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Approved Changes (3)

Brazil

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Brazilian Parliament Approves Reopening of Foreign Assets Disclosure Regime

The Brazilian Senate has announced it has given final approval on 14 March 2017 for the reopening of the Currency and Tax Compliance Special Regime (Regime Especial de Regularização Cambial e Tributária, RERCT) after receiving amendments to its initial proposal from the Chamber of Deputies in February. The RERCT regime was originally opened in 2016 for assets that were unreported up to 31 December 2014, and included a 15% tax rate plus a 15% penalty. Access to the regime ended 31 October 2016.

Subject to approval from the president, the RERCT regime will be reopened for 120 days from the date the required regulations are issued, and will apply for foreign assets unreported up to 30 June 2016. Assets declared as part of the reopened regime will be subject to a 15% tax plus a 20.25% penalty on the value of the assets as converted to Brazilian real using the 30 June 2016 exchange rate.

Estonia

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Estonian Parliament Approves Legislation for the Exchange of Tax Rulings and CbC Reports

On 15 March 2017, the Estonian parliament approved Bill 322 SE, which transposes into domestic law 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 (APAs) and Country-by-Country (CbC) reports. The amendments were made by Council Directive (EU) 2015/2376 and Council Directive (EU) 2016/881 respectively.

With regard to CbC reporting, the legislation sets out a general framework for the requirements, while referring to Annex III of Council Directive (EU) 2016/881 for most of the specifics. As provided in the legislation:

  • CbC reporting applies for ultimate parent entities resident in Estonia for fiscal years beginning on or after 1 January 2016;
  • Secondary CbC reporting requirements apply for non-parent entities resident in Estonia for fiscal years beginning on or after 1 January 2017;
  • Where a non-parent entity is responsible for submitting a CbC report, if all required information for the CbC report has not been provided to the local entity, an incomplete report must still be submitted and notification must be made of the parent's refusal to provide all information;
  • Group entities resident in Estonia must provide notification to the Estonian tax authorities within 6 months following the close of the fiscal year on whether it will be submitting a CbC report for the group, and if not, must provide details of the reporting entity for the group including jurisdiction of residence; and
  • Failing to comply with the CbC reporting requirements will result in penalties as already provided for in the Information Exchange Act (up to EUR 3,300).

The reporting form and method of submission will be established in future instruction.

Click the following link for the final version of Bill 322 SE as adopted (Estonian language). The bill has been sent to the president to be signed into law, and will enter into force on the day after it is published in the official gazette.

Russia

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Russia Clarifies 0% Tax Rate on Income from the Sale or other Disposal of Shares in Russian Entities

The Russian Ministry of Finance recently published Letter No. 03-03-06/1/9087, which clarifies the application of the 0% tax rate on income from the sale or other disposal of shares (stakes) in a Russian legal entity acquired on or after 1 January 2011. According to the letter, the 0% rate is available provided that the shares were held for a period of at least five years and one of the following conditions is met:

  1. The shares were not circulated on a securities market at any time during the period the shares were held;
  2. The shares were circulated on a securities market and those shares qualify as hi-tech (innovative) sector shares (see below);
  3. The shares were not circulated on a securities market on the date they were acquired, but on the date they were sold or disposed are circulated on a securities market and those shares qualify as hi-tech (innovative) sector shares (see below); or
  4. The shares constitute the capital of a Russian legal entity, where no more than 50% of the entity's assets consist directly or indirectly of immovable property situated in Russia (unless meeting condition 2).

Note - For hi-tech (innovative) sector shares (conditions 2 and 3), Federal Law 396-FZ of December 2015 reduced the required holding period to just one year until 2023.

Proposed Changes (2)

Australia

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Australia Publishes Draft Ruling on Central Management and Control Test of Residency

The Australian Taxation Office (ATO) has published a draft ruling (TR 2017/D2) setting out the Commissioner's preliminary view on how to apply the central management and control test of company residency following a court case finalized in November 2016 where four offshore companies were deemed to be resident in Australia for tax purposes (previous coverage).

Under the central management and control test, a company may be considered a resident of Australia if it carries on business in Australia and has its central management and control in Australia. In determining if the two criteria are met, the draft ruling sets out four relevant matters and detailed explanations for each:

  • Does the company carry on business in Australia?
  • What does central management and control mean?
  • Who exercises central management and control?
  • Where is central management and control exercised?

Click the following link for TR 2017/D2, which is proposed to apply from 15 March 2017. Comments on the draft ruling are due by 12 May 2017.

United Kingdom

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UK House of Lords Committee Recommends Delay in Making Tax Digital

In its report published 17 March 2017, the UK House of Lords Economic Affairs Committee recommends that the government further review and delay the implementation of the proposal for the Making Tax Digital for business scheme. The new scheme replaces the current system of annual self-assessment with mandatory digital record keeping that will require businesses, the self-employed, and landlords to:

  • Keep their tax records digitally using software compatible with HMRC systems and capable of making submissions to HMRC;
  • Submit basic information on their income and expenses quarterly to HMRC using the software; and
  • Prepare and confirm an annual statement via the digital system.

The system is meant to be more effective, more efficient, and simpler for taxpayers, and is expected to affect approximately 1.6 million companies, 2.4 million self-employed individuals, and 900,000 residential landlords. A pilot system is planned for April 2017, with the mandatory requirements to be implemented in stages beginning April 2018.

In the report, the Committee makes four recommendations:

  • The Government must revise and improve its assessment of the benefits and costs of the new scheme;
  • The Government should make keeping digital records and quarterly reporting optional for businesses with a turnover below the VAT threshold;
  • The Government should delay the launch of the scheme until 2020 in order to provide sufficient time to test and review the system and raise awareness of affected taxpayers; and
  • The government should re-examine the scope of businesses covered and consider exemptions for certain kinds of business, such as those with seasonal or highly irregular income.

Click the following link for the full Committee report.

Treaty Changes (3)

Brazil-India

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SSA between Brazil and India Signed

On 16 March 2017, officials from Brazil and India 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.

Estonia-Latvia

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Protocol to Tax Treaty between Estonia and Latvia under Negotiation

On 11 March 2017, officials from Estonia and Latvia met and agreed to negotiations for an amending protocol to update the 2002 income tax treaty between the two countries. Any resulting protocol would be the first to amend the treaty, and must be finalized, signed, and ratified before entering into force.

Hong Kong-Belgium-Canada-Guernsey-Netherlands-Italy-Mexico

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Hong Kong Signs Agreements for Automatic Exchange of Financial Account Information with Six Countries

On 16 March 2017, Hong Kong signed competent authority agreements for the automatic exchange of financial account information with Belgium, Canada, Guernsey, the Netherlands, Italy and Mexico. Under the agreements, Hong Kong and the respective countries will automatically exchange information on accounts held by tax residents of the other country based on the OECD Common Reporting Standard (CRS). The automatic exchange is to begin in 2018.

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