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Approved Changes (6)

Australia

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Australia Consults on Tax incentives for Early Stage Investors

The Australian Taxation Office (ATO) has launched a consultation on the tax incentives for investments in Australian early stage innovation companies. The incentives include a non-refundable carry forward tax offset based on the investment amount and modified capital gains tax treatment, under which capital gains on qualifying shares may be disregarded. The incentives were introduced as part of the Tax Laws Amendment (Tax Incentives for Innovation) Act 2016 (previous coverage) and are generally available from 1 July 2016.

The ATO consultation is seeking feedback on three discussion papers on technical issues for the application of the incentives, including the subsidiary test, the expenditure test, and the meaning of incurred expenses.

Click the following link for the consultation page. Submissions are due by 10 April 2017.

Brazil

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Brazil Announces Deadline for Transmission of Information on Foreign Financial Assets Disclosed under RERCT Regime

Brazil's Federal Revenue Department has announced that information on non-repatriated financial assets disclosed under the Currency and Tax Compliance Special Regime (RERCT) must be transmitted from 2 May 2017 to 30 June 2017. The RERCT regime provides for a 15% tax rate plus 15% penalty for disclosed assets that were unreported up to 31 December 2014, subject to a number of conditions, including that the taxpayer authorizes the relevant foreign financial institutions to transmit information on the balance of the disclosed foreign financial assets.

Guatemala

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Guatemala Updates Guidance on Related Party Disclosures and Transfer Pricing Studies

On 8 March 2017 The Guatemalan tax authority (SAT) published an update to its transfer pricing guidance page, which includes guidance on the submission of the annual related party transactions disclosure annex with the tax return and guidance for transfer pricing studies. The transfer pricing study guidance covers the form, content, and analysis required for correct transfer pricing. The transfer pricing study must be submitted on a non-rewritable CD in PDF format, and must include:

  • Information on the taxpayer's group, including:
    • The organizational, legal, and operational structure of the group;
    • A list of all entities of the multinational group by fiscal jurisdiction and main economic activity;
    • A general description of  the functions and risks of the group, including information on the supply chain for top products/services, intragroup service agreements,  brief analysis on contribution to value creation, and description of any restructurings;
    • Details of group intangible assets, including ownership, strategy, and agreements;
    • A general description of group financing;
    • A general description of the group's transfer pricing policy;
    • List and description of unilateral advance pricing agreements; and
    • A consolidated annual financial report for the group.
  • Information on the taxpayer and transactions analysis, including:
    • Details of the taxpayer, including a organizational chart, detailed description of functions, main competitors, operations with key customers and suppliers, and a list of related party transactions; and
    • A detailed comparability and economic analysis per transaction, including details on selected method, comparables, functional analysis, business strategies, etc.

The overall requirements are not significantly changed in the latest guidance, although certain elements have been added based on updated OECD transfer pricing guidance resulting from BEPS Action 13 (technical reference is made to the OECD guidance). One item in particular though, is the requirement to provide a list of all group entities by jurisdiction and their main economic activity, which based on Annex 3 to the guidelines, is practically identical to table 2 of a Country-by-Country (CbC) report. However, CbC reporting requirements are not provided for in the guidelines and Guatemala has not indicated its plan, if any, for the adoption of CbC reporting requirements.

Click the following link for the transfer pricing guidance page (Spanish language).

Iceland

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Iceland Lifts Capital Controls

On 14 March 2017, the Icelandic government took the final steps to remove all capital controls, which were put in place as a result of the 2008 financial crisis. According a release from the Icelandic government, capital flows to and from Iceland are now unrestricted apart from restrictions to carry trade and derivatives denominated in ISK.

