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Approved Changes (6)

Belgium

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Belgium Clarifies Non-Deductibility of Unreported Payments to Tax Havens

On 3 September 2015, The Belgian Federal Public Service (SPF) Finance issued an addendum to Circular AFZ 13/2010 clarifying that the non-deductibility of unreported payment to residents of tax havens does not apply in cases where the EU rules on the free movement of capital and the non-discrimination provisions of an applicable tax agreement apply. This refers to the rule in effect from 2010, that direct or indirect payments to tax havens must be reported in the annual tax return when such payments amount to at least EUR 100,000 during the relevant taxable period. If not reported, the payments are not deductible for tax purposes.

For the purpose of the non-deductibility limitation, tax havens generally include jurisdictions found not in compliance with the OECD standard for information exchange by the Global Forum on Transparency and Exchange of Information for Tax Purposes, and jurisdictions with a nominal corporate tax rate below 10%.

Egypt

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Egypt Introduces Sales Tax Changes to Prepare for Transition to VAT

On 5 September 2015, Egypt's Minister of Finance announced changes to the country's sales tax (GST) regime as part of a transition to a value added tax (VAT) regime. The changes include:

  • Allowing a full deduction of input sales tax;
  • Increasing the registration threshold to a unified threshold of EGP 500,000;
  • Simplifying and unifying the sales tax rates, and exempting a number of essential goods;
  • Introducing of a sales tax cash lottery to promote taxpayer compliance; and
  • Introducing a sales tax withholding requirement on certain payments to ensure collection and equal treatment of registered and non-registered taxpayers.

The drafting of VAT legislation was initially announced in April 2014 (previous coverage), and is expected to be introduced in October.

Ireland

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Irish Revenue Adds Unit Trusts and Offshore Funds Tax Manual Sections

On 10 September 2015, Irish Revenue published eBrief No. 87/15, announcing the addition of two new manuals concerning Unit Trusts and Offshore Funds.

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Unit Trusts and Offshore Funds - Sections 731-747G (Part 27)

Two new manuals - Part 27-02-01 (PDF, 75.4KB) and Part 27-04-01 (PDF, 100KB0 - have been inserted into the Tax and Duty Manual (TDM) system.

Part 27 of the Taxes Consolidation Act (TCA) 1997 deals with the taxation of Unit Trusts and Offshore Funds.

Chapter 2 of Part 27 provides for the tax treatment of income and gains from investments in Distributing and non-Distributing Offshore Funds.

Chapter 4 of Part 27 provides for the taxation, and return, of income and gains from investments in certain Offshore Funds.

The Manuals render obsolete the "Offshore Funds Legislation" article in Tax Briefing - Issue 65.

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OECD Planning to Publish Final BEPS Reports on 5 October

According to the OECD website, the final reports for all Action items of the OECD/G20 BEPS Project will be published and made available online on 5 October 2015. The reports and links where they will be made available are as follows.

Addressing the Tax Challenges of the Digital Economy, Action 1 - 2015 Final Report

Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 - 2015 Final Report

Designing Effective Controlled Foreign Company Rules, Action 3 - 2015 Final Report

Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 - 2015 Final Report

Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report

Preventing the Granting of Treaty Benefits in Inappropriate Circumstances, Action 6 - 2015 Final Report

Preventing the Artificial Avoidance of Permanent Establishment Status, Action 7 - 2015 Final Report

Aligning Transfer Pricing Outcomes with Value Creation, Actions 8-10 - 2015 Final Reports

Measuring and Monitoring BEPS, Action 11 - 2015 Final Report

Mandatory Disclosure Rules, Action 12 - 2015 Final Report

Transfer Pricing Documentation and Country-by-Country Reporting, Action 13 - 2015 Final Report

Making Dispute Resolution Mechanisms More Effective, Action 14 - 2015 Final Report

Developing a Multilateral Instrument to Modify Bilateral Tax Treaties, Action 15 -2015 Final Report

Thailand

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Thai Cabinet Approves Measures to Support SMEs Including Temporary Tax Rate Cut

On 8 September 2015, the Thai Cabinet approved a financial and fiscal stimulus scheme to support SMEs. Two of the main measures include a temporary cut in the corporate tax rate to 10% and a tax holiday incentive for new start-ups in certain industries.

The 10% reduced rate applies for two consecutive tax periods: the period starting 1 January 2015 and the period ending 31 December 2016. Income up to THB 300,000 remains exempt as per the standard SME regime.

The tax holiday is a 5-year corporate tax exemption for SME start-ups investing in targeted innovation and technology industries. The holiday applies for new SMEs that register from 1 October 2015 to 31 December 2016.

Qualifying SMEs are those with paid up capital not exceeding THB 5 million and annual revenue not exceeding THB 30 million.

United States

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U.S. IRS Publishes International Practice Units on Liquidation of a Foreign Corporation and Accounting for Intangibles and Services Associated with Tangible Property

The U.S. IRS recently published two international practice units, including:

International practice units are developed by the Large Business and International Division of the IRS to provide staff with explanations of general international tax concepts as well as information about specific transaction types. They are not an official pronouncement of law, and cannot be used, cited or relied upon as such.

Click the following link for the International Practice Units page on the IRS website.

Proposed Changes (1)

Slovenia

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Slovenia Proposes New APA rules and other Tax Procedures Amendments

On 28 August 2015, the Slovenian Ministry of Finance issued proposed amendments to the law on tax procedures. One of the main proposals is the introduction of a process for negotiating advance pricing agreements (APA), which are currently not available in Slovenia. Under the proposal, taxpayers would be able to submit a request for negotiation of a unilateral, bilateral or multilateral APA. The tax authorities would be required to respond as to whether a request is accepted within 30 days of receipt.

Other proposals include measures to simplify tax compliance and collection, implement EU Directive 2014/107 amending the Mutual Assistance Directive 2011/16/EU, and increase transparency in the tax system.

Treaty Changes (3)

Albania-Germany

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SSA between Albania and Germany Signed

On 8 September 2015, officials from Albania and Germany signed a social security agreement. The agreement is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Netherlands-Curacao

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Dutch Lower House Approves Tax Arrangement with Curaçao

On 10 September 2015, the Dutch lower house of parliament approved for ratification the pending income, inheritance and gift tax arrangement with Curaçao. Once in force and effective, the arrangement will replace the 1964 tax arrangement for the Kingdom of the Netherlands in respect of Curaçao and the Netherlands.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital subject to certain conditions; otherwise 15%
  • Interest - 0%
  • Royalties - 0%

The arrangement will enter into force on the first day of the second month after it is published in the Gazette, and will apply from 1 January of the year following its entry into force. Additional details will be published once available.

Spain-Uzbekistan

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Tax Treaty between Spain and Uzbekistan to Enter into Force

The income and capital tax treaty between Spain and Uzbekistan will enter into force on 19 September 2015. The treaty, signed 8 July 2013, is the first of its kind signed between the two countries, although the 1985 tax treaty between Spain and the former Soviet Union had applied up to 20 July 2010.

Taxes Covered

The treaty covers Spanish individual income tax, corporation tax, non-resident income tax, capital tax, and local taxes on income and capital. It covers Uzbekistan profits tax on legal persons, individual income tax and property tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 5%
  • 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;
  • 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 shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State; and
  • Gains from the alienation of shares or other rights, which directly or indirectly entitle the owner of such shares or rights to the enjoyment of 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.

Limitation on Benefits

A protocol to the treaty, signed the same date, includes the provision that the provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid was to take advantage of those Articles by means of that creation or assignment.

Effective Date

The treaty applies from the date of its entry into force, 19 September 2015.

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