Worldwide Tax News
On 10 May 2017, the European Commission published an updated report providing an overview of the national rules applied in EU Member States for the use of the mini one-stop shop (MOSS). MOSS may be used by suppliers of telecommunications, broadcasting and electronic services to account for value added tax (VAT) on supplies made to non-VAT taxable consumers (B2C) in the EU. The report provides the following for each Member State:
- Use and enjoyment rules;
- Time of supply / chargeability;
- Re-valuation of services at open market value;
- Bad Debt relief;
- Reduced and standard VAT rates;
- Invoicing obligations;
- Anti-avoidance measures;
- VAT registration process;
- Appointment of a VAT agent; and
- Penalties for non-compliance.
Click the following link for the report, which can be downloaded as a single file (excel), or as separate files for each Member State (PDF).
The Greek Public Revenue Authority has issued Circular POL 1071/2017, which clarifies the deadlines for corporate tax installment payments. In general, Greece requires advance payments in installments for the current year based on the previous year's return. The Circular provides that in relation to income earned from 1 January 2016, payments are to be made with a maximum of six monthly installments and that the first installment is no longer due by the tax return deadline, but instead by the end of the month following the tax return deadline. As provided in an example in the Circular, for tax year's ending 31 December 2016, the return is due by 30 June 2017, and the first installment payment is due by 31 July with subsequent payments due the end of each subsequent month and the last payment due the end of December.
The Circular also provides that for tax years beginning from 1 January 2016, the new deadline for individual tax returns is 30 June of the following year . This deadline generally applies for all income types.
On 5 May 2017, Guatemala published Executive Agreement 82/2017 in the Official Gazette. The Executive Agreement will enter into force 20 May 2017 and will apply for three months. It provides for fine, interest, and penalty relief for taxpayers who fulfill their outstanding tax obligations within the following time limits:
- 100% relief if within the first month after 20 May 2017;
- 95% relief if within the second month; and
- 90% relief if within the third month.
The relief applies for tax obligations that arose in any taxable period ending before 1 January 2017.
Diageo, owner of several beverage brands such as Johnnie Walker, Smirnoff, Guinness and others, has announced that UK HMRC intends to issue preliminary notices of assessment under the new Diverted Profits Tax (DPT) regime that require Diageo to pay additional tax and interest of approximately GBP 107 million in the aggregate for the financial years ended 30 June 2015 and 30 June 2016. The pending DPT assessment reportedly relates to Diageo's Amsterdam-based product development for its brands. Diageo will challenge the assessments once received, but the announcement notes that in order to do so, it will be necessary to pay the full amount assessed up front and then continue to work to resolve this matter with HMRC.
The DPT Regime imposes a punitive 25% tax on groups deemed to be artificially routing profits overseas. The DPT is levied on profits derived from the UK by a company that has either structured its operations to avoid creating a permanent establishment or made payments to a related company under an arrangement that lacks economic substance. It was introduced as part of the Finance Act 2015 (previous coverage), and applies for profits arising from 1 April 2015.
The Norwegian Government on 11 May 2017 issued a Revised Budget for 2017. The Revised Budget contains adjustments to the initial budget for the year approved in December 2016 (previous coverage). According to a government press release, policies introduced in the 2017 Budget are proving effective and the Government is therefore maintaining its focus on job creation, welfare, and security. With regards to tax policy, the Government proposes in the Revised Budget a few adjustments to reduce certain taxes, a new scheme for individual pension savings and tax reductions for pensioners, a new tax incentive for investments in business start-ups, and amendments to the financial activity tax that applies from 2017 to keep groups from making arrangement to avoid the higher tax rate for group financial companies. As part of the financial activity tax, corporate tax is levied at a rate of 25% (2016 rate), while the standard corporate tax rate for other companies was reduced to 24% from 2017.
According to recent reports, the Russian government is planning the introduction of an incentive to promote reinvestment. The incentive would take the form of a corporate tax rate reduction of up to 5% on profits reinvested into qualifying long-term capital assets of a company, with a focus on innovation and modernization for agriculture, manufacturing, and other areas.
The Singapore Ministry of Finance has launched a public consultation on the draft GST (Amendment) Bill 2017 to amend Goods and Services Tax (GST) Act. The proposed changes are as follows:
- Extend customer accounting for GST-registered Real Estate Investment Trusts (REITs) and their Special Purpose Vehicles (SPVs) to movable assets bought together with a non-residential property from the same seller. Currently, to ease cash flow, customer accounting applies to a GST-registered supplier's sale of non-residential property to a REIT or its SPV. It does not apply to movable assets sold together with the non-residential property. A GST-registered supplier who sells a furnished non-residential property to the REIT or its SPV will have to apportion the selling price into the value of the unfurnished property and that of the movable assets. The change will ease business compliance by dispensing with the need for apportionment.
