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Approved Changes (2)

Brazil

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Brazil's Exempts Domestic Loans with Terms Exceeding 365 Days from Financial Transactions Tax

On 20 January 2016, Brazil's Federal Revenue Department announced that domestic loans with terms longer than 365 days will be exempt from financial transactions tax (IOF). The change was implemented through a decree, which provides immediate effect and is not subject to legislative review.

United States

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U.S. IRS Publishes Practice Units on Exchange of Information

On 20 November 2016, the U.S. IRS has published three international practice units concerning the exchange of tax-related information with foreign tax authorities, including:

International practice units are developed by the Large Business and International Division of the IRS to provide staff with explanations of general international tax concepts as well as information about specific transaction types. They are not an official pronouncement of law, and cannot be used, cited or relied upon as such.

Click the following link for the International Practice Units page on the IRS website.

Treaty Changes (6)

Canada-Taiwan

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Update - Tax Arrangement between Canada and Taiwan

The income tax arrangement between Canada and Taiwan was signed on 15 January 2016. The arrangement is the first of its kind between the two jurisdictions.

Taxes Covered

The arrangement covers Canadian taxes imposed under the Income Tax Act, and Taiwan profit seeking enterprise income tax, individual consolidated income tax, and income basic tax.

Residence

If a company is considered resident in both Contracting Parties, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement based on its place of effective management, the place where it is incorporated or otherwise constituted, and any other relevant factors. If no agreement is reached, the company will not be entitled to claim any relief or exemption from tax provided by the arrangement.

Service PE

The arrangement includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting Party 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% if the beneficial owner is a company that directly or indirectly holds at least 20% 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 Party may be taxed by the other Party:

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from alienation of movable 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, trust or other entity deriving more than 50% of its value 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 on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not be available if one of the main purposes of any person concerned with the establishment, acquisition or maintenance of the person that is the beneficial owner, or with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid, is to obtain the benefits of those Articles. The limitation is included in each of those Articles.

Article 26 (Miscellaneous Rules) includes the provision that the arrangement will not apply to any company, trust or other entity that is resident of a Contracting Party and beneficially owned or controlled, directly or indirectly, by one or more persons who are not residents of that Party, if the amount of the tax imposed on the income is substantially lower than the amount that would be imposed if all the shares or interests were beneficially owned by residents of that Party.

In addition, Article 26 (Miscellaneous Rules) includes the provision that if any income is taxed in a Contracting Party by reference to the amount remitted or received in that Party and not by reference to the full amount, then any relief from tax provide for by the arrangement in the other Party will be limited to the amount of income taxed by the first-mentioned Party.

Entry into Force and Effect

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

Hungary-Uzbekistan

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Protocol to the Tax Treaty between Hungary and Uzbekistan has Entered into Force

According to an update from Hungary's National Tax and Customs Administration, the protocol to the 2008 income and capital tax treaty with Uzbekistan has entered into force and applies from 1 January 2016. The protocol, signed 25 November 2014, is the first to amend the treaty. It replaces article 27 (Exchange of Information), bringing it in line with the OECD standard for information exchange.

Montenegro-Turkey

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SSA between Montenegro and Turkey has Entered into Force

The social security agreement between Montenegro and Turkey entered into force on 1 December 2015. The agreement, signed 15 March 2012, is the first of its kind between the two countries and applies from the date of its entry into force.

San Marino-Vietnam

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Tax Treaty between San Marino and Vietnam has Entered into Force

The income and capital tax treaty between San Marino and Vietnam entered into force on 13 January 2016. The treaty, signed 14 February 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers San Marino general income tax on individuals and on bodies corporate and proprietorships. It covers Vietnamese personal income tax, business income tax, and capital 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 if the activities continue for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 10% if the beneficial owner is a company that has directly held at least 10% of the paying company's capital for an uninterrupted period of at least 12 months at the time of the distribution; otherwise 15%
  • Interest - 10% if the beneficial owner is a company that has directly held at least 10% of the paying company's capital for an uninterrupted period of at least 12 months at the time of the payment; otherwise 15%
  • Royalties - 10% if the beneficial owner is a company that has directly held at least 10% of the paying company's capital for an uninterrupted period of at least 12 months at the time of the payment; otherwise 15%
  • Fees for Technical Services (services of a technical, managerial or consultancy nature) - 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;
  • Gains from the alienation of shares of the capital stock of a company, or of an interest in a partnership, trust or estate, the property of which consists directly or indirectly principally of immovable property situated in the other Contracting State (principally means the value of such immovable property exceeds 30% of the aggregate value of all assets owned by the company, partnership, trust or estate); and
  • Gains from the alienation of shares, other than those mentioned above, in a company resident 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. A provision is also included for a tax sparing credit for tax that would otherwise be payable but has been reduced or exempted under legal provisions of a Contracting State for tax incentives for the promotion of economic development.

Effective Date

The treaty applies from 1 January 2017.

Singapore-OECD

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Singapore Deposits Ratification Instrument for Mutual Assistance Convention

On 20 January 2016, Singapore deposited the ratification instrument for the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. Singapore signed the convention as amended on 29 May 2013.

According to the OECD overview of signatories to the convention, the convention will enter into force in Singapore on 1 May 2016.

Switzerland-OECD

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Switzerland Announces it will Sign Multilateral Competent Authority Agreement for the Exchange of CbC Reports

On 20 January 2016, Switzerland published a press release announcing that the Federal Council has approved the signing of the Multilateral Competent Authority Agreement for the exchange of Country-by-Country (CbC) reports. According to the release, the agreement will be signed on 27 January 2016 in Paris.

Although Switzerland has not yet adopted CbC reporting requirements, documentation (German language) linked from the press release indicates that the requirements will be in line with the guidelines developed as part of Action 13 of the OECD BEPS Project, including a CHF equivalent of the EUR 750 million annual group revenue threshold. Any exchange of CbC reports with Switzerland will only occur for tax years in which Switzerland has CbC reporting requirements in effect.

Click the following link for the press release.

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