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Worldwide Tax News

Approved Changes (2)

Hong Kong

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Hong Kong Passes Inland Revenue (Amendment) Bill 2015 including Tax Exemption for Offshore Private Equity Funds

The Inland Revenue (Amendment) Bill 2015 was reportedly passed by the Hong Kong Legislative Council on 13 July 2015.

The main measure of the legislation is extending the tax exemption provided for offshore funds to also cover transactions involving shares in private companies incorporated outside Hong Kong. Currently, the offshore fund tax exemption applies only for certain specified transactions including transactions in securities, futures contracts, foreign exchange contracts, etc., but not for shares in private companies.

The legislation also relaxes the requirement that qualifying transactions be arranged through a person with a Securities and Futures Commission (SFC) license, and provides a profits tax exemption for gains from the disposal of a qualifying offshore portfolio companies by special purpose vehicles, including Hong Kong SPVs.

The changes will apply once the Bill is published in the Official Gazette, which is expected on 17 or 24 July.

United States

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IRS Makes Numerous Updates to FATCA Systems FAQ

On 14 July 2015, the U.S. IRS updated and made additions to the Technical FAQs for the International Data Exchange Services (IDES) system used for Foreign Account Tax Compliance Act (FATCA) data. The IDES system allows the IRS to exchange tax payer information with foreign tax authorities.

Click the following link for the FATCA IDES Technical FAQs.

Proposed Changes (3)

European Union

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EU Commission Release Study on Implementing the VAT Destination Principle to Intra-EU B2B Supplies of Goods

On 13 July 2015, the European Commission released a study conducted on the implementation of the destination principle to intra-EU B2B supplies of goods for value added tax (VAT) purposes, including five policy options to resolve issues in the current VAT system. The two main issues include:

  • The additional obligations and costs associated with VAT compliance for businesses engaging in cross-border trade; and
  • The existing levels of VAT fraud within the EU through fraudulent transactions such as MTIC (‘Missing Trader Intra-Community’) fraud (also known as carousel fraud).

The five policy options are designed to enable the implementation of a destination based VAT system across the EU, and include:

  1. Limited improvement of current rules - making improvements in the current rules without modifying them fundamentally;
  2. Taxation following the flow of the goods - adapting current rules while still following the flow of the goods with the supplier charging the VAT of the Member State of destination;
  3. Reverse charge following the flow of goods - adapting current rules while still following the flow of goods with the customer applying the reverse charge mechanism in the Member State of destination;
  4. Alignment with the place of supply of services - reducing compliance obligations and costs for businesses engaged in cross-border trade by harmonizing the place of supply for services and goods, with the customer applying the reverse charge in its Member State of establishment; and
  5. Taxation following the contractual flow - aligning with the contractual flow, with the supplier charging VAT of the Member State where the customer is established

According to the report, options 2 and 5 would have the biggest impact for reducing both costs and fraud.

Click the following link for the full VAT Destination Principle Study.

Poland

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Poland's Political Parties Propose Tax Reform including VAT and Other Tax Changes

Poland's two main political parties, the Civic Platform party and the Law and Justice party, have developed a number of tax reform measures to be considered prior to upcoming parliamentary elections. The proposed measures of each party are summarized as follows:

Civic Platform Party:

The main measures being proposed by the Civic Platform party include:

  • Reducing the standard value added tax (VAT) rate from 23% to 22%;
  • Exempting all individuals under the age of 30 from personal income tax; and
  • Reducing the income tax rate from 19% to 15% for companies that use employment contracts under the Labor Code instead of under civil law contracts.

Law and Justice Party

The main measures being proposed by the Law and Justice party include:

  • Changing the VAT payment system from an accrual basis to a cash (received) basis;
  • Introducing a 0.39% charge on bank assets;
  • Introducing a turnover tax on retailers based on sales volume; and
  • Introducing a double tax deduction for R&D expenses.

Any of the measures ultimately adopted would likely not apply until 1 January 2016.

Singapore

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Singapore Launches Public Consultation on Draft GST Amendment Bill

On 13 July 2015, the Inland Revenue Authority of Singapore published the following notice requesting comment on draft legislation amending Singapore's GST rules.

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Proposed Amendments

The draft GST (Amendment) Bill 2015 provides for three changes to existing tax policies and administration that arose from on-going reviews of Singapore’s GST system. These are:

a. Allowing the Comptroller of GST to impose a Travel Restriction Order on a person who fails to repay a tourist refund wrongly claimed under the Tourist Refund Scheme. Under the Tourist Refund Scheme, only eligible tourists are allowed to claim a refund of the GST paid on goods purchased in and brought out of Singapore. In view that a wrongful tourist refund owed is no different from a tax due to the Government, the Comptroller will be granted powers to impose a Travel Restriction Order on a person who fails to repay a tourist refund wrongly claimed under the Tourist Refund Scheme. This ineligible claimant will be allowed to leave the country after he repays the refund wrongly claimed;

b. Revising the definition of “aircraft” for the purpose of zero-rating supplies made in relation to an aircraft, and extending zero-rating to specific supplies made in relation to non-qualifying aircraft. The policy intent is to zero-rate supplies of and supplies relating to aircrafts that are used for international travel and international transportation of passengers and goods. To affirm this policy intent, the definition of “aircraft” will be revised to refer to any aircraft that is wholly used or intended to be wholly used for international travel, or any military aircraft. Zero-rating will also be extended to specific supplies relating to international flights made by a non-qualifying aircraft, as they are regarded as consumed outside Singapore;  

c. Clarifying the scope of zero-rating in relation to merchandise for sale on board an aircraft or ship. This is a technical change to clarify that zero-rating applies to the supply of goods for use as merchandise for retail sale on board an aircraft or ship.

Consultation Details

The public can access the consultation documents and explanations for the draft GST (Amendment) Bill 2015 on the Ministry of Finance's website ( http://www.mof.gov.sg) and the REACH consultation portal ( http://www.reach.gov.sg). Respondents may send their comments to the Ministry of Finance directly via the website, email, fax, or post.

Ministry of Finance

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Treaty Changes (3)

Ethiopia-Poland

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Tax Treaty between Ethiopia and Poland Signed

According to an announcement issued by the Polish Ministry of Finance, officials from Ethiopia and Poland signed an income tax treaty on 13 July 2015. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Germany-Netherlands

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Germany and the Netherlands Sign MoU for the Exchange of Information Regarding Tax Rulings

On 14 July 2015, officials from Germany and the Netherlands signed a memorandum of understanding (MoU) for the spontaneous exchange of information on tax rulings. Under the MoU, a formal information request will no longer be required, and the tax authorities of each country will actively and spontaneously exchange information with the other country on the tax rulings made in regard to a company of the other country.

Morocco-Spain

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Exchange of Notes between Morocco and Spain Signed

An exchange of notes concerning certain provisions of the 1978 income and capital tax treaty between Morocco and Spain was signed by Spain on 11 June 2015 and by Morocco on 23 June 2015.

The exchange of notes clarifies that payments for technical or economic studies under Article 12 (Royalties) includes analysis or research of a technical or economical nature where the party performing the analysis or research uses its own know-how without transferring the knowledge to the other party. It also clarifies that payments made by a resident of a Contracting State to a permanent establishment (PE) in that State for services rendered will not be subject to withholding tax when the income from the payments is attributed to the PE according to Article 7 (Business Profits).

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