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Approved Changes (2)

Germany

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Germany Issues Guidance on Country-by-Country Reporting

On 11 July 2017, the German Ministry of Finance issued a (rather brief) guidance on the Country-by-Country reporting requirements introduced in Germany in line with BEPS Action 13 and the EU Administrative Assistance Directive as amended. The guidance is presented as the result of high-level consultations between the tax authorities of the various German regional governments (Lander).

The guidance indicates that CbC reporting is effective for tax years starting after 31 December 2015. With respect to report format and technical specifications, the guidance only makes a reference to the OECD XML schema and related User Guide. It does, however, reproduce a German-language version of OECD standard Tables 1, 2 and 3, albeit only for illustrative purposes, and indicates that reports may be submitted in English.

The guidance can be accessed here (in German):

Saudi Arabia

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Saudi Shura Council Adopts VAT LAW

The Saudi Shura Council on 13 July 2017 adopted the proposed VAT law. The Council is not a parliament in the traditional sense, but rather a consultative legislative institution, albeit with some relatively  substantial powers. The text passed by the Council is in line with the uniform VAT agreement between the GCC countries. The Saudi General Authority for Zakat and Tax (GAZT) had published the text for public consultation in June 2017.

VAT will be levied initially at the rate of 5%, but specified goods and services, including those related to health, social services and education, would be exempt. The tax is expected to become effective in Saudi Arabia from 1 January 2018, but the law’s provisions regarding registration for VAT would become effective from the day following the publication of the law in the Official Gazette. Saudi Arabia is hitherto the only GCC country which has confirmed 1 January 2018 as effective go live date. The UAE has also indicated its intention to go live with VAT on 1 January 2018, but is yet to issue the necessary regulations. The remaining 4 GCC countries have not yet confirmed a definitive effective date.

Proposed Changes (1)

Andorra

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Andorran Government Adopts Amendment to Tax Act, Incorporates BEPS Measures

The government of Andorra on 28 June 2017 adopted a proposed amendment to the Tax Act. The amendments are intended to incorporate a number of BEPS-related measures and adapt Andorran legislation to the EU ECOFIN Code of Conduct.

The measures include the following:

Country-by-Country (CbC) Reporting

The Tax Act would be amended by adding new articles 16 bis to 16 quater. The articles provide for the obligation for resident parent companies with annual consolidated revenues in excess of EUR 750 million to file CbC reports. The reports would then be exchanged with Andorra’s qualifying partners. In the case of foreign-parented groups, local filing would be required if (a) the foreign ultimate parent company is not required to file CbC reports in its jurisdiction of tax residence; or (b) it is required to do so but there is no agreement for the automatic exchange of tax information between that jurisdiction and Andorra, or (c) it is required to do so, but although there is an agreement for the automatic exchange  of tax information between that jurisdiction and Andorra, there is a systemic failure to exchange.

The information released to date does not clarify various important issues including effective dates, filing formats and filing process.

Proposals Related to BEPS Action 5

The proposal would amend Andorran legislation to comply with recommendations under BEPS Action 5 on IP management regimes (so-called patent boxes). The proposal would introduce the “nexus approach” as a condition to qualify for the patent box regime. Further, the current patent box rules whereby 80% of income derived from cross-border exploitation of qualifying IP rights are excluded from the taxable base (thus resulting in an effective tax rate of 2%) would be revised. The exempt portion of qualifying income would be reduced by 25% each year and fully phased out by 1 January 2021. The grandfathering clause would be restricted to structures already in operation by 1 July 2017 or for which an application was lodged before the same date. Further, it would be restricted to IP rights that had been acquired by the taxpayer prior to 1 July 2017.

Amendment of Foreign Participation Exemption Regime

Under the current rules, local holding companies dedicated to the holding of foreign affiliates are exempt from tax on dividends and capital gains derived from/on such holdings. The regime would be revised as follows:

a. The regime would be extended to cover participations in local subsidiaries as well. In order to qualify for the regime, however, the local subsidiary may not be exempt from tax.

b. Eligibility of holdings in foreign affiliates to the regime would be made subject to a number of conditions. Hence, the holding company must hold at least 5% in the capital of the foreign affiliate for at least 1 year. Further, the foreign affiliate must be subject to a profits tax at a rate which is not lower than 40% (from 10% currently) of the Andorran tax rate (effectively not lower than 4%).

Pursuant to a grandfathering rule, structures in place prior to 1 July 2017 or for which an application was lodged before the same date would continue to qualify under the current rules until 31 December 2020.

Amendment of Trading, Intra-group Finance and Investment Companies Regimes

The current regime for trading companies, intra-group finance companies and investment companies, whereby 80% of income derived from qualifying activities is excluded from the tax base (thus resulting in an effective tax rate of 2%) would be revised by lowering the exempt portion of qualifying income by 25% each year until it is fully phased out by 1 January 2021. This transitional rule would be restricted to structures that were in place prior to 1 July 2017, or for which an application was filed before the same date.

The proposal can be accessed here (in Catalan).

Treaty Changes (3)

Croatia-Untd A Emirates

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Croatia and UAE Sign Tax Treaty

Croatia and the United Arab Emirates on 13 July signed a first time tax treaty between the two countries. The treaty was signed at the occasion of the visit by the UAE foreign minister to Croatia. Details of the treaty will be reported when the text thereof is released.

Hong Kong-New Zealand

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Hong Kong and New Zealand Sign Competent Authority Agreement for Exchange of Tax Information

The Hong Kong government announced that a competent authority agreement (CAA) for the exchange of financial account information in tax matters (AEOI) from 2018 has been signed with New Zealand on 14 July 2017. With this latest agreement, Hong Kong’s network of bilateral CAAs relating to the exchange of financial account information now covers 14 jurisdictions. The other jurisdictions are: Belgium, Canada, Guernsey, Indonesia, Ireland, Italy, Japan, Korea, Mexico, the Netherlands, Portugal, South Africa and the United Kingdom.

In the same announcement, the government reiterated its resolve to table legislative proposals by the end of 2017 in order to adopt the OECD-Council of Europe Mutual Assistance Convention.

The Inland Revenue had earlier announced that the AEOI Portal would be launched on 3 July 2017 for financial institutions to furnish notifications and file returns in relation to the reporting of financial account information for automatic exchange of financial account information (AEOI) purposes.

Financial Institutions have to register under the AEOI Portal in order to use the online services. The users are required to use their e-Cert (Organisational) with AEOI Functions for the purposes of authentication so as to ensure confidentiality of the data being transmitted.

Untd A Emirates-Cameroon

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Tax Treaty between UAE and Cameroon Signed

The United Arab Emirates and Cameroon on 15 July 2017 signed a first time tax treaty between the two countries. The agreement was signed in Dubai, on the occasion of the visit of the Cameroon Minister of Finance to the UAE. Details of the treaty will be reported once the text thereof is released.

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