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Worldwide Tax News

Approved Changes (2)

Japan

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Japan to Assign Taxpayer IDs under New System in October

Taxpayer identification numbers under the new "My Number" system will be assigned to both individuals and companies in October 2015. The ID numbers will be used for tax, social security and certain other purposes. Individuals will receive notice of their 12-digit ID numbers from their municipalities, while companies will receive notice of their 13-digit number (12-digit company number plus a 1-digit examination number) from the National Tax Agency.

The new ID numbers will apply for tax purposes from 1 January 2016, and must be included in relevant documents such as tax returns. Companies will also be required to collect and manage the tax numbers of all employees for the withholding of income tax and other purposes.

Click the following link for additional information on the system provided by the Cabinet Secretariat, including frequently asked questions.

Kazakhstan

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Kazakhstan Pension Amendments Signed into Law

On 4 August 2015, Kazakhstan president Nursultan Nazarbayev signed into law a number of amendments to the country's pension system. The main amendment affecting companies is an increase in the employee pension contribution from 10% to 15% of gross salary, which must be withheld and remitted by the employer. The change applies from 1 January 2018.

Proposed Changes (3)

Italy

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Italy Issues Decree Expanding the Scope of Advance Agreements Available for Multinationals

On 6 August 2015, the Italian government issued a decree that will expand the scope of advance agreements multinationals can enter into with the Italian Revenue Agency. Currently, advance agreements are generally available for transfer pricing issues and payments of interest, dividends, and royalties to non-resident entities. Under the new decree, agreements will also be available for:

  • Tax values attributed to a company's assets for exit tax purposes if transferring tax residence out of Italy; and
  • The attribution of profits and losses to permanent establishments in Italy of non-resident entities and foreign permanent establishments of Italian entities.

The decree also allows for the retroactive application of an agreement subject to certain conditions. In general, an advance agreement will apply from the tax period in which it is signed and for the following four years.

Regulations must now be issued to implement the decree, which is expected by the end of the year.

Poland

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Poland's Council of Ministers Adopts Legislation to Implement Changes to the Parent-Subsidiary Directive, Savings Directive and Transfer Pricing Rules

On 21 July 2015, Poland's Council of Ministers adopted legislation to implement changes to the EU Parent-Subsidiary Directive, Savings Directive and transfer pricing rules

  • The Parent-Subsidiary Directive change includes that Poland will not provide tax exemption for dividends if connected with an arrangement or a series of arrangements where the arrangement(s) are only put in place to receive a tax benefit and not for valid commercial reasons that reflect economic reality.
  • The Savings Directive change includes that Poland will automatically exchange information with other EU Member States concerning interest payments from savings accounts to residents of a State, as well as income from insurance contracts and investment funds.
  • The transfer pricing changes include new documentation rules in line with the guidelines developed as part of Action 13 of the OECD BEPS project, including the new country-by-country reporting requirements for entities that are part of a group with global revenue exceeding EUR 750 million (previous coverage).

Subject to approval, the changes to the EU Directives will apply from 1 January 2016, while the transfer pricing changes will generally apply from 1 January 2017. However, it is expected that the CbC reporting requirement will apply for tax periods beginning on or after 1 January 2016.

United Kingdom

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UK Publishes Updated Issue Briefing: Direct Recovery of Debts

On 5 August, the UK HMRC published Issue Briefing: Direct Recovery of Debts, which updates an earlier briefing published in November 2014. The briefing explains the Direct Recovery of Debts (DRD) power of the HMRC that allows the recovery of tax or tax credit debt directly from the bank and building society accounts (including Individual Savings Accounts) of debtors, as well as the safeguards that will be put in place.

DRD was announced in the 2014 budget, and draft legislation for its implementation is included in the Summer Finance Bill 2015.

Click the following link for the Issue Briefing: Direct Recovery of Debts on the Gov.UK site.

Treaty Changes (3)

Indonesia-Netherlands

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Update - Protocol to the Tax Treaty between Indonesia and the Netherlands

A protocol to the 2002 income tax treaty between Indonesia and the Netherlands was signed on 30 July 2015. The protocol is the first to amend the treaty, and will enter into force after the ratification instruments are exchanged.

Dividends

Paragraph 2 of Article 10 (Dividends) is replaced. The new provisions provide for a 5% withholding tax on dividends if the beneficial owner is a company directly holding at least 25% of the paying company's capital; 10% if the beneficial owner is a recognized pension fund; otherwise 15%.

Interest

Paragraph 4 of Article 11 (Interest) is replaced. The new provisions provide for a 5% withholding tax on interest if paid on a loan made for a period of more than 2 years, or paid in respect of a sale on credit of any industrial, commercial or scientific equipment.

Exchange of Information

Article 28 (Exchange of Information) is replaced, bringing it in line with the OECD standard for information exchange.

Assistance in the Collection of Taxes

Article 28A (Assistance in the Collection of Taxes) is added to the treaty.

2002 Protocol

A few changes are made to the protocol that was signed along with the original treaty:

  • A provision is added that the Contracting States will interpret the provisions of the treaty based on the OECD Commentary on the OECD Model Tax Convention on Income and on Capital including any clarifying modifications of the Commentary;
  • Article XI is added that states that Article 28 (Exchange of Information) also applies to information that is foreseeable relevant for carrying out income-related regulations if the Netherlands tax administration is in charge of implementing and enforcing such income-related regulations; and
  • Article VIII of the Protocol is replaced with the provision that refund claims for withholding tax withheld in excess of the amount chargeable under the provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) must be made within three years following the end of the calendar year in which the tax was levied.

Entry into Force and Effect

The protocol will enter into force on the first day of the second month following the exchange of the ratification instruments, and will apply from the first day of the second month following its entry into force.

Mali-Monaco

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Mali Approves Tax Treaty with Monaco

On 3 August 2015, Mali approved for ratification the pending income tax treaty with Monaco. The treaty, signed 13 February 2012, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Monaco income tax, and covers Malian:

  • Tax on wages and salaries;
  • Tax on business profits;
  • Corporation tax;
  • Tax on property income;
  • Tax on income from securities;
  • Tax on agricultural profits;
  • Tax on capital gains from the sale of movable and immovable property; and
  • Mining royalties

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 3 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 6%
  • Royalties - 15%

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

Monaco applies the credit method for the elimination of double taxation, while Mali generally applies the exemption method. However, Mali applies the credit method for income referred to in Articles 9 (Associate Enterprises), 10 (Dividends), 11 (Interest), 12 (Royalties), 16 (Directors' Fees) and 17 (Artistes and Sportsmen).

Entry into Force and Effect

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

South Africa-Uruguay

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TIEA between South Africa and Uruguay Signed

On 7 August 2015, officials from South Africa and Uruguay signed a tax information exchange 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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