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Worldwide Tax News

Approved Changes (2)

France

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France Amending Finance Law for 2016 Adopted by Parliament

On 21 December 2016, the French Amending Finance Law for 2016 was definitively adopted by the National Assembly. The Law will now be subject to constitutional review and will enter into force after being published in the Official Gazette. Key measures of the law include amendments in relation to tax exemptions and withholding tax requirements that have been ruled unconstitutional.

Profit Distribution Tax Exemption

Under current rules, French tax-consolidated groups are eligible for an exemption from the 3% tax on profit distributions, while foreign-parented groups are not. The amendments extend the exemption to foreign companies that are subject to corporate tax and directly or indirectly hold at least 95% of the capital of the French company distributing the profits. If the foreign company is established in a non-cooperative state or territory, the exemption will not be available unless the company can demonstrate that its establishment in such jurisdiction was not motivated by tax reasons.

Participation Exemption

Under current rules, the participation exemption for dividends requires at least 5% ownership in both the capital and voting rights of the distributing subsidiary. The amendments remove the 5% voting rights condition, while the 5% capital ownership condition continues to apply. The participation exemption for capital gains on the sale of participations, however, still requires at least 5% voting rights ownership.

75% Withholding Tax on Dividends Paid to Non-Cooperative Jurisdictions

A provision is added regarding the 75% withholding tax on dividends paid to a non-cooperative state or territory, which provides that the 75% rate will not apply if the taxpayer proves that the distribution does not have the purpose or effect of enabling tax evasion.

Click the following link for the text of the Amending Finance Law for 2016 as adopted (French language).

Singapore

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Singapore Publishes GST Guide for the Logistics Industry

On 20 December 2016, the Inland Revenue Authority of Singapore (IRAS) published an e-Tax guide on GST for the logistics industry. The guide notes that all supplies of services in Singapore are generally subject to GST, although if a service qualifies as an international service, the service may be zero-rated. The guide covers the logistics services that may be zero-rated and the conditions for each, including:

  • International transportation services;
  • International and local transportation services (when provided together as one supply);
  • Local transportation services within FTZ or designated area;
  • Handling services within FTZ or designated area; and
  • Storage services within FTZ or designated area.

Click the following link for e-Tax Guide: GST Guide for the Logistics Service Industry for additional information, including examples and conditions for specific service types.

Proposed Changes (3)

Australia

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Australia Consults on Multilateral Instrument for BEPS Measures and Increased Penalties for Significant Global Entities

On 19 December 2016, the Australia Treasury published a consultation paper on the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) and on 20 December published draft legislation for consultation to increase administrative penalties imposed on companies with global revenue of AUD 1 billion or more (Significant Global Entities - SGEs) who fail to adhere to tax disclosure obligations.

BEPS Multilateral Instrument

The consultation paper covers Australia’s adoption of the BEPS MLI, which is meant to implement the treaty-related measures developed as part of the BEPS Project without needing to separately amend each bilateral treaty, including the measure developed under:

  • BEPS Action 2: Neutralize the Effects of Hybrid Mismatch Arrangements;
  • BEPS Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances;
  • BEPS Action 7: Preventing the Artificial Avoidance of Permanent Establishment Status; and
  • BEPS Action 14: Making Dispute Resolution Mechanisms More Effective.

The key focus of the consultation is to seek stakeholder input on the adoption choices that Australia should make if it becomes a Party to the MLI. Australia's initial approach for adopting the MLI includes using the following principles:

  • Applying the MLI to all bilateral tax treaties that do not already incorporate BEPS rules;
  • Adopting the minimum standards and as many optional MLI articles as possible; and
  • Making limited use of the MLI reservation system.

If adopted, it is expected that the MLI could potentially take effect in Australia from 1 January 2019 (for rules relating to withholding taxes) and 1 July 2019 (for rules relating to other taxes).

Click the following link for the MLI consultation page. Comments are due by 6 February 2017.

Increased Penalties for SGEs

The draft legislation includes that from 1 July 2017, penalties relating to the lodgment of tax documents to the Australian Taxation Office (ATO) will be increased by a factor of 100 for SGEs. Currently, the penalty for large entities is equal to five penalty units (AUD 180) for each 28-day period that the tax document is not lodged up to a maximum of five periods. The draft legislation increases this to 500 penalty units for SGEs, which would result in a penalty of AUD 90,000 for the first 28-day period, and is increased in subsequent 28-day periods up to a maximum of AUD 450,000.

