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Approved Changes (4)

Colombia

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Colombia Sets Late Payment Interest Rate for September 2017

The Colombian Tax Authority (DIAN) has announced that the annual interest rate for late tax payment for 1 to 30 September 2017 is reduced from 30.97% to 30.22%. The rate is based on the rate set by the Financial Superintendence of Colombia through Resolution No. 1155 of 30 August 2017. Also, beginning with the September rate, the interest rate for late tax payment will be set monthly instead of quarterly.

Israel

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Israel Sets VAT Return Frequency Threshold for 2018

On 4 September 2017, the Israel Tax Authority published amended VAT Circular 3/2017, which sets the value added tax (VAT) return frequency threshold for 2018 at ILS 1,490,000. In general, all taxable persons are required to register for VAT in Israel. Taxable persons with annual turnover exceeding the threshold are required to submit VAT returns on a monthly basis and those with annual turnover not exceeding the threshold are required to submit VAT returns on a bimonthly basis.

The Circular is available on the Tax Authority's news page (Hebrew language).

Malaysia

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Malaysia Introduces Tax Exemption for Capital Expenditure on Manufacturing Automation

On 30 August 2017, Malaysia published Income Tax (Exemption) (No.8) Order 2017 in the Official Gazette, which introduces a tax exemption based on qualifying capital expenditure relating to automation equipment used by manufacturing companies resident in Malaysia. The Order provides for an income tax exemption on statutory income derived from a qualifying project that is equivalent to a 100% accelerated capital allowance provided for capital expenditure on automation equipment that is more technologically advanced than the current technology used by the qualifying company.

The exemption applies for the years of assessment 2015 to 2017 for qualifying companies engaged in qualifying projects relating to rubber, plastic, wood, furniture, and textile. For all other qualifying companies engaged in qualifying projects, the exemption applies for the years of assessment 2015 to 2020. To enjoy the exemption, an application must be made by 31 December 2017 or 2020, as the case may be.

Click the following link for the Income Tax (Exemption) (No.8) Order 2017 and the related Income Tax (Accelerated Capital Allowance) (Automation Equipment) Rules 2017, both of which are Malay and English.

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Peru Publishes Law on Promoting Service Exports and Tourism

On 17 August 2017, Peru published Law No. 30641 in the Official Gazette, which amends the Law on Value Added Tax (IGV) in order to promote the export of services and tourism. One of the main amendments made is removing the reference to Appendix V in the IGV Law, which lists specified services that qualify as export of services eligible for an IGV exemption. Instead, only the general conditions for export of services will apply, which include:

  • The service is provided for a fee, which must be demonstrated with the corresponding proof of payment;
  • The exporter (service provider) is a person domiciled in Peru;
  • The user or beneficiary of the service is a person not domiciled in Peru.
  • The use, exploitation, or benefit of the service takes place abroad.

In addition to meeting the above conditions, the service provider must also be registered as an exporter of services with the tax authority (SUNAT).

The Law also amends the types of tourism and transport related services that may be considered export of services for exemption purposes, and improves the availability of IGV refunds for tourists.

Law No. 30641 entered into force on 1 September 2017 and generally applies from that date.

Treaty Changes (5)

Cambodia-Thailand

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Tax Treaty between Cambodia and Thailand Signed

On 7 September 2017, officials from Cambodia and Thailand signed an income tax treaty. The treaty is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged. Additional details will be published once available.

Israel-Russia

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SSA between Israel and Russia to Enter into Force

The pending social security agreement between Israel and Russia will enter into force on 1 October 2017. The agreement, signed 7 June 2016, is the first of its kind between the two countries and will generally apply from the date of its entry into force.

Kazakhstan-India

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Kazakhstan Lower House Approves Pending Protocol to Tax Treaty with India

On 6 September 2017, Kazakhstan's lower house of parliament (Mazhilis) approved the pending protocol to the 1996 income tax treaty with India. The protocol, signed 6 January 2017, is the first to amend the treaty and includes several changes, including in relation to exchange of information, limitation on benefits, mutual agreement procedures, and other areas (previous coverage).

Netherlands-South Africa-Sweden

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Dutch Appeals Court Upholds Lower Court Decision that MFN Clause in Tax Treaty with South Africa Triggered by MFN Clause of South Africa-Sweden Treaty

A recent decision of the Dutch Court of Appeals (Gerechtshof 's-Hertogenbosch) was published on 31 August 2017 concerning whether the dividends MFN clause added by the 2008 protocol to the 2005 Netherlands-South Africa tax treaty was triggered by way of the dividends MFN clause added by the 2010 protocol to the 1995 South Africa-Sweden tax treaty.

The case involved a 2013 payment of dividends from a Dutch subsidiary to a South African shareholder, for which 5% tax was withheld. In 2014, the shareholder requested a refund of the tax withheld, claiming that the MFN clause added to the Netherlands-South Africa treaty had been triggered with the signing of the 2010 protocol to the South Africa-Sweden tax treaty, which resulted in an exemption for dividends between South Africa and Sweden. At the time of the dividend payments, this exemption was based on the exemption under the Cyprus-South Africa tax treaty, which has since been amended. In 2015, a lower Dutch court found in favor of the shareholder (previous coverage).

In its decision, the Court of Appeals also found in favor of the shareholder and upheld the lower court decision on the matter, finding that the signing of the protocol to the South Africa-Sweden treaty did trigger the MFN clause of the Netherlands-South Africa treaty. As a result, the tax withheld is to be refunded.

Pakistan-Bahrain-Finland-Italy-Turkey

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Pakistan Approves Signature of Protocol to Tax Treaty with Bahrain and Negotiation of Protocols to Tax Treaties with Finland, Italy, and Turkey

According to a Government release on 7 September 2017, Pakistan's Federal Cabinet has approved the signing of an amending protocol to the 2005 income tax treaty with Bahrain. The Federal Cabinet also approved the negotiation of protocols to update the exchange of information Articles of the 1994 tax treaty with Finland, the 1984 tax treaty with Italy, and the 1985 tax treaty with Turkey. Details of each protocol will be published once available.

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