distributions to unit holders that are not subject to Irish tax made by an Irish Real Estate Fund (IREF), which are investment undertakings where 25% of the value of the undertaking is made up of Irish real estate assets (an exemption applies for distributions to pension funds, life assurance companies, and certain others);
  • Amendment of Section 891H of the Taxes Consolidation Act 1997 concerning Country-by-Country (CbC) reporting in order to bring the rules in line with Council Directive (EU) 2016/881 on the exchange of CbC reports in the EU;
  • Amendments for the implementation Council Directive (EU) 2015/2376 concerning the exchange of cross-border tax rulings and advance pricing agreements;
  • Amendments to the reduced capital gains tax rate for entrepreneur relief, which is further reduced from 20% to 10% on up to EUR 1 million in chargeable gains from the sale in whole or in part of a business;
  • Amendments to the rules regarding apportionment of dual-use inputs for VAT deduction purposes to provide that the primary method of apportionment is based on a ratio of turnover from deductible supplies and total supplies, while providing that another basis may be used if the primary method does not correctly reflect the extent to which the dual-use inputs are used (Revenue eBrief); and
  • Amendments to deny the benefits (penalty mitigation) of a qualifying disclosure for taxpayers with tax liabilities in respect of offshore income, gains, or assets from 1 May 2017(Revenue guidance and FAQ).

Click the following link for the Finance Act 2016. The measures generally apply from 1 January 2017, although the Section 110 amendments generally apply from 6 September 2016, the qualifying disclosure amendments apply from May, and certain measures require an order of the Ministry of Finance to be effective.

Netherlands

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Netherlands Delays Exchange of Past Cross-Border Tax Rulings

In a letter to the Dutch House of Representatives dated 11 January 2017, Secretary of Finance Eric Wiebes provides an update on the exchange of cross-border tax rulings and advance pricing agreement as per the BEPS Action 5 and the Council Directive (EU) 2015/2376, which was recently transposed into Dutch Law. Under BEPS Action 5, information on past rulings was to be exchanged by the end of 2016, while under the EU rules, information on past rulings must be exchanged by the end of 2017.

The letter notes that due to the large number of past rulings that must be sorted through, the Netherlands has been unable to meet the deadline under BEPS Action 5. Approximately 13,000 rulings are under review for the purpose of exchange, with an estimated 2,000 meeting the Action 5 conditions for exchange, and 4,500 meeting the EU conditions for exchange.

Because the deadline could not be met, Dutch authorities have been in discussions with the OECD secretariat and have come to an agreement that the Netherlands will meet the exchange obligation on past rulings by 31 December 2017. In order to meet that deadline as well as exchange obligations for new rulings, the Dutch tax administration is adding more capacity and implementing new procedures to better facilitate the processing of rulings and APAs for exchange.

Click the following link for the letter (Dutch language).

Poland

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Poland Formally Suspends Retail Sales Tax until 2018

Poland has formally suspended the retail sales tax until 1 January 2018 via amending legislation published 21 December 2016. The tax originally entered into force 1 September 2016, but was suspended pending the completion of an illegal State aid investigation that was launched shortly thereafter by the European Commission (previous coverage).

Russia

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Russia Clarifies Notification Requirements Regarding Participation in CFC

The Russian Ministry of Finance recently published Letter No. 03-12-12/2/75553, which clarifies the notification requirements for taxpayers that have a participation in a controlled foreign company (CFC). The letter clarifies that resident taxpayers must notify the tax authorities if their participation in a CFC exceeds 10%. Such notification must be provided within three months from the date the 10% threshold is exceeded, including in regard to foreign institutions without legal personality. The letter also states that in the event of a termination of participation in a CFC, notification must also be provided within three months of the date of termination (only applies if the participation was greater than 10%).

Proposed Changes (1)

Isle Of Man

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Isle of Man Issues Response to Consultation on Draft Record Keeping Regulations

The Isle of Man Treasury has issued a response document following its consultation on enhanced tax requirements for accounting records (previous coverage 7.19.2016). The new requirements are meant to bring the Isle of Man in line with international standards and include the required retention of accounting records for five years. The requirements apply to:

  • All corporate taxpayers that are:
    • Resident in the Isle of Man for income tax purposes, and their officers; or
    • Resident outside the Isle of Man for income tax purposes and who carry on a business in the Island or who receive income arising from the rents of land, and their officers;
  • All non-corporate taxpayers who carry on a business or who receive income arising from the rents of land;
  • All partners resident in the Isle of Man, either individuals or corporate;
  • All trustees resident in the Isle of Man; and
  • The registered agent, enforcer, and members of the council of a foundation.

According to the response document, Treasury does not believe the consultation responses warrant any significant changes to the regulations, and a final version with minor amendments will go before the Tynwald (parliament) for approval.

Treaty Changes (4)

Albania-Iceland

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Tax Treaty between Albania and Iceland in Force

According to a notice from Iceland's Ministry of Foreign affairs dated 14 December 2016, the income tax treaty between Albania and Iceland entered into force on 6 January 2016. The treaty, signed 26 September 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Albanian personal income tax, corporate profits tax, and the tax on small business activities. It covers Icelandic income tax to the state and income tax to the municipalities.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other engaged personnel for a period or periods aggregating more than 6 months in any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital, otherwise 10%
  • Interest - 10%
  • Royalties - 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 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 of the capital stock of a company, or of an interest in a partnership or trust, the property of which consists directly or indirectly principally of immovable property situated in the other State.

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

Limitation on Benefits

Article 22 (Miscellaneous Provisions) includes the provision that a resident of a Contracting State will not receive the benefit of any reduction in, or exemption from, tax provided for in the treaty if the main purpose or one of the main purposes of such resident or a person connected with such resident is to obtain the benefits of the treaty.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Effective Date

The treaty applies from 1 January 2017.

India-Portugal

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India and Portugal to Sign Tax Treaty Protocol and Ratify Pending SSA

According to a release from India's Ministry of External Affairs concerning the State visit by Portugal's Ministry of Finance on 7 to 12 January 2017, the two countries are preparing to sign a protocol to amend the 1998 India-Portugal income tax treaty. The protocol will be the first to amend the treaty and must be finalized, signed, and ratified before entering into force.

The release also notes that the two sides are looking forward to the ratification of the pending social security agreement signed 4 March 2013. The agreement is the first of its kind between the two countries and will enter into force 90 days after the ratification instruments are exchanged.

Saudi Arabia-Hong Kong

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Saudi Arabia to Sign Tax Treaty with Hong Kong

On 9 January 2017, the Saudi Cabinet authorized the Ministry of Finance to sign an income tax treaty with Hong Kong. The treaty will be the first of its kind between the two jurisdictions and must be finalized, signed, and ratified before entering into force.

United States-Uruguay

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Social Security Agreement between the U.S. and Uruguay Signed

On 10 January 2017, officials from the U.S. and Uruguay signed a social security agreement. The agreement is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

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