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Proposed Changes (2)

Puerto Rico

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Puerto Rico Fiscal and Economic Growth Plan Published

On 9 September 2015, the Puerto Rico Fiscal and Economic Growth Plan was published. The plan was prepared by the Working Group for the Fiscal and Economic Recovery of Puerto Rico, which was established by Governor Alejandro García Padilla by executive order to address Puerto Rico's debt issues. The main tax-related aspects of the plan include:

  • Implementing a flatter low-rate corporate tax regime by reducing nominal corporate tax rates, eliminating inefficient corporate deductions and tax credits, and eliminating or reducing the alternative minimum tax;
  • Extending the 4% excise tax on certain purchases made by mainland (U.S.) companies for 5 years;
  • Expanding tax incentives under Act 73-2008 to apply to new companies coming to Puerto Rico, existing companies wishing to convert to new tax regime, and all firms after the expiration of their current tax grants;
  • Requesting the U.S. Congress to:
    • Amend US Internal Revenue Code to add new Section 933A to permit US-owned businesses in Puerto Rico to elect to be treated as U.S. domestic corporations (currently, Puerto Rican companies are generally treated as foreign corporations for U.S. tax purposes); and
    • Enact an economic activity tax credit for US investment in Puerto Rico designed as a targeted, cost-efficient version of former Section 936 of the US Internal Revenue Code, which allowed U.S. companies to repatriate Puerto Rican earnings effectively tax-free, but was repealed in 2005; and
  • Modernizing and streamlining administration to reduce costs and increase compliance.

Click the following link for the full Puerto Rico Fiscal and Economic Growth Plan.

Vietnam

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Vietnam Planning Thin Cap Rules

According to recent reports, Vietnam's Ministry of Finance (MoF) is planning to submit legislation to the National Assembly's Standing Committee to implement new thin capitalization rules. Currently no statutory thin capitalization rules exist, although debt limits apply for certain licensing requirements.

The MoF's plans include an initial 5:1 debt-to-equity ratio for companies in the production sector and a 4:1 ratio for all other sectors. These ratios would then be set at 4:1 and 3:1 respectively from 2019.

Treaty Changes (6)

Albania-Switzerland

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Protocol to the Tax Treaty between Albania and Switzerland Signed

On 4 September 2015, officials from Albania and Switzerland signed a protocol to the 1999 income and capital tax treaty between the two countries. The protocol is the first to amend the treaty and includes the following main changes:

  • Amends Article 2 (Taxes Covered) in regard to Albanian taxes;
  • Amends the definition of Switzerland and its competent authority in Article 3 (General Definitions) and definition of resident in Article 4 (Resident);
  • Adds a withholding tax exemption for interest paid to a pension scheme or government in Article 11 (Interest);
  • Adds an arbitration clause to Article 25 (Mutual Agreement Procedure);
  • Adds Article 26 (Exchange of Information) and amends the numbering of the following Articles accordingly;
  • Adds a new paragraph 4 to the protocol originally signed with the treaty that includes limitation on benefits provisions whereby the provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 21 (Other Income) will not apply to an item of income paid under a transaction, a part of a transaction, or series of transactions, or derived by an entity, if the main purpose of its conclusion or its establishment was to obtain the benefits of those Articles;
  • Adds a new paragraph 7 to the protocol originally signed with the treaty that includes an MFN clause regarding the withholding tax rate on royalties that applies if Albania signs an agreement with an EU/EEA Member State providing for a lower rate than provided in the Albania-Swiss treaty (5%)

The protocol will enter into force once the ratification instruments are exchanged, and will generally apply from 1 January of the year following its entry into force. For the purpose of the new arbitration clause in Article 25, the 3-year period after which a pending case may be submitted to arbitration will begin for pending cases on the date the protocol enters into force.

B Virgin Isl-Guernsey

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Protocol to the TIEA between the British Virgin Islands and Guernsey has Entered into Force

The protocol to 2013 tax information exchange agreement between the British Virgin Islands and Guernsey entered into force on 3 September 2015.The protocol, signed by Guernsey on 25 November 2014 and by the British Virgin Islands on 11 December 2014, is the first to amend the agreement. It adds Article 5A (Automatic Exchange of Information) and Article 5B (Spontaneous Exchange of Information).

Belgium-Cook Isl

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TIEA between Belgium and the Cook Islands Signed

A tax information exchange agreement Belgium and the Cook Islands was signed by Belgium on 21 August 2015 and by the Cook Islands on 8 September 2015. The agreement is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged, and will generally apply from the date of its entry into force.

Chile-OECD

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Chilean Senate Approves Ratification of Mutual Assistance Convention

On 4 September 2015, Chile's Senate Foreign Relations Committee approved for ratification the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The Convention as amended was signed by Chile on 24 October 2013. The ratification procedures must be completed and the ratification instrument deposited before the Convention enters into force.

Moldova-Romania

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Tax Treaty between Moldova and Romania under Negotiation

On 9 September 2015, officials from Moldova and Romania met for the first round of negotiations for a new tax treaty. Any resulting treaty must be finalized, signed and ratified before entering into force. Once in force and effective, the new treaty will replace the 1995 income and capital tax treaty between the two countries, which is currently in force.  

Qatar-Spain

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Tax Treaty between Qatar and Spain Signed

On 10 September 2015, officials from Qatar and Spain 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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