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Approved Changes (6)

Brazil

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Brazilian Supreme Court Holds ICMS Exemption for Printed Publication Extends to Digital Versions

In a decision issued 8 March 2017, the Brazilian Supreme Federal Court ruled on whether the constitutional exemption from state value added tax (ICMS) on supplies of books, newspapers, periodicals, and the paper used for printing also extends to their digital versions and the electronic devices used to display them (e-readers). According to the Court, the exemption extends to digital publications and e-readers, but not to devices that may also be used for other functions, such as smart phones and tablets.

Czech Rep

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Czech Parliament Approves Law for Exchange of Tax Rulings

The Czech parliament has approved the law transposing the amendments made by Council Directive (EU) 2015/2376 to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) concerning the automatic exchange of cross border tax rulings and advance pricing agreements (APAs) (previous coverage). The law must be signed by the president and will enter into force on the first day of the month after it is published in the Official Gazette.

Poland

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Polish Parliament Passes New Exchange of Information Law including for CbC Reports

After considering amendments from the Senate, the Polish Sejm (lower house of parliament) gave final approval for the Law on the exchange of tax information with other countries on 9 March 2017. The Law was sent to the president for signature on 10 March and is pending publication in the Official Gazette.

The Law includes measures to comply with the provisions of Council Directive (EU) 2016/881 on the exchange of CbC reports and Council Directive (EU) 2015/2376 on the exchange of cross border tax rulings and advance pricing agreements (APAs), as well as measures for the collection and exchange of financial account information under the OECD Common Reporting Standard (CRS).

With respect to CbC reporting, Poland was one of the first countries to adopt requirements. However, these requirements were not fully in line with the EU CbC reporting and exchange requirements introduced by Council Directive (EU) 2016/881. With the exchange of information Law, Poland's CbC reporting requirements apply as follows:

  • The CbC reporting requirements generally apply for fiscal years beginning on or after 1 January 2016 for MNE groups with consolidated revenue in the previous year meeting a EUR 750 million threshold (reporting fiscal year);
  • In determining if the EUR 750 million threshold is met, the exchange rate for the Polish zloty (PLN) is the average exchange rate announced by the Polish National Bank on the last working day of the fiscal year preceding the reporting fiscal year, and the exchange rate for foreign currencies is the exchange rate published by the European Central Bank on the last day of the fiscal year preceding the reporting fiscal year;
  • The requirement to submit applies for ultimate parent entities resident in Poland for fiscal years beginning on or after 1 January 2016;
  • The requirement to submit applies for non-parent companies resident in Poland for fiscal years beginning on or after 1 January 2017, if:
    • The parent entity is not required to submit a CbC report in its jurisdiction of residence for the reporting fiscal year;
    • The parent's jurisdiction of residence has not entered into a competent authority agreement for the exchange of CbC reports with Poland within 12 months following the reporting fiscal year; or
    • The parent's jurisdiction has suspended automatic exchange or failed to automatically exchange (systemic failure);
  • Where a non-parent entity is required to submit a CbC report, if all required information for the CbC report has not been provided to the local entity, an incomplete report must still be submitted and notification must be made of the parent's refusal to provide all information;
  • The requirement for a non-parent entity will not apply if:
    • Another group entity has been designated to submit a CbC report for the reporting fiscal year in another EU Member State; or
    • Another group entity has been designated to submit a CbC report for the reporting fiscal year in a non-EU country, subject to certain conditions, including that a competent authority agreement has been entered into with the non-EU country within 12 months following the reporting fiscal year;
  • Constituent entities resident in Poland (including PEs of foreign entities) must provide notification to the tax authority by the end of the reporting fiscal year on whether they will be submitting a CbC report as the ultimate parent or surrogate parent, and if neither, must provide details of the reporting entity for the group (as part of a transition, the deadline is 10 months after the end of the year for reporting fiscal years beginning after 31 December 2015 and before 1 January 2017);
  • The content and form of the CbC report is in line with Action 13 and the requirements of Council Directive (EU) 2016/881;
  • CbC reports received by the Polish tax authority will be exchanged with other jurisdictions in which the group operates, including other EU Member States and other jurisdictions that are eligible for exchange under a competent authority agreement (standard exchange within 15 months of the close of the reporting fiscal year; within 18 months for first year); and
  • Failing to comply with the CbC reporting requirements, including notification, will result in penalties of up to PLN 1,000,000 (~EUR 230,000) at the discretion of the tax authority.

Click the following link for the final version of the Law (Polish language).

Singapore

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Singapore Increases Annual Revenue Threshold for Simplified Tax Return and Estimated Chargeable Income Notification Purposes

On 7 March 2017, the Inland Revenue Authority of Singapore announced an increase in annual revenue thresholds for the filing of the simplified tax return (form C-S) and for the Estimated Chargeable Income (ECI) notification waiver.

From year of assessment 2017, the annual revenue threshold for companies to qualify to file Form C-S is increased from SGD 1 million to SGD 5 million. The other conditions for filing Form C-S are unchanged. For financial years ending after June 2017, the annual revenue threshold for the ECI notification waiver is also increased from SGD 1 million to SGD 5 million. The ECI notification waiver that applies where ECI is nil is maintained.

