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Worldwide Tax News

Approved Changes (7)

Argentina

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Argentina Extends Domestic Capital Goods Manufacturing Incentive

Argentina has published Decree no. 1348/2016. The Decree, dated 30 December 2016, extends to 30 June 2017 the incentive provided under Decree No. 379/2001 for the domestic manufacture of certain goods, including capital goods, IT and telecommunications equipment, and agricultural machinery. The incentive is in the form of a tax credit equal to 14% of the value of the goods produced that can be applied against value added tax, income tax, excise taxes, and minimum presumed income tax payments.

For the incentive to apply, taxpayers must submit an affidavit by 30 June 2017 confirming that the number of registered employees has not decreased from the number of employees registered as of December 2011. Taxpayers have until 30 September 2017 to apply for the credit for sales invoiced by 30 June 2017 in respect of goods delivered to the purchaser after 30 June 2014.

Mexico

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Mexico Tax Amnesty Program for Undisclosed Foreign Investments

On 18 January 2017, a decree providing a tax amnesty program for the repatriation of foreign investments was published in Mexico's Official Gazette. The decree provides that individuals and companies resident in Mexico, as well as permanent establishments in Mexico, may repatriate undisclosed foreign investment income subject to an 8% tax rate. The reduced rate may apply for foreign investment income up to 31 December 2016, subject to the condition that the income is reinvested in Mexico in 2017 and remains invested for a minimum of two years. The types of qualifying reinvestments in Mexico include:

  • The acquisition of fixed assets that are deductible for tax purposes and used for the taxpayers activities;
  • The acquisition of land and buildings that are used for the taxpayers activities;
  • Research and technology development investments directly and exclusively for the implementation of the taxpayer's own projects;
  • The payment of liabilities with independent parties entered into prior to the entry into force of the tax amnesty decree, provided that the payment is made through credit institutions or brokerage firms incorporated under Mexican law; and
  • Investments in Mexico through credit institutions or brokerage firms that are incorporated under Mexican law, including investments in financial instruments and shares issued by Mexican companies.

When foreign investment income is repatriated for the purpose of the tax amnesty program, the tax due is to be paid within 15 days of the repatriation.

Click the following link for the tax amnesty decree (Spanish language), which entered into force the day it was published and applies for a period of six months.

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Peru to Reduce VAT Rate if Collection Targets are Met

Peru has published Legislative Decree No. 1347, which provides for a conditional reduction in the value added tax (IGV) rate depending on whether collection targets are met. Currently, a standard 16% IGV rate applies plus a 2% municipal sales tax, resulting in effective rate of 18%. If the annual collection of IGV, net of refunds, reaches 7.2% of GDP by 31 May 2017, the standard IGV rate will be reduced from 16% to 15% effective 1 July 2017.

Click the following link for Legislative Decree No. 1347 (Spanish language).

Russia

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Russia Clarifies Beneficial Ownership Requirements for Treaty Benefits

The Russian Ministry of Finance recently published Letter No. 03-08-05/78852 concerning the beneficial ownership requirements for tax treaty benefits. According to the letter, from 1 January 2017, for a foreign resident to obtain the benefits of a tax treaty (lower rates or exemption on income), the foreign resident must not only provide proof of its residence in the relevant foreign jurisdiction to the Russian payer (tax agent), it must also provide proof that it has the actual right to receive the income (beneficial ownership).

According to the letter, a person is considered the beneficial owner if:

  • That person has the right to use or dispose of the income by reason of its direct or indirect participation in a entity, control over the entity, or because of other circumstances; or
  • Another person is authorized to dispose of the income in the interests of the person concerned.

In determining beneficial ownership, the functions performed and risks assumed by the person should be taken into account. If a person is simply acting as an intermediary, it may not be considered a beneficial owner, as this would not be consistent with the object and purpose of the tax treaties to which Russia is a party.

