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Approved Changes (4)

European Union-Bermuda-Cayman Islands-Guernsey-Hong Kong-Liechtenstein-OECD

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Several Jurisdictions and the OECD Voice Concerns with the EU Commission's list of Non-Cooperative Jurisdictions

A number of jurisdictions have voiced their displeasure with being included in the EU Commission's list of non-cooperative jurisdictions, which was issued as part of the Action Plan to reform corporate taxation in the EU (previous coverage). The list includes 30 jurisdictions that appear on the tax haven blacklists of 10 or more EU Member States.

Negative responses (some quite strongly worded) have been given by Bermuda, the Cayman Islands, Guernsey, Hong Kong and Liechtenstein. OECD’s Secretary General Angel Gurría has also voiced his concern in a letter sent to EU Commissioner Pierre Moscovici dated 19 June 2015, stating that:

"Many of the 30 jurisdictions identified on your consolidated compilation of national lists are Global Forum members, rated as largely compliant and also committed to automatic exchange of information, including as early adopters for some of them. There is nothing more that they could do in order to be considered as cooperative. They have expressed to us their concerns with the perception that they have been listed by the EU. I am sure you will agree that they can be reassured that this is not the case."

As presented by the Commission, the primary purpose of the list is to offer EU Member States a transparent tool to compare their national lists and adjust their respective approaches as necessary, and to develop a common EU approach to screen non-cooperative tax jurisdictions and implement strategies to deal with them.

The jurisdictions listed include:

Andorra, Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Brunei, Cayman Islands, Cook Islands, Grenada, Guernsey, Hong Kong, Liberia, Liechtenstein, Maldives, Marshall Islands, Mauritius, Monaco, Montserrat, Nauru, Niue, Panama, Saint-Vincent and the Grenadines, Saint Christopher and Nevis, Seychelles, Turks and Caicos Islands, US Virgin Islands, and Vanuatu.


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India's Finance Ministry Approves Formation of Committees for Implementation of GST

On 17 June 2015, the Indian Ministry of Finance published a notice that the Finance Minister has approved the formation of two committees that will facilitate the implementation of a national goods and services tax (GST) from 1 April 2016. The following is the main content of the announcement as issued.


A Steering Committee (has) been formed under the Co-Chairmanship of Additional Secretary, Department of Revenue and Member Secretary, Empowered Committee of State Finance Ministers. This Committee has Members from Department of Revenue, Central Board of Excise & Customs, Goods and Services Tax Network (GSTN) and representatives of State Governments. This Committee shall monitor the progress of IT preparedness of GSTN/CBEC/Tax authorities, finalisation of reports of all the Sub-Committees constituted on different aspects relating to the mechanics of GST and drafting of CGST, IGST and SGST laws/rules. The Committee shall also monitor the progress on consultations with various stakeholders like trade and industry and training of officers.

Another Committee has been formed under the Chairmanship of the Chief Economic Advisor, Ministry of Finance to recommend possible tax rates under GST that would be consistent with the present level of revenue collection of Centre and States. While making recommendations, this Committee would take into account expected levels of growth of economy, different levels of compliance and broadening of tax base under GST. The Committee would also analyse the Sector-wise and State-wise impact of GST on the economy. The Committee is expected to give its report within two months.

Meanwhile, progress is underway to finalise various aspects of GST design like business processes, payment systems, matters relating to dual control, threshold, exemptions, place of supply rules and also making of model GST, SGST and IGST laws and rules. This task is being undertaken through various Sub-Committees formed by the Empowered Committee which has officers from Government of India as well as State Governments as Members.

Goods and Services Tax Network (GSTN) is taking steps for preparing the IT infrastructure for roll out of GST. The IT infrastructure shall enable online registration, filing of returns and getting refunds. Various State Governments are also preparing the necessary back end IT infrastructure for implementation of GST which shall relate to aspects like assessments and audit.

Periodic reviews are being held in the Department of Revenue to monitor the progress of all the above activities.


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Netherlands Supreme Court Rules Business Motive Test Applies to all Transactions Involved in the Re-Routing of Offshore Funds

The Netherlands Supreme Court recently issued its ruling on whether the business motive test applies for all transactions in an offshore re-routing of funds as it applies for the deduction of related party interest expense.

The case concerned two Dutch resident subsidiaries that acquired funds from a related Mauritian financing company for the purpose of making several participation acquisitions. The funds lent from the Mauritian company had originated from the issuance of shares by the parent company of the group, the proceeds of which had been lent to a South African resident holding company, were then contributed to a Mauritian holding company, and subsequently lent to the Mauritian financing company. After the funds were lent to the two Dutch resident subsidiaries for the acquisitions, the subsidiaries claimed a deduction for interest paid on the grounds that the acquisitions and loans were based on commercial reasons. However, the deduction was challenged and the issue made its way to the Supreme Court.

Under Dutch tax law, interest on related party lending for the acquisition of shares is only deductible if based on valid commercial reasons (business motive test). Although the reasons may have been valid at the level of the two subsidiaries, the Court held that the reasons of all parties involved in the transaction must meet the business purpose test. Because not all of the individual transactions of the re-routing of the funds offshore were proven to be based on valid commercial reasons, the interest deduction was denied.


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Sweden Increases Social Security Contribution Rates for Young Workers

According to an announcement published by the Swedish Tax Agency on 17 June 2015, the Swedish parliament has approved changes to the country's social security contribution rates for young workers. From 1 May 2015, the employer contribution rate for employees born in 1989 is increased to the standard rate of 31.42%. From 1 August 2015, the reduced rate that applies for young workers born in 1990 or later is increased from 15.49% to 25.46%.

Treaty Changes (4)


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Exchange of Notes to the Tax Treaty between Austria and Luxembourg Signed

On 18 June 2015, officials from Austria and Luxembourg signed an exchange of notes that will amend the 1962 income tax treaty between the two countries.  The purpose of the exchange of notes is to bring the treaty in line with the OECD standard for transparency and information exchange.


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Protocol to the Tax Treaty between China and Pakistan under Negotiation

Officials from China and Pakistan began negotiations for a protocol to the 1989 income tax treaty between the two countries during meetings held 1 to 4 June 2015. The protocol will be the third to amend the treaty, and must be finalized, signed and ratified before entering into force.

Additional details will be published once available.

Gabon-Saudi Arabia

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Tax Treaty between Gabon and Saudi Arabia under Negotiation

Officials from Gabon and Saudi Arabia began negotiations for an income tax treaty during meetings held 9 to 10 June 2015. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Additional details will be published once available.


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Tax Treaty between Norway and Serbia Signed

On 17 June 2015, officials from Norway and Serbia signed a new income tax treaty. Once in force and effective, the new treaty will replace the 1983 tax treaty between Norway and the former Yugoslavia, which currently applies in respect of Serbia.

Additional details will be published once available.


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