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Approved Changes (3)

Ecuador

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Ecuador Publishes Resolution on Withholding Tax Refunds

Ecuador published Resolution NAC-DGECCGC16-00000388 in the Official Gazette on 27 September 2016. The resolution sets out the procedure for obtaining a refund from the tax authority (SRI) for tax withheld in excess of the maximum rate provided in a tax treaty. The procedure follows the restriction placed on automatic treaty benefits in June, which requires withholding agents to apply domestic withholding rate on payments in excess of USD 223,400 per non-resident per year (previous coverage).

Under the new procedure, non-residents may apply for a refund by using the SRI's online service (Spanish language). A refund request must include the following documentation:

  • Proof of withholding;
  • Agreement and invoice evidencing the transaction between the Ecuadorian resident and non-resident;
  • Proof of payment including details of the bank account holders, the banking institutions, account numbers of origin and destination, country, transaction amount and transaction date;
  • Copies of the identification and appointment of the legal representative of the non-resident; and
  • Certificate of tax residence of the non-resident.

If not originally in Spanish, a Spanish translation of the documentation is required.

A request may be made from the first working day of the month following the month in which the withholding agent submitted the withholding declaration and payment. Requests may be made per month per agent, or for multiple months and/or multiple agents. SRI is to respond to requests within 60 working days from the date of application.

Slovenia

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Slovenia Publishes Laws Amending Personal Income Tax Act and Tax Procedure Act including CbC Reporting

On 7 October 2016, the law amending the Personal Income Tax Act and the law amending the Tax Procedure Act were published in Slovenia's Official Gazette.

Personal Income Tax Amendments

The main change is the addition of a new personal income tax bracket between the current second and third brackets and an adjustment of the brackets overall as follows:

  • up to EUR 8,021.34 -16%
  • over EUR 8,021.34 up to 20,400.00 - 27%
  • over EUR 20,400.00 up to 48,000.00 - 34%
  • over EUR 48,000.00 up to 70,907.20 - 39%
  • over EUR 70,907.20 - 50%

Changes apply from 1 January 2017.

Tax Procedures Act Amendments

The Tax Procedures Act is amended to transpose into domestic law the amendments made to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) concerning the exchange of cross border tax rulings and advance pricing agreements (APAs) and Country-by-Country (CbC) reports. The amendments were made by Council Directive (EU) 2015/2376 (previous coverage) and Council Directive (EU) 2016/881 (previous coverage) respectively. The Tax Procedures Act is also amended in regard to tax payment installments, late payment interest, and certain other changes.

Tax Ruling Exchange

The automatic exchange of cross border tax rulings and APAs with other EU Member States will begin from 1 January 2017. The exchange also includes rulings and APAs issued or amended between 1 January 2012 and 31 December 2013, if still in force as of 1 January 2014, as well as those issued or amended between 1 January 2014 and 31 December 2016, regardless of whether they are still in force.

CbC Reporting and Exchange

Slovenia's CbC reporting requirements are implemented in line with Council Directive (EU) 2016/881, which is based on BEPS Action 13. The requirements include that a CbC report must be submitted by MNE groups operating in Slovenia that meet a EUR 750 million consolidated group revenue threshold in the previous year. The requirements apply for fiscal years beginning on or after:

  • 1 January 2016, if the ultimate parent of the group is resident in Slovenia; and
  • 1 January 2017, if the ultimate parent is not resident in Slovenia (surrogate parent or local constituent entity filing).

The automatic exchange of CbC reports will take place within 15 months following the last day of the reporting MNE's fiscal year, although for the first exchange, the exchange will take place within 18 months.

Tax Payment and Late Payment Interest

Changes regarding tax payment and interest include:

  • Allowing tax debts to be paid in 60 monthly installments following insolvency and dissolution proceedings; and
  • Adjusting the interest penalties per annum on outstanding tax debts as follows:
    • 2% if taxpayer is allowed to defer payment or pay in installments (the European Commission reference rate applies if higher than 2%);
    • 3% if the tax debt is self-declared through a return;
    • 5% if the tax debt agreed to during a tax inspection;
    • 7% if the tax debt based on decision of the tax authority following an inspection.

Changes apply from 1 January 2017.

Corporate Income Tax Amendments

Slovenia is also planning certain corporate income tax changes, including an increase in the corporate tax rate from 17% to 19% (previous coverage). However, the law for the changes has undergone additional parliamentary procedures and is pending a final vote. Further developments will be published once available.

South Africa

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South Africa Publishes Updated Guide on Special Voluntary Disclosure Program

The South African Revenue Service has published an updated version of the draft guide for the Special Voluntary Disclosure Program (SVDP). Main changes include that the deadline for the SVDP is extended from 31 March 2017 to 30 June 2017, and the aggregate value of assets included in taxable income is reduced from 50% to 40%.

Click the following link for Draft Guide: Special Voluntary Disclosure Program (v1.2).

