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Approved Changes (4)

Australia

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Australia 2017 International Dealings Schedule and Instructions Released

The Australian Taxation Office has announced the release of the 2017 International dealings schedule (IDS) and instructions. The IDS requirements apply for Australian taxpayers with more than AUD 2 million in related party dealings and must be lodged with the annual tax return. The announcement notes three main changes to the IDS for 2017, including that:

  • Significant global entities (SGEs) will need to indicate if they have lodged Part A of the Local File at the same time as their tax return, and if they have, will not need to complete questions 2-17 of the IDS (SGEs include members of groups with annual consolidated global income of AUD 1 billion or more);
  • Taxpayers will need to provide more detailed information on their foreign exchange gains returned, and foreign exchange losses deducted for Australian tax purposes (if any) for specified transaction types; and
  • Taxpayers will need to provide specific information on their international related party dealings involving disposal or acquisition of intangible property of a non-revenue (capital) nature for assignment of intellectual property, assignment of shares or other equity interests, and assignment of loans or debts.

Click the following links for the 2017 IDS form and the instructions.

Brazil

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Brazil Updates CbC Reporting Q&A

Brazil has published an updated version of the Q&A document on Country-by-Country (CbC) reporting dated 9 June 2017. Additions to the Q&A include clarifications that:

  • Where an entity has negative retained earnings, it is still to be reported in the accumulated earnings field in ECF section W200 (CbC Table 1), which means the field will be filled with the net amount (and may even have a negative value);
  • Where an entity is jointly controlled or operated by members of unrelated MNE groups (e.g., a joint venture), the entity's inclusion in the CbC report of a particular group depends on whether it is included in the consolidated financial statements of that group as per the applicable accounting rules, including if proportionally consolidated - i.e., should be reported in the CbC report if consolidated, and should not be reported if not consolidated; and
  • Where entities are involved in a special event, such as merger, acquisition, or spin-off, the rules applicable to the consolidated statements under the adopted accounting standard must be observed, which in the case of Brazil-parented groups means the report should include the amounts related to member entities involved in a special event, considering the period in which the entities were under the control of the group.

The Q&A also includes an explanation of the recently implemented transitional mechanism that allows a local constituent entity to indicate its ultimate parent as the reporting entity in its notification (ECF section W100), even if the parent is resident in a jurisdiction that does not yet have a competent authority agreement with Brazil for the exchange of CbC reports (previous coverage). If an exchange agreement is still not concluded by 31 December 2017, the local constituent entity will have 60 days to either submit a CbC report or indicate a surrogate entity.

Click the following link for the updated Q&A (Portuguese language). The new additions to the document are highlighted.

Hong Kong

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Hong Kong Issues Notice on Property Tax Obligations

On 15 June 2017, the Hong Kong Inland Revenue Department (IRD) issued a notice on the property tax obligations of property owners, which is charged by reference to the rent receivable (including lease premium) in the relevant year of assessment. Owners liable to property tax should inform the IRD and provide the particulars of the property within four months after the end of the basis period (before 31 July 2017 for year of assessment 2016/17), unless they have already received a return.

Note - Corporations can generally claim an exemption from property tax where rental income has been included as part of the profits assessable to profits tax; or the property was occupied or used by the corporation for producing chargeable profits. Where an exemption is not claimed and property tax was paid, the tax is generally deductible if meeting one of the aforementioned conditions.

Taiwan

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Taiwan Enacts Amendments for the Exchange of Information

On 14 June 2017, Taiwan's Taxation Administration announced the promulgation (enactment) of amendments to the Tax Collections Act so that Taiwan may coordinate with international standards on information transparency and avoid being categorized as a non-cooperative jurisdiction. Among other changes, the amendments allow the Ministry of Finance to, based on the principle of reciprocity, enter into a convention or agreement with a foreign government for the exchange of information on property, income, business, tax payment, financial accounts, and other tax information upon request, automatically, and spontaneously.

