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Approved Changes (2)

New Zealand

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New Zealand Issues Special Report on GST on Cross Border Supplies of Remote Services

New Zealand Inland Revenue's Policy and Strategy group has issued a special report on the new rules for Goods and Services Tax (GST) on cross border supplies of remote services. The report covers the new GST rules introduced as part of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act, which was approved on 10 May 2016 and received Royal assent on 13 May.

Under the rules, offshore suppliers of online "remote" services and intangibles are required to register and account for GST in New Zealand if supplies to New Zealand resident consumers exceed NZD 60,000 in a 12-month period. The special report covers all aspects of the new rules with examples.

Click the following link for the special report on the Inland Revenue Tax Policy website.

Russia

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Russia Publishes Guidance on Independent Corresponding Adjustments for Controlled Transactions

The Russian Ministry of Finance recently published Letter No. 03-01-18/15939, which provides guidance for corresponding adjustments for controlled transactions. According to the letter, when a taxpayer is a party to a controlled transaction that is not at arm's length resulting in an adjustment to that taxpayer's tax base, a corresponding adjustment may be made by the other party to the transaction.

In order for the other party to make a corresponding adjustment, the taxpayer making the initial adjustment must first file a tax return reflecting the adjustment and pay any tax due. The other party may then make a corresponding adjustment based on information provided from the first taxpayer and file its tax return along with documentation confirming that the first taxpayer's tax obligation has been met. If the other party has already filed its return for the relevant period, an amended return may be filed to include the corresponding adjustment. Where the corresponding adjustment results in a tax credit or refund for the other party, the standard rules for credits or refunds will generally apply. However, if the corresponding adjustment results in an increased loss for the other party, no credit or refund will be provided.

Proposed Changes (1)

European Union

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Draft Report from EU Parliament TAXE 2 Committee Published

The EU Parliament's Special Committee on tax rulings and other measures similar in nature or effect (TAXE 2) has published its draft report to be discussed at its upcoming meeting on 24 May 2016. In the report, the committee makes a number of conclusions and recommendations in several areas, including the reiteration of certain recommendations included in the original TAXE Committee report (previous coverage), as well as several new recommendations. In particular, the TAXE 2 Committee:

  • Urges the European Commission to come forward with a proposal for a common corporate consolidated tax base (CCCTB) in the EU;
  • Calls on the Commission to come up as soon as possible with a common Union list of uncooperative jurisdictions (i.e. a ‘blacklist of tax havens’) and for the establishment of a regulatory framework for sanctions against the blacklisted non-cooperative jurisdictions;
  • Calls on the Member States to renegotiate their bilateral tax treaties with third countries in order to introduce anti-abuse clauses and prevent treaty shopping;
  • Recommends introducing an EU-wide withholding tax, in order to ensure that profits generated within the Union are taxed at least once before leaving the EU;
  • Calls on the Commission to put forward proposals for binding Union legislation on patent boxes that goes beyond the OECD Modified Nexus Approach, so as to prohibit the misuse of patent boxes and to ensure that if and when used they are linked to genuine economic activity;
  • Calls on the Member States to integrate a Minimum Effective Taxation (MET) clause in the Interests and Royalties Directive and to ensure that no exemptions are granted;
  • Calls on the Commission to come forward with a Union Code of Conduct for all advisory services, including a Union incompatibility regime for tax advisers, in order to prevent them from advising both public and private sectors and to prevent other conflicts of interest;
  • Calls on the Commission to analyze the possibility of introducing proportional financial liability for banks and financial institutions facilitating transfers to known tax havens, and strengthen the requirements on banks to report transfers to and from such jurisdictions;
  • Calls for the creation of a new Union Tax Policy Coherence and Coordination Centre to guarantee the proper and coherent functioning of the single market and the implementation of international standards;
  • Calls on the OECD to start work on an ambitious BEPS II, to be based primarily on minimum standards and concrete objectives for implementation;
  • Calls for the establishment of a Union register of beneficial ownership, which would form the basis of a global initiative in this regard;
  • Calls for a global assets register of all assets held by individuals, companies and all entities such as trusts and foundations, to which tax authorities would have full access; and
  • Stresses the need for a comprehensive EU/US approach on the implementation of OECD standards and on beneficial ownership, and that good governance clauses and the full BEPS action plan should be included in the Transatlantic Trade Investment Partnership (TTIP).

