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Approved Changes (3)

Croatia

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Croatia Implements EU Parent-Subsidiary Directive Anti-Abuse Amendment

The law implementing the anti-abuse amendment to the EU Parent-Subsidiary Directive (previous coverage) into Croatian tax law entered into force on 9 June 2016. Based on the amendment, tax relief will not be granted if an arrangement or a series of arrangements are put in place with the main purpose or one of the main purposes to receive a tax benefit and not for valid commercial reasons that reflect economic reality.

Greece

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Greek Parliament Adopts Investment Law

On 16 June 2016, the Greek parliament adopted the draft investment law proposed by the government in May (previous coverage). The law introduces new incentives for qualified investment projects, including tax exemptions, guaranteed maximum tax rates, government grants and subsidies, and other incentives. Project eligibility is subject to a case-by-case approval process.

Additional details will be published once available.

Russia

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Russia Clarifies that LLC's Use of Retained Earnings to Increase Nominal Share Value Treated as Taxable Income for Shareholder

The Russian Ministry of Finance recently published Letter No. 03-03-06/1/30061, which provides guidance on the tax treatment of the use of retained earnings to increase the nominal share value for a shareholder in a limited liability company (LLC). According to the letter, under the Russian Tax Code a company's shareholder is not required to include in its tax base income received:

  • In the form of value added from additional shares distributed by a decision of a general meeting; or
  • In the form of the difference between the nominal value of new shares received in exchange for the original shares of the shareholder where there is an increase in share capital but no change in the shareholder's participation.

However, the letter clarifies that the above provisions apply only for shareholders in joint-stock companies. When an LLC uses retained earnings to increase the nominal share value, the shareholder in the LLC must include the increase in its tax base for corporate income tax purposes.

Proposed Changes (5)

Belgium

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Belgium CbC Requirements, Increased Tax Haven Payment Reporting Obligations and Other Measures Submitted to Parliament

The Belgian government submitted tax reform legislation to parliament on 2 June 2016. The legislation provides for the implementation Country-by-Country (CbC) reporting requirements, increased tax haven payment reporting obligations and various other measures to balance the budget.

CbC Reporting and Master/Local File Requirements

The legislation includes new CbC reporting, Master file and Local file requirements based on BEPS Action 13 (previous coverage). The CbC requirements include that for fiscal years beginning on or after 1 January 2016, MNE groups operating in Belgium must submit a CbC report if meeting an annual consolidated group revenue threshold of EUR 750 million in the previous year. Notification must be provided to the Belgian tax authorities by the end of the fiscal year concerned as to whether a resident company is the ultimate parent of the group or acting as a surrogate parent, and if neither, the identity and tax residence of the reporting entity.

Regarding Master and Local file, Belgian resident companies will be required to prepare both when meeting any of the following thresholds:

  • EUR 50 million operational and financial income;
  • EUR 1 billion balance sheet total; or
  • 100 annual average full-time equivalent employees

The Master file content requirements are based on Action 13 guidelines, while the Local file requirements differ in some respects. The main difference is the filing of two separate forms: the first containing general information on the local company and the second detailing the transfer pricing applied between the local company foreign related parties. The first form must be filed if the above thresholds are met, while the second form is required if any business unit of the Belgian company has related party cross border transactions exceeding EUR 1 million in the previous year.

When required, the CbC report and Master file are to be submitted within 12 months following the end fiscal year, while the local file (one or both forms) is filed with the annual tax return.

Tax Haven Payments

Under current rules, payments of EUR 100,000 or more made to residents established in jurisdictions considered tax havens or non-cooperative jurisdictions must be reported in the annual tax return in order to be deductible. The reform legislation expands the obligation to also require reporting of payments made to permanent establishments and bank accounts held in tax havens or non-cooperative jurisdictions.

