Worldwide Tax News
South Africa Publishes Public Notice on CbC Report, Master File, and Local File Reporting Requirements
On 13 October 2017, the South African Revenue Service published the public notice on the submission of Country-by-Country (CbC) report, Master file, and Local file information returns under the external business requirements specification (BRS): Country-by-Country and Financial Data Reporting (previous coverage). The publication of the notice shows an implementation date of 20 October 2017.
As provided in the notice, persons required to submit and the form of return include:
- 2.1 - A Reporting Entity (other than a Surrogate Parent Entity) that is a resident must submit a return in the form and containing the information specified in the BRS: CbC and Financial Data Reporting relating to a CbC Report, a Master file, and a Local file.
- 2.2 - Where a filing obligation exists in terms of paragraph 2 of Article 2 of the CbC Reporting Regulations and the exceptions under paragraph 3 of Article 2 do not apply (i.e., secondary non-parent local filing requirements apply - previous coverage), a resident that is a Constituent Entity as identified in paragraph 2 of Article 2, must submit a return in the form and containing the information specified in the BRS: CbC and Financial Data Reporting relating to a CbC Report, a Master file, and a Local file.
- 2.3 - If the aggregate of a person’s potentially affected transactions for the year of assessment, without offsetting any potentially affected transactions against one another, exceeds or is reasonably expected to exceed ZAR 100 million, and that person is a resident, the person must submit a return in the form and containing the information specified in the BRS: CbC and Financial Data Reporting relating to a:
- Master file, where the ultimate holding company in respect of the Group that the person is a member of is a resident, or where a master file that substantially conforms with Annex I to Chapter V of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2017 is prepared by any other entity within the Group that the person is a member of; and
- Local file.
The requirements apply:
- In the case of persons specified in 2.1 or 2.2, for reporting fiscal years commencing on or after 1 January 2016 and for subsequent reporting fiscal years; and
- In the case of persons specified in paragraph 2.3, for financial years commencing on or after 1 October 2016 and for subsequent financial years.
Returns referred to in 2.1 or 2.2 are due within 12 months following the end of the reporting fiscal year, while returns referred to in 2.3 are due within 12 months following the end of the person’s financial year.
SSA between Belgium and Israel has Entered into Force
The new social security agreement between Belgium and Israel entered into force on 1 June 2017. The agreement, signed 24 March 2014, replaces the 1971 agreement between the two countries and generally applies from the date of its entry into force.
Tax Treaty between Croatia and Kazakhstan Signed
On 12 October 2017, officials from Croatia and Kazakhstan signed an income 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. Details of the treaty will be published once available.
New Tax Treaty between Denmark and Japan Signed
Japan's Ministry of Finance has announced the signing of a new income tax treaty with Denmark on 11 October 2017. Once in force and effective, the new treaty will replace the 1968 tax treaty between the two countries.
The treaty covers Danish corporation income tax, individual income tax, individual municipal income tax, taxes imposed under the Hydrocarbon Tax Act, taxes imposed under the Pension Investment Return Tax Act, church tax, tax on dividends, and tax on royalties. It covers Japanese income tax, corporation tax, special income tax for reconstruction, local corporation tax, and local inhabitant taxes.
If a company is considered resident in both Contracting States, the competent authorities of both States will determine its residence for the purpose of the treaty through mutual agreement based on its place of head or main office, its place of effective management, the place where it is incorporated or otherwise constituted, and any other relevant factors. If no agreement is reached, the company will not be entitled to any relief or exemption from tax provided by the treaty.
The PE article includes anti-PE avoidance measures as per BEPS Action 7.
- Dividends - 0% if the beneficial owner is a company that has directly owned at least 10% of the paying company's voting power (in case of Japan payer) or capital (in case of Denmark payer) for a period of at least 6 months ending on the date on which entitlement to the dividends is determined; otherwise 15%
- Interest - 0%, although a 10% rate applies on interest that is determined by reference to receipts, sales, income, profits or other cash flow of the debtor or a related person, to any change in the value of any property of the debtor or a related person or to any dividend, partnership distribution or similar payment made by the debtor or a related person, or any other interest similar to such interest
- Royalties - 0%
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 alienation of any property, other than immovable property, forming part of the business property of a permanent establishment in the other State; and
- Gains from the alienation of shares or comparable interests if, at any time during the 365 days preceding the alienation, the shares or comparable interests derived at least 50% of their value directly or indirectly from immovable property situated in the other State (exemption if the shares or comparable interests are traded on a recognized stock exchange and the alienator together with related parties own in the aggregate 5% or less of the shares or comparable interests).