Proposed Changes (1)

Singapore

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Singapore Publishes Guide on CbC Reporting

On 10 October 2016, the Inland Revenue Authority of Singapore (IRAS) published an e-Tax guide on Country-by-Country (CbC) reporting. Singapore's CbC reporting requirements are not yet implemented, but are included as part of the draft Income Tax (Amendment) (No. 3) Bill 2016, which is pending enactment.

Some key aspects of the guide include:

  • The requirements will apply from the 2017 financial year (beginning on or after 1 January 2017) for Singapore MNE groups meeting an SGD 1.125 billion threshold in the previous year;
  • A Singapore MNE group is a group whose ultimate parent entity is tax resident in Singapore for the financial year in which the CbC Report is prepared;
  • The ultimate parent is the reporting entity - Singapore does not intend to provide for surrogate filing or impose a filing requirement on local entities of non-Singapore headquartered groups, although a secondary mechanism will be triggered if determined to be necessary;
  • The CbC report must be submitted electronically in the prescribed format within 12 months from the end of the fiscal year concerned, which includes the standard three tables:
    • The first table provides an overview of income, taxes, employees and assets of the MNE group allocated to the different tax jurisdictions that the MNE group operates in, i.e. each line reports the aggregated numbers relating to a particular tax jurisdiction.
    • The second table provides an overview of the entities (including permanent establishments) of the MNE group, again organized according to the tax jurisdictions where the entities are tax resident. The main business activities of each entity are also indicated. Dormant entities must also be included in this table.
    • The third table allows the MNE group to provide any additional information that it feels would be relevant and useful to interpret or understand the data provided in the CbC Report.

Click the following link for the e-Tax Guide: Country-by-Country Reporting.

Treaty Changes (5)

Azerbaijan-Malta-Sweden

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Azerbaijan Parliament Approves Pending Tax Treaties with Malta and Sweden

On 30 September 2016, the Azerbaijan parliament approved the pending income tax treaty with Malta. The treaty, signed 29 April 2016, is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

On the same date, the parliament also approved the pending income tax treaty with Sweden. The treaty, signed 10 February 2016, is the first of its kind directly between the two countries, although the 1981 income and capital tax treaty between Sweden and the former Soviet Union had applied in respect of Azerbaijan, but was terminated. The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Bulgaria-Algeria-Armenia-Azerbaijan-Georgia-Kazakhstan

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Bulgaria Seeking SSAs with Algeria, Armenia, Azerbaijan, Georgia, and Kazakhstan

According to an update from Bulgaria's Ministry of Labor and Social Policy, Bulgaria is negotiating a social security agreement with Azerbaijan and is seeking to begin negotiations with Algeria, Armenia, Georgia, and Kazakhstan. Any resulting agreements would be the first of their kind between Bulgaria and the respective countries, and must be finalized, signed and ratified before entering into force.

Canada-San Marino

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Canada and San Marino to Enter into Tax Treaty Negotiations

According to a 7 October press release from the Canadian Department of Finance, negotiations for a tax treaty with San Marino are scheduled to begin in October 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.

Korea, Rep of-Tajikistan

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Tax Treaty between South Korea and Tajikistan has Entered into Force

The income tax treaty between South Korea and Tajikistan entered into force on 28 September 2016. The treaty, signed 31 July 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Korean income tax, corporation tax, special tax for rural development, and local income tax. It covers Tajik tax on income of physical persons and tax on profit of legal persons.

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 6 months 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 - 0% for interest paid in connection with the sale on credit of any industrial, commercial or scientific equipment, or paid in connection with the sale on credit of any merchandise by one enterprise to another enterprise; otherwise 8%
  • 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; and
  • 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 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 provision that no person will be entitled to the benefits of the treaty if its affairs were arranged in such a manner as if it was the main purpose or one of the main purposes to avoid taxes to which the treaty applies.

Effective Date

The treaty applies from 1 January 2017.

Luxembourg-Ukraine

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Update - Protocol to Tax Treaty between Luxembourg and Ukraine

The protocol to the 1997 income and capital tax treaty between Luxembourg and Ukraine was signed on 30 September 2016. The protocol makes the following main changes:

  • Paragraph 3 of Article 5 (Permanent Establishment) is replaced to include 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 6 months within any 12-month period;
  • Paragraph 3 of Article 10 (Dividends) is deleted, which removes the withholding tax exemption where the beneficial owner of the dividends is a company that has held at least 50% of the paying company for at least 3 years and the investment is at least USD 1 million;
  • Paragraph 2 of Article 11 (Interest) is replaced to provide a 5% withholding tax on interest paid on any loans granted by a bank or any other financial institution, including investment banks and saving banks (originally 2%); 10% rate in other cases is unchanged;
  • Article 26 (Exchange of Information) is replaced to bring it in line with the OECD standard for information exchange; and
  • Article 28 (Exclusion of Certain Companies) is deleted, with the following Articles renumbered accordingly (Article 28 concerns the application of the treaty to holding companies within the meaning of special Luxembourg laws)

The protocol will enter into force on the same date that the treaty (currently pending) enters into force, which will be the date the ratification instruments are exchanged. Both the protocol and the treaty will apply from 1 January of the year following their entry into force.

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