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Approved Changes (4)

Denmark

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Denmark Clarifies Treaty Benefits for Investors through Transparent Foreign Investment Scheme

On 6 November 2017, the Danish tax authority (SKAT) published a binding ruling concerning treaty benefits on income received on investments through an authorized contractual scheme (ACS) established by two UK companies. The ruling first confirms that the ACS is considered tax transparent and clarifies that Danish investors that have invested through the ACS are considered to have invested directly in the underlying assets so that the distribution of dividends from underlying foreign shares would be covered by the applicable tax treaties between Denmark and the source countries, provided that the treaty conditions are met. Likewise, shares held through the ACS in a Danish company are deemed to be owned directly by the foreign investors so that dividends on the Danish shares would also be covered by the applicable tax treaties between Denmark and the countries of residence of the foreign investors.

Portugal

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Portugal Provides Further Extension for First Year CbC Notification Deadline

Portugal's State Secretary for Tax Affairs has issued Order No. 87/2017-A-XXI of 24 October 2017, which provides a further extension of the deadline for the Country-by-Country (CbC) reporting entity notification to 31 December 2017 with respect to the 2016 fiscal year. This is the third extension of the deadline for CbC notification, which under Portugal's standard CbC reporting rules is due by the notifying entity's tax return deadline (changed from the end of the reporting fiscal year by Law No. 98/2017). The Order notes that the extension is due to the ongoing development of the necessary IT systems for submission.

Saudi Arabia

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Saudi Arabia Clarifies VAT Zero-Rated and Exempt Supplies

The Saudi General Authority of Zakat and Tax (GAZT) has issued a release that clarifies the value added tax (VAT) zero-rating and exemptions for select goods and services as provided in the implementing regulations for Saudi Arabia's new VAT regime, which will be introduced on 1 January 2018.

Zero-rated goods and services include:

  • The supply of certain medications and medical equipment specified by the Ministry of Health and Saudi Food and Drug Authority;
  • The supply of gold, silver, and platinum that is for investment purposes that is at least 99% pure and tradable in the international market;
  • Any exports destined outside the GCC region;
  • Services supplied to non-GCC residents; and
  • International transport services of goods and people, the supply of qualified international transport vehicles, and related services such as the supply of spare parts, maintenance, repair, etc.

Exempted supplies include certain financial services and the rental of residential real estate. Further, any activity exercised by a government body in its capacity as a public authority is not considered to be an economic activity and as such, falls outside the VAT scope and is not subject to VAT.

In a separate release, the GAZT further clarifies the exemption for financial services supplies, which covers:

  • Interest or lending fees charged with an implicit margin, such as loans and credit cards, mortgages, and financial leasing;
  • Transactions involving money and securities;
  • Operation of current, deposit, and savings accounts; and
  • Provision or transfer of a contract of life insurance or the reinsurance of a life insurance contract.

The VAT exemption excludes cases where consideration payable in respect of the service is by way of an explicit fee, commission, or commercial discount, including fees on money transfers.

Taiwan

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Taiwan Parliament Approves Legislation to Attract Foreign Professionals

On 31 October 2017, Taiwan's Legislative Yuan (parliament) approved the legislation introducing measures to attract foreign professionals to work in Taiwan. One of the main measures is the introduction of a tax incentive that provides for a 50% reduction in the amount of taxable income exceeding TWD 3 million (~USD 99,500) for the first three years of employment (residence) in Taiwan. Amounts up to TWD 3 million will be taxed normally. If the foreign professional's stay in Taiwan does not exceed 183 days annually or their salary does not exceed TWD 3 million, the incentive may be deferred until the taxable year those conditions are met. However, this deferral may not exceed five years. The legislation also provides for relaxed residence permit requirements and extended duration for workers and their families, as well as improved access to social security and health insurance benefits.

