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Approved Changes (7)

Cyprus

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Cyprus Introduces VAT Requirements on Land Transactions and Leasing/Letting of Immovable Property for Business Activities

Effective 13 November 2017, Cyprus introduced measures to require the levy of value added tax (VAT) at the standard 19% rate on transactions involving the transfer of undeveloped land intended for the construction of one or more structures. In addition, the leasing or letting of immovable property used for business activities will be subject to VAT effective 2 January 2018. The measures were approved by parliament on 2 November in order to comply with the requirements of the EU VAT Directive.

Ireland

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Irish Revenue Updates Guidance on Distributions out of Certain Exempt Profits or Gains or out of Certain Relieved Income

Irish Revenue has published eBrief No. 105/17 concerning updated guidance on distributions out of certain exempt profits or gains or out of certain relieved income.

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The Revenue Tax and Duty Manuals Parts 06-04-02 (Distributions out of certain exempt profits or gains or out of certain relieved income) and 06-06-01 (Section 154 TCA 1997 - Attribution of Distributions to Accounting Periods) have been updated. Both manuals deal, among other things, with the treatment of certain types of income which is, or was, exempted income.

Over time, a number of exemptions given in respect of certain income have been withdrawn. The exemptions of certain profits derived from stallion fees (s231 Taxes Consolidation Act 1997), stud greyhound services (s233 TCA 97), and income from patent royalties (s141 TCA 97) are no longer available.

A paragraph has been inserted in Manual Part 06-04-02 to bring attention to the fact that the exemptions referred to in the manual may not be of current relevance.

Manual Part 06-06-01 refers to section 154 Taxes Consolidation Act 1997, which allows for certain distributions to be attributed to certain accounting periods. This manual has been updated to draw attention to the fact that some of the income sources mentioned are no longer treated as being exempt. It may also be noted that Manufacturing Relief and Export Sales Relief are mentioned in the manual; both of these reliefs have been discontinued.

Mexico

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Mexico Amends CbC Reporting Information Requirements with Respect to Permanent Establishments

On 14 November 2017, Mexico published a resolution in the Official Gazette that includes amendments to the aggregate information required in CbC reports with respect to permanent establishments. The amendments clarify the way in which certain permanent establishment information is included in the CbC report and essentially brings the requirements in line with the OECD guidelines. The areas amended with respect to permanent establishments include:

Accumulated Earnings - The amount should be reported by the legal entity to which the permanent establishment is attributed.

Stated Capital - The amount should be reported by the legal entity to which the permanent establishment is attributed, unless there is a defined capital requirement in the permanent establishment tax jurisdiction for regulatory purposes, in which case the amount should be reported in the jurisdiction where the permanent establishment is located.

Tangible Assets other than Cash and Cash Equivalents - The amount should be reported in the jurisdiction where the permanent establishment is located.

Pakistan

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Pakistan Issues Final CbC Report, Master File, and Local File Requirements

On 16 November 2017, Pakistan's Federal Board of Revenue issued Notification S.R.O. 1191(1)/2017 on amendments to the Income Tax Rules, 2002 to add a new Chapter - VIA: Documentation and Country-by-Country Reporting Requirements. This final notification is generally consistent with the draft notification issued in June 2017, although changes are made with respect to the first reporting fiscal year (tax year 2017) and with respect to the initial CbC report and notification submission deadlines.

The CbC reporting rules are summarized as follows:

  • A reporting threshold of EUR 750 million consolidated revenue in the previous fiscal year (or equivalent in amount in Pakistan Rupees);
  • Standard ultimate parent, surrogate parent, and local secondary submission requirements with a deadline of 12 months after the end of the reporting fiscal year of the MNE group (tax year 2017 report to be filed by 31 March 2018);
  • Notification requirements for all constituent entities resident in Pakistan on whether they are the ultimate or surrogate parent entity, and if neither, the details of the ultimate or surrogate parent entity and the country or territory of residence, with the notification due by tax return deadline (for the fiscal year relating to tax year 2017, the notification is due by 15 February 2018); and
  • The CbC report is to be submitted in the manner and as provided in Form A and Tables specified in the Schedule to the Notification (Chapter - VIA).

Master File and Local File

The Master file documentation requirements apply for taxpayers that are a constituent entity of an MNE group and have turnover of more than PKR 100 million (~EUR 850,000). The required content of the Master file is generally in line with the Action 13 guidelines.

Local file documentation requirements apply for all taxpayers with respect to transactions with associates exceeding PKR 50 million (~EUR 425,000). The required content of the Local file is also generally in line with the Action 13 guidelines.

As with the draft notification, the final notification does not indicate the first year the Master and Local file requirements apply, although based on the change in law that allows for the documentation requirements, the new requirements would apply from the tax year beginning 1 July 2016. With respect to the Local file in particular, the documentation should be made available, if requested, at any time after the due date for the tax return (within 30 days of request). It is assumed that the same applies for Master file, although not certain. Additional details will be published once available.

Russia

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Russia Clarifies Limit on Carried Forward Loss Offset

The Russian Ministry of Finance has published Letter No. 03-03-05/65749 of 9 October 2017, which clarifies the limit on the offset of carried forward losses to 50% of taxable income per year that applies from 1 January 2017. The letter clarifies that the 50% offset limit only applies for tax (reporting) periods from 1 January 2017 to 31 December 2020. The letter also notes that the ten-year limit on the carry forward of losses no longer applies from 1 January 2017.