Click the following link for the full TAXE 2 Draft Report.

Treaty Changes (5)

Belgium-Macedonia

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Belgian Lower House Approves Tax Treaty with Macedonia

On 12 May 2016, the Belgian Chamber of Representatives approved the pending income and capital tax treaty with Macedonia. The Macedonian parliament ratified the treaty on 30 November 2010. The treaty, signed 6 July 2010, is the first of its kind directly between the two countries and will replace the 1980 tax treaty between Belgium and the former Yugoslavia, which still generally applies in relation to Belgium and Macedonia.

Taxes Covered

The treaty covers Belgian individual income tax, corporate income tax, income tax on legal entities and income tax on non-residents. It covers Macedonian personal income tax, profit tax and property tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company that has directly or indirectly held at least 25% of the paying company's capital for an uninterrupted period of at least 12 months; 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 0% for interest paid in respect of a loan granted or a credit extended by an enterprise to another enterprise; otherwise 10%
  • Royalties - 10%

Technical Assistance and Technical Services

The protocol to the treaty, signed the same date, clarifies that payments for technical assistance and technical services are not considered royalties, but are taxable in accordance with the provisions of Article 7 (Business Profits).

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Macedonia applies the credit method for the elimination of double taxation, while Belgium generally applies the exemption method. However, subject to the provisions of Belgian law, Belgium will apply the credit method for interest and royalty income.

Limitation on Benefits

Article 26 (Limitation on Benefits) includes the provision that no reduction in or exemption from tax provided for in the treaty will apply for income paid in connection with an artificial arrangement. It also includes that an arrangement will not be considered artificial if it meets legitimate financial or economic needs and is entered into for valid commercial reasons.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force. The 1980 Belgium-Yugoslavia tax treaty will cease to have effect in relation to Belgium and Macedonia once the provisions of the new treaty are effective.

Colombia-Panama

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Tax Treaty between Colombia and Panama Signed

According to a 17 May 2016 release from Panama's Ministry of Foreign Relations, officials from Colombia and Panama have signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Indonesia-Armenia

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Indonesia Ratifies Tax Treaty with Armenia

According to a recent update from the Indonesian government, the pending income and capital tax treaty with Armenia was ratified on 8 March 2016. The treaty, signed 12 October 2005, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Armenian profit tax, income tax, property tax and land tax. It covers Indonesian income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 120 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 10% if the beneficial owners is a company directly holding at least 25% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 10%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Slovenia-India

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Slovenia to Sign Protocol to Tax Treaty with India

On 12 May 2016, the Slovenian government approved the signing of a protocol to the 2003 income tax treaty with India. The protocol will reportedly update Article 26 (Exchange of Information) to bring it in line with the OECD standard for information exchange and add a new article on assistance in the collection of taxes. It will be the first to amend the treaty, and must be finalized, signed and ratified before entering into force.

Switzerland-OECD

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Switzerland Initiates Consultation on Ordinance for Automatic Information Exchange

The Swiss Federal Council announced on 18 May 2016 that it has initiated a consultation on the Ordinance on the International Automatic Exchange of Information in Tax Matters. The Ordinance contains the provisions for the implementation of the Federal Act on the International Automatic Exchange of Information in Tax Matters and related provision for the automatic exchange of financial account information under the OECD Common Reporting Standard. The consultation will last until 9 September 2016.

Pending the implementation of the necessary provisions, Switzerland is planning to begin the automatic exchange of financial account information by September 2018.

Click the following for the Federal Council press release for additional information.

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