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Approved Changes (1)

Colombia

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Colombia Clarifies Requirements for Applying Renewable Energy Incentives

The Colombian Tax Authority (DIAN) has published Ruling 20438 of 2 August 2017, which covers the general requirements for taxpayers that want to apply the incentives for renewable energy projects. The incentives include an income tax deduction for investments made; certain value added tax (VAT) and customs duty exemptions; and accelerated depreciation (20%) for machinery, equipment and certain other assets (previous coverage). The ruling clarifies that for the income tax and VAT benefits, the taxpayer must have obtained the required certificates from the Ministry of the Environment. The benefit can then be applied directly in the tax return, with proof of certification only required if formally requested by DIAN. For the customs duty exemption benefit, the taxpayer must request the exemption at least 15 days prior to the actual import. Lastly, for the accelerated depreciation benefit, DIAN only needs to be informed if the taxpayer changes the rate used.

Proposed Changes (4)

Iceland

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Iceland Draft Budget Bill 2018 Submitted to Parliament

The Iceland Government has announced the submission of the draft Budget Bill 2018 to parliament (Althingi) on 12 September 2017. The Budget is in line with the objectives of the Fiscal Plan for 2018-2020, which was submitted to parliament in March and adopted in June (previous coverage). According to the Budget overview provided by the Government, the tax-related measures are mainly limited to new green taxes on carbon emissions, a reduction in the standard value added tax (VAT) rate to 22.5% from January 2019 as previously planned, and an extension of the reduced VAT rate for certain tourism-related activities until the beginning of 2019, at which time the activities will be subject to the standard rate.

Ireland

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Ireland Publishes Review of Corporation Tax Code including BEPS Recommendations

On 12 September 2017, Ireland's Department of Finance announced the publication of the Review of Ireland's Corporation Tax Code. The review was undertaken by Mr. Seamus Coffey, an independent expert appointed for the task in October 2016 (previous coverage). The following is a summary of the recommendations as provided in the review report:

Ensuring the corporation tax code does not provide preferential treatment to any taxpayer

1) Any proposed measures should be carefully scrutinised to ensure that they do not (i) constitute a potentially harmful preferential tax regime, as identified by the OECD Forum on Harmful Tax Practices, or (ii) a potentially harmful tax regime, as identified by the EU Code of Conduct for Business Taxation

Enhancing tax transparency

2) Ireland should take account of any recommendations of the peer review being undertaken by the Global Forum on Transparency and Exchange of Information for Tax Purposes.

3) Ireland should continue its commitment to support proposals for a Directive providing for mandatory disclosure rules in line with the recommendations outlined in the G20/OECD BEPS Action 12 Report.

4) The passage of the Taxation and Certain Other Matters (International Mutual Assistance) Bill through Dáil and Seanad Éireann should be facilitated.

5) Following the enactment of the Taxation and Certain Other Matters (International Mutual Assistance) Bill, Ireland will be able to, and should, withdraw its reservations regarding Sections II and III of the Convention on Mutual Administrative Assistance in Tax Matters, namely those sections encompassing the recovery of tax and service of documents. However, the reservation on Article 12, which allows one state to request another state take measures of conservancy, for example through the seizure of assets of a taxpayer before final judgement is given, should be retained.

Further implementing Ireland's commitments under the OECD/G20 BEPS project

Recommendations 6, 7, 8, 9, 10 and 12 are made in concert with Recommendation 16, which suggests that further consultation should be undertaken on certain matters with a view to improving tax certainty:

6) Ireland should provide for the application of the OECD 2017 Transfer Pricing Guidelines incorporating BEPS Actions 8, 9 and 10 in Irish legislation.

7) Domestic transfer pricing legislation should be applied to arrangements the terms of which were agreed before 1 July 2010.

8) Consideration should be given to extending transfer pricing rules to SMEs, having regard to whether the concomitant imposition of the administrative burden associated with keeping transfer pricing documentation on SMEs would be proportional to the risks of transfer mispricing occurring.

9) Consideration should be given to extending domestic transfer pricing rules to non-trading income. There is a strong rationale to extend domestic transfer pricing rules to non-trading income where it would reduce the risk of aggressive tax planning. Consideration should also be given to extending transfer pricing rules to capital transactions, having regard to whether such an extension would improve the existing provisions which already apply arm's length values to companies' transactions relevant to chargeable gains and capital allowances.

10) There should be a specific obligation on Irish taxpayers who are subject to domestic transfer pricing legislation to have available the transfer pricing documentation outlined in Annex I and II of Chapter V of the OECD 2017 Transfer Pricing Guidelines to ensure implementation of BEPS Action 13.

11) If it is decided to implement any or all of Recommendations 6, 7, 8, 9 and 10, this should take place no later than end 2020, which is the year to which the OECD and G20 have agreed to extend their co-operation on BEPS to complete the current work.

12) In transposing the Anti-Tax Avoidance Directive, Ireland should have regard to the recommendations of the Reports on BEPS Actions 2, 3 and 4.

