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Worldwide Tax News

Approved Changes (4)

Brazil

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Brazilian Courts Differ in Opinion on Constitutionality of Increase of PIS/COFINS on Financial Income

On 30 August 2016, the 7th Panel of the Federal Court of the First Region issued a decision concerning the legality of the reinstatement of the levy of the Program for Social Integration contribution (PIS) and Contribution for the Financing of Social Security (COFINS) on financial income (previous coverage). Under Decree No. 8426/2015, the rates were increased from 0% to a combined rate of 4.65% effective 1 July 2015 (0.65% for PIS and 4% for COFINS).

According to the decision, the rates of PIS/COFINS may only be increased through a law, and not through a decree. As such, the increase is not in accordance with the constitutional principle of strict legality. The decision only pertains to the particular case and is otherwise not binding.

However, a similar case on the increase is being reviewed at the higher Superior Court of Justice, which reportedly is not in favor of ruling the increase unconstitutional. Whatever the Superior Court decides, it may be the final say in the matter, as Justice Rosa Weber of the Brazilian Supreme Court has issued a ruling that it is not the jurisdiction of the Supreme Court to analyze the reinstatement of PIS/COFINS.

China

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China Approves New Foreign Investment Law

China's Standing Committee of the National People's Congress reportedly approved the new Foreign Investment Law on 3 September 2016. The new law replaces current foreign investment laws, including the laws on equity joint ventures, cooperative joint ventures, and wholly foreign owned enterprises.

Overall, the new law aligns the treatment of foreign invested enterprises with that of Chinese invested enterprises, including the removal of the government pre-approval requirement, unless investing in a sector included in the negative list. However, foreign invested enterprises will be subject to new reporting requirements, including reports of initial investment and reports of any changes such as name, business scope, restructuring, etc. In general, the reports must be made within 30 days of a change.

The new law is to enter into force on 1 October 2016. Additional details will be published once available.

Denmark

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Denmark to Purchase Panama Papers Data

Denmark's Tax Minister Karsten Lauritzen has announced that the tax authority (SKAT) has been authorized to purchase data leaked as part of the "Panama Papers" scandal to be used to open or further tax evasion investigations into Danish taxpayers. The data will be purchased from an anonymous source and includes information on 500 to 600 Danish taxpayers. The amount to be paid has not been disclosed, but is reportedly USD 1.3 to 1.8 million. While acknowledging the controversy associated with purchasing leaked data, Lauritzen said the government agreed that it was necessary to obtain the data to address tax evasion issues.

Switzerland-Netherlands

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Swiss Federal Court Overturns Lower Court Decision Rejecting Dutch Request for Bank Account Holder Details

On 12 September, the Swiss Federal Court issued a release announcing that an earlier lower court decision rejecting a Dutch financial account information request has been overturned.

That earlier decision concerned a 2015 administrative assistance request from the Dutch tax authorities for information on accounts of Dutch residents held at UBS Switzerland AG. That request was made as a collective (group) request for information on the name and addresses of the UBS customers concerned and their account details. The assistance was initially granted by the Swiss Federal Tax Administration (FTA), but was challenged by one of the Dutch residents on the grounds that because the request did not specify the names of the account holders, the request amounted to a "fishing expedition" and not allowed under the Dutch-Swiss tax treaty. The lower court agreed, and the request was rejected (just for the account holders that challenged the request).

The lower court decision was appealed by the FTA and the appeal was upheld by the Federal Court. According to the release, administrative assistance may be granted under the Dutch-Swiss tax treaty without specific names being given, provided that the request contains sufficient information to identify the persons concerned. In this case, there was sufficient information to identify the persons concerned; therefore the request did not amount to a fishing expedition and the request is allowed.

Click the following link for the release (French language).

Proposed Changes (1)

Russia

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Russia Adds Master and Local File Requirements to Draft Transfer Pricing Documentation Legislation

On 6 September 2016, Russia's Ministry of Finance published a revised version of the draft legislation for the introduction of the transfer pricing documentation requirements based on BEPS Action 13. In addition to Country-by-Country reporting requirements as included in the initial draft (previous coverage), the revised draft also includes Master and Local file requirements.

CbC Reporting Requirements

The CbC reporting requirements are generally unchanged from the initial draft, and apply for MNE groups meeting a consolidated group revenue threshold of RUB 50 billion in the previous year. The requirements apply for fiscal years beginning on or after 1 January 2017, and voluntary filing will be available for prior years.

One change is that the notice of participation in an MNE group must be submitted to the Russian tax authorities within three months following the end of the group's fiscal year, instead of 20 September as in the initial draft. The notice is to be submitted by the ultimate or surrogate parent if resident in Russia. If not resident in Russia, each Russian constituent entity must submit the notice or one entity may be designated to submit on behalf of the others.

Master and Local File

The new Master file (global documentation) and Local file (national documentation) requirements apply for Russian resident entities that are a member of an MNE group meeting the same RUB 50 million threshold for CbC reports. The Master file must be prepared if the ultimate or surrogate parent is resident in Russia. The Local file must be prepared by all constituent entities in Russia that have transactions with non-resident related parties.

The content of the Master and Local files is generally in line with the Action 13 guidelines. When required, the Master and Local file must be submitted within three months of request, but no earlier than 15 months after the end of the fiscal year concerned. Such a request may only be made as part of transfer pricing audit or in connection with the request of a competent authority of a foreign state in accordance with an exchange agreement.

Failing to submit when required or submitting incorrect information will result in a penalty of RUB 100,000 for each document type (same for CbC).

Click the following link for the revised transfer pricing documentation legislation (Russian language).

Treaty Changes (4)

Botswana-Singapore

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Tax Treaty between Botswana and Singapore to be Negotiated

According to recent reports, officials from Botswana and Singapore have agreed to begin negotiations for an income tax treaty. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Mexico-Vietnam

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Tax Treaty between Mexico and Vietnam under Negotiation

On 7 September 2016, officials from Mexico and Vietnam met and agreed to accelerate negotiations for an income tax treaty. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Norway-Zambia

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Norway Approves New Tax Treaty with Zambia

On 9 September 2016, the Norwegian government approved the pending income tax treaty with Zambia. The treaty, signed 17 December 2015, will enter into force once the ratification instruments are exchange, and will apply from 1 January of the year following its entry into force. Once in force and effective, the new treaty will replace the 1971 tax treaty between the two countries.

Click the following link for previous coverage of the treaty.

St. Vincent-Samoa-Uruguay-OECD

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Saint Vincent and the Grenadines, Samoa and Uruguay Deposit Ratification Instruments for Mutual Assistance Convention

On 31 August 2016, Saint Vincent and the Grenadines, Samoa and Uruguay deposited their ratification instruments for 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 both Saint Vincent and the Grenadines and Samoa on 25 August 2016 and by Uruguay on 1 June 2016.

According to the OECD overview of signatories to the convention, the convention will enter into force in the respective countries on 1 December 2016.

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