Proposed Changes (1)

Kazakhstan

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Kazakhstan Draft Tax Code Reform to be Finalized in July

According to a recent announcement from the lower house of the Kazakh parliament (the Mazhilis), discussions are ongoing for planned reforms of the country's tax code with a draft version of the reforms to be finalized in July 2017 as a single bill. Reforms of the tax code have been under discussion for over a year (previous coverage) and are meant to improve tax administration and collections, while creating more favorable conditions for business. The reforms are also being driven by Kazakhstan's accession to the WTO and the related obligations, as well as its participation in the BEPS inclusive framework, which involves a commitment to implementing the BEPS minimum standards, including Country-by-Country reporting.

Subject to approval, it is expected that the reformed tax code will enter into force on 1 January 2018. Details of the reforms will be published once available.

Treaty Changes (5)

Belarus-Spain

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Tax Treaty between Belarus and Spain Signed

On 14 June 2017, officials from Belarus and Spain signed an income tax treaty. The treaty will enter into force after the ratification instruments are exchanged, and once in force and effective, will replace the 1985 tax treaty between Spain and the former Soviet Union as it applies in respect of Belarus and Spain. Additional details will be published once available.

Cambodia-Hong Kong

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Tax Treaty between Cambodia and Hong Kong under Negotiation

According to an update from the Hong Kong Inland Revenue Department, officials from Cambodia and Hong Kong are scheduled to meet 19 to 23 June 2017 for the first round of negotiations for an income tax treaty. Any resulting treaty would be the first of its kind between the two jurisdictions, and must be finalized, signed, and ratified before entering into force.

Cyprus-Luxembourg

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Update - Tax Treaty between Cyprus and Luxembourg

The income tax treaty between Cyprus and Luxembourg was signed on 8 May 2017. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Cyprus income tax, corporate income tax, the special contribution for the defence of the republic, and capital gains tax. It covers Luxembourg income tax on individuals, corporation tax, capital tax, and communal trade tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 5%
  • Interest - 0%
  • Royalties - 0%

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; and
  • Gains from the alienation of shares in a company deriving at least 50% for their value directly from immovable property situated 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.

Offshore PE

Article 20 (Offshore Activities) provides that a permanent establishment will be deemed constituted if a resident of one Contracting State carries on offshore activities in connection with the exploration or exploitation of the seabed or subsoil or their natural resources situated in the other State, if such activities continue for a period or periods aggregating more than 30 days in any 12-month period. In determining if the 30-day period has been exceeded, activities of an associated enterprise that are substantially the same will be included.

Article 20 also provides that gains derived by a resident of a Contracting State may be taxed by the other State if derived from the alienation of exploration or exploitation rights, property situated in the other State used in connection with exploration or exploitation, and shares deriving the greater part of their value directly or indirectly from such rights and property taken together.

Double Taxation Relief

Cyprus applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption method. However, Luxembourg will apply the credit method in respect of income taxable in Cyprus in accordance with the provisions of Articles 10 (Dividends) and 16 (Artistes and Sportspersons).

Entitlement to Benefits

Article 28 (Entitlement to Benefits) provides that a benefit under the treaty will not be granted in respect of an item of income or capital if it is reasonable to conclude that obtaining the benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in the benefit, unless it is established that granting the benefit would be in accordance with the object and purpose of the relevant provisions of the treaty.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.

Ethiopia-Nepal

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Tax Treaty between Ethiopia and Nepal to be Negotiated

According to recent reports, officials from Ethiopia and Nepal have met to discuss bilateral relations, including the negotiation of an income tax treaty. Any resulting treaty would be the first of its kind between the two jurisdictions, and must be finalized, signed, and ratified before entering into force.

Italy-Barbados

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Italy Ratifies Pending Tax Treaty with Barbados

On 14 June 2017, Italy published Law No. 84 of 16 May in the Official Gazette, which provides for the ratification of the pending income tax treaty with Barbados. The treaty, signed 24 August 2015, is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force (previous coverage).

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