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Approved Changes (4)

Belgium

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Belgium Publishes New Tax Havens Lists for Participation Exemption and Cross Border Payment Reporting

On 10 March 2016, Belgium published a Royal Decree listing the jurisdictions considered tax havens for the purpose of the participation exemption (dividends received deduction). This was followed on 11 March 2016 with a Royal Decree listing the jurisdictions considered tax havens for the purpose of cross border payment reporting.

List for Participation Exemption

Under Belgium's participation exemption (dividends received deduction) regime, the exemption is generally not available for distributions from subsidiaries in jurisdictions where the nominal corporate income tax rate or the actual tax burden is less than 15% (tax havens).

Previously listed jurisdictions that remain in the new list include:

  • Bosnia and Herzegovina, Gibraltar, Guernsey,
  • Isle of Man, Jersey, Liechtenstein,
  • Macao, Maldives, Marshall Islands, Micronesia, Monaco,
  • Oman, and Uzbekistan.

Jurisdictions added to the list include:

  • Abu Dhabi, Ajman, Andorra, Dubai, East Timor,
  • Kosovo, Kuwait, Kyrgyzstan, Macedonia, Moldova, Montenegro,
  • Paraguay, Qatar, Ras al Khaimah, Serbia, Sharjah,
  • Turkmenistan, and Umm al Quaiwain.

The participation exemption restriction also applies for non-listed jurisdictions if the jurisdiction has no corporate income tax regime or does not impose corporate income tax on certain companies.

List for Cross Border Payments Reporting

Payments of EUR 100,000 or more made to residents in jurisdictions considered tax havens must be reported. If not reported, such payments are not deductible for tax purposes. If such payments are reported, they will only be deductible if it can be shown that they are for genuine purposes and not part of a tax avoidance scheme.

For this purpose, the listed jurisdictions generally include those 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 those with a nominal corporate tax rate below 10%.

Previously listed jurisdictions that remain in the new list include:

  • Abu Dhabi, Ajman, Anguilla, Bahamas, Bahrain, Bermuda, British Virgin Islands,
  • Cayman Islands, Dubai, Fujairah, Guernsey, Isle of Man, Jersey,
  • Micronesia, Monaco, Montenegro, Nauru, Palau, Ras al Khaimah,
  • St. Barts, Sharjah, Turks and Caicos, Umm al Qaiwain, Vanuatu, and
  • Wallis and Futuna.

Jurisdictions added to the list include:

  • Marshall Islands, Pitcairn Islands, Somalia, Turkmenistan, and Uzbekistan.

Effective Date

Both of the new lists apply from 1 January 2016, although the previous versions of each list may be referred to for tax years ending on or before 31 March 2016.

Colombia

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Colombia Introduces VAT Zero Rate for Tourism Services

On 23 February 2016, Colombia's Ministry of Commerce, Industry and Tourism issued Decree No. 297, which introduces a value added tax (VAT) zero rate for tourism services. According to the Decree, the zero rate applies for services provided to non-resident individuals as part of tourism packages sold by registered travel agencies and hotels. For the zero-rating to apply, proof of residence status of the service recipients must be obtained and kept, and certain other conditions must be met.

The Decree applies from the date it was issued. Click the following link for the full text of Decree No. 297 (Spanish language).

Ireland

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Ireland Announces Commencement of New Appeals Process

On 11 March 2016, Irish Revenue published eBrief No. 30/2016 announcing the commencement of the new appeals process introduced under the Finance (Tax Appeals) Act 2015, which was enacted 25 December 2015.

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Commencement of new tax and duty appeals process

On 21 March 2016, the Finance (Tax Appeals) Act 2015 will come into operation and the new Tax Appeals Commission (TAC) will be established.

From that date, all appeals (with the exception of customs duty appeals and "first-stage" VRT appeals) will have to be made directly to the TAC and not through Revenue in the first instance. In the meantime, the current procedures will continue to apply.