Proposed Changes (3)

Lithuania

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Lithuania Proposed Tax Measures for 2018

The Lithuanian parliament is currently considering a number of proposed tax measures as part of the Budget for 2018. Some of the main corporate tax measures include:

  • Introducing new definitions for collective investment vehicles and risk and private equity vehicles, and providing a corporate tax exemption for such vehicles, except for income derived from blacklisted jurisdictions;
  • Narrowing the scope of the 5% corporate tax rate for agricultural companies to cooperative agricultural companies, subject to certain conditions, including that income from agricultural activities exceeds 50% of total income;
  • Introducing an IP regime in accordance with the modified nexus approach that would provide for a 5% tax rate on income from qualifying IP;
  • Reducing the participation exemption ownership threshold from 25% to 10%;
  • Increasing the maximum credit for the investment project incentive from 50% to 100% of taxable income per year, and extending the incentive to 2023; and
  • Increasing the free economic zone tax exemption period to ten years with a 50% reduction for the following six years (flips the current incentive - six-year exemption followed by ten-year reduction).

Subject to approval, the measures will generally apply from 1 January 2018.

Qatar-Saint Kitts and Nevi-OECD

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Qatar and Saint Kitts and Nevis Join Inclusive Framework for Implementation of BEPS Measures

According to a 14 November 2017 update to the list of members, Qatar and Saint Kitts and Nevis have joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of members to 106. As a member of the Framework, the two countries have committed to the implementation of four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse), and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).

South Africa

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South Africa Consults on Draft Rule Amendment on the Sugar Tax

The South Africa Revenue Service has published a draft rule amendment notice for consultation on the health promotion levy on sugary beverages. The so-called sugar tax was originally proposed as part of the 2016 Budget and has been included as part of the Rates and Monetary Amounts and Amendment of Revenue Laws Bill (Bill 26 of 2017) at a rate of 2.1 cents per gram of sugar content exceeding 4 grams per 100 milliliters. The rules will be effective from 1 April 2018.

Click the following link for the consultation page, which includes the draft rule amendment notice, the completion notes for the sugary beverage levy return, and the related forms.

Treaty Changes (5)

Bahrain-Hong Kong

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Bahrain to Sign Tax Treaty with Hong Kong

On 13 November 2017, Bahrain's Cabinet approved the signature of an income tax treaty with Hong Kong. The treaty will be the first of its kind between the two jurisdictions, and must be finalized, signed, and ratified before entering into force.

Brazil-China

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SSA between Brazil and China under Negotiation

On 13 November 2017, officials from Brazil and China met to begin negotiations for a social security agreement. Any resulting agreement would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Cayman Islands-Neth Antilles-BES Island-Curacao-Sint Maarten

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TIEA between the Cayman Islands the Former Netherlands Antilles to Enter into Force

The tax information exchange agreement signed on 29 October 2009 between the Cayman Islands and the former Netherlands Antilles will enter into force on 1 December 2017. Because the Netherlands Antilles was dissolved in 2010, the agreement will apply with respect to the Cayman Islands and the Caribbean Netherlands (BES Islands - Bonaire, Sint Eustatius, and Saba), Curaçao, and Sint Maarten. The agreement applies for criminal tax matters from 1 January 2010 and for other matters from the date of its entry into force.

Colombia-Untd A Emirates

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Tax Treaty between Colombia and the UAE Signed

According to a release on the Colombian Presidency website, an income tax treaty with the United Arab Emirates was signed on 12 November 2017. The treaty is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged. Details of the treaty will be published once available.

United States-Portugal

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U.S. Publishes CbC Exchange Arrangement with Portugal

The U.S. IRS has published the competent authority arrangement on the exchange of Country-by-Country (CbC) reports with Portugal. The arrangement was signed 2 October 2017 and is operative (effective) from that date.

The arrangement provides that pursuant to Article 28 (Exchange of Information) of the 1994 Portugal-U.S. income tax treaty, each competent authority intends to automatically exchange CbC reports received from each reporting entity resident for tax purposes in its jurisdiction, provided that, on the basis of the information provided in the CbC report, one or more constituent entities of the MNE group of the reporting entity are resident for tax purposes in the jurisdiction of the other competent authority, or are subject to tax with respect to the business carried out through a permanent establishment situated in the other jurisdiction.

With respect to fiscal years beginning on or after 1 January 2016, CbC reports are to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. With respect to fiscal years beginning on or after 1 January 2017, reports are to be exchanged no later than 15 months after the last day of the fiscal year.

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