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Approved Changes (2)

Austria

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Austria Clarifies Electronic Filing of CbC Reports and Notifications

The Austrian Ministry of Finance (BMF) provided the following clarifications regarding the electronic filing of CbC reports (which are due for the first time by the end of FY 2017). According to the communication, the technical process consists of 3 steps as follows:

  • A technical guide will be published on the site of the BMF before the end of July 2017. The guide will describe the technical specifications including conversion of the CbC report to the standard OECD XML schema.
  • A test phase will follow from September 2017, whereby companies will be invited to submit their reports through the BMF’s FinanzOnline portal. The test phase is intended to identify any issue before broader rollout.
  • The test phase is expected to end in October 2017. From approximately that date, the system shall be fully deployed and companies will be able to file through FinanzOnline.
  • Companies should be able to file the required CbC notifications from 4 July 2017 through the FinanzOnline portal.

Belgium-OECD

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Belgian Parliament Ratifies Multilateral Competent Authority Agreement for Exchange of CbC Reports

The Belgian federal parliament on 6 July 2017 ratified the Multilateral Competent Authority Agreement for the Exchange of CbC Reports (CbC MCAA). Once formally published by the King, the CbC MCAA will enter into force in Belgium, thus making it possible to exchange CbC reports with partner countries.

Treaty Changes (3)

Brazil-Canada

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Brazilian Revenue Service Confirms Technical Service Fees Paid to Canadian Recipient Subject to Withholding Tax

In a letter ruling published on 5 July 2017 (DISIT/SRRF06 Nº 6029), the Brazilian Revenue Service confirmed that fees for technical services and technical assistance paid, credited or otherwise remitted to a Canadian resident, are subject to withholding tax in Brazil at the rate of 15% on their gross amount, regardless of whether or not the relevant transaction involves a transfer of technology.

Japan-Lithuania

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Tax Treaty Signed between Japan and Lithuania

Japan and Lithuania signed a first time tax treaty between both countries in Vilnius, Lithuania, on 13 July 2017.

The treaty substantially follows the OECD Model Convention. Salient features of the treaty include the following:

Residence

The residence of dual residents other than natural persons shall be determined by the Competent Authorities based on such factors as place of incorporation, and location of head office or of effective management. Failing such agreement, the person shall not be entitled to relief under the Convention.

Permanent Establishment

The PE article includes anti-PE avoidance measures as per BEPS Action 7.

Withholding Taxes

The source State may levy withholding tax as follows:

  • Dividends: 10% if paid to an individual and 0% if paid to a person other than an individual. However, the nil rate does not apply if the dividends are deductible to the payer.
  • Interest: 10% if paid to an individual and 0% if paid to a person other than individual. However, the nil rate does not apply to 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 dividends, partnership distribution or similar payment made by the debtor or a related person, or any other interest similar to such interest.
  • Royalties are taxable exclusively in the country of residence of the recipient.

Entitlement to Benefits

The Convention contains a limitation on benefits article.

Arbitration

The Convention contains an arbitration clause whereby cases submitted for consultation under the MAP but remaining unresolved for 2 years or more may be submitted to an arbitration panel.

Other

Except in the case of fraud and willful default, the Contracting States are barred from reassessing the profits of enterprises pursuant to transfer pricing regulations beyond the statute of limitations provided for under the relevant domestic laws, and in any case beyond a period of 10 years.

The Convention shall enter into force upon the exchange of diplomatic notes signaling the completion of the legislative process in both countries. It will apply for the first time as follows:

  • For taxes levied by way of assessment, to tax years commencing on or after 1 January following the year during which the Convention enters into force;
  • For taxes withheld at source, to taxes due from 1 January following the year during which the Convention enters into force;
  • With respect to Arts. 27 (Exchange of Information) and 28 (Assistance in the Collection of Taxes), from the date of entry into force of the Convention, regardless of the date on which the taxes are levied or the year to which the taxes relate.

Switzerland-Kosovo

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Switzerland-Kosovo Tax Treaty – Details

Details of the first time tax treaty signed between Switzerland and Kosovo on 26 May 2017 (see earlier coverage) have now become available. Salient features of the Convention include the following:

Business Profits

Except in the case of fraud or willful neglect, the contracting parties are barred from adjusting the income attributable to a permanent establishment if such adjustment occurs 5 years or more following the end of the year for which the income should have been attributed.

Withholding Taxes

  • The source State may levy a withholding tax on dividends paid to a resident of the other State at a rate not exceeding 15%. The rate is reduced to 5% if the recipient is a company (other than a partnership) which has held directly at least 25% of the capital of the payer during a period of at least 365 days, including the day on which the dividend was paid. Discontinuation of the holding period caused by mergers and similar restructuring operations are disregarded for the purpose of determining whether or not the minimum holding period is satisfied. The rate is further reduced to zero if the recipient is either a provident fund or the central bank of one of the States.
  • Interest paid to a resident of one of the States may be taxed in the source State, but the withholding tax may not exceed 5%. The rate is reduced to zero if the interest is paid (a) on account of the credit sale of equipment, goods or services, (b) on account of a loan of whatever nature granted by a bank, (c) to a provident institution, (d) to the government of that State, its local authorities or central bank, or (e) on account of intercorporate debt.
  • Royalties are exclusively taxable in the country of residence of the recipient.

Capital Gains

Capital gains on the disposal of shares in a company resident in a Contracting State may be taxed in that State but only if the assets of the company whose shares are sold consist for more than 50% of real estate situated in that State. This rule does not apply, and the gains are taxable exclusively in the country of residence of the seller, if the shares sold are listed on a stock exchange.

Entitlement to Benefits

The Convention contains a clause allowing the contracting parties to deny the granting of benefits under the convention if it appears from the facts and the circumstances of the case that the principal aim behind the structure or transaction was to obtain those benefits. The benefits of the convention may still be granted if in conformity with the object and purpose of the relevant treaty clause, or if the benefits would have been granted in the absence of the structure or transaction.

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