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Worldwide Tax News

Approved Changes (3)

Australia

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Australian Treasurer Announces New Tax Compliance Requirements for Investments in Australia

On 22 February 2016, Australian Treasurer Scott Morrison announced new tax compliance requirements for multinational companies investing in Australia. According to Morrison, all foreign enterprises operating in Australia are expected to meet all obligations imposed under the tax laws and to cooperate with the Australian Taxation Office in a timely and complete manner. Failure to do so may result in prosecution, fines and potentially divestment of Australian assets.

Whether foreign investors are meeting their compliance obligations will become part of the Foreign Investment Review Board's (FIRB) national interest assessment process. Investment applicants will be required to meet a number of specific conditions, and provide an annual report to the FIRB on their compliance.

Click the following link for the release from Treasurer Scott Morrison and the list of compliance conditions.

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Peru Publishes Deadlines for 2015 Tax Returns

Peru has published Resolution No. 358-2015, which sets out the deadlines for filing corporate tax returns for the 2015 tax year. The deadline depends on the last digit of a taxpayer's tax identification number (RUC) as follows:

  • ending in 0: 23 March 2016
  • ending in 1: 28 March 2016
  • ending in 2: 29 March 2016
  • ending in 3: 30 March 2016
  • ending in 4: 1 April 2016
  • ending in 5: 1 April 2016
  • ending in 6: 4 April 2016
  • ending in 7: 5 April 2016
  • ending in 8: 6 April 2016
  • ending in 9: 7 April 2016

For taxpayers with good taxpayer status (Buenos Contribuyentes), the deadline is 8 April 2016.

The exact deadlines vary from year to year, but are generally always during the last week of March and the first week of April.

United States

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U.S. IRS Publishes "Dirty Dozen" List of Tax Scams for 2016

The U.S. Internal Revenue Service recently published its final list of the "Dirty Dozen" Tax Scams for 2016. The list is compiled annually, and includes a variety of common scams taxpayers may encounter at any point during the year, but typically during tax return filing season. Perpetrators of the "Dirty Dozen" and other illegal scams may be subject to significant penalties and interest, as well as possible criminal prosecution.

For 2016, the "Dirty Dozen" are as follows:

Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely careful and do everything they can to avoid being victimized. (IR-2016-12)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2016-14)

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never send taxpayers an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS. Be wary of strange emails and websites that may be nothing more than scams to steal personal information. (IR-2016-15)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. Legitimate tax professionals are a vital part of the U.S. tax system. (IR-2016-16)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to enable people catch up on their filing and tax obligations. (IR-2016-17)

Inflated Refund Claims: Taxpayers need to be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records, or charges fees based on a percentage of the refund. Scam artists use flyers, advertisements, phony store fronts and word of mouth via community groups where trust is high to find victims. (IR-2016-18)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2016-20)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe or possibly receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming such credits as the Earned Income Tax Credit or Child Tax Credit. (IR-2016-21)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is generally limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2016-22)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by scam artists. Taxpayers are best served by filing the most-accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing big bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2016-23)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2016-25)

Frivolous Tax Arguments: Don’t use frivolous tax arguments in an effort to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims Even though they are wrong and have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2016-27)

Proposed Changes (2)

Guatemala

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Guatemala Considering an Increase in the Dividends Withholding Tax Rate

The Guatemalan congress is reportedly considering proposed legislation that would increase the withholding tax rate on dividends and profit distributions. Under the proposal, the standard domestic rate would be increased from 5% to 6%.

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OECD to Propose New Global Forum for the Implementation of the Outcomes of the BEPS Project at Upcoming G20 Meeting

On 23 February 2016, the OECD announced that it will present a proposal for a new global forum for the implementation of the outcomes of the OECD/G20 BEPS Project at the upcoming G20 Finance Ministers meeting in Shanghai on 26-27 February 2016.

According to the announcement, the forum will be open to all countries and jurisdictions. The forum's work will include setting any remain standards of the BEPS Project, and reviewing and monitoring the implementation of the BEPS package. Focus will be given to the implementation of the minimum standards in the areas of harmful tax practices, tax treaty abuse, Country-by-Country reporting requirements and improvements in cross-border tax dispute resolution.

If endorsed by the G20 Finance Ministers at the Shanghai meeting, the first forum meeting is to take place in Kyoto, Japan in June 2016.

Click the following link for the press release and the associated flyer to promote participation in the forum.

Treaty Changes (3)

European Union-Monaco

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Automatic Financial Account Information Exchange Agreement between the EU and Monaco Initialed

On 22 February 2016, officials from the European Union and Monaco initialed an agreement for the automatic exchange of financial account tax information. Under the agreement, information on the financial accounts of residents of EU Member States and Monaco will be automatically exchanged from 2018. The agreement is similar to agreements the EU has signed with Andorra, Liechtenstein, San Marino and Switzerland, and is expected to be formally signed before the summer.

Finland-Portugal

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Finland Initiates Process for Termination of Tax Treaty with Portugal

The Finnish Ministry of Finance (MOF) has announced that it has initiated the legislative process for the proposed termination of the 1970 income and capital tax treaty with Portugal. Finland has been attempting to negotiate a new tax treaty since October 2013, and is preparing for the termination of the current treaty unless negotiations progress.

As part of the process, a consultation has been launched that will run through 17 March 2016. According to the consultation webpage (Finnish language), the main issue with the 1970 treaty involves the taxation rights of pensions.

Serbia-Korea, Rep of

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Update - Tax Treaty between Serbia and South Korea

The income tax treaty between Serbia and South Korea was signed on 22 January 2016. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Serbian personal income tax and corporate income tax. It covers Korean income tax, corporation tax, special tax for rural development, and local income tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 10%
  • Royalties - 5% for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for radio or television broadcasting; otherwise 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 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.

Limitation on Benefits

Article 28 (Limitation on Benefits) includes that the beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), 13 (Capital Gains) and 22 (Other Income) 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 income is paid was to take advantage of those Articles by means of that creation or assignment.

MFN Clause

The protocol to the treaty, signed the same date, includes the provision that if Serbia signs a tax treaty with a third State that is a member of the OECD and such treaty provides for a lower rate of tax on interest or royalties, then negotiations will begin to revise the rates provided for under the Serbia-South Korea tax treaty.

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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