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Worldwide Tax News

Approved Changes (3)

Philippines

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Philippines Shifts Late Tax Payment Liabilities to Banks for Smaller Taxpayers

On 15 February 2017, the Philippine Department of Finance announced that a new revenue regulation will be issued with the Bureau of Internal Revenue that will make banks liable for delays in, or non-remittance of, taxes paid through credit, debit or prepaid cards. The new regulation will amend regulation No. 3-2016, which made taxpayer's responsible when paying through such methods even if late payment was due to the bank's failure to remit the payment on time. According to the announcement, the change will benefit primarily self-employed taxpayers and owners of micro, small and medium enterprises.

Switzerland

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Switzerland Related Party Interest Rate Safe Harbor Limits for 2017 Published

The Swiss Federal Tax Administration has published the circulars on the safe harbor interest rate limits for shareholder and related party financing for 2017. The rates depend on whether the financing is in Swiss francs or in a foreign currency.

Financing in Swiss Francs

  • Loans to shareholders or related parties:
    • Financed through equity - at least 0.25%
    • Financed through debt - at least actual interest expense plus 0.50% for amounts up to CHF 10 million, plus 0.25% for amounts exceeding CHF 10 million
  • Loans from shareholders or related parties:
    • Real estate loans - at most 1.0% to 2.25% depending on nature of the property and the amount financed
    • Business loans received by:
      • Commercial and industrial companies - at most 3.0% for amounts up to CHF 1 million, and 1.0% for amounts exceeding CHF 1 million
      • Holding and asset management companies - at most 2.50% for amounts up to CHF 1 million, and 0.75% for amounts exceeding CHF 1 million

Financing in Foreign Currency (loans to or from shareholders or related parties)

  • Financed through equity - 0.75% if in EUR, 2.50% if in USD, and between 0.75% and 8.0% for other currencies
  • Financed through debt - actual interest expense plus 0.50%, with a minimum of 0.75% if in EUR, 2.50% if in USD, and between 0.75% and 8.0% for other currencies

The safe harbor rates may be deviated from if it can be shown the rate is appropriate given the circumstances and is at arm's length. If the rates are deviated from and not shown to be at arm's length, excess interest paid will be treated as a hidden profit distribution (deemed dividend) subject to tax.

Untd A Emirates

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U.A.E. Clarifies Certain Aspects of the Pending VAT Regime

In a recent interview with Thomson Reuters Zawaya, Under Secretary of the U.A.E. Ministry of Finance Younis Al Khouri clarified certain aspects of the pending VAT regime, including that:

  • VAT at the rate of 5% will be adopted effective 1 January 2018 as planned;
  • VAT will apply to most goods and services, although certain exemptions may be introduced for the education, healthcare, renewable energy, water, space, transport, and technology sectors;
  • The planned registration threshold will be annual revenue of USD 100,000; and
  • The introduction of a zero-rate is possible, but not currently planned.

In addition, according to updates to the VAT FAQ published by the Ministry of Finance, registration is expected to be available three months prior to the launch of VAT and the VAT period for returns is expected to be three months for most taxpayers. Both registration and return filing will available via online eServices.

Proposed Changes (1)

Czech Rep

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Czech Bank Tax Proposed

Czech Prime Minister Bohuslav Sobotka announced a proposal on 14 February 2017 to introduce a four-tiered bank tax that would be levied in addition to the standard corporate tax (19%). The tax would be based on asset value, with a top rate of 0.3% for banks with assets over CZK 300 billion. It would apply for both domestic and foreign owned banks in the Czech Republic. The likelihood of the proposal going through will depend in large part on the Prime Minister's Social Democratic Party winning elections that will be held in October.

Treaty Changes (4)

Germany-Angola-Bahamas-Nigeria-Senegal

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Germany Negotiating Tax Instruments with Angola, Bahamas, Nigeria and Senegal

According to a recent update from the German Ministry of Finance, negotiations are underway for income tax treaties with Angola, Nigeria, and Senegal, as well as for a protocol to the 2010 tax information exchange agreement with the Bahamas. Any resulting treaties would be the first of their kind between Germany and the respective countries and the protocol would be the first to amend the exchange agreement with Senegal. Details of each tax instrument will be published once available.

Liechtenstein-Untd A Emirates

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Tax Treaty between Liechtenstein and the U.A.E. to Enter into Force

The income and capital tax treaty between Liechtenstein and the United Arab Emirates will enter into force on 24 February 2017. The treaty, signed 1 October 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Liechtenstein personal income tax, corporate income tax, real estate capital gains tax, wealth tax, and coupon tax. It covers United Arab Emirates income tax and corporate tax.

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 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 deriving more than 50% of their value directly or indirectly from immovable property situated 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.

Hydrocarbons and Other Natural Resources

Article 20 (Income From Hydrocarbons and Other Natural Resources) provides that the treaty will not affect the right of either one of the Contracting States to apply their domestic laws and regulations related to the taxation of income, profits, and gains derived from hydrocarbons or other natural resources and their associated activities situated in the territory of the respective Contracting State.

Double Taxation Relief

The United Arab Emirates applies the credit method for the elimination of double taxation, while Liechtenstein generally applies the exemption method. However, Liechtenstein applies the credit method in respect of income covered by Articles 14 (Income from Employment), 15 (Directors' Fees), 16 (Entertainers and Sportspersons) and 17 (Pensions).

Limitation on Benefits

Article 28 (Entitlement to Benefits) provides that a resident of a Contracting State shall not receive the benefit of any reduction in or exemption from tax provided for by the treaty if the competent authority of the other State determines that the principal purpose of such resident or a person directly or indirectly controlling such resident was to obtain the benefits. Before a person is denied benefits, the competent authorities of both Contracting States will consult with each other.

Effective Date

The treaty applies from 1 January 2018.

Niger-Qatar

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Tax Treaty between Niger and Qatar to be Signed

According to recent reports, officials from Niger and Qatar have agreed to sign a draft tax treaty. The treaty will be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Qatar-Turkey

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Update - New Tax Treaty between Qatar and Turkey

The new income tax treaty between Qatar and Turkey was signed on 18 December 2016. Once in force and effective, it will replace the 2001 tax treaty between the two countries.

Taxes Covered

The treaty covers Qatari income tax, and cover Turkish income tax and corporation tax.

Service PE

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

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 20% of the paying company's capital; otherwise 10%
  • Interest - 10%
  • Royalties - 10%

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; 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

Both countries apply the credit method for the elimination of double taxation.

Limitation of Benefits

Article 28 (Limitation of Benefits) provides that the competent authorities of the Contracting States, upon their mutual agreement, may deny the benefits of the treaty to any person, or with respect to any transaction, if in their opinion the receipt of those benefits under the circumstances would constitute an abuse of the treaty.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force. The 2001 tax treaty between the two countries will cease to apply on the date the new treaty is effective.

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