Delivering tax certainty and maintaining competitiveness

13) In the context of the introduction of the Controlled Foreign Company rule provided by the Anti-Tax Avoidance Directive, consideration should be given to whether it is appropriate to move to a territorial corporation tax base in respect of the income of the foreign branches of Irish-resident companies and, in respect of connected companies, the payment of foreign-source dividends. In doing so, regard should be had to whether moving to a territorial corporation tax base would require additional anti-avoidance measures. In deciding whether to move to a territorial corporation tax base, a balance must be struck between the prospective reduction in compliance burdens for Irish-resident outbound investors through an exemption of foreign income, the prospective increase in compliance burden necessitated by the introduction of any additional anti-avoidance measures required, and any potential revenue impact.

14) An alternative to a territorial corporation tax base is to review Schedule 24 of the Taxes Consolidation Act 1997 with a view to effecting a policy and revenue neutral simplification of the computation of the foreign tax credit for all forms of foreign income. This would achieve the competitiveness advantages associated with moving to a territorial corporation tax base, whilst avoiding the introduction of additional complexity to the corporation tax code by new anti-avoidance measures.

15) To reduce uncertainty and ensure that Ireland protects its corporation tax base, Ireland should ensure an adequately resourced Competent Authority.

16) A key element of reducing uncertainty in tax matters is pro-active consultation regarding proposed measures. It is recommended that a number of proposed changes suggested in this review are carried out subject to consultation to reduce uncertainty regarding the proposed changes and to better inform policy-making. In particular, it is recommended that consultation be carried out on:

  • the implementation of the Anti-Tax Avoidance Directive, with a view to better understanding the effect of the proposed technical changes to the Irish corporation tax code;
  • the implementation of Actions 8, 9 and 10 of the G20/OECD BEPS initiative;
  • additional considerations regarding Ireland's domestic transfer pricing rules; and,
  • the effects of moving to a territorial corporation tax base and of reviewing Schedule 24 of the Taxes Consolidation Act 1997 to effect a policy and revenue neutral simplification of the computation of the foreign tax credit.

The role and sustainability of corporation tax receipts

17) Although it is impossible to be definitive and the volatility in receipts will remain the level-shift increase in Corporation Tax receipts seen in 2015 can be expected to be sustainable over the medium term to 2020.

18) In order to ensure some smoothing of corporation tax revenues over time, it is recommended that the limitation on the quantum of relevant income against which capital allowances for intangible assets and any related interest expense may be deducted in a tax year be reduced to 80%.

With respect to the recommendations made in the report, Minister for Finance and Public Expenditure & Reform, Paschal Donohoe, has stated his intent to launch a consultation process on Budget Day (10 October 2017).

Sweden

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Sweden Publishes Planned Measures for Budget 2018

The Swedish Government has published an overview of the planned measures for Budget 2018, which is to be submitted to parliament (Riksdag) on 20 September 2017. With respect to income increasing measures, planned changes include measures to increase tax revenue, including increased environmental and climate taxes. In addition, three measures are noted in particular, including an increase in the taxation of savings and capital insurance accounts by increasing the rate to 1.0%; the introduction of an excise tax on e-cigarettes; and the withdrawal of the allowance granted for voluntary tax return corrections.

United Kingdom

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UK Consults on Draft Legislation for the Finance Bill 2017 to 2018

On 13 September 2017, UK HM Treasury and HMRC published the draft legislation for Finance Bill 2017 to 2018, which will be subject to confirmation as part of the Autumn Budget 2017. Policy papers for the main draft measures include the following:

The consultation on the draft measures will close 25 October 2017. The Autumn Budget is to be delivered the end of November.

Treaty Changes (2)

Argentina-Israel

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SSA between Argentina and Israel Signed

On 12 September 2017, officials from Argentina and Israel signed a social security agreement. The agreement is the first of its kind between the two countries and will enter into force and generally apply from the first day of the third month following the exchange of the ratification instruments.

Brazil-Argentina

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Brazil Clarifies Dividend Income Exemption under Tax Treaty with Argentina

Brazil has published Private Ruling 400 of 5 September 2017, which clarifies the exemption for dividend income from Argentina provided under the 1980 income tax treaty between the two countries. The exemption is included in paragraph 2 of Article XXIII (Methods for the Elimination of Double Taxation), which provides that "Dividends which are paid by a company which is a resident of Argentina to a company which is a resident of Brazil and holds more than 10 per cent of the capital of the company paying the dividends and which are taxable in Argentina in accordance with the provisions of this Convention shall be exempt from tax in Brazil". The Private Ruling clarifies that this exemption must be interpreted literally, in that it only applies for dividends paid and taxed in Argentina and not with respect to the corporate income tax (IRPJ) and social contribution on profits (CSLL) that is due on the equivalent portion of the adjustment in the value of the investment in an Argentine subsidiary.

This is in relation to the provisions of Brazilian tax law on when income derived from abroad is considered available. The law determines that the portion of the adjustment of the investment value equivalent to the profits earned by a subsidiary abroad will be deemed to be made available at the time the subsidiary's balance sheet is determined and should be included in the parent company's tax basis in Brazil. The tax paid in the country of the subsidiary may offset the tax due in Brazil.

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