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Approved Changes (4)

France

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France Updates VAT Exemption Thresholds for 2017

On 14 February 2017, the French Ministry for the Economy and Finance published an update to the VAT exemption thresholds for 2017. According to the update, taxpayers can apply for a VAT exemption if the turnover for the previous calendar year is less than:

  • EUR 82,800 for purchasing and resale activities, on-site consumption, and housing services;
  • EUR 33,200 for other commercial and non-commercial services;
  • EUR 42,900 for regulated activities of lawyers and solicitors, and transactions involving intellectual property.

Taxpayers may opt for the exemption as long as their turnover remains within the thresholds indicated above.

Mexico

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Mexican Ministry of Finance Announces Three Special Economic Zones

On 10 February 2017, the Mexican Ministry of Finance published Communication No. 16 announcing the creation of three special economic zones. The special economic zones are: the Port of Lázaro Cárdenas, including the neighboring states of Michoacán and Guerrero; the Isthmus of Tehuantepec, including the ports of Coatzacoalcos, Veracruz state, and Salina Cruz, Oaxaca state; and Port Chiapas, in Chiapas state. According to local reports on the special economic zones, tax incentives for investments in the zones will include:

  • A 10-year income tax exemption followed by a 5-year 50% tax exemption;
  • A 10-year 50% tax credit on social security contributions followed by a 5-year 25% credit;
  • Special VAT treatment similar to the treatment provided for foreign trade operations; and
  • A special customs regime including tax exemptions.

Additional details, such as qualifying criteria, will be published once available.

United Kingdom

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UK Updates List of Targeted Tax Avoidance Schemes

On 14 February 2017, UK HMRC published an updated list of tax avoidance schemes that HMRC believes are being used to avoid paying tax due. The guidance includes schemes that HMRC has identified as having the features of tax avoidance and has started investigating. HMRC has been increasing its efforts against tax avoidance schemes in recent years, including new guidance on the disclosure of tax avoidance schemes, which was published in October 2016.

United States

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U.S. IRS Publishes "Dirty Dozen" List of Tax Scams for 2017

On 17 February 2017, the U.S. IRS published its annual "Dirty Dozen" list of tax scams. The tax scams making the list for 2017 are as follows:

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2017-19)

Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid being victimized. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records or charges fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find victims. (IR-2017-26)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by con artists. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2017-31)

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program to enable people to catch up on their filing and tax obligations. (IR-2017-35)

Proposed Changes (1)

Ireland

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Ireland Planning to Sign BEPS Multilateral Instrument

In a speech delivered 16 February 2017 at a conference on corporate tax fairness, responsibility, and leadership, Ireland's Minister for Finance Michael Noonan confirmed that Ireland will sign the multilateral instrument for tax treaty-related BEPS measures (MLI) when it becomes possible. The MLI is meant to enable the broad implementation of the treaty-related BEPS measures instead of bilaterally revising the thousands of relevant treaties. The treaty-related measures include those developed under Action 2 (Neutralizing the Effects of Hybrid Mismatch Arrangements), Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances), Action 7 (Preventing the Artificial Avoidance of PE Status), and Action 14 (Making Dispute Resolution Mechanisms More Effective). The MLI is to be ready for signature in June 2017 (previous coverage).

Treaty Changes (5)

Italy-Monaco

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TIEA between Italy and Monaco has Entered into Force

The tax information exchange agreement between Italy and Monaco entered into force on 4 February 2017. The agreement, signed 2 March 2015, is the first of its kind between the two countries and applies for requests concerning tax periods beginning on or after 2 March 2015. The final protocol to the agreement also includes provisions for the automatic exchange of information under the OECD Common Reporting Standard (CRS).

Kazakhstan-Slovenia

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Tax Treaty between Kazakhstan and Slovenia has Entered into Force

According to an update from the Kazakh Ministry of Finance, the income tax treaty with Slovenia entered into force on 30 December 2016. The treaty, signed 10 March 2016, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Kazakhstan corporate income tax, individual income tax, and tax on property of legal entities and individuals. It covers Slovenian tax on income of legal persons, tax on income of individuals, and tax on property.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner 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;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or comparable interests in the capital of a company deriving more than 50% of their value directly or indirectly from immovable property situated 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.

Effective Date

The treaty applies from 1 January 2017.

Macedonia-Untd A Emirates

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Tax Treaty between Macedonia and the U.A.E. has Entered into Force

The income tax treaty between Macedonia and the United Arab Emirates entered into force on 7 February 2017. The treaty, signed 26 October 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Macedonian personal income tax and profit tax, and covers U.A.E. income tax and corporate tax.

Withholding Tax Rate

  • Dividends - 5%
  • Interest - 5%
  • Royalties - 5%

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;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other State, unless listed on a recognized stock exchange.

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.

Income from Hydrocarbons

Article 27 (Income from Hydrocarbons) provides that the treaty will not affect the right of either one of the Contracting States to apply their domestic laws and regulations related to the taxation of income and profits derived from hydrocarbons and its associated activities situated in the territory of the respective Contracting State, as the case may be.

Effective Date

The treaty applies from 1 January 2018.

Mexico-Vietnam

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Mexico and Vietnam to Conclude Tax Treaty Negotiations

During a meeting held 12 to 14 February 2017, officials from Mexico and Vietnam agreed to conclude negotiations for an income tax treaty in April 2017. The treaty will be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Panama-OECD

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Panama Approves Mutual Assistance Convention

On 14 February 2017, Panama's National Assembly approved for ratification the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The Convention will enter into force for Panama on the first day of the third month following the deposit of the ratification instrument.

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