In addition to expanding the obligation, the legislation increases nominal corporate tax rate below which a jurisdiction is considered a tax haven for the reporting obligation from the current 10% to 15%. Inclusion of jurisdictions found not in compliance with the OECD standard for information exchange by the Global Forum on Transparency and Exchange of Information for Tax Purposes is unchanged.

Bolivia

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Bolivian Chamber of Deputies Approves Amendments to Late Tax Payment Penalties

On 16 June 2016, the Bolivian Chamber of Deputies (lower house of the legislative assembly) approved bill PL-153-16, which amends the country's rules concerning late tax payment penalties. The main amendment is changing the interest rate for late payments from the rate published by the Central Bank of Bolivia plus 3%, to fixed rates depending on the length of payment delay as follows:

  • 4% per annum for the first 4 years of arrears (beginning the day after the payment is due);
  • 6% per annum from the first day of the 5th year until the last day of 6th year;
  • 8% per annum from the first day of the 7th year until the last day of 8th year; and
  • 10% per annum beginning the first day of the 9th year until paid.

As part of a transition, taxpayers will be allowed to use the 4% rate for the period from when the legislation is enacted to the end of the year, instead of the approximately 5% rate based on the current Central Bank rate (~2%). The legislation also maintains the progressive reduction of the penalty due depending on the stage of the audit or the legal process.

The legislation now goes to the Chamber of Senators (upper house) for approval.

European Union-Austria-Belgium-France-Germany-Greece-Italy-Portugal-Slovak Republic-Slovenia-Spain

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Compromise Accepted on EU Financial Transactions Tax but Final Decision Delayed to September

Austrian Minister of Finance Dr Hans Jörg Schelling announced on 17 June 2016 that the ten EU Member States supporting the EU Financial Transaction Tax (FTT) have accepted a compromise proposed by Austria, but that a final decision on the FTT is delayed to September 2016 so technical details can be worked out. A final decision on outstanding issues was to be made by 30 June (previous coverage). According to the announcement, if a solution to the remaining issues is not found by September, an agreement on the FTT will probably not be reached.

Click the following link for the announcement.

Hong Kong

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Hong Kong Joins Framework for Implementation of BEPS Measures

On 20 June 2016, the Hong Kong government announced that it will join the inclusive framework as an Associate for the global implementation of the BEPS Project measures. As a BEPS Associate, Hong Kong is committed to the comprehensive BEPS Package, including the four minimum standards, 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).

According to the announcement, the government will decide on the timing of the implementation after an ongoing analysis on the BEPS Package is completed and consultations with relevant industries are held.

Click the following link for the press release.

Turkey

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Turkey Announces Development of Reform Package to Promote Investment

On 13 June 2016, Turkish Deputy Prime Minister Nurettin Canikli announced that the government is developing a tax reform package to promote foreign investment into the country. The package includes:

  • Notary fees exemptions for company formation;
  • Stamp Tax exemptions for transactions related to high-technology production;
  • Property tax exemptions for buildings constructed and land obtained with incentive certificates for investment purposes;
  • Revision to transfer pricing rules to reduce compliance costs for international companies; and
  • Individual income tax exemptions for certain foreign employees working in Turkey.

The reform package must be finalized and sent to parliament for approval. Additional details will be published once available.

Treaty Changes (2)

Fiji-New Zealand

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Negotiations Ongoing for Protocol to Tax Treaty between Fiji and New Zealand

According to recent reports, officials from New Zealand and Fiji met 10 June 2016 to discuss ongoing negotiations for a protocol to the 1976 income tax treaty between the two countries, which began in 2014. Any resulting protocol will be the third to amend the treaty, and must be finalized, signed and ratified before entering into force.

Kosovo-Switzerland

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SSA between Kosovo and Switzerland under Negotiation

Officials from Kosovo and Switzerland have reportedly agreed to begin negotiations for a social security agreement. Any resulting agreement would be the first of its kind between the two countries, and would need to be finalized, signed and ratified before entering into force.

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