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Worldwide Tax News

Approved Changes (4)

Hungary

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Hungary Approves Reform Measures including Corporate Tax Rate Cut

On 12 December 2016, the Hungarian parliament reportedly approved legislation to introduce a single corporate tax rate of 9%. The 9% rate replaces both the current 10% rate on taxable income up to HUF 500 million and the 19% rate on taxable income exceeding that amount. Other measures approved include:

  • A reduction in the effective tax rate condition for controlled foreign company (CFC) purposes from 10% to 9%;
  • A reduction of the small business flat tax (KIVA) rate from 16% to 14% in 2017 and to 13% in 2018 (covers corporate tax, value added tax, social security, etc.); and
  • A reduction in the social tax rate from 27% to 22% in 2017 and to 20% in 2018.

The measures generally apply from 1 January 2017.

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Peru Legislative Decrees Published Implementing 2017 Corporate and Individual Tax Reform Measures

A series of legislative decrees have been published in Peru's Official Gazette for the implementation of a number of tax measures for 2017. The main corporate and individual tax measures include:

  • The corporate tax rate is increased from 28% to 29.5% (Legislative Decree No. 1261);
  • The dividends withholding tax rate is reduced from 6.8% to 5% (Legislative Decree No. 1261) (note - dividends paid out of profits earned between 1 January 2015 and 31 December 2016 remain subject to the 6.8% rate, while dividends paid out of profits earned before 2015 are subject to a 4.1% rate);
  • The tax exemption on gains from the sale of shares listed in the Peru stock exchange is extended to 31 December 2019, and the scope of eligible securities is expanded (Legislative Decree No. 1262);
  • The capital gains tax rate for non-resident individuals on the disposal of immovable property in Peru is reduced from 30% to 5% (Legislative Decree No. 1258); and
  • A voluntary disclosure scheme for individuals is introduced for undeclared income generated up to 31 December 2015, including:
    • A tax rate of 10% on income declared; or
    • A tax rate of 7% on income declared that is also repatriated and invested in Peru (Legislative Decree No. 1264).

The legislative decrees generally apply from 1 January 2017. Additional legislative decrees, including possible BEPS measures, are expected by the end of the year or early January 2017 due to the expiry at the time of the 90-day executive power granted to issue the decrees.

Portugal

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Portugal Extends First CbC Notification Deadline to May 2017

On 15 December 2016, an order (DESPACHO n.º 254/2016-XXI 12/12) from Portugal's Secretary of State of Tax Affairs was published concerning the deadline for the Country-by-Country (CbC) reporting notification. Under Portugal's CbC reporting requirements, the identity and tax residence of the reporting entity must be provided electronically to the Portuguese tax authority by the end of the fiscal year concerned. However, because the electronic means for providing the notification are not yet finalized, the notification deadline for the 2016 fiscal year is extended to the last day of May 2017 (the tax return deadline). The order also notes that the end of May notification deadline may be made permanent with the pending transposition of amendments made by Council Directive (EU) 2016/881 concerning the exchange of CbC reports.

Taiwan

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Taiwan's Legislative Yuan Approves Legislation to Require Foreign E-Service Suppliers to Register for VAT

According to a recent announcement from Taiwan's Ministry of Finance, Taiwan's Legislative Yuan has approved legislation amending the value added tax (VAT) law to require foreign suppliers of electronic services and content (e-service) to register and pay VAT on e-service supplies made to natural persons resident in Taiwan. Under the new requirements, the foreign supplier must either register directly or appoint a tax agent to fulfill the obligations.

Although not indicated in the announcement, the new requirements are expected to apply from early 2017. Additional details of the requirements, including the method for registering and filing returns, will be issued by the Ministry of Finance in the near future.

Proposed Changes (3)

Costa Rica

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Costa Rica Consults on Master/Local File Requirements

On 12 December 2016, the Costa Rica Directorate General of Taxation published a draft resolution for public consultation on the introduction of transfer pricing documentation requirements based on Action 13 of the OECD BEPS Project. The draft resolution includes:

  • Group information requirements (Master file), including details of the organizational structure, supply chain for top five products/services, functional analysis, intangibles and R&D, etc., and
  • Local business information requirements (Local file), including details of the structure, business strategy, main competitors, transactions, comparability analysis and transfer pricing methods used, copies of APAs and relevant tax rulings, etc.

