Worldwide Tax News
According to Indonesia's Director General of Taxes Ken Dwijugiasteadi, the Indonesian tax authority will begin collecting taxes from Google by the end of the year. Google is one of several major online companies that have been under investigation regarding their tax status in Indonesia (previous coverage). For Google Indonesia, the main issue is whether it should be considered a permanent establishment in Indonesia as a dependent agent of Singapore-based Google Asia Pacific Pte Ltd.
The tax amount due and the process for the collection taxes from Google going forward will be finalized once the current investigation is completed, but the outstanding amount due plus penalties for the last five years has been reported to be as high as IDR 5.5 trillion (~USD 410 million). It is possible, however, that an agreement for a lower amount will be reached.
Draft legislation is currently with Poland's Standing Committee of the Council of Ministers to implement measures in relation to the automatic exchange of information with other countries. This includes measures to comply with the provisions of Council Directive (EU) 2016/881 on the exchange of CbC reports and Council Directive (EU) 2015/2376 on the exchange of cross border tax rulings and advance pricing agreements (APAs), as well as measures for the collection and exchange of financial account information under the OECD Common Reporting Standard (CRS).
In regard to CbC reporting, Poland already has requirements in place, but must amend them to adhere to Directive 2016/881, including in relation to secondary filing requirements, notification requirements, etc.
The legislation is expected to be referred to parliament by the end of November. Additional details will be published once available.
Belgium Approves Pending Tax Instruments with the Cayman Islands, Guernsey, Mexico, Norway, and Uzbekistan
On 10 November 2016, the Belgian parliament approved the following pending tax instruments:
- The tax information exchange agreement with the Cayman Islands, signed 24 April 2014;
- The tax information exchange agreement with Guernsey, signed 24 April 2014 by Belgium and 7 May 2014 by Guernsey;
- The protocol to the 1992 income tax treaty with Mexico, signed 26 August 2013;
- The new income tax treaty with Norway, signed 23 April 2014; and
- The protocol to the 1996 income and capital tax treaty with Uzbekistan, signed 18 February 2015.
The tax information exchange agreements will enter into force after the respective ratification instruments are exchanged and will generally apply from that date. The treaty protocols and the treaty will enter into force after the respective ratification instruments are exchanged and will generally apply from 1 January of the year following their entry into force.
The new income tax treaty between Finland and Portugal was signed on 7 November 2016. Once in force and effective, it will replace the 1970 tax treaty between the two countries.
The treaty covers Finnish state income taxes, corporate income tax, communal tax, church tax, tax withheld from interest, and tax withheld at source from non-residents' income. It covers Portuguese personal income tax, corporate income tax, and surtaxes on corporate income tax.
- Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
- Interest - 10%
- Royalties - 5%
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 or comparable interests 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.
Both countries generally apply the credit method for the elimination of double taxation. However, Finland will exempt dividends received by a Finnish company that directly controls at least 10% of the voting power in the paying company.
The final protocol to the treaty includes that the benefits of the treaty will not be granted to a resident of a Contracting State that is not the beneficial owner of the income derived from the other State. In addition, the benefits of the treaty will not be granted if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of the benefits by means of such creation or assignment.
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. The 1970 tax treaty between the two countries will cease to apply and will terminate on the date the new treaty is effective.
Officials from Madagascar and Morocco began the first round of negotiations for an income tax treaty on 14 November 2016. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.
On 14 November 2016, the Saudi Cabinet approved the pending income tax treaty with Gabon. The treaty, signed 17 December 2015, is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.
Additional details of the treaty will be published once available.
The Swiss Federal Council has announced that an agreement has been signed with the UK in relation to the termination of the UK-Switzerland withholding tax agreement. The withholding tax agreement, which entered into force 1 January 2013, allows for the regularization of assets held in Switzerland by UK taxpayers and the taxation of income generated by these assets. However, with the entry into force of the agreement between Switzerland and the EU on the automatic exchange of information in tax matters on 1 January 2017, the withholding tax agreement is no longer needed and will be terminated on that date.