Worldwide Tax News
Bulgaria Publishes Law for Automatic Exchange of Tax Rulings and CbC Reports
On 4 August 2017, Bulgaria published in the Official Gazette the amendment law to adopt the amendments made to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) concerning the exchange of cross border tax rulings and advance pricing agreements (Council Directive (EU) 2015/2376) and Country-by-Country (CbC) reports (Council Directive (EU) 2016/881).
The automatic exchange applies for cross border tax rulings and APAs issued, amended, or renewed after 31 December 2016. The exchange also applies with respect to rulings and APAs issued, amended, or renewed between:
- 1 January 2012 and 31 December 2013, if they were still in force on 1 January 2014; and
- 1 January 2014 and 31 December 2016, whether or not they are still in force.
However, rulings and APAs issued, amended, or renewed before 1 April 2016 will not be exchanged if the annual net revenue of the relevant group concerned is less than EUR 40 million in the year preceding the issuance, amendment, or renewal. This exception does not apply in respect of persons engaged in financial or investment activity.
The CbC reporting requirements apply for fiscal years beginning on or after 1 January 2016 for MNE groups operating in Bulgaria that meet a consolidated annual revenue threshold in the previous year of:
- BGN 100 million (~EUR 51 million) if the ultimate parent of the group is resident in Bulgaria; or
- BGN 1,466,872,500 (~EUR 750 million) if the ultimate parent of the group is not resident in Bulgaria.
Secondary local filing requirements also apply for fiscal years beginning on or after 1 January 2017, whereby a local constituent entity is required to file a CbC report if:
- The ultimate parent is not required to submit a CbC report in its jurisdiction of residence;
- The ultimate parent's jurisdiction has not entered into an agreement for the exchange of CbC reports with Bulgaria by the deadline for the report; or
- There is a systemic failure for exchange by the ultimate parent's jurisdiction, and this failure has been notified to the local entity.
In such cases, the local entity must request that the ultimate parent provide the necessary information to prepare the CbC report. If all required information is not provided, a CbC report must still be submitted based on the information available, and the tax authority must be notified of the parent's refusal to provide the information.
Where there are multiple local entities, one may be designated to submit and the designation must be notified to the tax authority. The requirement will not apply, however, if a surrogate parent entity has been designated to submit a report for the year and certain conditions are met, including that the report will be exchanged with Bulgaria and the tax authorities have been notified.
When required in Bulgaria, the CbC report must be submitted electronically within 12 months of the close of the fiscal year concerned in the prescribed format, which is to be published on the website of the National Revenue Agency by 31 October 2017.
In addition, group entities resident in Bulgaria must provide notification to the tax authority on whether they are the ultimate parent or surrogate parent, or otherwise submitting a report (secondary filing) by the end of the reporting fiscal year, while non-reporting entities resident in Bulgaria must provide notification on the identity of the reporting entity and its jurisdiction of residence by the end of the reporting fiscal year. For the first year, however, the notification deadline is extended to 31 December 2017.
Failure to comply with the CbC reporting and notification requirements will result in the following penalties:
- BGN 100,000 to 200,000 for failure to submit a CbC report;
- BGN 50,000 to 150,000 for submitting an incomplete report or incorrect information (including when incomplete due to the failure of the ultimate parent to provide full information in cases of secondary local filing); and
- BGN 100,000 to 200,000 for failure to submit required notifications.
Each of the above penalties may be increased for repeated violations.
Update - Morocco Decree on APA Procedures Published and in Effect
On 10 August 2017, Morocco published in the Official Gazette the decree on the procedures advance pricing agreements as approved by the Moroccan Council of Ministers (previous coverage). The Decree sets out the general conditions for entering into an APA and the required information to be included in an APA application. Click the following links for the APA decree as published in the Official Gazette (Arabic), as well as the latest French-language version.
Slovenia Publishes CbC Notification Form and Instruction
On 26 July 2017, the Slovenian Ministry of Finance published an update on its Country-by-Country (CbC) reporting guidance page that includes the form and instruction for submitting the CbC reporting notification (obvestilo CbCR). As provided for in the CbC Reporting Regulations (previous coverage), the notification is to be submitted electronically at the same time as the submission of the corporate tax return.
