Worldwide Tax News
Australia Simplified and Standard GST Registration Systems for Non-Resident Businesses
The Australian Taxation Office has issued a business bulletin on the available GST registrations system for non-resident businesses in relation to the supply of digital products and services to Australian consumers.
Non-resident businesses supplying services and digital products to Australian consumers and who meet the turnover threshold of A$75,000 will need to register for Australian GST by 1 July 2017.
How to register
There are two ways non-resident businesses can register for GST:
- Using our simplified online GST registration system from 26 June 2017
- to prepare online before 26 June, you can request an ATO reference number (ARN). Email us at AustraliaGST@ato.gov.au to request an application form
- you will still need to complete an online registration application from 26 June 2017.
- Using our standard system. An Australian business number (ABN) is required. It can take up to 28 days to process your GST registration so allow enough time to finalise your registration. See more at abr.gov.au.
- International taxation of goods and services supplied to Australia
- New Australian law applying GST to imported digital products and services
CJEU Judgment Published on Compatibility of Belgian Fairness Tax with EU Law
On 17 May 2017, a judgment of the Court of Justice of the European Union (CJEU) was published concerning whether Belgium's Fairness Tax is compatible with both the freedom of establishment under Article 49 of the TFEU and the provisions of the EU Parent-Subsidiary Directive (2011/96/EU). The case involved an action brought before the Belgian Constitutional Court to annul the articles of Belgian Law that introduced the Fairness Tax because it is not compatible with EU Law . Since the Court had doubts about the compatibility of the Fairness tax, three main questions regarding the interpretation of the EU Law were referred to the CJEU for a preliminary ruling.
Overall, the ruling of the CJEU is in line with the Advocate General opinion issued on the case in November 2016 (previous coverage), finding that the Fairness Tax is compatible with EU Law in most aspects, but is not compatible in cases where a parent company redistributes profits received from its subsidiary and the resulting tax burden on the profits exceeds the amount allowed under Directive 2011/96/EU (5%). In particular, the CJEU ruled that:
1. Freedom of establishment must be interpreted as not precluding tax legislation of a Member State, such as that at issue in the main proceedings, under which both a non-resident company conducting an economic activity in that Member State through a permanent establishment and a resident company, including the resident subsidiary of a non-resident company, are subject to a tax such as the ‘fairness tax’ when they distribute dividends which, as a result of the use of certain tax advantages provided for by the national tax system, are not included in their final taxable profits, provided that the method of determining the taxable amount of that tax does not in fact lead to that non-resident company being treated in a less advantageous manner than a resident company, which is for the referring court to ascertain.
2. Article 5 of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States must be interpreted as not precluding tax legislation of a Member State, such as that at issue in the main proceedings, providing for a tax such as the ‘fairness tax’, to which non-resident companies conducting an economic activity in that Member State through a permanent establishment and resident companies, including the resident subsidiary of a non-resident company, are subject when they distribute dividends which, as a result of the use of certain tax advantages provided for by the national tax system, are not included in their final taxable profits.
3. Article 4(1)(a) of Directive 2011/96, read in conjunction with Article 4(3) thereof, must be interpreted as precluding national tax legislation, such as that at issue in the main proceedings, in so far as that legislation, in a situation where profits received by a parent company from its subsidiary are distributed by the parent company after the year in which they were received, has the consequence of subjecting those profits to taxation exceeding the 5% ceiling provided for in that provision.
Click the following link for the full text of the judgment.
Brazil Publishes CbC Reporting Q&A Including Details on Reporting and Notification Obligations
Brazil's Federal Revenue Department (RFB) has published a Q&A document on the Country-by-Country reporting requirements provided in RFB Normative Instruction (NI) No. 1.681/2016 (previous coverage). Brazil's CbC reporting requirements apply for fiscal years beginning on or after 1 January 2016, with the first CbC reports due 31 July 2017. The reporting threshold is annual group revenue in the previous year of BRL 2.26 billion or more (or EUR 750 million or equivalent in local currency as of 31 January 2015). As a rule, the obligation to file a CbC report applies for the ultimate parent of the group, although a local non-parent entity may be required to file if certain conditions are met.
The following is a summary of the main questions and answers regarding the CbC report/notification filing obligations.
The obligations of the ultimate parent include:
- Informing the RFB that it is the ultimate parent by completing section W100 (notification) of the ECF (annual tax return); and
- Submitting the CbC report by completing sections W200, W250, and W300 of the ECF (three sections of the CbC report).
The ECF is submitted electronically via the Sped digital system and the deadline is the standard ECF deadline for the reporting fiscal year, which with respect to the 2016 fiscal year is 31 July 2017.
A local non-parent entity may be required to file a CbC report in Brazil if:
- The ultimate parent is not required to submit a CbC report in its jurisdiction of residence;
- The jurisdiction of residence of the ultimate parent does not have a competent authority agreement with Brazil by the deadline for submission of the CbC report (31 July); or
- There has been a systemic failure for exchange, and the failure has been notified by the RFB to the entity resident in Brazil.
Where local filing is required, the obligations of the local entity include:
- Informing the RFB of the identity of the ultimate parent by completing section W100 of the ECF;
- Informing the RFB that the local entity is acting as the reporting entity by completing section W100 of the ECF; and
- Submitting the CbC report by completing sections W200, W250, and W300 of the ECF.
