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Approved Changes (4)

Belgium-European Union

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Belgium Appeals European Commission Decision that Excess Profit Rulings Violate State Aid Rules

The press office of EU General Court announced on 4 April 2016 that Belgium has appealed the 11 January 2016 decision of the European Commission that Belgium's so-called "excess profit" tax rulings violate EU State aid rules (previous coverage). The rulings essentially allow Belgian resident members of MNE groups to deduct the "excess profits" that the Belgian resident would not have been able to generate if it were not part of an MNE group. If the Commission decision is upheld, approximately EUR 700 million in taxes will need to be recovered from 35 companies.

European Union

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EU Parliament Extends Minimum 15% VAT through 2018

On 12 April 2016, the EU Parliament reportedly voted to adopt a resolution extending the minimum standard value added tax (VAT) rate of 15% to the end of 2018. Under EU VAT rules, individual Member States may not set their standard VAT rate lower than 15%, although reduced rates may apply for specified goods and services. The minimum rate was introduced in 1993 has part of a transitional VAT system and has been extended several times since then. The previous extension expired 31 December 2015.

The resolution to extend the minimum rate must now be adopted by the Council of the EU, and will apply retroactively to the date the previous extension expired.

Note - The EU Commission recently issued an Action Plan on VAT that includes proposed measures that may affect the minimum standard VAT rate, as well as Member State's rights to set reduced rates (previous coverage).

Jamaica

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Jamaica Transfer Pricing Regime Will Not Apply for 2015

Jamaica's Minister of Finance and the Public Service Audley Shaw announced on 29 March 2016 that the country's new transfer pricing rules will not be applied retroactively. The new transfer pricing rules were approved on 8 December 2015 as part of the Income Tax (Amendment) (No. 2) Act 2015 and include requirements to prepared documentation and submit a transactions report with the tax return (previous coverage).

When initially approved, the government has stated that the rules would apply for 2015, with transactions reports due in 2016. However, according to Shaw, company's still need time to become familiar with the rules and it would not make sense to insist that transfer pricing submissions be made retroactive to 2015.

Sri Lanka

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Sri Lanka Delays Implementation of New Tax Rates

On 1 April 2016, Sri Lanka's Inland Revenue Department issued a notice that Circular SEC/2016/04 would be temporarily withheld (previous coverage). The Circular sets the following corporate tax rates, which were to apply from 1 April:

  • 28% for banking, financial services and insurance sectors;
  • 40% for liquor, tobacco, lottery, betting and gaming sectors; and
  • 17.5% for all other sectors.

The Inland Revenue Department also issued a notice to clarify that the proposed increase in value added tax rate from to 15% would not apply from 1 April 2016, and that the 11% rate will apply until further notice (previous coverage).

Click the following links for the corporate tax rate notice and the VAT rate notice.

Proposed Changes (1)

Norway

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Norway Committed to Reducing Corporate Tax and Wealth Tax

In a recent speech given at the Norwegian Shipowners’ Association Annual Conference, Minister of Finance Siv Jensen stated that the government is committed to lowering the corporate tax level in order to close some of the gap between Norway and neighboring countries. Jensen also stated that it is important for the government to reduce the wealth tax to strengthen local private ownership (wealth tax generally only applies to individuals).

Click the following link for the full speech.

Treaty Changes (3)

Finland-Spain

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Update - Finland Ratifies Tax Treaty with Spain

On 8 April 2016, Finland's President Sauli Niinistö ratified the pending income tax treaty with Spain. The treaty, signed 15 December 2015, will replace the 1967 income and capital tax treaty between the two countries, which currently applies.

Taxes Covered

The treaty covers Finnish state income tax, corporate income tax, communal tax, church tax, interest withholding tax, and non-resident income withholding tax. It covers Spanish individual income tax, corporate income tax, and non-resident income tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a pension fund; 5% if the beneficial owners is a company directly holding at least 10% of the voting power in the paying company; otherwise 15%
  • Interest - 0%
  • Royalties - 0%

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;
  • Gains from the alienation of shares or similar rights deriving more than 50% of their value directly or indirectly from immovable property situated in the other State, with an exemption for shares listed on a recognized stock exchange in either State; and
  • Gains from the alienation of shares or other rights that directly or indirectly entitle the owner of the shares or rights to the enjoyment of immovable property situated 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 generally apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force three months after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force. However, Articles 23 (Mutual Agreement Procedure) and 24 (Exchange of Information) will apply from the date of the treaty's entry into force.

The 1967 tax treaty between the two countries will terminate on the date the new treaty is effective.

Morocco-Slovenia

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Update - Tax Treaty between Morocco and Slovenia

The income tax treaty between Morocco and Slovenia was signed on 5 April 2016. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Moroccan income tax and corporation tax. It covers Slovenian tax on income of legal persons and tax on income of individuals.

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 3 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 7% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 10%
  • Royalties, including technical assistance - 10%

Article 10 (Dividends) also includes that the withholding tax on repatriated profits of a permanent establishment is limited to 7% after deducting the corporation tax payable.

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 the capital stock of a company, the property of which consists directly or indirectly principally 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. A provision is also included for a tax sparing credit for tax that would otherwise be payable but has been reduced or exempted in accordance with incentives laws in a Contracting State that were in effect on the date the treaty was signed (5 April 2016). The tax sparing credit will apply for five years beginning 1 January of the year following the treaty's entry into force.

Entry into Force and Effect

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

Untd A Emirates-United Kingdom

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Tax Treaty between the U.A.E and the UK Signed

On 12 April 2016, officials from the United Arab Emirates and the United Kingdom 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.

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