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Worldwide Tax News

Approved Changes (1)

Russia

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Russia Publishes List of Jurisdictions without Adequate Information Exchange for CFC Profit Exemption Purposes

The Russian Federal Tax Service recently published a list of countries that do not have adequate tax information exchange with Russia, which affects the Russian tax exemption for controlled foreign company profits. Under Russian law, an exemption from tax is provided for the profits of CFCs meeting certain conditions (previous coverage), unless the CFC is resident in a listed jurisdiction.

140 jurisdictions are listed, including those that have not entered into an agreement for information exchange with Russia, and those that have not responded adequately to information exchange requests.

The listed jurisdictions are as follows.

Abkhazia, Afghanistan, Alderney (Channel Islands), Andorra, Angola, Anguilla, Anjouan (Comoros), Antigua and Barbuda, Aruba, Austria;

Bahamas, Bahrain, Bangladesh, Barbados, Belize, Benin, Bermuda, Bhutan, Bolivia, Bosnia and Herzegovina, Brazil, British Virgin Islands, Brunei, Burkina Faso, Burundi;

Cambodia, Cameroon, Cape Verde, Cayman Islands, Central African Republic, Chad, Colombia, Comoros Islands, Democratic Republic of Congo, Republic of Congo, Cook Islands, Costa Rica, Curacao;

Djibouti, Dominica, Dominican Republic, East Timor, Ecuador, El Salvador, Equatorial Guinea, Eritrea, Estonia, Ethiopia, Fiji, Gabon, Gambia, Georgia, Ghana, Gibraltar, Grenada, Guatemala, Guernsey, Guinea, Guinea Bissau, Guyana;

Haiti, Honduras, Hong Kong, Jersey, Isle of Man, Iraq, Israel, Ivory Coast, Jamaica, Jordan, Kenya, Kiribati;

Labuan (Malaysia), Laos, Lebanon, Lesotho, Liberia, Liechtenstein, Macau, Madagascar, Malawi, Maldives, Malta, Marshall Islands, Mauritania, Mauritius, Micronesia, Monaco, Montserrat, Mozambique, Myanmar;

Nauru, Nepal, Nicaragua, Niger, Nigeria, Niue, Oman, Pakistan, Palau, Palestine, Panama, Papua New Guinea, Paraguay, Peru, Rwanda;

Samoa, San Marino, St. Vincent and the Grenadines, Island of Sark, St. Kitts and Nevis, St. Lucia, St. Maarten (Dutch part), Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Solomon Islands, Somalia, South Ossetia, South Sudan, Sudan, Surinam, Swaziland, Switzerland;

Tanzania, Turks and Caicos Islands, Togo, Tonga, Trinidad and Tobago, Tuvalu, Tunisia, Uganda, United Arab Emirates, U.K., Uruguay, Vanuatu, Yemen, Zambia, and Zimbabwe.

Proposed Changes (2)

Ireland

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Ireland Issues Report on the Importance of International Tax Dispute Resolution including Implementation of Formal APA Procedures

Irish Revenue recently issued a report on the increasing importance of the role of the Irish competent authority in resolving international tax disputes, including the need to implement a formal program for entering into bilateral advance pricing agreements. Currently, the Irish tax authorities will generally be willing to enter into bilateral APAs on an ad-hoc basis where treaty partners are involved. In such cases, Ireland will follow the procedures of the jurisdiction of the foreign party to the APA. According to the report, Ireland needs to implement its own formal procedures in anticipation of the increased number of transfer pricing disputes expected with the implementation of the OECD BEPS Project measures, and for Ireland to maintain its position as a fair and transparent jurisdiction for multinational enterprises to do business.

Click the following link for the report, The Role of the Competent Authority, which also covers dispute resolution in general, mutual agreement procedures, and arbitration.  

