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Worldwide Tax News

Approved Changes (4)

Hungary

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Hungarian Parliament Adopts 2017 Budget Measures Including IP Regime Amendments and Other Changes

On 7 June 2016, the Hungarian parliament adopted legislation including the 2017 Budget Measures. One of the main measures is the amendment of the country's IP regime to bring it in line with the modified nexus approach as developed under Action 5 of the OECD BEPS Project (previous coverage). The changes apply from 1 July 2016, with royalty income from IP owned prior to that date generally grandfathered to 30 June 2021.

Other changes include:

  • The general anti avoidance rules are amended so that the related expenses, costs and benefits of a transaction may not be utilized if the main purpose of the transactions was to obtain a tax advantage (under current rules a tax advantage should be the only purpose);
  • The value added tax (VAT) threshold for monthly VAT return filing and certain other reporting obligations is reduced from HUF 1 million to HUF 100,000;
  • The VAT rates for certain goods and services are reduced:
    • Rate for restaurant/catering services reduced to 18% from 1 January 2017 and 5% from 1 January 2018;
    • Rate for certain food stuffs, including eggs, milk, and poultry reduced to 5%;
    • Rate for internet access services reduced to 18%;
  • Minimum initial capital and shareholder requirements for real estate investment trust (REIT) status are relaxed (REITs are eligible for corporate and local businesses tax exemptions and other benefits);
  • Taxpayer's are allowed to use excess R&D expenses to offset social security contributions subject to certain requirements; and
  • The bank tax rate is set at 0.21% for 2017 and 0.15% for 2018.

The legislation must be signed into law by the president and published in the official gazette before entering into force. The changes will generally apply from 1 January 2017, aside from the above-mentioned IP regime changes.

New Zealand

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New Zealand Issues Special Report on New Residential Land Withholding Tax

New Zealand Inland Revenue's Policy and Strategy group has issued a special report on the new Residential Land Withholding Tax (RLWT) introduced as part of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act, which was approved on 10 May 2016 and received Royal assent on 13 May. The RLWT applies on residential property sales by offshore individuals and companies within two years of acquisition. The RLWT amount is generally the lower of 10% of the current purchase price or 33% for individual sellers and 28% for company sellers.

Click the following link for the special report on the Inland Revenue Tax Policy website.

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Upcoming OECD Webcast on BEPS Developments and Tax Transparency

The OECD will hold a webcast on 16 June 2016 to provide updates on recent and upcoming developments, including:

  • Developments since the delivery of the BEPS package in October 2015, and the upcoming inaugural meeting of the new BEPS inclusive framework; and
  • The impact of the Panama Papers, and progress towards a global level playing field through enhanced transparency.

Click the following link to the OECD website to register for the webcast.

Singapore

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Singapore Publishes GST e-Tax Guides for the Insurance Industry and the Approved Import GST Suspension Scheme

The Inland Revenue Authority of Singapore (IRAS) has recently published e-Tax guides on Goods and Services Tax (GST), including:

The IRAS regularly publishes new and updated e-Tax guides to provide clarity on certain issues or reflect changes in tax rules.

Proposed Changes (2)

Costa Rica

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Costa Rica Publishes Draft Rules for Annual Transfer Pricing Declaration

On 6 June 2016, the Costa Rican tax authority (DGT) published a draft resolution introducing new rules for an annual transfer pricing declaration requirement. The rules will apply for taxpayers engaged in cross border related party transactions that are classified as large national or territorial taxpayers or operate under the free trade zone regime. The transfer pricing declaration includes six main sections covering:

  • Details of the taxpayer and the period to which the declaration relates;
  • General transaction information, the related party, transfer pricing methods used, etc.;
  • Details of transactions involving tangible assets;
  • Details of transactions involving intangible assets;
  • Details of financing transactions; and
  • Details of other specified service transactions.

The information included in the declaration must correspond to information included in the taxpayer's transfer pricing study.

The first annual transfer pricing declaration will be due by the last business day of June 2017, and will be submitted electronically. The Penalty for failing to submit information will apply for failure to submit the declaration, which is equal to 2% of the taxpayer's gross income in the previous year, with a minimum penalty of 10 base salaries and a maximum of 100 base salaries (2016 bases salary equal to CRC 424,200, ~USD 790).

Click the following link for the draft resolution (Spanish language).

Pakistan

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Pakistan Includes Master File, Local File and CbC Reporting in Finance Bill for 2016/2017

Pakistan has included measures in the Finance Bill for 2016/2017 for the introduction of three-tiered documentation requirements developed as part of Action 13 of the OECD BEPS Project. The requirements include that any taxpayer that has entered into related party transactions is to maintain a Master file, Local file and other documentation containing information as may be prescribed, as well as a Country-by-Country (CbC) report, where applicable. Additional details of the requirements as included in the Finance Bill are limited, and include only that documentation is to be submitted within 30 days if required by the Commissioner, with a possible extension of up to 45 Days.

Click the following link for the Finance Bill. Additional details of the new requirements will be published once available.

Treaty Changes (4)

Aruba-Czech Rep

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TIEA between Aruba and the Czech Republic to Enter into Force

The tax information exchange agreement between Aruba and the Czech Republic will enter into force on 1 August 2016. The agreement, signed 29 June 2015, is the first of its kind between the two countries and is in line with the OECD standard for information exchange. It applies for criminal tax matters on the date of its entry into force, and for other matters for tax periods beginning on or after that date.

Azerbaijan-Malta

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Update - Malta Ratifies Tax Treaty with Azerbaijan

On 10 June 2016, Malta issued the legal notice containing the order for the ratification of the pending income tax treaty with Azerbaijan. The treaty, signed 29 April 2016, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Azerbaijani tax on income of physical persons and tax on profit of legal persons. It covers Malta income tax.

Service PE

The treaty includes provisions 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 -
    • 8% if paid from Azerbaijan to a beneficial owner in Malta
    • Limited to the amount of Malta tax on the profits out of which the dividends are paid if paid from Malta to a beneficial owner in Azerbaijan
  • Interest - 8%
  • Royalties - 8%

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;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or other corporate rights deriving more than 50% of their value directly or indirectly from immovable property situated 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.

Entry into Force and Effect

The 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.

India-Mauritius

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Indian Tax Authority Establishes Working Group to Examine Impact of Mauritius Tax Treaty Revisions

On 13 June 2016, India's Central Board of Direct Taxes (CBDT) issued a press release announcing that a working group has been established to examine the impact of the revisions made by the recently signed protocol to the 1982 income and capital tax treaty with Mauritius.

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Sub: India-Mauritius Double Taxation Avoidance Agreement and related issues - Working Group to examine consequential issues arising out of amendment - reg

With a view to examine the consequential issues arising out of amendments to India - Mauritius Double Taxation Avoidance Convention and related issues, a Working Group headed by Joint Secretary (FT&TR-II), CBDT and comprising of departmental officers and representatives of SEBI, custodians, brokerage firms and fund managers has been constituted.

The Working Group will submit its report to the CBDT within 3 months, after examining the relevant issues.

Turkmenistan-United Kingdom

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Tax Treaty between Turkmenistan and the UK Signed

On 10 June 2016, officials from Turkmenistan and the UK signed an income and capital tax treaty. The treaty is the first of its kind directly between the two countries, and will enter into force after the ratification instruments are exchanged. Once in force and effective, it will replace the 1985 tax treaty between the UK and the former Soviet Union as applied by Turkmenistan. The UK does not generally apply the 1985 treaty.

Additional details will be published once available.

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