Saudi Arabia

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Saudi Arabia Maintains 60-Day Limit to Make Appeal until Further Notice

The Saudi General Authority of Zakat and Tax (GAZT) has issued Circular No. 7258/16/1439 of 14 November 2017 to clarify the changes in the appeals procedure introduced by Royal Decree No. M/113 of 25 July 2017 (previous coverage). The Circular notes that reduction in the time to make an appeal from 60 days to 30 days under the Royal Decree will not apply until the two new appeal committees provided for in the Royal Decree are established. Since the establishment of the new committees is still pending, the 60-day limit to make an appeal will continue to apply until further notice.

Untd A Emirates

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UAE VAT on Residential and Commercial Real Estate

The United Arab Emirates Federal Tax Authority has issued a release announcing that under the country's new value added tax (VAT) regime, the supply of commercial real estate, selling or leasing, will be subject to VAT at the 5% rate. Residential units will generally remain exempt, except for the first supply of a new residential building within the first three years of it being constructed, which will be zero-rated. The supply of real estate is defined as activities that include, among other things, the sale, lease or giving of the right to any real estate. For mixed-use buildings, the residential and commercial parts of the buildings will be subject to VAT accordingly.

The VAT regime goes into effect on 1 January 2018. Suppliers of taxable goods and services, including building owners, must register if the value of supplies over the previous 12-month period exceeds AED 375,000 or is expected to exceed that amount in the next 30 days.

Proposed Changes (2)

Italy

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Italian Parliament Considering Equalization Tax on Digital Services

According to recent reports, the Italian parliament is considering a proposed equalization tax on digital services supplied by foreign suppliers that would be introduced as part of an amendment to the 2018 Budget law. The tax is meant to target large multinational digital companies, such as Apple, Facebook, and Google, and would be levied at a rate of 6% to be withheld by the recipient of the services. An exemption would apply for individuals. Further to the equalization tax, a proposal is also reportedly being considered that would require the Italian Revenue Agency to review the permanent establishment status of any foreign company making digital supplies to Italy if the number of transactions exceeds 1,500 and the value of the transactions exceeds EUR 1.5 million in a half-year period.

Additional details of the proposal will be published once available.

Russia

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Russian State Duma Approves Draft Legislation for CbC Report, Master File, and Local File Requirements

According to recent reports, Russia's State Duma (lower house of parliament) has approved a revised draft of the legislation for the introduction of Country-by-Country (CbC) report, Master file, and Local file documentation requirements based on BEPS Action 13 (previous coverage).

The revised draft retains most of the provisions of the prior draft, although there are some key differences, including that the legislation will enter into force once published in the Official Gazette instead of from 1 January 2018 as originally proposed. This is generally for the purpose of voluntary parent surrogate filing, which requires that CbC reporting requirements be in place by the deadline for the CbC report in other jurisdictions (generally 31 December 2017). Another key difference is that the CbC report and Master file requirements would apply from 1 January 2017, instead of 2018. The Local file requirement, however, would apply from 2018 as provided in the prior draft. The revised draft also includes certain clarifying amendments with respect to the required content of the documentation, as well as a transitional extension for the submission of the Local file, which will be due 31 December of the following year with respect to 2018 and 2019, and will be due 1 June of the following year for subsequent years.

The legislation must still be passed by the Federation Council (upper house) and signed by the president before being enacted.

Treaty Changes (4)

Argentina-Bulgaria

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SSA between Argentina and Bulgaria under Negotiation

Bulgaria's Ministry of Labor and Social Policy has announced that officials from Bulgaria and Argentina have agreed to the negotiation of a social security agreement. Any resulting agreement would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Jordan-Saudi Arabia

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Update - Tax Treaty between Jordan and Saudi Arabia

The income tax treaty between Jordan and Saudi Arabia entered into force on 1 September 2017. The treaty, signed 19 October 2016, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Jordanian income tax and covers Saudi Zakat and income tax, including the natural gas investment 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 6 months within any 12-month period.

Limited Force of Attraction Provision

Article 7 (Business Profits) includes a limited force of attraction provision whereby taxing rights are granted to a Contracting State on profits attributable to the sale of goods or merchandise or other business activities carried on in that Contracting State by a resident of the other State if the same or similar goods or merchandise or business activities are also sold or carried out by a PE maintained by that resident in the first-mentioned Contracting State.

Withholding Tax Rates

  • Dividends - 5%
  • Interest - 5%
  • Royalties (including related technical assistance) - 7%

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 other rights representing a participation in the capital of a company resident in the other State, unless 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.

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 has been exempted or reduced in a Contracting State for a limited period in accordance with the laws and regulations of that State relating to investment incentives.

Effective Date

The treaty applies from 1 January 2018.

Kyrgyzstan-Estonia

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Kyrgyzstan Approves Pending Tax Treaty with Estonia

On 19 November 2017, the Kyrgyzstan government approved the pending income tax treaty with Estonia. The treaty, signed 10 April 2017 (previous coverage), is the first of its kind between the two countries and will enter into force once the ratification instruments are exchanged.

Liechtenstein-Netherlands

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Tax Treaty between Liechtenstein and the Netherlands under Negotiation

The Liechtenstein government has announced that the first round of negotiations for an income tax treaty with the Netherlands was held 15 to 17 November 2017, with negotiations to continue in 2018. 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.

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