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Approved Changes (5)

Ecuador

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Ecuador Issues Resolution on Assets and Liabilities Reporting Annex

The Ecuador Internal Revenue Service (SRI) has issued Resolution No. NAC-DGERCGC17-00000335 of 22 June 2017, which sets out the requirements for a new annex on assets and liabilities of companies and permanent establishments in Ecuador. The annex must be submitted electronically by entities with foreign assets or liabilities in excess of USD 500,000, with an exemption for certain entities, including public entities, international organizations, and financial institutions. The annex should include details of assets/liabilities held in both Ecuador and abroad. Reportable assets include:

  • Cash and investments held in financial institutions and other depositories;
  • Equivalent rights of capital, including shares and interests in companies, investment funds, trust funds, and others;
  • Accounts receivable in general;
  • Movable property and constructions in progress, including plant, machinery, equipment, etc.;
  • Motor vehicles, ships, and aircraft;
  • Rights to property, including intellectual property rights;
  • Real estate, including residential and commercial premises, land, rural property, etc.; and
  • Other assets, including income and value added tax credits.

Reportable liabilities include debts contracted with financial institutions, shareholders, partners, dividends, head office transfers, and others.

The deadline for the assets and liabilities annex is in May of each year, with the exact date depending on the ninth digit of the taxpayer's tax ID number (RUC). However, as part of a transitional provision, the deadline for the annex for 2017 is in September.

France

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France Issues Interest Rate Limits for Shareholder Loan Interest Deductions for Fiscal Years Ending between 30 June 2017 and 29 September 2017

France has published the interest rates used in determining the deductibility of interest payments to shareholders for companies whose fiscal year ends between 30 June 2017 and 29 September 2017. The portion of interest payments exceeding the following rates is generally not deductible unless documentation is provided demonstrating that the interest rate applied is at arm's length. The period in which the fiscal year ends and the applicable rates are as follows:

  • Between 30 June 2017 and 29 July 2017 - 1.83%
  • Between 30 July 2017 and 30 August 2017 - 1.80%
  • Between 31 August 2017 and 29 September 2017 - 1.78%

The interest rates are determined by the Central Bank of France based on the average annual interest rates charged by financial institutions on medium-term variable rate loans of 2 years or more.

France-Ireland

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French Tribunal Holds Google Ireland does Not have PE in France

The Paris Administrative Tribunal issued a decision on 12 July 2017 finding that Google Ireland does not have a permanent establishment in France in relation to its Adwords services (search-based advertising). The case involved the French tax authority's determination that Google Ireland had a PE in France and was liable to tax (EUR 1.12 billion) for the period 2005 to 2010 based on the activities of its French subsidiary and the dependent agent provisions of the 1968 France-Ireland tax treaty. However, the Tribunal found that Google France's activities did not constitute a PE because Google France does not have the legal authority to conclude contracts in the name of Google Ireland. Aside from the PE issue, the Tribunal also found that Google Ireland was not liable for VAT or minimum professional tax because Google France lacked the staff and IT equipment to independently perform the required services.

The French Ministry of Economy and Finance has already announced its intent to appeal.

Click the following link for a Tribunal release on the decision (French language), which includes links to the individual judgments in the case.

New Zealand

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New Zealand General Depreciation Rates Guides Update

New Zealand Inland Revenue has published an updated general depreciation rates guide, which sets out the rates for both diminishing value (DV) and straight line (SL) that apply for assets other than buildings acquired on or after 1 April 2005, and buildings acquired on or after 19 May 2005. The guide also provides a general overview of depreciation requirements. In general, taxpayers must claim depreciation, although an election can be made to treat an asset as non-depreciable. For assets acquired before 1 April 2005, a separate guide on historic depreciation rates is available.

United Kingdom

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UK Business Profits Toolkit for 2016 to 2017 Tax Year

UK HMRC has published an updated business profits toolkit for the 2016 to 2017 tax year. The toolkit is mainly aimed at helping and supporting tax agents and advisers by providing guidance on common errors that occur in relation to business profits for small and medium sized businesses. It includes a checklist of items for review, as well a description of the risk associated with each item and methods of mitigation.

