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Worldwide Tax News

Approved Changes (3)

El Salvador

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El Salvador Publishes Tax Havens List for 2017

The Salvadoran tax authority has published a revised list of jurisdictions and territories that are considered tax havens for tax purposes for the 2017 tax year (Resolution DG - 001/2016). Payments made to recipients domiciled in a listed jurisdiction/territory are subject to an increased withholding tax of 25%. In certain cases, payments to entities under a particular tax regime will be subject to increased withholding, but not the jurisdiction as a whole.

Entities in jurisdictions that are not listed may still be subject to increased withholding if meeting the statutory definition for being deemed a tax haven under Salvadoran tax law. In addition, a taxpayer may submit evidence that a listed jurisdiction does not meet the statutory definition, and if accepted may be relieved from the increased withholding tax rate.

The listed jurisdictions/territories and their status are as follows.

Low-Tax Jurisdictions/Territories

Albania, Andorra, Azores Islands (Portugal), Barbados, Bosnia and Herzegovina, Botswana, Bulgaria, Cyprus, Czech Republic, Estonia, Georgia, Gibraltar, Hong Kong, Hungary, Iceland, Ireland, Kazakhstan, Kuwait, Labuan (Malaysia), Latvia, Lebanon, Liechtenstein, Lithuania, Macau, Macedonia, Maldives, Malta, Mauritius, Moldova, Montenegro, Oman, Paraguay, Poland, Qatar, Romania, San Marino, Saudi Arabia, Serbia, Singapore, Slovenia, Switzerland (certain regimes), Taiwan, Turkey, and Uzbekistan.

No-Tax Jurisdictions/Territories

Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Brunei, Campione d'Italia (Italy), Cayman Islands, Cook Islands, Curacao, Delaware (United States), Dominica, Florida (United States), Grenada, Guernsey, Isle of Man, Jersey, Liberia, Luxembourg (certain regimes), Marshall Islands, Monaco, Montserrat, Nauru, Nevada (United States), Norfolk Islands, Panama (certain regimes), Qeshm (Iran), Samoa, Seychelles, South Dakota (United States), St. Helena and Tristan Da Cunha, St. Kitts and Nevis, St. Lucia, St. Martin, St. Vincent and the Grenadines, Turks and Caicos, United Arab Emirates, U.S. Virgin Islands, Vanuatu and, Wyoming (United States).

Classified as tax havens by the OECD

For 2017, no jurisdictions/territories are listed as classified by the OECD. With regard to those listed for 2016, Nauru has been added to the no-tax list and Niue has been removed.

Germany

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German Maximum Income Basis for Social Security Contributions for 2017

On 12 October 2016, the German Federal Cabinet approved the maximum annual income basis for social security contributions for 2017. For pension and unemployment insurance, the maximum basis will be:

  • EUR 76,200 for Western Federal States (old States); and
  • EUR 68,400 for Eastern Federal States (new States).

For health insurance and nursing insurance for disability and old age, the maximum annual basis will be EUR 52,200 for all Federal States.

Pending approval from the Bundesrat (upper house of parliament), the changes apply from 1 January 2017.

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OECD Launches Business Survey on Tax Certainty

The OECD has launched a confidential and anonymous business survey for businesses and other stakeholders to provide their feedback on tax certainty. The survey consists of five sections:

  1. General, broad information on the individual respondent;
  2. Characteristics of the firms (size, sector and geographical location);
  3. Economic factors affecting business decisions, including but not limited to taxation;
  4. Sources of uncertainty in the tax system; and
  5. Measures to enhance certainty in the tax system

The survey is available from 18 October to 16 December 2016. After the survey is completed, the results will be made available in aggregated format and presented to the G20 in 2017.

Click the following link for the OECD announcement and the survey.

Proposed Changes (3)

Andorra-OECD

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Andorra Joins Inclusive Framework for Implementation of BEPS Measures

According to a 19 October 2016 update from the OECD, Andorra has joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 86. As a member of the Framework, Andorra has committed to the implementation of four minimum standards, including 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).

Click the following link for the list of participants.

Mexico

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Mexico Consulting on Administrative Rules for CbC report, Master File and Local File

On 17 October 2016, the Mexican Office of the Taxpayer Advocate launched a public consultation on the draft administrative rules for the submission of Country-by-Country reports, Master files and Local files. The new documentation requirements apply for fiscal years beginning on or after 1 January 2016. The Master file and Local file requirement applies for companies with annual revenue in the preceding year exceeding approximately MXN 645 million (threshold adjusted yearly), and the CbC reporting requirement applies for MNE groups meeting an MXN 12 billion threshold in the previous year.

The draft administrative rules cover the method for submission, the specific content that must be included, and the deadlines. For the submission, a new electronic tool (DAIPR) must be used, which provides for submission through the tax authority (SAT) portal. The deadline to submit is generally by 31 December of the year following the fiscal year concerned (calendar year). However, in respect of CbC reports, if a Mexican entity is designated by a foreign parent of the group to file a CbC report in Mexico, the due date for the CbC report will depend on the month in which the parent entity's fiscal year ends. If ending in June through December, the report will be due by 31 December of the following year. If ending in the months of January, February, March, April or May, the report will be due by the end of the respective month in the following year. In such cases, the designated entity must notify the tax authority of its designation.

Click the following link for the consultation announcement (Spanish language) and the draft administrative rules (Spanish language). The consultation ends 18 November 2016.