- Provide for basis to implement an "opt-out" approach for digital tax notices. The wide availability of technology allows taxpayers to receive digital instead of hardcopy tax notices. The use of digital notices gives taxpayers greater convenience, security and timeliness of alerts. To enable more taxpayers to benefit from digital channels, the Act will be amended so that taxpayers who wish to continue receiving hardcopies can opt out while others will receive digital tax notices. (The current provisions of the Act require taxpayers to provide specific consent before the Comptroller can issue them with digital tax notices instead of hardcopy notices.) Taxpayers will have the flexibility to manage their preference for hardcopy or e-copy at any time.
- Provide for the GST treatment for the sale of Government land with existing buildings to be demolished to follow the approved use of the land, rather than the approved use of the building. Currently, when Government land is sold with an existing building to be demolished, the GST treatment on whether the supply is exempt or taxable depends on the approved use of the building, which might not reflect the approved use of the land. The change will provide more consistency in tax treatment for this category. In addition, reference to the land zone "Rural Centre and Settlement" is removed as the land zone is no longer in use.
- Extend customer accounting to prescribed supplies commonly used in fraud schemes. Under customer accounting, GST-registered sellers will not charge GST on the sale of prescribed supplies to GST-registered customers. Instead, their GST-registered customers will be required to account to the Comptroller of GST for the GST chargeable. This will deter fraud schemes where the seller absconds with the GST collected, and businesses further along the supply chain continue to claim input tax. Customer accounting will be applicable for supplies of mobile phones, memory cards and off-the-shelf software, which are commonly used in fraud schemes. These supplies will be prescribed in subsidiary legislation.
- Provide for electronic record keeping requirements and additional requirement for invoice details for selected businesses. The change is intended for strengthening tax administration, and will assist the Comptroller in verifying that GST transactions are properly accounted for.
- Provide for the monthly penalty of SGD 200 for late submission of GST returns to commence immediately after the filing due date. Currently, a monthly penalty of SGD 200 is imposed on outstanding returns starting from one month after the filing due date. The change will help to deter the late filing of tax returns.
Click the following link for the consultation page. The consultation runs to 4 June 2017.
The new income and capital tax treaty between Austria and Israel was signed on 28 November 2016. Once in force and effective, it will replace the 1970 tax treaty between the two countries.
The treaty covers Austrian income tax, corporation tax, land tax, tax on agricultural and forestry enterprises, and tax on the value of vacant plots. It covers Israeli income tax and company tax (including tax on capital gains), tax imposed on gains from the alienation of property according to the Real Estate Taxation Law, and profit tax on financial institutions.
- Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10%
- Interest - 5%, with an exemption for interest paid to a pension fund, interest paid on corporate bonds traded on a stock exchange in the State in which the issuing company is resident, and interest paid to/by the government or in respect of a loan, debt-claim or credit insured/guaranteed by the government
- Royalties - 0%
Article 10 Dividends also provides that distributions made by a real estate investment fund may be taxed in both the Contracting States of the fund and the beneficial owner of the distribution, but the rate is limited to 10% in the State in which the fund is resident if the beneficial owner holds directly less than 10% of the fund's capital.
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 shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State, with an exemption for shares regularly trade on a stock exchange, unless:
- The gains are from the alienation of shares in a real estate investment fund mentioned in Article 10; or
- The shares were acquired at a time when the company was not listed on a stock exchange, in which case, only the gains computed by reference to a period before which there was regular trading in those shares on a stock exchange may be taxed in the other Contracting 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 other property by a resident of a Contracting State may only be taxed by that State.
Israel applies the credit method for the elimination of double taxation, while Austria generally applies the exemption method. However, Austria will apply the credit method in respect of income taxed in Israel in accordance with the provisions of Articles 10 (Dividends) and 11 (Interest).
The final protocol to the treaty includes the general provision that the treaty does not prevent a Contracting State from applying provisions in its domestic law on the prevention of tax evasion or tax avoidance where those provisions are used to challenge arrangements which constitute an abuse of the treaty.
The treaty will enter into force on the first day of the third month following the exchange of the ratification instruments and will apply from 1 January of the year following its entry into force. The 1970 tax treaty between Austria and Israel will cease to have effect in respect of any tax from the date the new treaty is effective in respect of the tax.
On 11 May 2017, officials from Brazil and Mozambique 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.
According to an update to the OECD's list of signatories, Turkey has signed the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information. The MCAA provides for the exchange of information as part of the Common Reporting Standard (CRS) developed by the OECD. Turkey intends for the first exchange of information to take place by September 2018.