Click the following links for the updated tax return guidance and ECI notification guidance pages on the IRAS website.

Turkey

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Turkey Introduces New Tax Credit for Compliant Taxpayers

On 8 March 2017, Turkey published Law No. 6824 in the Official Gazette, which provides for various amendments to both the Income Tax and Value Added Tax (VAT) Laws. One of the main amendments is the introduction of a new tax credit for compliant taxpayers equal to 5% of their calculated tax liability for the year. The maximum credit amount is TRY 1 million. Conditions include:

  • The tax return for the current year and the two previous years must have been submitted by the statutory deadline;
  • The taxpayer must not be subject to any tax assessments for the current year or the previous two years;
  • The taxpayer must not have any outstanding tax debts or penalties in excess of TRY 1,000 at the time the return is submitted; and
  • The taxpayer must not have committed any fraudulent acts in the current year or previous four years.

The tax credit is available for individual and corporate taxpayers for returns submitted after 1 January 2018, with the exception of companies in the finance, banking, insurance, reinsurance, and retirement/pension investment sectors.

United States

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U.S. IRS Issues Interest Rates on Overpaid and Underpaid Tax for Q2 2017

The U.S. IRS has announced the interest rates for overpaid and underpaid tax for the calendar quarter beginning 1 April 2017, which are unchanged from the previous quarter. The rates are 4% for both underpayment and overpayment by individuals, and 3% and 4% for corporate overpayments and underpayments, respectively.

The rate for corporate overpayments exceeding USD 10,000 in a tax period is 1.5% on the portion exceeding that amount, and the rate for large corporate underpayments exceeding USD 100,000 is 6%.

Proposed Changes (2)

Russia

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Russia Publishes Revised Draft Law for BEPS Transfer Pricing Documentation Requirements

On 6 March 2017, the Russian government published for public consultation a revised version of the draft law for the introduction of the three-tiered documentation requirements for MNE groups based on BEPS Action 13 (previous coverage). The main changes from the previous draft include:

  • The applicable revenue threshold for whether the new documentation/notification requirements apply for an MNE group is changed for Russian parented groups and foreign parented groups, so that:
    • For Russian parented groups, the applicable threshold is RUB 50 billion (included in prior draft as general threshold for all groups); and
    • For foreign parented groups, the applicable threshold is the CbC reporting threshold in the foreign parent's jurisdiction;
  • The deadline for submitting the notice of participation in an MNE group is extended from 3 months following the end of the group's fiscal year to 8 months;
  • The requirement to prepare a Master file is extended to all local constituent entities (prior draft only applied for resident parent (surrogate) entities), with the timing of submission unchanged - within 3 months of request as part of a transfer pricing audit, but no earlier than 15 months after the end of the fiscal year concerned;
  • The Local file is clarified as replacing the requirement to prepare transfer pricing documentation under existing rules;
  • The required language for the CbC Report, Master file and Local file is Russian, with the exception of CbC reports for foreign parented groups;
  • The effective date of the law is clarified to be 1 January 2017, including for transactions entered into prior to that date if income/expenses resulting from the transactions are recognized for tax purposes on or after that date;
  • Provisions are added that the CbC report and Master file may not contain information pertaining to state secrets or military-technical cooperation with foreign countries and that the exchange of CbC reports may be restricted with respect to enterprises included in the Russian list of strategic enterprises and their subsidiaries; and
  • The penalties related to notification and CbC reporting compliance failures are maintained at RUB 50,000 and RUB 100,000 respectively, while the specified penalties for Master and Local file are removed.

Click the following link for the consultation page (Russian language), which includes the revised legislation.

South Africa

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South Africa Publishes Draft Interpretation Note on the Withholding Tax on Royalties

The South African Revenue Service (SARS) has published a draft interpretation note for public comment on the withholding tax on royalties. South Africa currently imposes withholding tax on royalties paid to foreign persons at the rate of 15%. The withholding tax rules are contained in sections 49A to 49H of the Income Tax Act, which replaced the prior rules under Section 35 of the Act effective 1 July 2013. The draft interpretation covers all aspects of the application of the rules, including key definitions, applicable exemptions, liability to pay and withhold, reduction under tax treaties, and declaration and payment.

Click the following link for the draft interpretation note. Comments are to be submitted to policycomments@sars.gov.za by 21 April 2017.

Treaty Changes (1)

Finland-OECD

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Finland Committed to Exchange of CbC Reports

On 8 March 2017, the Finnish Ministry of Finance published a declaration in the Official Gazette on Finland's commitment to exchange Country-by-Country (CbC) reports as per the Multilateral Competent Authority Agreement on the Exchange of CbC reports, which Finland signed on 27 January 2016, and has since been signed by a total of 57 jurisdictions. Finland's CbC reporting requirements were finalized in November 2016 and apply for fiscal years beginning on or after 1 January 2016 for MNE groups meeting the standard EUR 750 million consolidated revenue threshold (previous coverage).

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