Proposed Changes (4)

Denmark

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Denmark Consulting on Draft Legislation to Replace Tax Control Act

The Danish Ministry of Taxation has launched a public consultation on a draft legislative proposal as part of Legal Security Package III. The draft includes a replacement of the current Tax Control Act in order to improve clarity for taxpayers, improve administration, and strengthen measures against tax evasion. The draft is broken down into three main sections, including both new and amended rules:

  • Section I, which concerns tax return obligations, transfer pricing documentation, and other disclosures requirements;
  • Section II, which concerns taxpayer and third party disclosure requests; and
  • Section III, which concerns administrative consequences of non-compliance and criminal consequences.

One of the main areas of change is with respect to tax returns, which includes a change from a return concept to an information reporting concept for determining tax due. Rules for transfer pricing documentation and other disclosure requirements are largely a continuation of current law with some revision.

As proposed, the legislation would enter into force on 1 January 2019 with certain transitional arrangements.

Click the following link for the consultation page and the draft legislation (Danish language). The consultation runs through 11 August 2017.

European Union-Bulgaria-Cyprus-Portugal

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European Commission calls on Bulgaria, Cyprus, and Portugal to Implement Tax Ruling Exchange Rules

In its recently published July infringements package on legal action pursued against EU Member States, the European Commission has announced that it has sent reasoned opinions to Bulgaria, Cyprus, and Portugal as these Member States have failed to communicate the transposition of new measures on the automatic exchange of tax rulings between EU tax authorities (Council Directive (EU) 2015/2376). Legislation for the exchange rules is currently pending approval in the respective parliaments of Bulgaria (previous coverage) and Portugal (previous coverage). The status of the rules in Cyprus is unknown.

Ireland

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Ireland Publishes Summer Economic Statement 2017

On 12 July 2017, Ireland's Minister for Finance and Public Expenditure & Reform, Paschal Donohoe, published the Summer Economic Statement for 2017, which sets out the medium-term fiscal and economic policy, and forms the basis for the 2018 Budget due in October. According to a press release on the Economic Statement, the Government's economic strategy revolves around six key pillars:

  • Ensuring sound and sustainable public finances;
  • Managing public expenditure to ensure maximum return on taxpayers’ resources;
  • Targeted increases in public investment;
  • Reforming the tax system to ensure it is growth-friendly;
  • Ensuring inclusive growth; and
  • Facilitating access to finance, especially for SMEs.

With respect to taxation, the Economic Statement does not include any specific measures, but notes that in net terms EUR 0.22 billion is available for new taxation measures and that any tax reduction proposals will require additional discretionary measures unless compensating expenditure reductions are identified. Upcoming Tax Strategy Group papers will set out potential options for revenue increases and reductions.

Click the following link for the Summer Economic Statement 2017.

Poland

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Poland Proposes Several BEPS-Related Tax Measures

The Polish Ministry of Finance has announced draft tax legislation that includes a number measures with a focus on countering BEPS, including measures of the Anti-Tax Avoidance Directive (EU) 2016/1164 (ATAD1). Main measures include:

  • The introduction of separate tax treatment for capital gains from other income;
  • The introduction of a deduction limit equal to 30% of taxable income for net interest expense, with the excess carried forward indefinitely and certain exemptions;
  • Modification of the controlled foreign company rules to broaden their application;
  • Modification of the rules governing the functioning of tax groups (PGK);
  • The introduction of a deduction limit equal to 5% of taxable income for expenses exceeding PLN 1.2 million for advisory, legal, management, and other similar services, as well as license agreement fees; and
  • The introduction of a minimum tax in respect of taxable persons with commercial real estate of significant value (more than PLN 10 million), with a rate of 0.042% of the real estate value per month.

Click the following link for the draft legislation (Polish language), which is currently in the initial stages and is open for comment.

Treaty Changes (1)

Switzerland-France

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Switzerland and France Resolve Exchange of Information Issues

On 12 July 2017, the Swiss Federal Council announced that Switzerland and France have reiterated their commitment to effective cooperation in the area of taxes and have been able to find answers to outstanding application issues. The two countries are now in a position to pursue the exchange of information upon request in all pending and future cases effectively and in compliance with the applicable legal provisions.

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