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Approved Changes (4)

Chile

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Chile Clarifies Residence Notification Requirements to Obtain Full Tax Credit for Dividend and Profit Distributions in 2017 and Future Years

The Chilean Internal Revenue Service (SII) has issued Circular (Oficio) No. 1985 of 3 August 2015, which clarifies the residence notification requirements to obtain the full tax credit for dividend and profit distribution income received by non-residents. This is in regard to the new alternative tax regime (PIS), which will apply from 1 January 2017. Under the PIS regime, such income is taxed when actually distributed, while under the standard attribution regime (AIS) the income is taxed whether distributed or not (effective rate generally 35%).

PIS Regime

Under the PIS regime, if the non-resident is resident in a country with which Chile does not have a tax treaty in force, only 65% of the income tax (FCT) paid by the distributing entity may offset the 35% withholding tax, therefore:

  • In 2017 the effective rate is 43.925% = 25.5% FCT + 35% WHT - 16.575% (65% FCT credit); and
  • In 2018 the effective rate is 44.45% = 27% FCT + 35% WHT - 17.55% (65% FCT credit)

However, if the relevant country of residence does have a tax treaty in force with Chile, a full FCT credit is available resulting in an effective rate of 35%.

Residence Notification Requirements

According to the Circular, a non-resident taxpayer must provide the Chilean tax authorities a certification of residence in order to obtain the benefit of the full FCT credit. If the taxpayer changes its country of residence, notification must be provided to the tax authorities as soon as the change is effective.

If Chile disputes the residence of a taxpayer, the issue will be resolved with the competent authority of the relevant country through the mutual agreement procedures of the applicable tax treaty.

Greece

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Greece Announces Bailout Agreement Negotiations Concluded

On 11 August 2015, Greece's Finance Minister Euclid Tsakaloto announced that bailout agreement negotiations have concluded. As part of the agreement, Greece must implement reforms in addition to the corporate tax, value added tax and other measures already adopted (previous coverage). The additional reforms include:

  • Implementing measures to strengthen the system to collect back taxes;
  • Ending fuel subsidies and increasing advance tax payments for the agriculture sector;
  • Implementing further reforms of the pension system;
  • Creating a EUR 50 billion sovereign wealth fund to recapitalize banks;
  • Implementing new laws on nonperforming loans held by banks; and
  • Deregulating the natural gas market.

The Greek parliament and EU finance ministers must approve the agreement before 20 August 2015 in order to avoid another default by Greece.

India

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India Publishes Parameters for Splitting GST Revenue between Federal and State Governments

On 11 August 2015, the Indian government published parameters for the splitting of GST revenue between the federal government (Centre) and the States. Although still working out its implementation, the new GST regime is to apply from 1 April 2016.

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Under the proposed GST regime, both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the States Goods and Service Tax (SGST) on all transactions within a State. The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all interState supply of goods and services. The proceeds of IGST will be apportioned between the States and the Centre, under the proposed Article 269A, as provided by Parliament by law on the recommendations of the GST Council. Further, the CGST collected by the Central Government as well as the Union's share of IGST collected will be devolved to the States as per the provisions of Article 270.

The rates of GST will be recommended by the GST Council after it is constituted after the amendment of the Constitution.

Ukraine

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Ukraine Clarifies Penalties for Failure to Submit Transfer Pricing Documentation upon Request

The Ukraine State Fiscal Services (SFS) recently published a letter clarifying the penalties imposed for failing to submit transfer pricing documentation upon request. According to the letter, the SFS may request transfer pricing documentation after 1 May of the year following the year in which the relevant controlled transactions were performed.

If no documentation is submitted within 30 days of the request, a penalty of 3% of the value of the relevant controlled transactions applies; capped at 200 minimum wages. If documentation has been submitted within 30 days but is insufficient, the SFS will issue a follow-up request. In this case, the penalty will not apply unless the taxpayer fails to submit the additional documentation with 10 days of the follow-up request.

1 minimum wage = UAH 1,218 (2015) or ~USD 55

Proposed Changes (1)

Israel

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Israel Publishes Draft of Economic Arrangements Law for 2015/16 including Measures for Increasing Transparency and Countering Tax Avoidance

Israel's Ministry of Finance has recently published a draft of the Economic Arrangements Law for 2015/16, which includes measures from the Economic and Budget Plan. The main business related measures concern increased transparency and countering tax avoidance, as well as the introduction of natural resource royalty and surtax.

The transparency and anti-avoidance measures include:

  • Taxpayers will be required to inform the Israel Tax Authority when they have applied or relied on written tax advice, including the nature of the advice;
  • Financial institutions will be required to provide information to the ITA concerning the transactions of businesses on a regular basis and by request;
  • The Prohibition on Money Laundering Law will be amended to cover fraudulent tax offenses, which will allow for criminal prosecution and greater penalties; and
  • The standard statute of limitations for assessment will be increased from 3 years to 4 years

The proposed measure for natural resources includes the introduction of a 5% royalty charge on natural resources in Israel and a surtax on excess profits of taxpayers exploiting such resources.

The measures must be finalized by the government and approved by parliament before entering into force.

Treaty Changes (2)

Israel-Seychelles

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Tax Treaty between Israel and Seychelles to be Negotiated

During a meeting held 6 August 2015, officials from Israel and Seychelles reportedly agreed to begin negotiations for an income tax treaty. 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.

Saudi Arabia-Tajikistan

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Update - Tax Treaty between Saudi Arabia and Tajikistan

The income and capital tax treaty between Saudi Arabia and Tajikistan was signed on 13 May 2014. It is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Taxes Covered

The treaty covers Saudi Zakat and income tax including the natural gas investment tax. It covers Tajik individual income tax, tax on legal persons, and immovable property tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting State furnishes services in the other State through employees or other engaged personnel if the activities continue 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 - 8%
  • Royalties - 8%

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 in a company resident 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.

Non-Discrimination

The treaty does not include non-discrimination provisions.

Entry into Force and Effect

The treaty will enter into force on the first day of the second month following the exchange of the ratification instruments, and will apply from 1 January of the year following its entry into force.

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