Submission method and deadlines are the same as for ultimate parents.
Where a CbC reporting requirement applies for the MNE group, but a local entity of the group is not designated to submit, the obligations of the local entity include:
- Informing the RFB of the identity of the ultimate parent by completing section W100 of the ECF; and
- Informing the RFB of the identity of the reporting entity for the group by completing section W100 of the ECF (may be the ultimate parent, surrogate parent, or another local entity in Brazil).
Submission method and deadlines are the same as above.
When an MNE group has not met the conditions for submitting a CbC report, certain CbC related obligations still apply, which include:
- Informing the RFB of the identity of the ultimate parent by completing section W100 of the ECF; and
- Informing the RFB that the MNE group is exempt from CbC reporting requirements for the year by completing section W100 of the ECF.
CbC reports voluntarily filed by ultimate parents may serve to fulfill Brazil's CbC reporting requirements, provided that all conditions related to voluntary filing set out in Art. 7 § 2 of NI 1.681/2016 are met. These include:
- The ultimate parent has submitted a CbC report (in accordance with Brazil's requirements) in its jurisdiction of residence within 12 months from the last day of the fiscal year;
- The foreign jurisdiction has CbC requirements in force by the filing deadline, even if they do not yet apply for the fiscal year concerned;
- The foreign jurisdiction has a competent authority agreement with Brazil for the exchange of CbC reports by the filing deadline (31 July); and
- There is no systemic failure for exchange.
If the conditions are met, the obligations of a local Brazilian entity are the same as an entity not designated to submit as above - informing RFB by completing section W100 of the ECF.
Click the following for the full CbC Reporting Q&A (Portuguese language) for additional information, including information regarding specific content of the CbC report.
Estonian Prime Minister Speaks on Plans for Upcoming EU Presidency
On 16 May 2017, Estonian Prime Minister Jüri Ratas spoke to parliament on plans for the EU presidency, which Estonia will take over from Malta on 1 July 2017. With respect to taxation, the Prime Minister notes a few main areas Estonia will focus on, which include:
- Improving the cross-border VAT mechanism;
- Establishing rules concerning financial advisors;
- Achieving more efficient cooperation between the tax authorities of different countries; and
- Finalizing the common EU blacklist of non-cooperative jurisdictions, including tax havens.
Click the following link for the full text of the speech.
European Commission Requests France to Abolish Withholding Tax Imposed on EU/EEA Companies in Deficit
In its recently published May infringements package on legal action pursued against EU Member States, the European Commission has announced that it has requested France to abolish withholding tax applied to dividends received in France by companies based in the EU/EEA.
The Commission has requested that France abolish a withholding tax that applies to dividends received in France by companies based in other EU or European Economic Area (EEA) Member States. By applying a withholding tax on such dividends, the French authorities are failing to fulfil their obligations regarding free movement of capital (Article 63 TFEU and Article 40 of the EEA Agreement). The withholding tax leads to immediate taxation, without the possibility of a refund of the dividends paid to an EU and EEA company in the following situations: first, when the company is in structural deficit, even though French companies do not pay this tax in comparable situations; second, when the company is in a temporary loss-making phase, even though French companies facing the same difficulties are subject to taxation only when the firm regains its surplus. An amendment of the legislation adopted by France at the end of 2015 applies only to non-resident companies facing both deficit and liquidation. If the French authorities fail to respond to this reasoned opinion within two months, the case may be referred to the Court of Justice of the EU.
Greek Tax Rate Changes Proposed in Parliament
Draft legislation has reportedly been submitted to the Greek parliament providing for a number of tax amendments, including the following proposed tax rate changes:
- A reduction in the corporate tax rate from 29% to 26% for companies with double-entry bookkeeping, as well as partnerships, cooperatives, and joint ventures with single-entry bookkeeping;
- A reduction in the first bracket individual income tax rate from 22% to 20% (income up to EUR 20,000); and
- Adjustments to the special solidarity tax brackets and rates as follows:
- up to EUR 30,000 - 0%
- over EUR 30,000 up to 40,000 - 2%
- over EUR 40,000 up to 65,000 - 5%
- over EUR 65,000 up to 220,000 - 9%
- over EUR 220,000 - 10%
Additional details of the draft legislation will be published once available.
Hungary Budget 2018 - Repeal of 10% Holding Condition for Capital Gains Participation Exemption
Hungary's Budget Bills for 2018 (T/15381 and T/15428) were submitted to parliament on 2 May 2017. In addition to the KIVA and VAT rate changes previously reported, the legislation also provides for the repeal of the 10% holding requirement for the participation exemption regime for capital gains from the sale and contribution in kind of shares. The requirement to register shares with the tax authority upon acquisition and the minimum one-year holding would continue to apply.
Subject to approval, the change is to apply from 1 January 2018.
Angola Planning to Negotiate First Tax Treaty with the U.A.E.
According to recent reports, the Angolan government is planning to begin negotiations for an income tax treaty with the United Arab Emirates. Any resulting treaty would be the first of its kind between the two countries and the first for Angola with any country.
Czech Republic Approves Signing of BEPS Multilateral Instrument
The Czech Government has reportedly 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 purpose 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).
Tax Treaty between Nigeria and Turkey under Negotiation
On 8 to 12 May 2017, officials from Nigeria and Turkey met for the first round of negotiations for an income tax treaty. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.