United States

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U.S. Treasury Responds to Senate Finance Committee and House Ways and Means Committee Letter on CbC Regs

In a recently published letter (dated 5 October 2015), U.S. Department of the Treasury’s Deputy Under Secretary for Legislative Affairs Anne Wall responded to concerns raised by Senate Finance Committee Chairman Orrin Hatch R-UT and previous House Ways & Means Committee Chairman Paul Ryan R-WI regarding the implementation of the outcome of the OECD BEPS Project (previous coverage). In particular, Deputy Under Secretary Wall addressed country-by-country reporting requirements developed as part of Action 13 of the BEPS Project, including the need for a coordinated approach to implement consistent CbC requirements across all countries.

Concerning Treasury's authority to implement CbC reporting requirements, Wall stated, "the Internal Revenue Service (IRS) and the Treasury Department have authority to issue country-by-country regulations under sections 6001, 6011, and 6038 of the Internal Revenue Code, as well as authority to exchange that information with other jurisdictions under our existing treaty and tax information exchange network. Accordingly, we plan to issue regulations to require country-by-country reporting by certain U.S.-based companies pursuant to the standard administrative rulemaking process."

Although the letter did not specify a particular timeframe for the issuance of CbC regulations, previous statements from Treasury officials have indicated that temporary regulations will be issued by the end of 2015 that will have effect for tax years beginning on or after 1 January 2016.

Treaty Changes (4)

Brazil-South Africa

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Update - Protocol to the Tax Treaty between Brazil and South Africa

The pending protocol to the 2003 income tax treaty between Brazil and South Africa was signed 31 July 2015. The protocol replaces Article 26 (Exchange of information) of the treaty, bringing it in line with the OECD standard for information exchange. It will enter into force 30 days after the ratification instruments are exchanged, and will generally apply from that date.

Guernsey-Spain

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TIEA between Guernsey and Spain Signed

On 10 November 2015, officials from Guernsey and Spain signed a tax information exchange agreement. The agreement is the first of its kind between the two jurisdictions and is in line with the OECD standard for information exchange. It will enter into force three months after the ratification instruments are exchanged, and will generally apply from that date.

Malta-Mauritius

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Tax Treaty between Malta and Mauritius has Entered into Force

According to a notice published by Malta's government on 10 November 2015, the income tax treaty between Malta and Mauritius entered into force on 23 April 2015. The treaty, signed 15 October 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Malta income tax and Mauritius income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise from one Contracting State furnishes services in the other State through employees or other engaged personnel for the same or connected project for a period of more than 12 months.

Withholding Tax Rates

  • Dividends - 0%
  • 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 directly or indirectly deriving more than 50% of their value from immovable property situated in the other State, unless such shares are quoted on the Malta Stock Exchange, the Stock Exchange of Mauritius, or any other stock exchange agreed upon by both States

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.

Effective Date

The treaty applies from 1 January 2016.

United States-Chile-Hungary-Poland-Japan-Luxembourg-Spain-Switzerland-OECD

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U.S. Senate Foreign Relations Committee Approves Pending Tax Treaties and Protocols

On 10 November 2015, the U.S. Senate Foreign Relations Committee approved eight pending tax treaties and protocols, which are now to be put to a vote in the full Senate.

The pending treaties include:

  • The 2010 income and capital tax treaty with Chile, which is the first of its kind between Chile and the U.S.;
  • The 2010 income tax treaty with Hungary, which will replace the 1979 treaty; and
  • The 2013 income tax treaty with Poland, which will replace the 1974 treaty.

Then pending protocols include:

  • The 2013 protocol to the 2003 income tax treaty with Japan;
  • The 2009 protocol to the 1996 income and capital tax treaty with Luxembourg;
  • The 2013 protocol to the 1990 income tax treaty with Spain;
  • The 2009 protocol to the 1996 income tax treaty with Switzerland, and
  • The 2010 protocol amending the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters.

The pending treaties and protocols will enter into force after the ratification instruments are exchanged with the respective countries, and the protocol to the Mutual Assistance Convention will enter into force after the ratification instruments is deposited.

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