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Worldwide Tax News

Approved Changes (2)

Australia

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Australian Parliament Passes Major Bank Levy Bill

On 19 June 2017, the Major Bank Levy Bill 2017 was passed by the Australian Parliament. The Bill provides for the introduction of the bank levy on authorized deposit-taking institutions (ADIs) with total liabilities of greater than AUD 100 billion. The levy will be imposed at a rate of 0.015% on certain liabilities of affected ADIs on a quarterly basis (0.06% per annum). The bank levy will be effective 1 July 2017.

Lithuania

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Lithuania Adopts CbC Reporting Requirements

The Lithuanian parliament adopted amendments to the Law on Tax Administration on 23 May 2017 (Law XIII-374), which provide for the implementation of amendments made to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) concerning the exchange of Country-by-Country (CbC) reports (Council Directive (EU) 2016/881). The law itself is relatively brief and was followed by an Order from the State Tax Inspectorate (STI) setting out the specifics, which are generally in line with Council Directive (EU) 2016/881. Main aspects of the STI Order are summarized as follows:

  • The CbC reporting requirements apply for fiscal years beginning on or after 1 January 2016 for MNE groups meeting a EUR 750 million consolidated revenue threshold in the previous year;
  • The requirement to submit applies for ultimate and surrogate parent entities resident in Lithuania, as well as non-parent constituent entities resident in Lithuania if standard secondary local filing conditions are met;
  • The deadline for the CbC report is 12 months following the close of the reporting fiscal year, although for first reporting fiscal year (2016), the deadline is the end of the first quarter of 2018 (March 31)
  • The report is to be submitted electronically in a compliant XML format using a tax authority web service; and
  • Group entities resident in Lithuania must provide notification to the tax authority by the end of the reporting fiscal year on whether they are the ultimate parent, surrogate parent, or otherwise required to submit report (secondary local filing); otherwise, notification must be provided on the identity and residence of reporting entity (ultimate or surrogate parent) (reportedly extended to 31 December 2017 for the first year).

Click the following links for Law XIII-374 and the STI Order on the CbC requirements (Lithuanian language).

Proposed Changes (3)

European Union

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European Commission Proposes New Transparency Rules for Tax Planning Intermediaries

On 21 June 2017, the European Commission announced proposed transparency rules for tax planning intermediaries that design and promote tax planning schemes for their clients. The rules will require reporting of cross-border tax planning schemes bearing certain characteristics or 'hallmarks', including the use of losses to reduce tax liability, the use of special beneficial tax regimes, and arrangements through countries that do not meet international good governance standards. The obligation to report will apply for:

  • The intermediary who supplied the cross-border scheme for implementation and use by a company or an individual;
  • The individual or company receiving the advice, when the intermediary providing the cross-border scheme is not based in the EU, or where the intermediary is bound by professional privilege or secrecy rules; and
  • The individual or company implementing the cross-border scheme when it is developed by in-house tax consultants or lawyers.

In general, reportable cross-border schemes are to be reported within five days after such schemes become available to a taxpayer for implementation. However, where the reporting obligation is on the taxpayer, schemes are to be reported within five days after the scheme, or the first step of a scheme, is implemented. Information on the schemes reported will then be automatically exchanged among EU Member States through a centralized database every three months.

The proposed Council Directive for the new rules will be submitted to the European Parliament for consultation and to the Council for adoption. As proposed, the new transparency rules will apply from 1 January 2019.

Click the following link for the text of the proposed Directive and the annex to the proposed Directive, which sets out the generic and specific hallmarks.

Sweden

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Sweden Interest Deduction Restrictions Proposed with Corporate Tax Rate Cut

The Swedish Ministry of Finance has proposed corporate tax reform measures, including the introduction of new interest reduction restrictions and hybrid mismatch rules along with a cut in the corporate tax rate. The proposed measures include:

  • A general EBIT-based interest deduction restriction of 35% of EBIT with an SEK 100,000 safe harbor deduction limit and allowed carry forward of excess interest up to six years, as well as an alternative proposal for an EBITDA-based interest deduction restriction of 25% of EBITDA;
  • A temporary limit for the offset of carried forward losses to 50% of taxable profit for two years if EBIT-based restriction adopted and for three years if EBITDA-based restriction adopted;
  • A reduction in the corporate tax rate 22% to 20%;
  • Hybrid mismatch interest deduction rules based on the EU Anti Tax Avoidance Directive as amended for mismatches involving third countries; and
  • Intragroup loan interest deduction rules that would limit deductions where the primary purpose of an arrangement is to obtain a tax benefit, subject to certain conditions.

As proposed, the measures would apply from 1 July 2018.

Vietnam

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Vietnam Joins Inclusive Framework for Implementation of BEPS Measures

According to a 21 June 2017 update of the list of participants, Vietnam has joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 100. As a member of the Framework, Vietnam has committed to the implementation of the 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).

Treaty Changes (3)

Germany-Armenia

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Germany Approves Pending Tax Treaty with Armenia

According to a recent release, the German Bundestag (lower house of parliament) approved the bill for the ratification of the pending income and capital tax treaty with Armenia on 1 June 2017. The treaty, signed 29 June 2016, is the first of its kind directly between the two countries, and once in force and effective, will replace the 1981 tax treaty between Germany and the former Soviet Union as it applies in respect of Armenia and Germany(previous coverage).

Guernsey-Seychelles

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Protocol to TIEA between Guernsey and Seychelles has Entered into Force

The amending protocol to the tax information exchange agreement between Guernsey and Seychelles entered into force on 14 June 2017. The protocol, signed 12 August 2016 by Seychelles and 1 September 2016 by Guernsey, repeals Article 11 (No Prejudicial or Restrictive Measures) of the agreement. Article 11 provided that neither Party may apply prejudicial or restrictive measures based on harmful tax practices to residents, nationals or citizens of the other Party, on the basis that the other Party does not engage in effective exchange of information and/or because it lacks transparency in the operation of its laws, regulations or administrative practices, or on the basis of no or nominal taxes and one of the preceding criteria.

The protocol applies from the date it entered into force.

Norway-Belgium-France-Germany-Kuwait-Switzerland

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Norway Negotiating Tax Treaties with France and Kuwait and Treaty Protocols with Belgium, Germany, and Switzerland

According to an update from the Norwegian Ministry of Finance dated 20 June 2017, Norway is negotiating a new tax treaty with France, which would replace the 1980 tax treaty between the two countries, and is negotiating a tax treaty with Kuwait, which would be the first of its kind between the two countries. Norway is also negotiating amending protocols to the pending 2014 tax treaty with Belgium, the 1991 tax treaty with Germany, and the 1987 tax treaty with Switzerland. Any resulting treaties/protocols will need to finalized, signed, and ratified before entering into force. Additional details of each will be published once available.

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