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Approved Changes (2)

Costa Rica

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Costa Rica Publishes New Annual Transfer Pricing Declaration Requirements in Official Gazette

On 13 September 2016, Resolution N° DGT-R-44-2016 was published in Costa Rica's Official Gazette. The resolution sets out the requirements for the new transfer pricing declaration, which must be submitted annually by certain taxpayers.

Affected Taxpayers

The annual declaration requirements apply for:

  • Large national or territorial taxpayers engaged in cross border related party transactions; and
  • Taxpayers operating under the free trade zone regime established by Law 7210 of 1990.

Status as a large taxpayer depends on certain conditions, which include meeting a threshold of CRC 40 billion (~USD 72.6 million) in gross income or average total assets in the previous three years for large national taxpayers and half those amounts for large territorial taxpayers. A taxpayer may also be given large taxpayer status based on the amount of tax paid or if the tax authority deems that the taxpayer is of fiscal interest.

Declaration Content

The transfer pricing declaration includes six main sections that cover:

  • Identification 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.

Due Date and Penalties

When required, the declaration must be submitted electronically by the last working day of June following the close of the fiscal year concerned. For the first submission, which is due June 2017, separate declarations must be submitted for both 2015 and 2016.

Failing to submit the declaration will result in the penalty that applies for failing to submit information, 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 base salary equal to CRC 424,200, ~USD 770).

Click the following link for the 13 September issue of the Official Gazette (Spanish language). Resolution N° DGT-R-44-2016 begins on page 95, and includes the basic declaration form and instructions.

Egypt

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Update - Egypt's New VAT Law Ratified and Published

Law No. 67 for Egypt's new value added tax (VAT) regime has been ratified by the president and published in the Official Gazette on 7 September 2016. The main aspects of the new regime, which entered into force 8 September, are summarized as follows.

VAT Rates

  • The standard VAT rate is 13% for the year ending 30 June 2017, and will be 14% from 1 July 2017;
  • A 5% reduced rate applies for machinery and equipment used for producing goods or rendering services;
  • A zero-rate applies for exports, subject to certain conditions to be published at a later date; and
  • Several goods and services are listed as exempt, including basic commodities, banking services, medicines and health services, education and research services, free broadcast radio and television, and sale/lease of real estate.

VAT Registration and Returns

All natural persons and legal entities are required to register for VAT if their gross sales of both taxable and exempt goods and services equal or exceed EGP 500,000 (~USD 56,000) in the previous 12-month period. If the threshold is met, the taxpayer must register for VAT within 30 days of meeting the threshold. In determining if the requirement to register applies, sales before the law entered into force are included.

When registered, the tax period is monthly, with VAT returns due within two months following the end of each period even if no taxable sales were made. Failure to file by the deadline may result in a deemed assessment from the tax authorities and late payment will result in a penalty of 1.5% of the unpaid amount per month.

Non-resident Suppliers

Supplies made by non-resident suppliers are subject to VAT. When supplies are made to an Egyptian resident not registered for VAT, the non-resident supplier is required to appoint a tax representative or agent in Egypt to fulfill the VAT obligations. If the non-resident does not appoint a representative or agent, the Egyptian resident is required to fulfill the VAT obligations on the supply, but retains the right to seek reimbursement from the non-resident supplier.

When supplies are made to an Egyptian resident that is registered for VAT, the Egyptian resident is generally responsible for fulfilling the VAT obligation, unless the non-resident has appointed a representative or agent for VAT purposes. Where the Egyptian resident has fulfilled the VAT obligations, an input deduction is generally allowed for the VAT paid on the supply.

Proposed Changes (1)

United States-European Union

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U.S. Treasury Secretary Lew Says EU State Aid Investigations Highlight Need for U.S. Tax Reform

In an op-ed piece published 13 September 2016, U.S. Treasury Secretary Jacob Lew says that there is a growing bipartisan consensus on the need to reform the U.S. business tax system, and that the European Commission’s State aid investigations have further highlighted the issue and created additional urgency. According to Lew, the Commission's actions undermine the overall business climate in Europe and threaten the U.S. corporate tax base since U.S. companies could claim foreign tax credits for any tax-related payments to EU Member States. In particular, Lew notes the recent State aid decision requiring Ireland to recover up to EUR 13 billion in unpaid taxes from Apple (previous coverage).

To address the issues of the current U.S. tax system, Lew is urging Congress to act on President Obama’s proposed plan for business tax reform and infrastructure investment, which according to Lew would:

  • Create an environment in which business considerations drive decision-making;
  • Modernize the business tax system and enhance economic competitiveness by lowering the maximum corporate income-tax rate;
  • Eliminate dozens of outdated tax preferences and take steps to prevent corporate inversions;
  • Limit the ability of companies to use excessive interest deductions to lower their tax bills artificially; and
  • Make the practice of parking income overseas impossible by imposing a minimum tax on foreign income.

Click the following link for the full text of Lew's op-ed piece.

Treaty Changes (5)

China-Netherlands

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SSA between China and the Netherlands Signed

On 12 September 2016, officials from China and the Netherlands 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.

India-Seychelles

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TIEA between Indian and Seychelles has Entered into Force

According to a recent update from the Indian Ministry of Finance, the tax information exchange agreement with Seychelles entered into force on 28 June 2016. The agreement, signed 26 August 2015, is the first of its kind between the two countries and generally applies from the date of its entry into force.

Ireland-Macao

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TIEA between Ireland and Macau Signed

On 12 September 2016, officials from Ireland and Macau signed a tax information exchange agreement. The agreement is the first of its kind between the two jurisdictions, and will enter into force after the ratification instruments are exchanged.

Kyrgyzstan-Turkmenistan

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Kyrgyzstan to Accelerate Conclusion of Tax Treaty with Turkmenistan

During a 25 August 2016 meeting between officials from Kyrgyzstan and Turkmenistan, Kyrgyzstan proposed to accelerate the conclusion of a tax treaty between the two countries. A treaty was reportedly initialed in July 2015, and must now be signed and ratified before entering into force.

Pakistan-OECD

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Pakistan Signs Mutual Assistance Convention

The OECD has announced that on 14 September 2016, Pakistan signed the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The Convention must now be ratified by Pakistan and the ratification instrument deposited before entering into force in the country.

Click the following link for signatories to the Mutual Assistance Convention to date.

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