Worldwide Tax News
On 15 June 2015, the Estonian parliament adopted a number of tax law amendments introduced by the government in April. The main changes of the plan that were adopted are in regard to individual income tax, social tax, VAT and excise duties, including:
- The annual individual income tax exemption/allowance will be increased from EUR 1,848 to:
- EUR 2,040 in 2016;
- EUR 2,160 in 2017;
- EUR 2,280 in 2018; and
- EUR 2,440 in 2019;
- Social Tax employer contribution will be reduced from 33% of employees' wages/salary to 32.5% in 2017 and 32% in 2018;
- The reduced VAT rate on accommodation services of 9% will be increased to 14% from 1 January 2017; and
- A number of excise duties are increased:
- On tobacco - increased by 8% on 1 June 2016, and further increased by 8% in 2017 and 2018, and by 10% in 2019 and 2022;
- On alcohol - increased 15% on 1 February 2016, and further increased by 10% in 2019 and 2020 (20% for wine)
- On petrol (gasoline) - increased by 10% in 2016, 2017 and 2018; and
- On diesel - increased by 14% in 2016, and 10% in 2017 and 2018
Other measures of the government's tax plans that need to be adopted include measures for greater scrutiny of related party cross border transactions to reduce the outflow of untaxed profits, and a reduction in the taxation of dividend payouts. Additional details on those planned measures will be published once available.
On 17 June 2015, the European Commission issued a press release announcing its Action Plan to reform corporate taxation in the EU. The plan includes five main actions:
1. Re-launching the Common Consolidated Corporate Tax Base (CCCTB)
The CCCTB would provide the best solution within the EU to the problem of aggressive tax planning. The Action Plan therefore sets out a step-by-step approach to the CCCTB, which will provide fresh momentum to this proposal.
2. Ensuring fair taxation where profits are generated
Profits should be taxed where the value is generated. The Action Plan sets out how the Commission will work with Member States to ensure that companies active in the EU are effectively taxed in the EU.
3. Creating a better business environment
The Action Plan outlines tax measures to make the Single Market simpler and more attractive for business and therefore support growth and competitiveness in the EU. Companies say that tax systems need to provide more stability, legal certainty and be simpler to administer.
4. Increasing transparency
Tax transparency leads to fairer taxation and helps countries better tackle abuse. In March 2015, the Commission presented an ambitious Tax Transparency Package, as its first step in improving the EU's corporate tax framework. The Action Plan details the next steps towards greater tax transparency.
5. Improving EU coordination
- Cooperation between EU Member States is essential to successfully tackle tax avoidance. The Action Plan sets out how current instruments to facilitate this cooperation could be improved, along with ideas for new ways of using existing groups to maximum potential.
- It would ensure companies operating cross border in the EU would apply the same rules for calculating their tax, limiting the opportunities for these companies to manipulate their tax position. Work will begin immediately on a new proposal for a mandatory CCCTB. In the meantime discussions will continue on international aspects of the tax base linked to Base erosion and profit shifting (BEPS). This includes a common approach to tax havens, starting with a pan-EU list of listed countries, and the launch of a public consultation on further transparency measures, such as Country-by-Country Reporting.
Click the following links for the press release, a question and answer fact sheet on the plan, and a timeline for the plan, which includes that work will begin immediately with the main proposals issued in 2016.
On 8 June 2015, the Indonesian government published Regulation 106/PMK.010/2015, providing a luxury goods sales tax exemption for most goods in order to stimulate consumption. Except for cars, yachts and aircraft, luxury goods will no longer be subject to the tax, which ranges from 10% to 125% depending on the nature of the good. As a partial offset, the government also issued Regulation 107/PMK.010/2015 the same date, which increases the import tax by 10% on the exempt luxury goods.
The exemption applies 30 days from the date the Regulation was published, and the increased import tax applies 60 days from the date.
On 12 June 2015, the European Commission issued a proposal for a Council Implementing Decision authorizing Italy to introduce a special measure derogating from Articles 206 and 226 of the VAT Directive (2006/112/EC).
The special measure is the introduction of a split-payment system for goods and services supplied to Italian public bodies, including government bodies, public hospitals and universities. Under the system, VAT is charged normally, but the payment is split where the taxable amount is paid to the supplier and VAT is paid directly to a blocked VAT bank account of the Treasury. The purpose of the measure is to counter considerable VAT fraud that exists in Italy in relation to supplies of goods and services to public authorities.
In its proposal for authorization, the Commission includes the condition that Italy must provide a report on the VAT refund procedure for suppliers affected by the split-payment system, including the average time needed to effectively refund the VAT and an outline of particular problems. The report should be provided eighteen months after the entry into force of the derogation. In addition a sunset clause is included for an automatic time limit which is set at 31 December 2017 for the derogation.
Click the following link for the Commission proposal.
U.S. Congress to Spend Rest of the Year on International Tax Reform while Holding off on Comprehensive Reform
According to recent comments made by House Ways and Means Chair Paul Ryan, Congress will spend the remainder of the year working on international tax reform measures including a possible innovation box and conversion from a worldwide to a dividend exemption system. Ryan also commented that certain tax extenders should be made permanent, such as the research tax credit. As for comprehensive tax reform, Ryan said that major reforms are more likely in 2017, although smaller reforms will be made before that.
On 16 June 2015, Australian Treasurer Joe Hockey and Finance Minister Mathias Cormann announced in a joint statement that Australia and Germany are formally starting negotiations on a new income and capital tax treaty. The new treaty will replace the 1972 income and capital tax treaty between the two countries and according to the statement will tighten rules to address base erosion and profit shifting consistent with current OECD and G20 objectives.
On 15 June 2015, Thailand's Ambassador to Cambodia announced that the two countries have begun negotiations for an income tax treaty. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.
On 16 June 2015, the Indian Finance Ministry announced that it is negotiating a new income tax treaty with Cyprus. Any resulting treaty will replace the 1994 income and capital tax treaty between the two countries.
Cyprus is currently a notified jurisdiction (black-listed) due to inadequate exchange of information in the current treaty. The new treaty is meant to resolve that and other issues.
According to recent reports, the Zambian government has approved the signing of a new income tax treaty with the Netherlands. The new treaty will replace the 1977 income tax treaty between the two countries, which is currently in force.
Additional details will be published once available.