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Worldwide Tax News

Approved Changes (3)

Belarus

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Belarus Provides Tax Exemption for Corporate Bonds

On 3 March 2016, Belarus President Alexander Lukashenka signed Decree No.85, which provides for a corporate income tax exemption on income derived from transactions that involve qualifying corporate bonds issued by legal entities resident in Belarus. The Edict also provides for a withholding tax exemption on such income derived by non-residents without a permanent establishment in Belarus. The decree entered into force on 6 March 2016, and applies for corporate bonds issued between 1 January 2016 and 31 December 2017.

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OECD Publishes Peer Review Reports on Transparency and Information Exchange for 10 Jurisdictions

On 14 March 2016, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes published new peer review reports for 10 jurisdictions. The reports and their results are as follows:

The reports are produced as part of a two-phase review process for compliance with the international standard for information exchange. The Phase 1 report includes an evaluation of a jurisdiction's legal and regulatory framework for transparency and exchange of information, and provides recommendations for improvement. Jurisdictions deemed to have a sufficient framework in place move on to Phase 2, which includes an evaluation of the actual implementation of the standard for information exchange, with a compliance rating given along with recommendations for improvement. The compliance ratings include Non-Compliant, Partially Compliant, Largely Compliant or Compliant.

Click the following link for an overview of the compliance ratings provided for the 28 jurisdictions that have only completed Phase 1 and the 94 jurisdictions that have completed Phase 2.

United States

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U.S. Interest Rates on Overpaid and Underpaid Tax Remain Unchanged for Q2 2016

On 14 March 2016, the IRS announced that the interest rates for overpaid and underpaid tax will not be changed for the second quarter of the year beginning 1 April 2016. The rates are 3% for both underpayment and overpayment by individuals, and 2% and 3% for corporate overpayments and underpayments respectively.

The rate for a corporate overpayments exceeding USD 10,000 in a tax period will remain 0.5% on the portion exceeding that amount, and the rate for large corporate underpayments exceeding USD 100,000 will remain at 5%.

Proposed Changes (3)

Estonia

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Estonia to Adopt Amendments to EU Parent-Subsidiary Directive Concerning Hybrid Mismatches and Anti Abuse

The Estonian government has recently approved draft legislation to amend the Income Tax Act based on amendments made to the EU Parent-Subsidiary Directive in 2014 and 2015 concerning hybrid mismatches and anti-avoidance provisions. The proposed amendments include that:

  • The tax exemption for dividends received from a subsidiary in another EU Member State will not apply if the dividend payments are treated as deductible for the subsidiary; and
  • The tax exemption for dividends or other profit distributions would not apply if a transaction or series of transactions are not genuine (main purpose or one of the main purposes is obtaining a tax advantage).

The draft legislation must now be adopted by parliament. If adopted, the amendments would enter into force on 1 September 2016.

European Union

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EU Considering Relaxation of Restrictions on Reduced VAT Rates

The European Commission is reportedly close to finalizing a proposal that would relax restrictions on reduced value added tax rates levied in individual EU Member States. The proposed changes are to include abolishing the minimum reduced VAT rate limit of 5% and relaxing some restrictions on what supplies may be subject to reduced VAT rates as provided for in the EU VAT Directive.

Ireland

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Ireland Finalizing Plans to Implement Formal APA Program

On 11 March 2016, Irish Revenue Assistant Secretary Eamonn O’Dea announced that Ireland's Office of the Revenue Commissioners is in the process of finalizing plans for the implementation of a formal bilateral advanced pricing agreement (APA) program. Once finalized, the program will provide for bilateral APAs with terms of three to five years.

In the past, the Irish Revenue Commissioners have generally been willing to enter into APAs on an ad-hoc basis where treaty partners are involved. However, with the expected influx of transfer pricing disputes resulting from the implementation of measures from the OECD BEPS Project, a formal Irish APA program is seen as needed.

Guidance on the program is to be issued in June 2016.

Treaty Changes (3)

Cyprus-Kuwait

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Tax Treaty between Cyprus and Kuwait has Entered into Force

According to a recent update from the Cyprus Ministry of Finance, the new income tax treaty with Kuwait entered into force on 30 August 2013. The treaty, signed 5 October 2010, replaces the 1984 tax treaty between the two countries.

Taxes Covered

The treaty covers Cyprus income tax, corporate income tax, special contribution for the Defense of the Republic, and capital gains tax. It covers the following Kuwaiti taxes:

  • Corporate income tax;
  • The contribution from the net profits of the Kuwaiti shareholding companies payable to the Kuwait Foundation for Advancement of Science (KFAS);
  • The Zakat; and
  • The tax subjected according to the supporting of national employee law

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if 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 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 5%

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; and
  • 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 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.

Effective Date

The treaty is effective from 1 January 2014. The 1984 tax treaty between the two countries was terminated on that date.

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Mauritius Publishes Update on Tax Treaty/TIEA Negotiations Status

The Mauritius Revenue Authority has published an update on the status of ongoing negotiations for tax treaties and tax information exchange agreements (TIEAs). All the treaties/TIEAs would be the first of their kind between Mauritius and the respective jurisdictions.

Tax Treaties

Treaties awaiting signature include treaties with Burkina Faso, Cape Verde, Ghana and Jersey.

Treaties still under negotiation include treaties with Algeria, Canada, Czech Republic, Greece, Hong Kong, Lesotho, Montenegro, North Sudan, Portugal, Republic of Iran, Malawi, Saudi Arabia, Spain, St. Kitts & Nevis, Tanzania, Vietnam and Yemen.

TIEAs

TIEAs awaiting signature include TIEAs with Argentina, Greece, Isle of Man and Korea.

No other TIEAs are currently under negotiation.

Turkey-Ukraine

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Protocol to the Tax Treaty between Turkey and Ukraine under Negotiation

According to recent reports, negotiations are underway for a protocol to update the 1996 income and capital tax treaty between Turkey and Ukraine. Any resulting protocol would be the first to amend the treaty, and must be finalized, signed and ratified before entering into force.

Details of the amendments will be published once available.

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