The letter also notes the types of documentation that may be provided regarding the actual right to income, including:

  • Documentation confirming the income recipients discretion in the disposition and use of income received;
  • Documentation confirming that the income recipient is subject to tax on the income and does not register a tax savings at source when the income is subsequently transferred by third parties (resident/registered in non-tax treaty jurisdictions); and
  • Documentation confirming that the income recipient carries on actual business activity in the jurisdiction in which it resides or is registered.

Click the following link for the text of the letter (Russian language).

Slovenia

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Slovenia Regulates APA Procedures

Slovenia has published the regulations for the country's advance pricing agreement (APA) procedures, which are available in Slovenia from 1 January 2017.The regulation sets out the four main steps:

  • Preparation, which includes the filing of a written initiative with the tax authority providing:
    • Details of the taxpayer;
    • Details of the related parties entering into the transaction(s) to covered;
    • The type of APA (unilateral, bilateral, or multilateral);
    • A brief presentation of the organization structure of the taxpayer and its group;
    • A brief description of the transactions; and
    • The proposed methods for the determination of transfer prices;
  • Filing an application for the conclusion of the APA, which includes the submission of:
    • Similar information as above, but in more detail;
    • Additional relevant information if a bilateral or multilateral APA, such as applicable tax treaty provisions;
    • An annual report of related entities with which the transactions are covered by the APA, showing the material and financial operations and profit, including tax returns, for the three previous tax years; and
    • Transfer pricing documentation for the transactions covered, including methods used, critical assumptions made, financial and economic analysis, etc.;
  • The conclusion and signing of the APA, which may apply for up to five years, with the possibility of renewal; and
  • The monitoring of the implementation of the APA, which includes that the taxpayer must report on the validity of critical assumptions and if any critical assumptions change, adjustments must be made.

The costs for an APA are EUR 15,000 for the conclusion of an APA and EUR 7,500 for renewal.

Click the following link for the APA procedures regulations (Slovenian language), which entered into force 1 January 2017.

United Kingdom-Gibraltar-European Union

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EU Advocate General Considers that the UK and Gibraltar are a Single Member State for the Purposes of the Freedom to Provide Services

On 19 January 2017, the opinion of Advocate General Maciej Szpunar of the Court of Justice of the European Union (CJEU) was published concerning the treatment of Gibraltar and the UK as one entity for the purposes of the freedom to provide services under Article 56 of the Treaty on the Functioning of the European Union (TFEU).

The case concerns the UK tax regime for certain gambling duties, which requires gambling services providers to pay a gaming duty in respect of all remote games of chance placed with them by UK consumers, regardless of the tax paid in their own jurisdiction. After the introduction of the tax regime in 2014, the Gibraltar Betting and Gaming Association (GBGA) challenged the regime before the High Court of England and Wales on the basis that the tax is contrary to the freedom to provide services enshrined under Article 56 TFEU. In response, UK HMRC argued that the GBGA has no enforceable EU rights as the provision of services between Gibraltar and the UK is not caught by EU law. The High Court referred to the CJEU on whether, for the purposes of the freedom to provide services, Gibraltar and the UK should be treated as if they were part of a single Member State or whether Gibraltar has the constitutional status of a separate territory to the UK so that the provision of services between the two is to be treated as intra-EU trade.

In his opinion, Advocate General Szpunar takes the view that, for the purposes of the freedom to provide services, Gibraltar and the UK are to be treated as one entity. In particular, the Advocate General concluded that it is the UK and not Gibraltar that has assumed obligations towards the Member States in ratifying the treaties, and that the application of EU law to Gibraltar does not create new or supplementary rights between the UK and Gibraltar that are in addition to those flowing from UK and Gibraltar constitutional law. Therefore, Gibraltar and the UK cannot be other than a single Member State for the purposes of the freedom to provide services.

Click the following link for the full text of the opinion and a related press release.