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Article 21 (Entitlement to Benefits) includes substantial provisions regarding a resident's entitlement to benefits under the treaty. This includes that a resident of a Contracting State will only be entitled to the withholding tax exemptions provided under Articles 10 (Dividends), 11 (Interest), and 12 (Royalties) if the resident is a qualified person (as defined in the treaty) or meets certain other conditions. There are also provisions to limit benefits where income is attributed to a permanent establishment in a third state and where a resident of a Contracting State is only subject to tax in that State on income remitted to or received in that State.
Article 21 also includes a general anti-abuse provision, which provides that a benefit under the treaty will not be granted in respect of an item of income if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit would be in accordance with the object and purpose of the relevant provisions of the treaty.
Both countries generally apply the credit method for the elimination of double taxation.
Article 24 (Mutual Agreement Procedure) includes the provision that where taxation disputes have not been resolved through consultation between the tax authorities of the Contracting States within two years, the unresolved issue will be submitted to arbitration if requested.
The final protocol to the treaty provides that any income and gains derived by a silent partner who is resident in Demark in respect of a silent partnership (Tokumei Kumiai) contract or another similar contract may be taxed in Japan according to its laws if such income and gains arise in Japan.
The treaty will enter into force 30 days after the ratification instruments are exchanged, and will generally apply from 1 January of the year following its entry into force. The 1968 tax treaty between the two countries will cease to apply from the date the new treaty applies and will terminate on the last such date.
TIEA between Finland and the U.A.E. has Entered into Force
The tax information exchange agreement between Finland and the United Arab Emirates entered into force on 13 October 2017. The agreement, signed 27 March 2016, is the first of its kind between the two countries and applies for criminal tax matters from the date of its entry into force and for other matters for taxable periods beginning on or after 1 January 2018, or where there is no taxable period, for all charges to tax arising on or after that date.
Hong Kong and Switzerland Sign Agreement on the Automatic Exchange of Financial Account Information
On 13 October 2017, officials from Hong Kong and Switzerland signed an agreement on the automatic exchange of financial account information. The information exchange will be carried out under the OECD Common Reporting Standard (CRS). Hong Kong and Switzerland intend to start collecting data in 2018 and begin the exchange from 2019.
Protocol to Tax Treaty between Netherlands and Ukraine under Negotiation
On 6 October 2017, Ukrainian President Petro Poroshenko authorized the signing of an amending protocol to the 1995 income and capital tax treaty with the Netherlands. The protocol will be the first to amend the treaty, and must be finalized, signed, and ratified before entering into force.
Pakistan to Amend Tax Treaties with France, Morocco, Nepal, Portugal, Sri Lanka, and Tunisia
According to a government release, Pakistan's Federal Cabinet has approved the negotiation of amendments to the 1994 tax treaty with France, the 2006 tax treaty with Morocco, the 2001 tax treaty with Nepal, the 2000 tax treaty with Portugal, the 1981 tax treaty with Sri Lanka, and the 1996 tax treaty with Tunisia. The treaties will be amended to update the Articles on the exchange of information. The amendments would be the first to the respective treaties, and must be finalized, signed, and ratified before entering into force.
Singapore Publishes e-Tax Guide on Avoidance of Double Taxation Agreements
On 11 October 2017, the Inland Revenue Authority of Singapore (IRAS) published an e-Tax Guide on avoidance of double taxation agreements (DTAs). The purpose of the guide is to provide taxpayers with guidance on the interpretation and application of Singapore’s DTAs and the mutual agreement procedure (MAP). In particular, the guide covers:
- Singapore's DTA policy;
- The Multilateral Convention to Implement the Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, including the main changes to Singapore's DTAs;
- Common DTA Provisions; and
- Mutual Agreement Procedure (MAP), including the four-step MAP process: application, evaluation, review and negotiation, and implementation.
Click the following link for the IRAS e-Tax Guide: Avoidance of Double Taxation Agreements (DTAs).