First Round of NAFTA Revision Negotiations Held
On 16 August 2017, officials from Canada, Mexico, and the U.S. met for the first round of negotiations for revisions to the North American Free Trade Agreement (NAFTA). Click the following links for the opening statement of U.S. Trade Representative (USTR) Robert Lighthizer, and a summary of objectives for the renegotiation of NAFTA release earlier by the Office of the USTR, which covers several areas of the agreement, including the addition of a new chapter on the digital economy.
Poland Planning to Maintain Retail Sales Tax but Suspend Implementation to 2019
On 11 August 2017, Poland's Ministry of Finance published a draft amendment to the Retail Sales Tax Act that would suspend the effective date of the tax to 1 January 2019. The tax was introduced in September 2016 with progressive rates of up to 1.4% on monthly turnover. However, its effective date was suspended to 1 January 2018 due to a European Commission State aid investigation, which ultimately found that the tax was in violation of EU State Aid rules because its progressive nature would unduly favor certain companies over others (previous coverage). Instead of amending the tax to comply with the decision, Poland has decided to wait for its challenge to the State aid classification to be resolved. Because of the risk that the challenge may not be resolved before 1 Jan 2018, the further suspension to 2019 is needed.
Slovak Government Approves Draft Legislation for EU Anti-Tax Avoidance Directive and other BEPS-related Measures
On 16 August 2017, the Slovak Republic's Ministry of Finance announced that the government has approved draft legislation that would introduce measures of the EU Anti-Tax Avoidance Directive (Council Directive (EU) 2016/1164), as well as certain other BEPS-related measures. The main measures include:
- Transparency rules for the public disclosure of information on taxpayers with excessive deductions, which would include the amount of their excessive deduction and their tax liability;
- Amendments to the rules regarding what constitutes a permanent establishment to provide for a digital permanent establishment when operating through a digital platform in the Slovak Republic;
- New exit tax rules that provide for a 21% exit tax (standard corporate rate) on the value of assets (with adjustments) when leaving the Slovak Republic;
- The introduction of a patent box regime in line with the modified nexus approach that would provide for a 50% exemption on qualifying IP income in relation to patents, utility models, and copyrighted software;
- An increase in the deduction of research and development costs from the current 25% to 100%, as well as an additional deduction of up to 100% of the incremental increase in R&D expenditure;
- The introduction of controlled foreign companies (CFC) rules, including that a foreign company will be considered a CFC if the Slovak taxpayer directly or indirectly holds itself, or with associated enterprises, more than 50% of the foreign company's capital, voting rights or rights to profit; and the actual corporate tax paid by the foreign company is less than the difference between the tax that would have been paid in the Slovak Republic and the tax paid by the foreign company;
- An additional withholding tax requirement that includes that tax is to be withheld at the rate of 35% if the taxable person cannot prove it is the final beneficiary; and
- An extension of the time period for maintaining accounting documents from the current five years to ten years.
The draft legislation must be submitted to parliament, and subject to approval, the measures will generally apply from 1 January 2018.
TIEA between Argentina and Thailand to be Negotiated
Argentina's Ministry of Foreign Affairs has announced that on 14 August 2017, officials from Argentina and Thailand met to discuss bilateral relations and agreed to begin negotiations for a tax information exchange agreement. Any resulting agreement would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.
Nigeria Signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS and Agreement on Exchange of Financial Account Information
The OECD has announced that on 11 July 2017, Nigeria signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI), bringing the total number of signatories to 71. According to Nigeria's provisional list of reservations and notifications, Nigeria wishes to have 19 tax treaties covered by the MLI. For the MLI to become effective for a particular treaty, the other jurisdiction must also include the treaty as a covered agreement, and both sides must have completed the required procedures for the ratification of the MLI (previous coverage).
At the same time, Nigeria also signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, which provides for the exchange of information under the OECD Common Reporting Standard (CRS). Nigeria intends to begin the first exchanges by September 2018.
Pakistan Approves Pending Tax Treaty with Hong Kong
On 15 August 2017, the Pakistan Cabinet approved the ratification of the pending income tax treaty with Hong Kong. The treaty, signed 17 February 2017, is the first of its kind between the two jurisdictions (previous coverage). It will enter into force once the ratification instruments are exchanged, and will apply in Hong Kong from 1 April of the year following its entry into force and in Pakistan from 1 July next following its entry into force.