Worldwide Tax News
Italy Publishes Updated Lists of Companies Subject to VAT Split-Payment
On 14 September 2017, Italy's Department of Finance published updated lists of companies controlled by central and local public bodies for the purpose of the expanded scope of Italy's value added tax (VAT) split-payment system. The update also provides links to final lists published 26 July 2017 that remain unchanged, including companies listed on the FTSE MIB index of the Italian Stock Exchange. Under the split-payment system, supplies of goods and services to specified recipients are subject to VAT at normal rates, but the payment is split, with the taxable amount paid to the supplier and the VAT due paid directly to a blocked VAT bank account.
Netherlands Decree on Reorganizations and the Amended Innovation Box Regime
On 15 September 2017, the Netherlands Ministry of Finance published Decree No. 2017-167217 concerning business mergers, legal divisions, and legal mergers in relation to amendments to the innovation (IP) box regime that were made as part of the 2017 tax plan (previous coverage). Changes to the innovation box were made to bring it in line with the modified nexus approach of BEPS Action 5. The Decree provides, in general, that where the innovation box is used, an exempt division/merger is only allowed by decision of the inspector. Previously, decision of the inspector was only required when the acquirer could claim application of the innovation box. The Decree also clarifies that the application of the innovation box can be continued unchanged by the acquiring company.
OECD Publishes French and Spanish Versions of Draft Toolkit on Taxation of Offshore Indirect Transfers of Assets and Extends Comment Period
On 15 September 2015, the OECD updated its announcement regarding the draft toolkit designed to help developing countries tackle the complexities of taxing offshore indirect transfers of assets. The update notes that French and Spanish language versions of the toolkit are now available for review, and that the comment period has been extended to 20 October 2017 (initially 25 September).
South Africa Publishes Binding Private Ruling on Capital Gains Tax Participation Exemption in Relation to CFCs
The South Africa Revenue Service has published Binding Private Ruling (BPR) 279 on the capital gains tax participation exemption in relation to controlled foreign companies (CFC), which includes the condition that the parties to a transaction are not connected persons.
The ruling concerns a resident of South Africa (the applicant) that wholly owns a foreign subsidiary (the co-applicant - CFC), which wholly owns two foreign subsidiaries (companies A and B). The applicant acts as a principal investor in multinational development projects and is planning to merge its investments with a foreign principal investor (the counterparty). The transactions will involve making a contribution to a newly incorporated foreign company (Newco), which will first be incorporated by the counterparty. The contribution will then be made by the co-applicant through the disposal of all shares in companies A and B in exchange for shares in Newco.
The ruling determines that although a connected person relationship would be created as a result of the proposed transaction, the participation exemption from capital gains tax is available for the disposal of assets by the co-applicant (CFC) because the parties are not yet connected persons at the time the proposed transaction would be executed.
IRS Releases Practice Units on Sourcing of Income, Creditable Foreign Taxes, Inbound High Value Services, and other Issues
The U.S. IRS has recently released six international practice units, including:
- Verifying Refund Requests of IRC 1441 Withholding on FDAP Income
- Sourcing of Income
- Creditable Foreign Taxes
- Categorization of Income and Taxes into Proper Basket
- High Value Services: Technical and Marketing Fees – Inbound
- Competent Authority Revenue Procedure 2015-40 Guidance: U.S.-Initiated Adjustment(s)
International practice units are developed by the Large Business and International Division of the IRS to provide staff with explanations of general international tax concepts as well as information about specific transaction types. They are not an official pronouncement of law and cannot be used, cited, or relied upon as such.
Click the following link for the International Practice Units page on the IRS website.
Finland Announces Government Legislative Plan for Autumn 2017
On 8 September 2017, the Finnish Government announced that it has approved a legislative plan to be submitted to parliament during the autumn term 2017. The plan does not include any major tax changes, but does include several adjustments, including changes to the individual income tax brackets, an increase in real estate taxes, an increase in excise duties on tobacco, and other changes. In addition, the plan includes the approval of various bilateral agreements, as well as measures for the implementation of certain provisions for the exchange of information with Andorra, Liechtenstein, Monaco, San Marino, and Switzerland. Additional details of the measures will be published once available.
Protocol to Tax Treaty between Kuwait and Turkey Signed
On 14 September 2017, officials from Kuwait and Turkey signed an amending protocol to the 1997 income and capital tax treaty between the two countries. The protocol is the first to amend the treaty and will enter into force after the ratification instruments are exchanged. Additional details will be published once available.
TIEA between New Zealand and San Marino has Entered into Force
The tax information exchange agreement between New Zealand and San Marino entered into force on 8 September 2017. The agreement, signed 1 April 2016, is the first of its kind between the two countries. It applies on the date of its entry into force for criminal tax matters, and for other matters for taxable periods beginning on or after that date or, where there is no taxable period, all charges to tax arising on or after that date.
SSA between Romania and Uruguay Signed
On 13 September 2017, officials from Romania and Uruguay 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.