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Worldwide Tax News

Approved Changes (3)

El Salvador

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El Salvador Reduces Withholding Tax on Income from Securities Traded on the Salvadorian Stock Exchange

According to recent reports, on 12 November 2015, El Salvador's National Assembly adopted an amendment that reduces the withholding tax rate for income derived by non-residents from securities traded on the Salvadorian Stock Exchange. Under the amendment, the withholding tax rate for any income derived from such securities is reduced from 20% to 3%. Although uncertain at this point, it is likely that the reduced rate will not apply for non-residents domiciled in a tax haven, which are generally subject to an increased withholding rate of 25%.

Mexico

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Mexico Adopts 2016 Tax Reform Including CbC Reporting and other Transfer Pricing Related Changes

On 18 November 2015, Mexico published the recently adopted 2016 tax reform package in the Official Gazette. One of the main measures of the package is the implementation of new transfer pricing documentation requirements in line with the OECD guidelines developed as part of Action 13 of the BEPS Project, including:

  • A local file - providing information on the local taxpayer, its business activities, related party transactions, etc.;
  • A master file - providing information on the taxpayer's group, including organizational structure, profit drivers, intangible assets, supply chain, intercompany financing, etc.; and
  • A country-by-country (CbC) report - providing aggregated information for each jurisdiction in which the taxpayer's group operates, including revenues from related and unrelated parties, profit (loss) before tax, tax paid and accrued, number of employees, capital, tangible assets, etc.

The local file and master file requirement applies for companies with annual revenue in the preceding year exceeding approximately MXN 645 million (threshold adjusted yearly). The CbC report requirement applies for companies qualifying as Mexican multinational holding companies with consolidated annual group revenue exceeding MXN 12 billion, or a Mexican company designated to file the report by a foreign parent company of a group with annual revenue exceeding that threshold.

Click the following link for previous coverage of additional measures in the 2016 tax reform package, including several tax incentive changes.

The measures of the reform package generally apply from 1 January 2016. The initial filing deadline for the CbC report will be 31 December 2017 for the tax year beginning 1 January 2016.

United Kingdom

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UK Summer Finance Bill 2015 Receives Royal Assent

On 18 November 2015, the UK Summer Finance Bill 2015 received Royal Assent, becoming the Finance (No. 2) Act 2015. The legislation includes measures introduced in the Summer Budget 2015. Some of the main measures include:

  • Reducing the corporation tax rate from 20% to 19% in 2017 and to 18% in 2020;
  • Increasing the Annual Investment Allowance to GBP 200,000 for expenditure incurred on or after 1 January 2016;
  • No longer allowing a deduction for the acquisition cost of goodwill certain other intangibles from 8 July 2015;
  • Restricting the offset of carried-forward losses against tax on controlled foreign companies (CFC) from 8 July 2015; and
  • Reducing the bank levy rate from 0.21% to 0.10% over the period 2016 to 2020, and introducing a new 8% surcharge on banking profits for periods after 1 January 2016.

Click the following link for  (previous coverage of the measures) and the text of the legislation as enacted.

Proposed Changes (2)

France

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France Amending Finance Bill for 2015 Includes Several Dividends Exemption Changes

On 13 November 2015, the French government submitted the Amending Finance Bill for 2015 to parliament. The bill includes a number of measures regarding dividend tax exemptions, including:

  • The anti-abuse rule for dividends that was added to the EU Parent-Subsidiary Directive earlier in 2015 is transposed into domestic law (previous coverage) - Under the new rule, France will not provide the participation exemption for dividends if connected with an arrangement or a series of arrangements where the arrangement(s) are put in place with the main or one of the main purposes of receiving a tax benefit and not for valid commercial reasons that reflect economic reality;
  • The withholding tax exemption for dividends and branch profits paid to EU parent companies will be extended to EEA parent companies; and
  • Concerning the non-application of the participation exemption regime for dividends paid from a non-cooperative state or territory, a safe harbor clause will be added whereby the exemption may apply if it can be proven that a transaction is genuine and does not involve the abusive shifting of profits.

Subject to approval, the changes will generally apply from 1 January 2016.

Slovenia

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Slovenia Proposes Making Permanent the 50% Individual Income Tax Rate

On 10 November 2015, Slovenia's Ministry of Finance published proposed amendments to the Individual Income Tax Law. One of the main proposed amendments is making permanent the 50% individual income tax rate for taxable income exceeding EUR 70,907.20. If not adopted, the 50% top rate would no longer apply from 1 January 2016.

Treaty Changes (4)

Belarus-India

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Belarus Ratifies Protocol to the Tax Treaty with India

On 10 November 2015, Belarus ratified the pending protocol to the 1997 income and capital tax treaty with India. The protocol, signed 3 June 2015, is the first to amend the treaty. It replaces Article 27 (Exchange of Information) to bring it in line with the OECD standard for information exchange.

The protocol will enter into force once the ratification instruments are exchanged, and will apply from the date of its entry into force.

Curacao-Malta

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Tax Treaty between Curaçao and Malta Signed

On 18 November 2015, officials from Curaçao and Malta signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Hong Kong-Romania

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Tax Treaty between Hong Kong and Romania Signed

On 18 November 2015, officials from Hong Kong and Romania signed an income tax treaty. The treaty is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Hong Kong profits tax, salaries tax and property tax. It covers Romanian tax on income and tax on profit.

Withholding Tax Rates

  • Dividends - 3% if the beneficial owner is a company directly holding at least 15% of the paying company's capital; otherwise 5%
  • Interest - 0%, as long as Hong Kong does not levy a withholding tax on interest - if Hong Kong does introduce a withholding tax on interest, the rate under the treaty will be 3%
  • Royalties - 3%

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

Capital Gains

The following capital gains derived by a resident of one Contracting Party may be taxed by the other Party:

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other Party; and
  • Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other Party

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

Double Taxation Relief

Both Parties 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.

Mexico-Philippines

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Tax Treaty between Mexico and the Philippines Signed

On 17 November 2015, officials from Mexico and the Philippines signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

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