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Approved Changes (1)

Ireland

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Ireland Issues eBrief on Knowledge Development Box Guidance

On 11 August 2016, Irish Revenue published eBrief No. 73/2016 concerning guidance on Ireland's Knowledge Development Box, which was introduced by Finance Act 2015 and applies for fiscal years beginning on or after 1 January 2016. The Knowledge Development Box is in line with the modified nexus approach of BEPS Action 5, and provides a 50% reduction in taxable profits arising from qualifying patents, copyrighted software or IP equivalent to a patentable invention (6.25% effective tax rate).

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Knowledge Development Box

Following extensive consultation with stakeholders, practical guidance on the Knowledge Development Box (KDB) (PDF, 1.03MB) has been issued by Revenue.

Unforeseen practical issues will arise as companies implement the policies and procedures necessary to claim relief under the KDB. As practical issues are brought to Revenue's attention the guidelines can be updated, ensuring the regime remains as transparent as possible.

Queries in relation to the guidelines or the KDB regime should be addressed to Áine Hollingsworth (aholling@revenue.ie).

Proposed Changes (3)

Australia

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Australia Discussion Paper on Transfer Pricing Compliance Guideline for Offshore Marketing Hubs

On 10 August 2016, the Australian Taxation Office (ATO) published a discussion paper for public comment on a draft practical compliance guideline that sets out the ATO's compliance approach to transfer pricing issues related to offshore marketing hubs. In particular, the guideline is meant to assist taxpayers in:

  • Assessing whether their hub arrangements pose a transfer pricing risk and how they can work with the ATO to mitigate risk;
  • Understanding when the ATO may take a closer look at hub arrangements and the documentation and evidence that is expected to be prepared and readily available; and
  • Understanding related disclosure obligations.

The draft guideline has been published for consultation only, and may not be relied on for any purpose.

Click the following link for the consultation page on the ATO site.

India

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Indian Lower House Approves Capital Gains Tax Exemption for Privatization Transactions and Relaxes Requirements for Textile Employment Incentive

On 10 August 2016, India's Lok Sabha (lower house of parliament) approved the Taxation Laws (Amendment) Bill, 2016, which includes two main amendments to the Income Tax Act, 1961.

The first amendment provides for a capital gains tax exemption for public sector companies that are privatized. In particular, where a public sector company is divided with certain land and assets going to the government, the transaction would be exempt.

The second amendment relaxes the requirements for the additional deduction for employee costs for the textile sector. Currently, textile companies that employ workers for at least 240 days of the year are allowed to deduct an additional 30% of the employee costs incurred for tax purposes. With the amendment, the number of days of employment is reduced to 150 days to be eligible for the additional deduction.

The amendments will have effect from 1 April 2017, subject to approval from the Rajya Sabha (upper house).

Indonesia

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Indonesian President Announces Plans for Corporate Tax Rate Cut while Promoting New Tax Amnesty Program

According to a release from the Indonesian Cabinet, Indonesian President Joko Widodo has announced that the government is considering a cut in the corporate tax rate in order to be competitive in attracting investment, especially in relation to Singapore. Any cuts would likely be implemented in phases, with a possible initial cut from 25% to 20%, followed by a second cut to 17%.

Widodo announced the tax cut plans while speaking at an event to promote Indonesia's new tax amnesty program, which was launched July 2016 and is scheduled to end 31 March 2017. Under the program, assets that are declared, repatriated and reinvested for at least three years in Indonesia are eligible for reduced rates of 2%, 3% and 5% in the first three months, second three months and third three months respectively. For offshore assets declared but not repatriated, the rates are doubled. For SMEs, a reduced rate of 0.5% applies on declared assets up to IDR 10 billion, and a 2% rate applies for assets declared exceeding that amount.

Treaty Changes (4)

Iran-Italy

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Update - Tax Treaty between Iran and Italy

The income tax treaty between Iran and Italy was signed 19 January 2005. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Iranian income taxes on real estate, agriculture, salary, business and legal persons. It covers Italian personal income tax, corporate income tax and regional tax on productive activities (IRAP).

Withholding Tax Rate

  • Dividends - 5% if the beneficial owner is a company that owns at least 25% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 10%

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.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply in Iran from 21 March (first day of Farvardin - Iranian calendar) of the year following its entry into force and in Italy from 1 January of the year following its entry into force.

Mauritius-Korea, Rep of

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TIEA between Mauritius and South Korea Signed

On 11 August 2016, officials from Mauritius and South Korea signed a tax information exchange agreement. The agreement is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Romania-Vietnam

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Romania to Negotiate Protocol to Tax Treaty with Vietnam

On 10 August 2016, the Romanian government authorized the negotiation of a protocol to the 1995 income and capital tax treaty with Vietnam. According to an initial draft, the protocol will amend Articles 2 (Taxes Covered), 3 (General Definitions) and 13 (Capital Gains), and will replace Article 27 (Exchange of Information) to bring it in line with the OECD standard for information exchange.

The protocol will be the first to amend the treaty, and must be finalized, signed and ratified before entering into force.

Ukraine-Qatar

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Ukraine to Conclude Tax Treaty Negotiations with Qatar by the End of the Year

Ukraine's Ministry of Finance has announced that Ukraine intends to conclude negotiations for an income tax treaty with Qatar by the end of the year. 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.

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