The draft resolution includes that the documentation should be available upon request. No specific thresholds or deadlines for preparation are provided in the resolution.

The draft resolution will apply once finalized and published in the Official Gazette.

New Zealand

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New Zealand Cabinet Paper on BEPS Measures to Address Transfer Pricing and Permanent Establishment Issues

On 14 December 2016, the New Zealand Minister of Revenue Michael Woodhouse released a Cabinet paper providing information on BEPS measures being considered by the Government. The paper seeks the agreement of the Economic Growth and Infrastructure Committee to prepare and issue a discussion document primarily on measures to strengthen transfer pricing rules and prevent permanent establishment (PE) avoidance. In particular, the paper recommends that Inland Revenue and the Treasury develop a package of measures that should include:

  • Measures to prevent the avoidance of a PE in New Zealand, which would be similar in effect to this aspect of the Australian/UK DPT (including a possible override of Double Tax Agreements) and consistent with the OECD’s BEPS measures;
  • Amendments to transfer pricing legislation, in order for the authorities to collect better information, to tax multinationals more in accordance with the economic substance of their activities in New Zealand (in accordance with the OECD’s new transfer pricing guidelines), and so that Inland Revenue does not have the burden of proof in transfer pricing cases;
  • Adoption of other OECD BEPS measures relating to transfer pricing and PE avoidance, which includes strengthening tax treaties so they cannot be used for this purpose;
  • Other domestic law amendments to address issues specific to New Zealand; and
  • Administrative measures to make it easier to assess and collect tax from uncooperative multinationals in practice (particularly in relation to transfer pricing).

The Government plans to release the discussion document to consult on the measures in early 2017.

Ukraine

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Ukraine Draft Law to Counter Tax-Related Corruption

The Ukraine Ministry of Finance has announced draft law No. 5368, which includes a number of measures to improve tax administration in order to counter tax-related corruption, as well as certain measures to support businesses. According to the announcement, key measures of the draft law include:

  • Implementation of the electronic office for taxpayers to improve the transparency of tax administration;
  • Implementation of a tax break for new businesses (for 5 years) to foster the development of small business;
  • Implementation of the single register for tax advice aimed to minimize the number of tax disputes;
  • Administration of all databases by the ministry of finance designed to reduce opportunities for the abuse of office;
  • Faster depreciation (2 years) for production equipment to stimulate investments;
  • Single public register of VAT refund applications aimed to increase the transparency of VAT refund;
  • Implementation of the mechanism to block the registration of tax bills meeting risk criteria, removing opportunities to manipulate VAT refund; and
  • Suspension of fines and exemption from local taxes aimed to settle tax payments in the ATO zone.

Draft law No. 5368 is expected to be adopted by the parliament in the near future.

Treaty Changes (4)

Ecuador-Italy

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Protocol to Tax Treaty between Ecuador and Italy Signed

On 13 December 2016, officials from Ecuador and Italy signed a protocol to the 1984 income and capital tax treaty between the two countries. The protocol is the first to amend the treaty and will enter into force after the ratification instruments are exchanged. Additional details will be published once available.

Isle Of Man-Turks Caics

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TIEA between Isle of Man and Turks and Caicos Islands to Enter into Force

The tax information exchange agreement between the Isle of Man and the Turks and Caicos Islands will enter into force on 29 December 2016. The agreement, signed by the Turks and Caicos Islands on 30 June 2016 and by the Isle of Man on 2 August 2016, is the first of its kind between the two jurisdictions. It generally applies for criminal tax matters on the date of its entry into force and for other matters from 1 January 2016.

Italy-Romania

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Italy's Chamber of Deputies Approves New Tax Treaty with Romania

The Italian Chamber of Deputies (lower house of parliament) has approved the bill for the ratification of the pending income tax treaty with Romania (treaty details). The treaty, signed 25 April 2015, will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. Once in force and effective, it will replace the 1977 tax treaty between the two countries.

Morocco-Spain

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Exchange of Notes between Morocco and Spain in Force

According to recent reports, the exchange of notes concerning certain provisions of the 1978 income and capital tax treaty between Morocco and Spain entered into force on 4 August 2016. The exchange of notes 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. The exchange of notes 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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