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Approved Changes (3)

Brazil-OECD

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Brazil Implements Common Reporting Standard for Exchange for Financial Account Information

Brazil has implemented the OECD Common Reporting Standard (CRS) for the exchange of financial account information. Regulation of the CRS is made through Normative Instruction No. 1680/2016, which sets out the requirements of financial institutions to identify and remit information on reportable financial accounts of non-residents, which will be automatically exchanged with other jurisdictions participating in the CRS.

The exchange of information is made under the Mutual Assistance Convention and the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information.

Indonesia

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Indonesia Introduces Transfer Pricing Documentation Requirements based on BEPS Action 13

Indonesia's Ministry of Finance has published Regulation 213 /PMK.03/ 2016, which introduces new transfer pricing documentation requirements based on the three-tiered approach of BEPS Action 13.

Master/Local File

Under the new rules, a Master and Local file must be prepared if a taxpayer has related party transactions and meets any of the following conditions in the previous year:

  • Annual gross income exceeding IDR 50 billion (~USD 3.74 million);
  • Annual related-party transactions exceeding:
    • IDR 20 billion (~USD 1.5 million) in the case of tangible goods; or
    • IDR 5 billion (~USD 374,000) in the cases of services, interest payments, royalty payments, or similar transactions; or
  • Have transactions with related parties who are located in jurisdiction with a lower tax rate than Indonesia (25%).

When required, the Master and Local file must be prepared and made available within four months after the tax year (tax return due date). The information and data should be contemporaneous (as of the time of the transactions). Indication of preparation and a summary is due with the tax return.

The Master/Local file requirements apply in respect of the 2016 tax year. The general requirement is that the documentation must be prepared in Indonesian. However, for taxpayers that are allowed to keep their books in a foreign language, the language indicated in their operating license may be used, but an Indonesian translation is still required.

CbC Report

Indonesian parent entities must prepare and submit a Country-by-Country (CbC) report if annual group revenue meets or exceeds IDR 11 trillion (~USD 824 million). The regulation includes that non-parent entities may also be required to submit a CbC report if the parent's jurisdiction:

  • Does not require the submission of CbC reports;
  • Does not have an agreement with Indonesia for the exchange of CbC reports; or
  • An agreement exists, but Indonesia is unable to obtain the report from the jurisdiction.

When required, the CbC report must be prepared and made available no later than 12 months after the end of the tax year and must be submitted as an annex to the tax return for the following year. The data and information should be as of the end of the relevant tax year. The inclusion of separate preparation and submission deadlines is unique among countries that have adopted CbC reporting, and may be meant to enable Indonesia to meet future exchange obligations with other countries.

The content of the CbC report is based on Action 13 guidelines, but includes additional requirements concerning information on individual group members. This includes gross revenues, taxes paid, capital, retained earnings, and other information that is submitted in a CbC report working paper along with the CbC report. The same language requirements as Master/Local file apply for CbC reports.

The CbC reporting requirement applies for the 2016 tax year, with the first CbC reports required to be prepared and made available by 31 December 2017.

Click the following link for Regulation 213 /PMK.03/ 2016 (Indonesian language). Further regulations concerning the new requirements are to be issued by the Directorate General of Taxation and will be reported on once available.

Ukraine

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Ukraine Clarifies Deductibility of Royalty Payments to Non-Residents

Ukraine's State Fiscal Service (SFS) recently published guidance letter No. 28476/6/99-99-15-02-02-15, which clarifies the deductibility of royalty payments to non-residents in the absence of a certificate of residence when such non-resident is registered in a jurisdiction included in the list of tax havens. According to the letter, such payments are non-deductible regardless of the presence of a certification of residence. Likewise, royalty payments to a non-resident not registered in a tax haven are generally deductible regardless of the presence of a certification of residence. However, the letter notes that if a taxpayer wishes to avail of a reduced withholding tax rate provided by a tax treaty, a certification of residence for the non-resident is required.