Switzerland-France

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Swiss Federal Supreme Court Overturns Lower Court Judgment Rejecting French Request for Bank Account Holder Details

On 13 March 2017, a judgment of the Swiss Federal Supreme Court was published concerning an administrative assistance request from the French tax authority. The case involved an initial request in December 2012 and a follow-up request in December 2013 for a list of taxpayers that are subject to investigation involving evasion and undeclared accounts with an unnamed bank (reportedly UBS). This investigation and the 2013 request for assistance were initiated based on a list of clients that had been illegally obtained by an employee of the bank and provided to the French authorities.

The request for administrative assistance was initially granted, but subsequently appealed by one of the account holders. In a judgment issued in September 2015, the Federal Administrative Court accepted the appeal and rejected the 2013 assistance request. One of the main reasons for the rejection was that a request for assistance cannot be based on bank data obtained illegally and then handed over or sold to a State.

This was then appealed to the Federal Supreme Court, which accepted the appeal and overturned the lower court judgment. The Court found that the resolution for the issue requires an interpretation of the French-Swiss tax treaty and its information exchange provisions (Article 28). In particular the Court notes that Article 28 does not reference the circumstances that led to a Contracting State's request for information, and therefore does not allow a request for administrative assistance to be refused on the basis of the manner in which the requesting State obtained the data leading to the assistance application. Further, the Court found that the request is not based on information obtained by acts punishable under Swiss law and therefore the case does not satisfy the conditions for refusing to provide assistance. Lastly, the Court examined whether there was any basis for calling into question the good faith of France, which the Court found there was not.

Click the following link for the full text of the Federal Supreme Court judgment (French language).

Taiwan

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Taiwan Clarifies VAT Refund Eligibility for Foreign Entities Engaged in Temporary Business Activities in Taiwan

The Taiwan Ministry of Finance has published a release clarifying the eligibility of foreign entities to claim a refund of value added tax (VAT) paid while engaged in exhibitions or temporary business activities in Taiwan. According to the release, foreign entities may be eligible for a VAT refund if:

  • Their total VAT incurred in Taiwan is at least TWD 5,000 within one fiscal year;
  • They obtain and preserve documentary evidence for the purchases made;
  • They have no fixed place of business within the territory of Taiwan;
  • Their business registration or similar registration has been approved by the competent authority-in-charge in the respective country (region) - condition not applicable if registration not required under the law of the respective country (region) or no business tax or similar is levied in the country (region); and
  • Reciprocal treatment or exemption from VAT or similar taxes is provided by the respective country (region) to Taiwan entities performing similar activities.

With respect to the reciprocal treatment conditions, qualifying countries (regions) include: Australia, Austria, Bahrain, Belgium, Finland, France, Germany, Hong Kong, Ireland, Israel, Kuwait, Liechtenstein, Macau, the Netherlands, Qatar, Saudi Arabia, Slovenia, Switzerland, and the United Kingdom.

Additional information, including refund application forms and instructions, can be found on the English-language Exhibitor's VAT Refund System page on the Taiwan eTax portal website.

Treaty Changes (3)

Ghana-Mauritius

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Tax Treaty between Ghana and Mauritius Signed

On 11 March 2017, officials from Ghana and Mauritius 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.

Qatar-Turkey

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Qatar Ratifies Tax Treaty with Turkey

On 8 March 2017, Qatar's Emir Sheikh Tamim bin Hamad Al Thani approved for ratification the pending income tax treaty with Turkey (previous coverage). The treaty was signed 18 December 2016, and once in force and effective will replace the 2001 tax treaty between the two countries. The new treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.

Singapore-Belgium-Denmark-Luxembourg

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Singapore Signs Agreements for Automatic Exchange of Financial Account Information with Belgium, Denmark, and Luxembourg

According to an update from the Inland Revenue Authority of Singapore, competent authority agreements for the automatic exchange of financial account information were signed with Belgium and Luxembourg on 10 March 2017 and with Denmark on 13 March 2017. Under the agreements, each country will automatically exchange information on accounts held in the respective country by tax residents of the other country based on the OECD Common Reporting Standard (CRS). The automatic exchange is to begin by September 2018 for information collected on the 2017 reporting year.

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