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Worldwide Tax News

Approved Changes (4)

Ireland-Brazil

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Ireland's Reaction to Inclusion on Brazilian Blacklist

An Irish Ministry of Finance spokesman said the government was surprised by the move on 13 September 2016 by Brazil to place the country on its blacklist for tax havens (previous coverage). He emphasized that Ireland does not meet any of the international standards to be considered a tax haven, and that the country is an active participant in global work to reform the international corporate tax system.

The spokesman also noted that the Irish ambassador in Brazil is attempting to get a meeting with the Brazilian authorities to affect Ireland's removal from the list.

New Zealand

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New Zealand GST Guides Covering Basic and Complex Issues

New Zealand Inland Revenue published the following two GST guides on 19 September 2016.

GST guide - Working with GST (IR375)

This guide is for all businesses and organizations that charge GST and need basic information on the GST regime. It covers GST registration, returns, penalties, refunds, etc.

GST plus - Working out specific GST issues (IR546)

This guide is for businesses and organizations that charge GST and need information for more complex or less common GST issues. It looks at how to deal with GST adjustments, exempt supplies, zero-rated supplies and special supplies.

Tunisia

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Tunisian Parliament Approves New Investment Code

On 17 September 2016, the Tunisian parliament approved a new Investment Code that replaces the Code issued in 1993. Work on the new Code has been ongoing for several years in order to attract increased foreign investment. Some of the main features of the new Code include:

  • A 10-year tax holiday for major projects;
  • Increased flexibility for foreign investors to transfer funds, including the repatriation of profits;
  • The establishment of the Investment Authority, which will act as the single point of contact to handle administrative procedures for foreign investors; and
  • The establishment of a new investment fund to support investment in infrastructure projects and projects in marginalized areas of the country.

Additional details of the new Investment Code will be published once available.

United Kingdom

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UK Publishes Guidance on VAT Obligations for Overseas Businesses Selling Goods in the UK through an Online Marketplace

On 16 September 2016, UK HMRC published guidance on the value added tax (VAT) obligations of overseas sellers using an online marketplace (website) to sell goods in the UK. A business is considered an overseas seller if it sells goods stored in the UK to UK consumers and does not have a business establishment in the country. In such case, the overseas seller must register and account for VAT regardless of meeting any threshold. If the overseas seller fails to meet the VAT obligation, the marketplace or the seller's VAT representative in the UK (if appointed) may also be held jointly and severally liable for payment of the VAT owed.

Click the following link for the guidance.

Proposed Changes (2)

Bulgaria

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Bulgaria to Amend Return Filing Requirements

On 16 September 2016, Bulgaria's Ministry of Finance published draft amendments to the corporate and individual income tax return filing requirements. The main changes include:

  • Requiring the electronic filing of both corporate and individual income tax returns; and
  • Allowing both corporate and individual taxpayers to file an amended return by 30 September of the year in which the initial return was filed, without needing to submit a written correction request to the tax authority.

Subject to approval, the changes are to apply from 2017.

European Union-Luxembourg-United States

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Amazon and McDonald's to be Next for EU State Aid Investigations

In a recent interview, EU Commissioner for Competition Margrethe Vestager discussed the pending State aid investigations. According to Vestager, the next companies in the pipeline are Amazon (previous coverage) and McDonald's (previous coverage), which are both involved in investigations concerning Luxembourg tax rulings. In both of the rulings, Luxembourg accepted royalty structures that allowed minimal taxation on billions in revenue from the companies' European operations. In the McDonald's case, Luxembourg will be reportedly required to recover up to EUR 500 million in back taxes. In the Amazon case, the potential figure is uncertain, but may be as high or higher.

Treaty Changes (4)

European Union-Andorra

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EU Council Approves Financial Account Information Exchange Agreement with Andorra

On 20 September 2016, the Council of the European Union approved the agreement with Andorra providing for the automatic exchange of tax information on financial accounts of each other’s residents from 2018. The agreement was signed on 12 February 2016 and will replace the 2004 agreement between the EU and Andorra whereby the latter agrees to put in place measures equivalent to those provided for by the EU Savings Directive. The revision of the 2004 agreement became necessary now that the EU Savings Directive has been repealed and replaced by the amended provisions of the EU Administrative Assistance Directive.

Germany-Israel

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New Tax Treaty between Germany and Israel in Force

The new income and capital tax treaty between Germany and Israel reportedly entered into force on 9 May 2016. The treaty replaces the 1962 treaty between the two countries.

Taxes Covered

The treaty covers German income tax, corporation tax, trade tax and capital tax. It covers Israeli income tax and company tax (including tax on capital gains), profit tax on financial institutions, and the tax imposed on gains from the alienation of property.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital, otherwise 10%
  • Distributions made by a real estate investment company - 15% if the beneficial owner is a company directly holding less than 10% of the paying company's capital
  • Interest - 0% for interest paid to a pension fund and interest derived from corporate bonds issued by a resident of a Contracting State and traded on a stock exchange in that State, otherwise 5%
  • Royalties - 0%

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 shares or similar rights deriving more than 50% of their value directly or indirectly from immovable property situated in the other State; and
  • 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 other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Israel applies the credit method for the elimination of double taxation, while Germany generally applies the exemption method. However, Germany may use the credit method for dividends not exempted, interest, royalties and certain other items of income in accordance with German tax law.

Limitation on Benefits

Article 26 (Limitation on Benefits) includes that the benefits of the treaty will not apply where a main purpose for entering into certain transactions or arrangements was to secure a more favorable tax position, and obtaining that more favorable treatment in these circumstances would be contrary to the object and purpose of the relevant provisions of the treaty.

Effective Date

The new treaty applies from 1 January 2017. The 1962 tax treaty between the two countries ceases to have effect the same date.

Isle Of Man-Turks Caics

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TIEA between the Isle of Man and Turks and Caicos Islands Signed

According a recent update from the Isle of Man government, a tax information exchange agreement was signed by the Turks and Caicos Islands on 30 June 2016 and by the Isle of Man on 2 August 2016. The agreement is the first of its kind between the two jurisdictions, and will enter into force after the ratification instruments are exchanged.

Kyrgyzstan-Armenia

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Kyrgyzstan to Sign Tax Treaty with Armenia

On 20 September 2016, the Kyrgyzstan Parliamentary Committee on International Affairs, Defense, and Security approved for signature a draft tax treaty with Armenia. The treaty will be the first of its kind between the two countries, and must be signed and ratified before entering into force.

Additional details will be published once available.

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