Worldwide Tax News
On 10 February 2017, the Indian Ministry of Finance issued a release announcing that harsh punitive actions will be taken against deviant shell companies (those used in money laundering and tax-evasion). Actions include the freezing of bank accounts, the striking off the names of dormant companies, and the invocation of the Benami Transactions (Prohibition) Amendment Act, 2016 (BTP Amendment Act). The release also notes that a task force has been set-up under the co-chairmanship of the Revenue Secretary and Corporate Affairs Secretary with members from various regulatory ministries and enforcement agencies to monitor the actions taken against deviant shell companies.
Note - Benami transaction are generally defined as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person. The BTP Amendment Act expanded the definition and strengthened the related penalties, including imprisonment for up to seven years and a fine of up to 25% of the value of the property.
Ivory Coast Finance Law for 2017 Introduces New Transfer Pricing Documentation Requirements and Measures to Promote National Ownership
The Ivory Coast Finance Law for 2017 was adopted the end of December 2016 and entered into force in January 2017. Main measures of the law are summarized as follows.
In order to promote national ownership, non-resident companies will receive the following benefits if at least 10% of their shares in an Ivory Coast subsidiary are transferred to a resident individual or company:
- An exemption from registration fees on the transfer; and
- 25% of the dividends paid in respect of the remaining shares held by the non-resident are exempt from tax for one year.
New transfer pricing documentation requirements are introduced that include submission of documentation with the annual financial statements that provide:
- A general description of the legal and operational structures of the group;
- Identification of the related parties engaged in intra-group transactions during the fiscal year; and
- A description of the specific transactions carried out with related parties during the fiscal year, including:
- The nature of the transactions;
- The amount (value) of the transactions; and
- The identity and geographical location of the specific related parties involved in the transactions.
If the documentation is not submitted, the deduction of payments related to the transactions carried out with related parties will be disallowed. Incomplete or inaccurate documentation may also result in the disallowance of a deduction.
Low (or no) tax jurisdictions and non-cooperative jurisdictions are defined as those that are blacklisted by the OECD and do not have an information exchange agreement with the Ivory Coast. Withholding tax on dividends paid to such jurisdictions is increased to 25% (standard rate is 15%). In addition transactions with such jurisdictions are subject to the transfer pricing rules and expense deduction limitations may apply whether the relevant party is related or not.
New Zealand Parliament Passes Legislation Providing New Trust Disclosure Requirements, CRS Implementation, and Business Compliance Simplification
New Zealand's Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill was passed by parliament on 14 February 2017 and now awaits Royal Assent. The legislation provides for:
- The implementation of stronger foreign trust disclosure requirements;
- The implementation of the OECD's Common Reporting Standard (CRS) for the exchange of financial account information; and
- The implementation of measures to simplify compliance for businesses, especially SMEs, including:
- The introduction of the accounting income method, which will give smaller businesses a new pay-as-you go option for provisional tax from 1 April 2018;
- The reduction or removal of use-of-money interest for most business taxpayers from 1 April 2017; and
- The removal of the 1% incremental late payment penalty for new GST, income tax, and overpaid Working for Families tax credits.
Click the following links for the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill and a related government release on its passage.
On 6 February 2017, the Thailand Revenue Department announced personal income tax revisions for 2017, including revised brackets:
- up to THB 300,000 - 5%
- THB 300,001 - 500,000 - 10%
- THB 500,001 - 750,000 - 15%
- THB 750,001 - 1,000,000 - 20%
- THB 1,000,001 - 2,000,000 - 25%
- THB 2,000,001 - 5,000,000 - 30%
- over THB 5,000,000 - 35%
The tax exemption on the first THB 150,000 continues to apply.
IRS Releases Practice Units on Hedge Funds and Penalties for Failing to Timely File Return on Interests in Foreign Partnerships
On 14 February 2017, the U.S. IRS published two international practice units:
- Hedge Fund Basics, which discusses typical hedge fund structures with a focus on tax issues related to a master fund; and
- Monetary Penalties for Failure to Timely File a Complete and Accurate Form 8865 – Category 1 & 2 Filers, which discusses the penalties related to filing Form 8865, which include an initial penalty of USD 10,000, increased by USD 10,000 per 30-day period if failure continues for more than 90 days (USD 50,000 maximum).
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.
Estonia and Singapore Sign Competent Authority Agreement for Exchange of Financial Account Information
According to an update from the Inland Revenue Authority of Singapore, a competent authority agreement for the automatic exchange of financial account information was signed with Estonia on 14 February 2017. Under the agreement, each country will automatically exchange information on accounts held in the respective country by tax residents of the other country based on the OECD Common Reporting Standard (CRS). The automatic exchange is to begin by September 2018 for information collected on the 2017 reporting year.
On 13 February 2017, officials from Greece and Vietnam met and agreed to accelerate negotiations for an income tax treaty. 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.
The income tax treaty between Jordan and the United Arab Emirates reportedly entered into force on 10 January 2017. The treaty, signed 5 April 2016, is the first of its kind between the two countries.
The treaty covers Jordan income tax and covers U.A.E. income tax and corporation tax.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting State furnishes services in the other State through employees or other engaged personnel for a period or periods aggregating more than 6 months within an 12-month period.
- Dividends - 7%
- Interest - 7%
- Royalties - 10%
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 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.
Article 20 (Income from Hydrocarbon Resources) provides that that the treaty will not affect the right of either one of the Contracting States to apply their domestic laws and regulations related to the taxation of income and profits derived from hydrocarbons and its associated activities situated in the territory of the respective Contracting State, as the case may be.
Both countries apply the credit method for the elimination of double taxation. A provision is also included for a tax sparing credit whereby the credit for tax paid will be deemed to include tax which is otherwise due but has been reduced or exempted in accordance with laws or measures related to incentives designed to promote economic development.
The treaty applies from 1 January 2018.
On 13 February 2017, the Philippine Senate ratified the pending social security agreement with Japan. The agreement, signed 19 November 2015, is the first of its kind between the two countries and will enter into force on the first day of the third month following the exchange of the ratification instruments.