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Approved Changes (3)

Australia

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Australia Enacts Legislation on GST Treatment of Cross-Border Transactions

Australia's Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016 was approved by both houses of the parliament on 4 May 2016 and received royal assent on 5 May (previous coverage). The Act includes measures concerning the goods and services tax (GST) treatment of cross border transactions, including:

  • Expanding the scope of GST to require that non-resident suppliers register and account for GST when making cross border digital supplies amounting to AUD 75,000 or more per year to Australian resident consumers not registered for GST (B2C supplies); and
  • Amending the GST Law to minimize compliance costs for B2B supplies made by non-residents by adjusting the test to determine when a non-resident carries on an enterprise in Australia for GST purposes so that more non-resident supplies will be considered disconnected supplies, which are subject to reverse charge (Australian business accounts for the GST due).

The new B2C rules apply from 1 July 2017 and the new B2B rules apply from 1 October 2016 (first day of the second quarterly tax period following royal assent).

Click the following link to the Australian parliament website for the text of the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016 as approved and the Explanatory Memorandum.

Denmark

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Denmark Issues Master and Local File Documentation Requirements

On 28 April 2016, Denmark's Ministry of Taxation issued Order no. 401 and Order no. 402 concerning transfer pricing documentation requirements. Order no. 401 includes the specific documentation to be included under Denmark's new Master and Local file requirements, and repeals the previous documentation requirements as provided in Order no. 42 (2006). Order no. 402 repeals Order no. 582 (2006), which provided the option for taxpayers to prepare transfer pricing documentation using common guidelines concluded between states that are not members of the EU.

Denmark's new Master and Local file documentation requirements are drawn directly from the guidelines developed as part of Action 13 of the OECD BEPS Project. Overall, the level of documentation is not significantly increased in comparison with the previous requirements, although additional information is required concerning certain areas, such as tax agreements, intangible assets, and financing. The language and submission requirements are unchanged, including that the documentation can be prepared in Danish, Norwegian, Swedish or English, and must be provided to the tax authorities within 60 days of request.

The new requirements apply for controlled transactions in fiscal years beginning on or after 1 January 2016. Click the following links for Order no. 401 and Order no. 402 (Danish language).

United States

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U.S. Issues Modified Pre-Filing Agreement Program Revenue Procedure

On 4 May 2016, the U.S. IRS issued Revenue Procedure 2016-30, which modifies and supersedes Revenue Procedure 2009-14. The procedure permits a taxpayer under the jurisdiction of the Large Business and International Division (LB&I) to request that the IRS examine specific issues relating to tax returns before those returns are filed. The revenue procedure provides the framework within which a taxpayer and the IRS may work together in a cooperative environment to resolve, after examination, issues accepted into the program. If the taxpayer and the IRS are able to resolve the examined issues before the tax returns that they affect are filed, an LB&I Pre-Filing Agreement may be executed.

Click the following links for Revenue Procedure 2016-30 and the IRS Pre-Filing Agreement Program webpage for additional information.

Proposed Changes (2)

Greece

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Greece Launches Public Consultation on New Investment Law

On 5 May 2016, the Greek Ministry of Finance launched a public consultation on a draft investment to promote private investments for regional and economic development. The draft law includes the introduction of new incentives for qualified investment projects, including:

  • A 15-year tax exemption beginning when at least 50% of an investment project has been implemented, with an exemption cap based on a certain percentage of the investment;
  • Grants to cover certain percentages of the investment;
  • Leasing subsidies for the acquisition of new machinery and equipment for a project;
  • A guaranteed maximum tax rate for 12 years beginning once the investment project is complete; and
  • Several others.

Eligibility for the various incentives will be subject to different criteria and an approval process will apply.

Click the following link for the public consultation page (Greek language). Comments are due by 16 May 2016.

Norway

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Norway Finalizing Legislation for the Implementation of CbC Reporting

On 4 May 2016, Norway's Finance Minister Siv Jensen submitted a letter to parliament on the adoption of measures based on the OECD BEPS Project, including the implementation of Country-by-Country (CbC) reporting requirements. According to the letter, draft legislation for CbC reporting requirement will be submitted to parliament by the end of May. Based on the public consultation on CbC reporting launched in January (previous coverage), the CbC requirements would be in line with Action 13 guidelines and would apply for fiscal years beginning on or after 1 January 2016 with an annual group revenue threshold of NOK 6.5 billion in the previous year.

Treaty Changes (3)

Bahrain-Cyprus

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Tax Treaty between Bahrain and Cyprus has Entered into Force

The income tax treaty between Bahrain and Cyprus entered into force on 26 April 2016. The treaty, signed 9 March 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Bahrain income tax, and Cypriot income tax, corporate income tax, the special contribution for the defence of the republic, and capital gains tax.

Hydrocarbon PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise of one Contracting State is directly engaged in the exploration for or production of crude oil or other natural hydrocarbons from the ground in the other State, or when refining crude oil in its facilities in the other State.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 0%

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; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment 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.

Double Taxation Relief

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

Effective Date

The treaty applies from 1 January 2017.

Belarus-Ecuador

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Belarus Approves Tax Treaty with Ecuador

On 4 May 2016, the budget and finance committee of the Belarusian parliament approved for ratification the pending income and capital tax treaty with Ecuador. The treaty, signed 27 January 2016, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Belarusian tax on income, tax on profits, income tax on individuals, and property tax. It covers Ecuador income tax and property tax.

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 the same or connected project for a period or periods aggregating more than 183 days within 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;
  • Gains from the alienation of shares or other rights in a company if more than 25% of the company's assets consist of immovable property situated in the other State; and
  • Gains from the alienation of shares or other rights in a company resident in the other State if at least 25% of the capital of the company was directly or indirectly held 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

Belarus applies the credit method for the elimination of double taxation, while Ecuador generally applies the exemption method. However, for income covered by Articles 10 (Dividends), 11 (Interest) and 12 (Royalties), Ecuador applies the credit method.

Limitation on Benefits

Article 26 (Limitation on Benefits) includes the provision that the benefits of the treaty will not be available for companies merely acting as a holding company or engaging in activities solely of an auxiliary or preparatory nature for related parties.

Article 26 also 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 the establishment or existence of such resident was to obtain the benefits of the treaty that would otherwise be unavailable.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Lithuania-Oman

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Tax Treaty between Lithuania and Oman under Negotiation

According to an announcement from the Lithuanian Ministry of Foreign Affairs, officials from Lithuania and Oman have agreed to speed up the conclusion of negotiations for an income tax treaty during a bilateral cooperation meeting held 2 to 4 May 2016. Any resulting treaty would 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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