Worldwide Tax News
The Canada Revenue Agency has published an overview of what's new for corporations for 2016 and 2017 at both the federal level and the province and territory level. With regard to the 2017 changes at the federal level, the overview notes the new measures introduced as part of the Budget 2017 (previous coverage), such as the extension of base erosion rules to foreign branches of life insurers, capital cost allowances for heat and electricity generating equipment, rules on factual control of a corporation, and others. The overview also notes the Country-by-Country reporting requirements in 2017 with regard to fiscal years beginning on or after 1 January 2016. At the province and territory level, the overview notes changes in higher and lower (small business) tax rates, as well as changes in the various credits/incentives.
The Cyprus Ministry of Finance has announced that the Council of Ministers has approved the signing of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), which is scheduled to take place in Paris on 7 June 2017. The BEPS MLI is for the purposes of implementing the treaty-related measures developed as part of the BEPS Project without needing to separately amend each bilateral treaty. This includes measures developed as part of BEPS Action 2 (Hybrid Mismatches), Action 6 (Preventing Treaty Abuse), Action 7 (Preventing Artificial Avoidance of a PE), and Action 14 (Improving Dispute Resolution).
Malaysia has published the Income Tax (Exemption) (No. 2) Order 2017 in the Official Gazette. The Order sets out the conditions and method of determination for the special reduced tax rates on the year-on-year incremental increase in chargeable income for years of assessment 2017 and 2018. The amount of the reduction depends on the amount of the incremental increase as follows:
- 1% reduction for an incremental increase of 5% to 9.99% (23% rate on incremental amount);
- 2% reduction for an incremental increase of 10% to 14.99% (22% rate on incremental amount);
- 3% reduction for an incremental increase of 15% to 19.99% (21% rate on incremental amount); and
- 4% reduction for an incremental increase of 20% or more (20% rate on incremental amount).
The special reduced rates apply for qualifying persons, including a company incorporated under the Companies Act, a limited liability partnership registered under the Limited Liability Partnership Act, and certain others. To be eligible, the qualifying person's business must have been in operation for at least 24 months and must have had chargeable income in the basis period for the year of assessment and the previous period.
For qualifying persons with capital of MYR 2.5 million or less, the reduced rates do not apply if the incremental amount is part of the first MYR 500,000 of chargeable income for the period, which is already subject to a reduced rate of 18% (reduced from 19% from year of assessment 2017 - previous coverage). When the incremental amount is part of chargeable income exceeding MYR 500,000, the reduced rates for incremental income apply.
Malta's Inland Revenue Department (IRD) has issued a notice on the extended deadlines for filing tax returns electronically in the 2017 year of assessment. When e-filing for 2017, the deadlines in general have been extended by a full two months, although the extension is three months for taxpayers with a 31 March 2017 standard deadline and the deadline is 28 November 2017 for taxpayers with a 30 September 2017 standard deadline. The extended deadlines apply only for electronic tax return filing, while any payment due must still be made by the standard deadlines.
Click the following link for the IRD news page with the deadlines notice.
The Pakistan Federal Board of Revenue has published Notification S.R.O. 255 (I)/2017 on the amendment of the Income Tax Rules, 2002 regarding the remittance of tax withheld. The amendment provides that where tax has been collected or deducted at source by a person other than the Federal or Provincial Government, the tax amount must be remitted to the Treasury or deposited in the State Bank or National Bank of Pakistan within seven days from the end of the withholding week (ending Sunday). For payments to non-residents, the amount of tax to be deducted or collected must be remitted before the payment is remitted abroad.
The Ukraine State Fiscal Service (SFS) recently published guidance letter No. 6345/6/99-99-15-02-02-15 concerning withholding tax on income derived by a non-resident as part of a joint venture (activity) agreement involving business activities in Ukraine. According to the letter, persons engaged in joint activities without a legal entity shall be considered a separate entity in such activities for tax purposes. In such case, the accounting of the results of the joint activity can be assigned to one of the partners to the agreement, which must submit a tax return and financial statements including the profit each partner received. For the amount paid to a non-resident, the partner assigned to manage the accounting results must withhold tax at the standard 15% rate, unless otherwise provided by an applicable tax treaty. Failure to withhold and remit the tax due will result in a penalty of 25% of the tax due (50% and 75% for repeated violations within a 1095-day period).
The Czech Ministry of Finance is currently consulting on proposals for the implementation of Council Directive (EU) 2016/1164 (previous coverage). The Directive includes anti-avoidance rules in five areas, including interest limitation rules, exit taxation rules, a general anti-abuse rule (GAAR), controlled foreign company (CFC) rules, and hybrid mismatch rules.
In general, the Ministry of Finance is planning to implement measures in line with the Directive. However, with respect to interest limitation rules, each Member State has a degree of flexibility based on certain options included in the Directive, for which the Ministry of Finance is planning a more strict approach. This will include an interest deduction limit equal to 30% EBITDA as provided in the Directive, but with a lower de minimis deduction threshold of EUR 1 million (Directive recommends EUR 3 million). In addition, the Ministry does not plan to provide an exception for loans concluded before 17 June 2016 or provide for the carry-back of excess interest expense or the carry-forward of unused EBITDA capacity. The carry-forward of excess interest expense, however, would be allowed.
The Ministry is planning to introduce the interest limitation rules and CFC rules with effect from 1 January 2019, and introduce the exit taxation and hybrid mismatch rules with effect from 1 January 2020. The Ministry is not planning to introduce a new GAAR, as current rules/practices are seen as sufficient.
Click the following link for the consultation page (Czech language). Comments are due by 30 April 2017.
The tax information exchange agreement between Argentina and Armenia will enter into force on 28 April 2017. The agreement, signed 7 July 2014, is the first of its kind between the two countries and will apply for criminal tax matters on the date of its entry into force and for other matters from 1 January 2018.
The Rwandan Council of Ministers had reportedly approved the pending income tax treaty with Morocco. The treaty, signed 19 October 2016, is the first of its kind between the two countries and will enter into force once the ratification instruments are exchanged (previous coverage).