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Worldwide Tax News

Approved Changes (3)

Argentina

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Argentina Special Tax Program to Support SMEs in Force

On 10 August 2016, Argentine Law 27264 entered into force, which provides a special tax program to support the productivity of micro, small and medium-sized enterprises. The main benefits of the program include:

  • The 1% corporate asset tax (creditable minimum tax) repealed effective 1 January 2019 by Law 27260 (previous coverage) is repealed for SMEs effective 1 January 2017;
  • For micro and small enterprises, the financial transactions tax on bank account debits and credits may be treated as an advance payment of income tax in full, while group 1 medium enterprises may treat 50% of the tax as advance payment;
  • The deadline for filing value added tax returns is extended by one month for micro and small enterprises; and
  • A credit equal to 10% of productive investments is provided, limited to 2% of average monthly net income (3% for qualifying medium-sized manufacturing enterprises

For the purpose of the benefits, Argentina's classification of an enterprise as micro, small or medium-sized is based on the enterprise's business sector and average annual sales in the past three years. The thresholds range from ARS 2 million to 9 million depending on sector for micro, from ARS 13 million to 55 million for small, from ARS 100 million to 450 million for medium (group 1), and from ARS 160 million to 650 million for medium (group 2).

United States

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U.S. IRS Releases 2015-2016 Priority Guidance Plan Fourth Quarter Update and the Initial 2016-2017 Plan

The U.S. IRS released the fourth quarter update of the 2015-2016 Priority Guidance Plan on 15 August 2015. On the same date, the initial 2016-2017 Priority Guidance Plan was also released, which includes 281 projects.

The U.S. Treasury Department's Office of Tax Policy and the IRS use the Priority Guidance Plans to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The plans also set out the schedule for routine publications for each month of the plan year.

Both the initial and updated Priority Guidance Plan versions for current a prior years can be found on the IRS Priority Guidance Plan webpage.

World Bank

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World Bank Publishes Global Corruption Survey Data in Relation to Taxation, Licensing and Other Areas of Doing Business

The World Bank Group has published survey data on the level of corruption in various countries and regions where businesses may be required to make unofficial payments or give gifts to "get things done." The survey includes data from more than 125,000 respondents and covers 147 countries and 8 regions. The survey looks at several indicators of corruption, including:

  • Percent of firms experiencing at least one bribe payment request;
  • Percent of public transactions where a gift or informal payment was requested;
  • Percent of firms expected to give gifts in meetings with tax officials;
  • Percent of firms expected to give gifts to secure government contracts;
  • Value of gift expected to secure a government contract (% of contract value);
  • Percent of firms expected to give gifts to get an operating license, import license or construction permit;
  • Percent of firms expected to give gifts to get an electrical or water connection;
  • Percent of firms expected to give gifts to public officials "to get things done";
  • Percent of firms identifying corruption as a major constraint; and
  • Percent of firms identifying the courts system as a major constraint.

Regarding tax officials, the most corrupt region overall is East Asia and the Pacific, followed by South Asia, and the Middle East and North Africa.

Click the following link for the survey data.

Treaty Changes (5)

China-Romania

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Update - New Tax Treaty between China and Romania

The new income tax treaty between China and Romania was signed on 4 July 2016. Once in force and effective, the new treaty will replace the 1991 income tax treaty between the two countries, which is currently in force.

Taxes Covered

The treaty covers Chinese individual income tax and enterprise income tax, and covers Romanian tax on income and tax on profit.

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 for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 3%
  • Interest - 0% for interest paid in respect of a sale on credit of any equipment, merchandise or services, or on any loan granted by a financial institution; otherwise 3%
  • Royalties - 3%

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 deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares substantially and regularly traded on a stock exchange)

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 22 (Other Income) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest, royalties or other income are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force. The 1991 tax treaty between the two countries will cease to have effect from the date the new treaty is effective.

India-Slovenia

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Update - Protocol to Tax Treaty between India and Slovenia

The protocol to the 2003 income tax treaty between India and Slovenia was signed on 17 May 2016. The protocol replaces Article 26 (Exchange of Information) to bring it in line with the OECD standard for information exchange and inserts Article 27 (Assistance in the Collection of Taxes), with the following articles renumbered accordingly.

The protocol is the first to amend the treaty. It will enter into force once the ratification instruments are exchanged, and will apply from the first day of the third month next following the date of its entry into force.

Kuwait-OECD

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Kuwait Signs Multilateral Agreement on Automatic Exchange of Financial Account Information

According to an update from the OECD, Kuwait signed the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information on 19 August 2016. The MCAA provides for the exchange of information as part of the Common Reporting Standard (CRS) developed by the OECD. With the signing, Kuwait has re-confirmed its commitment to begin automatic exchange by September 2018.

Click the following link for the 84 jurisdictions that have signed the MCAA to date.

Mauritius-Korea, Rep of

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Mauritius Intends to Negotiate Tax Treaty with South Korea

The Mauritius government reportedly intends to begin negotiations for an income tax treaty with South Korea. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Uruguay-Vietnam

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Tax Treaty between Uruguay and Vietnam has Entered into Force

The income and capital tax treaty between Uruguay and Vietnam entered into force on 26 July 2016. The treaty, signed 9 December 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Uruguayan tax on business income, personal income tax, non-residents income tax, tax for social security assistance, and capital tax. It covers Vietnamese personal income tax and business income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel if the activities continue for the same or connected project within a Contracting State for a period or periods aggregating more than 183 days within any 12-month period.

Natural Resources Exploitation PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise conducts activities that relate to the exploration for and exploitation of natural resources located in a Contracting State.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 70% of the paying company's capital; otherwise 10%
  • Interest - 10%
  • Royalties - 10%
  • Technical fees for 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; and
  • Gains from the alienation of shares of the capital stock of a company, or other corporate rights in a company, including an interest in a partnership, trust or estate, which is a resident of 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.

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