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Approved Changes (5)

Denmark

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Denmark's New Anti-Abuse Rules in Force

New anti-abuse rules entered into force in Denmark on 1 May 2015. The rules are included in legislation adopted on 21 April 2015 that allow the Danish tax authorities to deny EU tax directives benefits and tax treaty benefits in cases of abuse. The rules are based on recent anti-abuse rules added to the EU Parent-Subsidiary Directive, and Action 6 of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project, which deals with preventing treaty abuse. The rules apply in regard to the benefits of the EU Parent-Subsidiary Directive, Interest Royalty Directive and the Merger Directive, as well as Denmark's current and future tax treaties.

The EU directives anti-abuse rule essentially states that Denmark will not grant the benefits of a directive to an arrangement or a series of arrangements if the arrangement(s) are only put in place to receive a tax benefit and not for valid commercial reasons that reflect economic reality.

The tax treaty anti-abuse rule essentially states that Denmark will not grant the benefits of a tax treaty if it is reasonable to establish that obtaining a tax benefit is one of the main reasons of any arrangement or transaction which directly or indirectly leads to the benefit, unless it can be established that providing the benefit would be in accordance with the content and purpose of the treaty.

Ecuador

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Ecuador Publishes Tax Amnesty Law

On 5 May 2015, the Ecuadorian government published a new tax amnesty law in the country's Official Gazette. The tax amnesty applies for tax obligations arising up to 31 March 2015.

If the tax due is fully paid within 60 days of publication of the law in the Official Gazette (by 28 July), 100% exemption from interest and penalties for late payment is provided. If paid after 60 days up to 90 days after the law was published (by 8 Sept.), a 50% exemption applies.

Liechtenstein

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Liechtenstein Requires Electronic Return Filing

The Liechtenstein government recently adopted a change in tax regulation requiring legal entities to file their tax returns electronically. The new requirements apply for returns filed from 15 May 2015.

Click the following link for the Liechtenstein e-filing webpage (German language), including e-filing software and instructions.

Panama

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Panama Enacts Tax Reform

On 4 May 2015, Panama enacted Law No. 27, which amends certain provisions of the Tax Code and other tax laws. The main amendments are summarized as follows.

Exceptions to the Definition of Panamanian-Source Income

Exceptions are introduced in regard to the territorial tax principle that income derived by non-residents must be Panamanian-source in order to be taxable in Panama. These exceptions are based on the status of the payer.

Under the general definition, income is deemed Panamanian-source when payments are made to non-residents for services or actions that benefit the resident payer in Panama and the payments are registered as a deductible expense by the payer. With the new amendments, payments from Panamanian residents to non-residents may be taxable and subject to withholding tax even if the payments do not meet the general conditions to be deemed Panamanian-source.

The exceptions include if the payer is:

  • A public entity of any type, including state-owned companies and companies with a state equity participation of 51% or more;
  • An entity that is not a taxpayer for income tax purposes; or
  • A taxpayer with losses

Withholding Tax on Dividends Distributed by Real Estate Investment Companies

The withholding tax rate on dividends distributed by registered real estate investment companies that are committed to distribute at least 90% of their net income as dividends is increased from 5% to 10%. In addition, dividends distributed to holders of preferred shares will no longer be exempt.

Withholding Tax Exemption Limitation

Section 733-A of the Tax Code is reinstated (repealed 2009), which includes the provision that if a special law exempts Panamanian-source dividends, royalties, interest, professional fees, and similar amounts paid to non-residents, the exemption will only apply if proof is provided by the beneficial owner that a tax credit cannot be claimed in their jurisdiction of residence. The proof must be in the form of a formal opinion issued by an independent tax expert of the non-resident's jurisdiction. If a partial credit applies, the amount of withholding tax may be reduced in proportion to the partial credit.

Mineral Extraction Royalty

The Code of Mineral Resources is amended to include a royalty tax of 2% to 4% on the value of extracted minerals. The rate depends on the mineral type

The amendments are effective 5 May 2015.

Puerto Rico

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Puerto Rican Government Reaches Tentative Agreement on Sales Tax

The Puerto Rican government has reached tentative agreement on increasing the existing sales and use tax from 7% to 11.5%, as well as introducing a 4% sales tax on B2B services. The agreement follows the House of Representatives rejection in late April of the government's planned implementation of a new value added tax (VAT) regime to replace sales tax.

Formal approval of the legislation for the change is expected in the next few days and the change will be implemented approximately one month following its approval. The increase is meant to be a temporary solution for Puerto Rico's debt problems while work continues on the implementation of a VAT regime.

Treaty Changes (6)

Albania-Untd A Emirates

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Update - Tax Treaty between Albania and the U.A.E.

The income and capital tax treaty between Albania and the United Arab Emirates was signed 14 March 2014. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Albanian corporate profits tax, personal income tax, capital gains tax, tax on small business activities and property tax. It covers U.A.E income tax and corporate tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other engaged personnel if such activities continue for a period or periods aggregating more than 9 months.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10%
  • Interest - 0%
  • 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 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.

Income from Hydrocarbons

The treaty includes the provision under Article 23 (Income from Hydrocarbons) that the treaty will not affect the application of domestic laws and regulations related to the taxation of income and profits derived from hydrocarbons and its associated activities situated in the territory of either Contracting State.

Double Taxation Relief

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

Entry into Force and Effect

The treaty will enter into force once the notification instruments are exchanged and will apply from 1 January 2014.

Georgia-Cyprus

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Tax Treaty between Georgia and Cyprus Signed

On 13 May 2015, officials from Georgia and Cyprus signed an income and capital tax treaty. The treaty is the first of its kind directly between the two countries, although the 1982 income and capital tax treaty between Cyprus and the former Soviet Union had applied but was terminated. The new treaty will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Georgia-Iceland

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Tax Treaty between Georgia and Iceland Signed

On 13 May 2015, officials from Georgia and Iceland signed an income tax treaty. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Georgian profits tax and income tax, and covers Icelandic income taxes to the state and income taxes to the municipalities.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 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; 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.

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.

Georgia-Liechtenstein

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Tax Treaty between Georgia and Liechtenstein Signed

On 13 May 2015, officials from Georgia and Liechtenstein signed an income and capital tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Germany-Jersey

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Limited Tax Treaty between Germany and Jersey Signed

On 7 May 2015, officials from Germany and Jersey signed a tax treaty which is limited to certain items of income. The treaty replaces the agreement signed in 2008. It covers the tax treatment of income in regard to pensions and annuities, students or business apprentices, and associated parties, and provides mutual agreement procedures.

The treaty will enter into force once the ratification instruments are exchanged and will apply for tax periods beginning on or after 29 August 2014.

Luxembourg-Philippines

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SSA between Luxembourg and the Philippines Signed

On 15 May 2015, officials from Luxembourg and the Philippines signed a social security agreement. The agreement is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

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