The increased penalties apply to all lodgments required in the approved form which includes income tax returns, activity statements, Country-by-Country reports, and general purpose financial statements.

In addition to lodgment penalties, penalties relating to statements and failing to give documents necessary to determine tax-related liabilities will be doubled from 1 July 2017.

Click the following link for the SGE penalties consultation page, which includes the draft legislation and explanatory memorandum. Comments are due by 13 January 2017.

Czech Rep

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Czech Government Approves Draft Legislation for Introduction of CbC Reporting including Notification Deadline Extension

On 20 December 2016, the Czech Ministry of Finance announced that the government has approved the draft legislation to amend Act no. 164/2013 Coll., on International Cooperation in Tax Administration to transpose BEPS measures, including the 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 as per Council Directive (EU) 2016/881.

Key aspects of the draft are for the most part unchanged from the initial draft issued in August 2016 (previous coverage), including that reporting threshold is the standard EUR 750 million (or equivalent in Czech koruna) and that the reporting requirements will apply for fiscal years beginning on or after 1 January 2016 for resident parented groups and from 1 January 2017 for non-resident parented groups. However, because the legislation is not scheduled to enter into force until June 2017, a temporary provision has been added that the first CbC reporting notification deadline will be 30 September 2017 for fiscal years ending up to that date. For fiscal years ending after that date, the standard end-of-year notification deadline will apply.

European Union

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European Commission Launches Public Consultations for a Single European VAT Area

On 20 December 2016, the European Commission launched three public consultations as part of its ongoing work in relation to the Action Plan on VAT - Towards a single EU VAT area. The three consultations are as follows:

Public Consultation on the Definitive VAT system for Business to Business (B2B) intra-EU transactions on goods

This consultation aims at obtaining the views of stakeholders on:

  • The current VAT situation of B2B intra-EU supplies of goods;
  • Possible short term improvements of the current transitional VAT system; and
  • The need to move towards the definitive VAT system based on the principle of taxation of the supply in the Member State of destination.

Its results will feed into the preparatory work on the definitive VAT system legislative initiative.

Public Consultation on the special scheme for small enterprises under the VAT Directive

This consultation aims at obtaining the views of stakeholders on:

  • The current VAT provisions for SMEs and their application; and
  • Possible changes as regards the VAT provisions for SMEs.

Its results will feed into the review of the SME scheme.

Public Consultation on the reform of VAT rates

This consultation aims at obtaining stakeholders’ views on the following aspects:

  • The need for EU action in the field of VAT rates;
  • The proper balance between harmonization and Member States autonomy in setting VAT rates;
  • The problems and risks linked to differentiation of VAT rates within the Single Market;
  • The desirable direction for reform; and
  • Stakeholders' views on the proposed policy options.

Its results will feed into the review of the current rules on VAT rates.

Each public consultation runs through 20 March 2017.

Treaty Changes (3)

Guernsey-United Kingdom

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Amendment to Income Tax Arrangement between Guernsey and the UK has Entered into Force

The amending arrangement to the 1952 tax arrangement between Guernsey and the UK entered into force on 6 December 2016. The tax arrangement is amended to clearly allocate the primary taxing right over profits from immovable property to the territory in which the property is situated. The amending arrangement applies retroactively from 16 March 2016.

Mauritania-Untd A Emirates

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Update - Tax Treaty between Mauritania and the U.A.E.

The United Arab Emirates President has reportedly issued the decree ratifying the pending income and capital tax treaty with Mauritania. The treaty, signed 21 October 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Mauritanian tax on industrial and commercial profits, tax on income from movable properties, tax on income from immovable properties, tax on wages, salaries and pensions, general income tax, tax on agricultural income, tax on non-commercial profits, and royalties. It covers U.A.E. income tax and corporation tax.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • 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; 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

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

Entry into Force and Effect

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

Uruguay-Singapore

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Uruguay Ratifies Pending Tax Treaty with Singapore

According to a recent update from the Uruguay government, the pending income tax treaty with Singapore was ratified on 2 December 2016 (treaty details). The treaty, signed 15 January 2015, is the first of its kind between the two countries and will enter into force 15 days after the ratification instruments are exchanged. It will apply in Uruguay from 1 January of the year following its entry into force, and will apply in Singapore in respect of taxes withheld at source from 1 January of the year following its entry into force and for other taxes from 1 January of the second year following its entry into force.

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