Worldwide Tax News
India's Central Board of Excise and Customs has announced that the service tax exemption for cross border B2C online services is withdrawn effective 1 December 2016. From that date, foreign providers making supplies to Indian residents will need to register with the service tax department, and collect and pay service tax at the effective 15% rate. Online services subject to service tax include online information and database access or retrieval services, known as OIDAR services. Such services include:
- Advertising on the internet;
- Providing cloud services;
- Provision of e-books, movie, music, software and other intangibles via telecommunication networks or internet;
- Providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;
- Online supplies of digital content (movies, television shows, music, etc.);
- Digital data storage; and
- Online gaming.
Services that are not considered OIDAR services include:
- Supplies of goods, where the order and processing is done electronically;
- Supplies of physical books, newsletters, newspapers or journals;
- Services of lawyers and financial consultants who advise clients through email;
- Booking services or tickets to entertainment events, hotel accommodation, or car hire;
- Educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link);
- Offline physical repair services of computer equipment; and
- Advertising services in newspapers, on posters and on television.
Click the following link for Circular 202/12/2016, which provides an overview of the changes and new requirements, including links for service tax registration and payment.
On 18 November 2016, Japan's National Diet (legislature) passed legislation that delays the increase in the consumption tax and local tax changes (previous coverage).
The consumption tax was scheduled to be increased from 8% to 10% effective 1 April 2017, but will now be increased from 1 October 2019. The delay also applies for the introduction of a reduced consumption tax rate, the introduction of an invoicing system, and other related changes.
Planned local tax changes are also delayed from 1 April 2017 to 1 October 2019. These include:
- Abolishing the special local corporation tax on the enterprise tax, while increasing the base enterprise tax rate; and
- Reducing the prefectural and municipal rates that form part of the inhabitant's tax to 1.0% and 6.0% respectively, while increasing the local corporate tax rate component to 10.3%.
Although the local tax changes are delayed, they essentially just shift the tax amounts, and there is no impact on the resulting effective corporate tax rate.
On 21 November 2016, a Decree from the Dutch State Secretary of Finance was published in the Netherlands Official Gazette concerning an extension of the first Country-by-Country (CbC) reporting notification deadline.
Under Dutch CbC reporting rules, resident entities are required to notify the tax authority by the end of the reporting fiscal year as to whether they are the ultimate parent or surrogate parent for the group, and if neither, the identity and jurisdiction of the reporting entity. This means the first CbC reporting notification would be due by 31 December 2016 for calendar fiscal years. However, the Dutch authorities have decided to extend the deadline to 1 September 2017 for fiscal years ending between 31 December 2016 and 31 August 2017. For fiscal years ending 1 September 2017 and later, the standard deadline applies.
The main reason for the extension is the requirement under the Multilateral Competent Authority Agreement for the exchange of CbC reports that signatories to the agreement provide notification to the OECD of the other signatories to the agreement with whom they are going to exchange. The Dutch authorities expect that the timeline for this exchange notification will run through 1 July 2017, and since MNE groups may not be able to determine their reporting entity until after that date, the deadline to provide the reporting notification is extended.
In addition to the extension, the notice also states that a mandatory automated notification tool will be introduced for CbC reporting notification purposes and that the Netherlands intends to accept CbC reports filed voluntary. Further proposals for each will be developed.
Click the following link for the Decree (Dutch language).
On 18 November 2016, the French Government submitted the draft Amending Finance Bill for 2016 to the National Assembly. Two of the main amendments in the bill are in relation to the exemption from the tax on profit distributions for French tax-consolidated groups and the 5% voting rights requirement for the dividends participation exemption — both of which have been ruled unconstitutional.
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 would 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 jurisdiction, the exemption will not be available unless the company can demonstrate that its establishment in such jurisdiction was not motivated by tax reasons.
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 would remove the 5% voting rights condition, while the 5% capital ownership condition would continue to apply. The participation exemption for capital gains on the sale of participations, however, would still require at least 5% voting rights ownership.
New Zealand Updates Tax Policy Work Programme 2016-17 to Include Timetable for Consultations on BEPS and Other Issues
On 17 November 2015, the New Zealand government updated its tax policy work programme for 2016-17 that provides more detail on government plans, including a timetable of planned consultations and events for 2016–17. This includes consultations that will run February to April 2017 on implementation of BEPS project actions for:
- Interest limitation rules (Action 4);
- Hybrid instruments (Action 2);
- Transfer pricing (Actions 8-10, and 13); and
- Permanent establishment definition (Action 7).
Consultations will also be held in relation to business transformation and enhancements to tax policy within broad-base, low-rate tax settings.
Click the following links for the tax policy work programme and an address on the updates from the Minister of Revenue.
According to recent reports, the Spanish government is getting closer to reaching a compromise with political opponents for a 2017 budget, as it struggles to meet EU mandated deficit targets. While far from being finalized, budget measures are expected to include increases in tobacco, alcohol, and fuel taxes, as well as the elimination and/or reduction of certain tax exemptions and deductions for corporate taxes, personal income taxes, and value added tax.
On 19 November 2016, officials from Ethiopia and Morocco 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.
On 15 November 2016, the Italian Senate approved the pending tax information exchange agreement with Monaco. The agreement, signed 2 March 2015, is the first of its kind between the two countries. It will enter into force after the ratification instruments are exchanged and will apply for requests concerning tax periods beginning on or after 2 March 2015.
On 16 November 2016, the Romanian government approved the signature of protocols to the 1997 tax treaty with Belarus and the 2008 tax treaty with Turkmenistan. The protocols will be the first to amend the treaty and must be signed and ratified before entering into force. Details of each protocol will be published once available.