United Nations

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U.N. Tax Committee Proposed Changes to Transfer Pricing Manual and Model Tax Convention

The U.N. has published proposed changes to the Practical Manual on Transfer Pricing for Developing Countries and the Model Tax Convention to address BEPS and other issues. The proposed amendments were discussed during the Twelfth Session of the Committee of Experts on International Cooperation in Tax Matters held 11 to 14 October 2016.

Practical Manual on Transfer Pricing

The changes to the Practical Manual on Transfer Pricing include:

  • A revised format and a rearrangement of some parts of the Manual for clarity and ease of understanding, including a reorganization into four parts as follows:
    • Part A includes substantive issues as they relate to transfer pricing;
    • Part B contains guidance on design principles and policy considerations;
    • Part C addresses practical implementation of a transfer pricing regime in developing countries; and
    • Part D contains country practices, similarly to Chapter 10 of the previous edition of the Manual;
  • A new chapter on intra-group services;
  • A new chapter on cost contribution arrangements;
  • A new chapter on the treatment of intangibles;
  • Significant updating of other chapters, taking account other global issues such as the relevant parts of the outputs of the G20/OECD action plan on BEPS; and
  • An index to make the contents more easily accessible (to be constructed later)

The updated manual is to be finalized and published in spring 2017.

Model Tax Convention

The changes to the Model Tax Convention include:

  • The replacement of Article 1 (Persons Covered) to address the application of tax treaties to payments made through hybrid entities;
  • The addition of a new article on fees for technical services (Article 16) and the associated commentary, as well as an addition concerning fees for included services to the commentary on Article 12 (Royalties);
  • Several proposed changes specifically related to BEPS issues, including:
    • Changes to the title and preamble to clarify that treaties are not intended to be used to produce situations of double non-taxation;
    • Changes to Article 1 (Persons Covered) to include a principal purpose test, a savings clause, and provisions limiting benefits where profits are attributed to a permanent establishment in a third state;
    • Changes to the non-individual tie breaker test in Article 4 (Resident) to replace the place of effective management test with a requirement that the competent authorities should endeavor to resolve the question of residence by mutual agreement;
    • Changes to Article 10 (Dividends) to increase the ownership threshold for a reduced withholding tax rate from 10% ownership to 25% ownership, and the addition of a minimum holding period of 365 days;
    • Changes to Article 13 (Capital Gains) by replacing the current UN Model paragraph 4 with the OECD Model concerning the taxation of gains from the alienation of shares deriving value from immovable property, and adding the concept of a comparable interest to paragraph 5;
    • Changes to Article 5 (Permanent Establishment), including the addition of the condition that all activities covered in the specified activity exemptions be of a preparatory or auxiliary character; the addition of an anti-fragmentation rule; the broadening of the scope of the dependent agent PE rule to counter structures aimed at the avoidance of a PE (including commissionaire arrangements); and the removal of the re-insurance exemption.

Given that there is some overlap in the proposals, further work will be needed to finalize the proposed changes.

Click the following link for the Twelfth Session page, which includes links to all the proposals and relevant documents in the background tab.

Treaty Changes (4)

Belarus-Kazakhstan

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Belarus Approves Pending Protocol to Tax Treaty with Kazakhstan

On 6 October 2016, the Belarus Council of the Republic (upper house of parliament) approved the pending protocol to the 1997 tax treaty between the two countries. The protocol is the first to amend the treaty, and reportedly:

  • Adds provisions to simplify the confirmation of tax residence;
  • Adds a provision to Article 5 (Permanent Establishment) for a service permanent establishment where a non-resident furnishes services in a Contracting State for more than 6 months in a 12-month period;
  • Adds a provision to Article 13 (Capital Gains) for the taxation of gains from the alienation of shares deriving value from immovable property situated in a Contracting State;
  • Adds an article concerning the income of teachers and researchers that includes an exemption from taxation for 24 months; and
  • Updates Article 26 (Exchange of Information) to broaden the scope of information that may be exchanged.

The protocol will enter into force after the ratification instruments are exchanged. Additional details will be published once available.

Germany

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German Bundesrat Approves CbC Multilateral Exchange Agreement

On 14 October 2016, the German Bundesrat (upper house of parliament) approved legislation for the implementation of the Multilateral Competent Authority Agreement (MCAA) on the exchange of Country-by-Country (CbC) reports. The Bundestag (lower house) approved the bill on 22 September 2016.

Click the following link for the list of the CbC MCAA signatories to date.

Guernsey-United Kingdom

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2015 Protocol to Tax Arrangement between Guernsey and the UK has Entered into Force

According to an 18 October 2016 update from UK HMRC, the 2015 protocol to the 1952 income tax arrangement with Guernsey has entered into force. The protocol, signed 22 September 2015 by the UK and 7 October 2015 by Guernsey, replaces the definitions of the respective jurisdictions. The protocol is the third to amend the arrangement. It applies in the UK from 1 April 2016 for corporation tax and from 6 April 2016 for income tax, and applies in Guernsey from 1 January 2017.  

Italy-Holy See

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TIEA between Italy and the Holy See (Vatican) has Entered into Force

The tax information exchange agreement between Italy and the Holy See (the Vatican City State's governing body) entered into force on 15 October 2016. The agreement, signed 1 April 2015, is the first of its kind between the two jurisdictions and generally applies from the date of its entry into force.

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