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Worldwide Tax News

Approved Changes (4)

Denmark

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Denmark Issues Change of Practice Notice on Dividends Withholding Tax Refund Time Limit

On 13 June 2016, the Danish tax authority (SKAT) issued a change of practice notice confirming that the time limit to claim a refund of dividends withholding tax is reduced from five years to three years, which is calculated from the 10th day of the month following the month in which the dividend is declared. A three-month transitional relief period is provided for withholding tax refund claims to be made, with refund claims received by SKAT after 13 September subject to the three-year time limit, regardless of when the dividends were declared.

Although the new standard practice is to allow three years for claims to be made, if a tax treaty Denmark has entered into provides for a longer period, the treaty period will be followed for refunds claimed under the treaty.

Hong Kong

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Hong Kong Revises Application Forms for Certificate of Resident Status

The Hong Kong Inland Revenue Department (IRD) has published revised application forms for Certificate of Resident Status with regard to the Hong Kong - (Mainland) China tax arrangement. The certificate is needed for the purpose of claiming tax benefits. Different forms are used for natural and legal persons, and whether the benefits claimed are in regard to the Hong Kong - (Mainland) China tax arrangement, or a tax treaty between Hong Kong and other jurisdictions.

The new forms are required for applications made on or after 20 June 2016.

Click the following link for the Certificate of Resident Status webpage on the IRD website for the downloadable forms and instructions.

Indonesia

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Indonesia Revises Negative Investment List

The Indonesia government issued a revised Negative Investment list on 18 May 2016 as approved through Presidential Decree No. 44/2016. The new list replaces the list issued in May 2014 (previous coverage). In general, the new list further opens up various sectors to foreign direct investment, although special licensing requirements may apply. Some of the main changes include:

Sectors further opened to foreign ownership:

  • Airport services - 67% ownership permitted;
  • Fixed and mobile telecommunications - 67% ownership permitted;
  • Internet services - 67% ownership permitted;
  • Large-scale electricity production >10MW - 100% ownership permitted;
  • Futures brokering - 100% ownership permitted;
  • Salvage services and/or underwater work - 100% ownership permitted;
  • Non-hazardous waste management and disposal - 100% ownership permitted; and
  • Healthcare sectors, including medical equipment and management and consulting services - 100% ownership permitted

Previously closed sectors opened to foreign ownership:

  • Passenger land transportation - 49% ownership permitted;
  • Rubber industry - 100% ownership permitted; and
  • Biomass pellet production - 100% ownership permitted

Investments approved prior to the issuance of the decree are not affected unless the changes are beneficial.

Click the following link for Presidential Decree No. 44/2016 and the Negative Investment List (Indonesian language).

Paraguay-OECD

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Paraguay Joins Global Forum on Transparency and Exchange of Information for Tax Purposes

The OECD announced on 16 June 2016 that Paraguay has joined the Global Forum on Transparency and Exchange of Information for Tax Purposes as the 134th member. As a member of the Forum, Paraguay will now be subject to monitoring and a peer review process to ensure the implementation of and compliance with the international standards for information exchange.

Click the following link for the announcement.

Proposed Changes (2)

European Union

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ECOFIN Reaches Agreement on Revised Anti Tax Avoidance Directive

On 17 June 2016, the EU Economic and Financial Affairs Council (ECOFIN) reached broad agreement on a revised draft of the Anti Tax Avoidance Directive, subject to a silence procedure that will end at midnight on 20 June 2016. The two main revisions include:

  • Regarding the interest deduction limitation rules, EU Member States would be allowed to introduce a five-year grandfathering period for existing loans;
  • Regarding the CFC rules, one of the conditions for a company to be treated as CFC is changed from being subject to an effective tax rate lower than 50% of what the effective tax rate would be in the Member State, to the actual corporate tax paid by the foreign company being less than the difference between the corporate tax that would have been paid in the Member State and the actual corporate tax paid.

It has also been reported that ECOFIN agreed to remove the switch-over clause, which provides that an EU Member State may not exempt certain income from third countries if the tax rate in third country is lower than 40% of the Member State's tax rate, although a credit would be allowed.

The directive will be adopted at a future meeting.

Click the following links for the Outcome of the Council Meeting and the Anti Tax Avoidance Directive Revisions.

Singapore

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Singapore Joins Framework for Implementation of BEPS Measures and Commits to CbC Reporting

On 16 June 2016, the Inland Revenue of Authority of Singapore (IRAS) published a media release announcing that it will join the inclusive framework for the global implementation of the BEPS Project. As a BEPS associate, Singapore will work with other jurisdictions to help develop the implementation and monitoring phase of the BEPS Project.

IRAS also announced that it is committed to implementing the four minimum standards under the BEPS Project, which include those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse) and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation). Regarding CbC reporting, Singapore will commit to implement the requirements for fiscal years beginning on or after 1 January 2017 for MNE groups meeting a SGD 1.125 billion consolidated revenue threshold. Details of the CbC reporting requirements are to be finalized by September 2016.

Click the following link for the media release.

Treaty Changes (3)

Chile-Korea, Rep of

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SSA between Chile and South Korea Signed

According to recent reports, officials from Chile and South Korea signed a social security agreement on 22 April 2015. The agreement is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Japan-Taiwan

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Tax Agreement between Japan and Taiwan has Entered into force

The income tax agreement between Japan and Taiwan entered into force on 13 June 2016. The agreement, signed 26 November 2015, is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Japanese income tax, corporation tax, special income tax for reconstruction, local corporation tax and local inhabitant taxes. It covers Taiwan profit-seeking enterprise income tax, individual consolidated income tax, and income basic tax.

Service PE

The agreement includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in the other Party through employees or other engaged personnel for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 10%
  • Royalties - 10%

Capital Gains

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

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from alienation of any property, other than immovable property, forming part of the business property of a permanent establishment in the other Party; and
  • Gains from the alienation of shares in a company or of interests in a partnership or trust deriving at least 50% of the value of its property directly or indirectly from immovable property situated in the other Party

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

Double Taxation Relief

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

Limitation of Relief

Article 26 (Limitation of Relief) includes the provision that the benefit of any reduction in or exemption from tax provided for in the agreement will not be provided to a resident of a Contracting Party if the conduct of operations by such resident or a person connected with such resident had for the main purpose or one of the main purposes to obtain the benefit of the agreement.

Effective Date

The treaty applies from 1 January 2017.

Netherlands-Uruguay

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TIEA between the Netherlands and Uruguay has Entered into Force

The tax information exchange agreement between the Netherlands and Uruguay entered into force on 1 June 2016. The agreement, signed 24 October 2012, is the first of its kind between the two countries and is in line with the OECD standard for information exchange. It applies for criminal tax matters on the date of its entry into force and for all other matters in respect of tax periods beginning on or after that date.

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