United States

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U.S. IRS Publishes 2016 Tax Changes for Individual Taxpayers

The U.S. IRS has published a fact sheet covering 2016 tax changes for individual income taxpayers. Some of the main points include:

  • Taxpayers will have until Tuesday, April 18, 2017 to file their 2016 returns and pay any taxes due as a result of the weekend and a holiday in the District of Columbia;
  • Refunds on tax returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) will be held until at least 15 February;
  • Many taxpayers using Individual Taxpayer Identification Numbers (ITINs) will need to apply for new ITINs due to changes in law the resulted in the expiration of certain ITINs on 1 January;
  • The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR, Form 114) is now the same as for a federal income tax return (previously due by 30 June), although filers that miss the 18 April deadline will be granted an automatic extension until 16 October 2017 with no specific extension request required.

Click the following link for the fact sheet (FS-2017-01).

Proposed Changes (1)

Netherlands

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The Dutch Ministry of Finance to Introduce New Measures against Tax Evasion

The Dutch Ministry of Finance has announced initial proposals to tackle tax evasion. The proposals, which were introduced in a letter to parliament on 17 January 2017, include:

  • Abolishing the voluntary disclose scheme so that penalty relief will no longer be available for disclosures made within 2 years of the initial inaccurate/incomplete declaration;
  • Eliminating the use of bearer shares of non-listed companies by requiring the storage of share ownership information in electronic form, with title to the shares recorded through a regulated custodian (already required for listed companies);
  • Limiting the tax information privilege for notaries and lawyers; and
  • Shaming tax advisors by publishing information on those that have been penalized for providing improper advice.

The letter also notes efforts in international transparency, including the automatic exchange of financial account information under the OECD Common Reporting Standard, the implementation of beneficial ownership registries, the development of a common blacklist of non-cooperative jurisdictions, and the mandatory disclosure of artificial or hidden offshore structures with tax evasion purposes.

Click the following link for the Ministry of Finance announcement (Dutch language), which includes a link to the parliament letter.

Treaty Changes (3)

Japan-Bahamas

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Japan and Bahamas Agree in Principle on TIEA Protocol

Japan's Ministry of Foreign Affairs has announced that officials from the Bahamas and Japan have agreed in principle on a protocol to amend the 2011 tax information exchange agreement between the two countries. The protocol will introduce an article concerning automatic exchange of information that is necessary for the exchange of financial account information based on OECD international standards. The protocol must be signed and ratified before entering into force.

Kazakhstan-Slovenia

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Update - Tax Treaty between Kazakhstan and Slovenia

The income and capital tax treaty between Kazakhstan and Slovenia was signed on 10 March 2016. The treaty is the first of its kind between the two countries

Taxes Covered

The treaty covers Kazakhstan corporate income tax, individual income tax, and tax on property of legal entities and individuals. It covers Slovenian tax on income of legal persons, tax on income of individuals, and tax on property.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 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 or comparable interests in the capital of a company deriving more than 50% of their value directly or indirectly from immovable property situated 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.

Nigeria-Untd A Emirates

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

The income and capital tax treaty between Nigeria and the United Arab Emirates was signed on 18 January 2016. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Nigerian personal income tax, corporate income tax, petroleum profit tax, capital gains tax, tertiary education tax, and the information technology levy. It covers U.A.E. income tax and corporate tax.

Income from Hydrocarbons

Article 3 (Income from Hydrocarbons) provides that the treaty will not affect the right of either one of the Contracting States to apply their domestic laws and regulations related to the taxation of income and profits derived from hydrocarbons and its associated activities situated in the territory of the respective Contracting State.

Withholding Tax Rates

  • Dividends - 7.5%
  • Interest - 7.5%
  • Royalties - 7.5%
  • Technical service fees for any service of a managerial, professional, technical or consultancy nature - 7.5%

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 deriving more than 50% of their value from immovable property situated in the other State, unless the shares are 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.

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.

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