An appeal will have to be made by submitting a "Notice of Appeal" to the TAC. A Notice of Appeal form will be available on the TAC's website (taxappeals.ie) when it goes live. The TAC will have an email address info@taxappeals.ie and will have the same postal address as the current Office of the Appeal Commissioners - Fitzwilton House, Wilton Place, Dublin 2 D02 FX04.

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Click the following link for the Finance (Tax Appeals) Act 2015 published on the Oireachtas (Irish legislature) website.

Portugal

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Portugal Temporarily Reduces Employer Social Security Contribution Rate

On 8 March 2016, Portugal published Decree No. 11/2016 in the Official Gazette. The Decree provides for a temporary reduction in the employer social security contribution rate by 0.75%. This results in an employer contribution rate of 23% of employees' gross monthly salary, which is effective from February 2016 to January 2017.

Proposed Changes (2)

Israel

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Israel Planning to Impose VAT on Foreign Digital Service Providers

Israel's Tax Authority has reportedly issued draft legislation that would require foreign suppliers of digital services to register and account for value added tax (VAT) on supplies made to Israeli consumers. The standard rate of VAT (17%) would apply on several types of digital supplies, including:

  • Streaming or downloadable content, such as music, movies, games and eBooks;
  • Online advertising
  • Internet-based telephony services;
  • Online software as a service (SaaS);
  • Online sites with membership/access fees; and
  • Others

The VAT registration and payment requirements would apply for B2C supplies. For B2B supplies, the reverse charge would apply. When supplies are made through a third-party online platform, the platform operator would be required to comply with the VAT requirements.

This proposal seems to indicate that the Israeli Tax Authority is moving away from a proposal made in April 2015 (previous coverage) that would address the taxation of digital supplies through the potential creation of a permanent establishment in Israel for foreign suppliers.

Switzerland

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Switzerland Planning to Implement CbC Reporting Requirement for 2016

According to recent comments from Séverine Grüber, a transfer pricing economist with the Swiss Federal Department of Finance, Switzerland is close to finalizing draft legislation for the implementation of Country-by-Country (CbC) reporting requirements, and will release the draft for public comment in April 2016.

As currently drafted, the CbC reporting requirement would apply from the 2016 fiscal year with a reporting threshold of CHF 900 million. Both the effective date and threshold are subject to change, however. The effective date may be delayed due to the possible need for a referendum on the legislation, which could delay implementation. The threshold may change due to it being based on a conversion from the recommended EUR 750 million threshold using a 1 January 2015 exchange rate, which has changed significantly since that time (currently ~EUR 820 million).

Treaty Changes (3)

Kazakhstan-Slovenia

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Tax Treaty between Kazakhstan and Slovenia Signed

On 10 March 2016, officials from Kazakhstan and Slovenia signed an income and capital tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Malta-Vietnam

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Tax Treaty between Malta and Vietnam under Negotiation

According to an announcement from the Vietnam government, negotiations are underway for an income tax treaty with Malta. 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.

Portugal-Senegal

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Tax Treaty between Portugal and Senegal to Enter into Force

The income tax treaty between Portugal and Senegal will enter into force on 20 March 2016 according to an announcement recently published in Portugal's Official Gazette. The treaty, signed 13 June 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Senegalese corporate income tax, minimum corporate tax, individual income tax, contributions payable by employers, and capital gains tax on developed and undeveloped land. It covers Portuguese personal income tax, corporate income tax and surtaxes on corporate income tax.

Service PE

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 the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

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 - 10%
  • Royalties - 10%
  • Technical Services (management, technical, or consultancy) - 8%

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 similar rights 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 representing an interest exceeding 50% in a company resident in the other State (rate limited to 20% of the gains)

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

Article 30 (Limitation on Benefits) includes the provision that the benefits of the treaty will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of goods or rights for which the income is paid is to take advantage of the benefits through the creation or assignment.

Effective Date

The treaty applies from 1 January 2017.

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