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Approved Changes (4)


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Brazil Clarifies Withholding Tax on Payments for Rights to Sell Software

Brazil's Federal Revenue Department (RFB) has issued Ruling No. 18 of 27 March 2017 concerning withholding tax on payments for rights to market or resale software to final consumers in Brazil that will receive a license to use the software. According to the ruling, payments for such rights fall within the scope royalties, and are therefore subject to withholding tax at the standard rate of 15% at source. This position is changed from a 2008 ruling that such payments are considered payments for the purchase of goods and only subject to state value added tax (ICMS).

Hong Kong

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Hong Kong Restricts Exemption from New Residential Stamp Duty

The Hong Kong Inland Revenue Department has announced that the exemption from the new 15% stamp duty for buyers that do not own any other residential property will be revised to limit the exemption to single property purchases. The change is made to prevent investors from inappropriately obtaining the exemption by acquiring multiple properties under a single instrument.

The new 15% rate applies from 5 November 2016 and the exemption restriction applies from 12 April 2017, although the legislation for the new rate is still before the Legislative Council, with the next meeting scheduled for 21 April.

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OECD Releases International VAT/GST Guidelines

The OECD has announced the release of the International VAT/GST Guidelines during the fourth meeting of the OECD Global Forum on VAT held 12 to 14 April 2017. The guidelines present a set of internationally agreed standards and recommended approaches to address the issues that arise from the uncoordinated application of national VAT systems in the context of international trade, with a view to reduce uncertainty and risks of double taxation and unintended non-taxation. They focus in particular on trade in services and intangibles, as well the recommended principles and mechanisms to address the challenges for the collection of VAT on cross-border sales of digital products that had been identified in the context of Action 1 of the BEPS Project. Also included is the formal Recommendation by the Council of the OECD as approved on 27 September 2016, which recommends that OECD Members and non-Members take due account of the Guidelines when designing and implementing legislation, including adherence to the principles of VAT neutrality and the destination principle for determining the place of taxation for cross-border supplies of services and intangibles.

Click the following for the International VAT/GST Guidelines.

United States

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IRS Releases Practice Unit on FTC General Principles

On 11 April 2017, the U.S. IRS published an international practice unit: FTC General Principles. The practice unit provides an overview of the following foreign tax credit (FTC) principles:

  • Basic concept of FTC;
  • Identifying taxpayers eligible for FTC;
  • The foreign taxes that qualify for FTC;
  • Foreign tax credit vs. foreign tax deduction; and
  • The carryback and carryover of unused credits.

International practice units are developed by the Large Business and International Division of the IRS to provide staff with explanations of general international tax concepts as well as information about specific transaction types. They are not an official pronouncement of law and cannot be used, cited, or relied upon as such.

Click the following link for the International Practice Units page on the IRS website.

Proposed Changes (4)


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Australia Consults on Draft Determination on Foreign Resident Capital Gains Withholding Tax Credit

The Australian Taxation Office (ATO) has published a draft determination CRP 2017/D1 for consultation concerning claims for a credit for Foreign Resident Capital Gains Withholding (FRCGW). The FRCGW (10%) was introduced from 1 July 2016 as a non-final withholding tax where a foreign vendor sells Australian real property (previous coverage). CRP 2017/D1 modifies the operation of the crediting provisions to ensure that a credit for an amount paid to the Commissioner under the FRCGW provisions is made available in the same income year as that in which the sale of the asset subject to FRCGW is recognized for tax purposes. This applies in relation to cases where the sales process of exchange and settlement straddle more than one year, which under current operation would result in the vendor being required to lodge two returns:

  • One for the income year in which the liability to pay tax on the capital gain arises (the year of exchange); and
  • One for a subsequent income year (the year of settlement), in which the vendor would claim their entitlement to a refund for the FRCGW amount.

In general, CRP 2017/D1 modifies the current operation so that depending on when the FRCGW is paid, the vendor can either claim the credit in the return for the year of exchange, if FRCGW is paid before the return due date; or request an amendment to the return to include the credit, if FRCGW is paid after the return due date.

Click the following link for draft determination CRP 2017/D1 and the explanatory statement. Comments are due by 5 May 2017.

Belize-Cayman Islands-OECD

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Belize and the Cayman Islands Join Inclusive Framework for Implementation of BEPS Measures

According to a 13 April 2017 update from the OECD, Belize and the Cayman Islands have joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 96. As members of the Framework, the three countries have committed to the implementation of four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse), and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).

Click the following link for the list of participants.


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Canada Budget Act Tabled in Parliament

The Canadian Department of Finance has announced that Finance Minister Bill Morneau tabled the Budget Implementation Act, 2017, No. 1 in the House of Commons on 11 April 2017. The legislation provides for the implementation of certain measures proposed as part of Federal Budget 2017, which was tabled 22 March (previous coverage).

Czech Rep

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Czech Republic Planning Further Extension to CbC Notification Deadline

According to recent reports, because the Czech parliament will not likely be able to pass the required legislation to implement Country-by-Country (CbC) reporting by the 4 June 2017 deadline, a proposal has been made to extend the CbC notification deadline to 31 October 2017 for the first year. The 4 June deadline is set in Council Directive (EU) 2016/881, which includes the requirement for all EU Member States to implement CbC reporting. The proposed legislation for the implementation of the requirement in the Czech Republic already includes a first extension to 30 September 2017, after which notification is due by the end of the reporting fiscal year (previous coverage).

Treaty Changes (2)


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Bahrain to Sign Protocol to Tax Treaty with the Philippines

On 10 April 2017, Bahrain's Council of Ministers approved the signing of an amending protocol to the 2001 income and capital tax treaty with the Philippines. The protocol will be the first to amend the treaty and must be signed and ratified before entering into force. Additional details will be published once available.


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Netherlands Publishes MoU on Automatic Exchange of Information with Spain

On 11 April 2017, the Netherlands published the MoU concluded between the Dutch and Spanish tax authorities on the automatic exchange of information on taxes under Article 28 (Exchange of Information) of the 1971 Netherlands-Spain tax treaty and Article 2 of the EU Mutual Assistance Directive (2011/16/EU). The MoU was signed by the Netherlands and Spain on 10 March and 16 February 2017 respectively. It sets out the scope of information to be exchanged automatically, the timing of exchange, and other related matters. The MoU entered into force on 10 March 2017, and replaces the MoU signed 11 April 2006.


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