Note - In addition to the restriction on the deduction of royalties paid to a tax haven, Ukraine's general rule includes a limit equal to 4% of net income for the previous year plus the amount of royalty income of the taxpayer, unless the payment is shown to be in accordance with the arm's length principle.

Proposed Changes (1)

Russia-Hong Kong

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Russia to Remove Hong Kong from Tax Haven List

On 10 January 2017, the Russian Ministry of Finance published a notice of consultation on an order to remove Hong Kong from the tax havens list originally approved by Order No. 108n of 13 November 2007. The removal from the list is a result of the 2016 Hong Kong-Russia tax treaty, which entered into force on 29 July 2016 and generally applies from 1 January 2017 (previous coverage). The consultation is open until 30 June 2017, after which the draft order will be finalized and is to apply from September 2017.

Treaty Changes (5)

Germany-Switzerland

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Germany and Switzerland Sign Consultation Agreement on Tax Treaty Pension Provisions

On 21 December 2016, officials from Germany and Switzerland signed a consultation agreement regarding the interpretation of pension provisions in Article 19 of the 1971 income and capital tax treaty between the two countries. The agreement clarifies the taxation of government pensions. It applies from the date it was signed in relation to any current and future cases.

Hungary-Iraq

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Hungary Approves Pending Tax Treaty with Iraq

The Hungarian government has approved the pending income and capital tax treaty with Iraq, and submitted it to the National Assembly for ratification. The treaty, signed 22 November 2016, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Hungarian personal income tax, corporate tax, land parcel tax, and building tax. It covers Iraqi income tax, real estate tax, vacant land tax, and income tax on foreign oil companies contracting for work in Iraq.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes consultancy or administrative services in a Contracting State through employees or other engaged personnel for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 5%
  • Interest - 0% for interest paid in connection with the sale on credit of any merchandise or equipment, or on any loan or credit of whatever kind granted by a bank; otherwise 5%
  • Royalties - 5%

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 shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment 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.

Double Taxation Relief

Hungary generally applies the exemption method for the elimination of double taxation, although the credit method is applied in respect of income covered by Articles 10 (Dividends), 11 (Interest), and 12 (Royalties). Iraq applies the credit method.

Entitlement to Benefits

Article 28 (Entitlement to Benefits) includes the provision that a benefit provided under the treaty will not be granted if it is reasonable to conclude that obtaining the benefit was one of the principle purposes of any arrangement or transaction that resulted directly or indirectly in the benefit. However, the denial of benefits will not apply if it is established that the granting of the benefit would be in accordance with the object and purpose of the relevant provisions of the treaty. Before a resident of a Contracting State is denied benefits, the competent authorities of both States will consult with each other.

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Qatar-Tajikistan

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Qatar and Tajikistan Conclude Tax Treaty Negotiations

During a meeting held 9 to 12 January 2017, officials from Qatar and Tajikistan concluded negotiations with the initialing of an income tax treaty. The treaty is the first of its kind between the two countries and must be signed and ratified before entering into force. Additional details will be published once available.

United Kingdom-Uruguay

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UK Confirms Entry into Force of Tax Treaty with Uruguay

On 12 January 2017, the UK Foreign & Commonwealth Office published a release confirming that the income and capital tax treaty with Uruguay entered into force 14 November 2016, and has taken effect from 1 January 2017 for taxes withheld at source, and in respect of other taxes, for taxable periods (and in the case of UK Corporation Tax, financial years) beginning on or after 1 January 2017. The treaty, signed 24 February 2016, is the first of its kind between the two countries. Click the following link for details of the treaty.

Vietnam-Slovenia

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Vietnam to Negotiate Tax Treaty with Slovenia

According to recent a government release, Vietnam's President Tran Dai Quang has expressed his hope to Slovenian Ambassador Janez Premoze to conclude negotiations and sign an income tax treaty. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

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