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Approved Changes (3)

China

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China Further Increases Small Business Tax Relief Threshold and Extends VAT Exemption

During a meeting of China's State Council on 18 August 2015, the decision was made to increase the taxable income threshold for small business tax relief from RMB 200,000 to RMB 300,000 with effect from 1 October 2015. This is the second increase to the threshold this year as the Council increased the threshold from RMB 100,000 to RMB 200,000 in February 2015, with effect from 1 January 2015.

Businesses with taxable income not exceeding the threshold are eligible to be taxed on 50% of their taxable income. The 50% relief can also be used in conjunction with China's reduced tax rate of 20% for business with taxable income not exceeding RMB 300,000, subject to certain other conditions including number of employees and asset value.

In addition to the 50% tax relief threshold increase, the State Council also extended the small business value added tax exemption for businesses with monthly revenue not exceeding RMB 20,000 to the end of 2017.

China's State Administration of Taxation will issue implementation notices for the changes in the near future.

Portugal

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Portugal Cuts Intermediate and Reduced VAT Rates for Azores Islands

Portugal has cut the intermediate and reduced value added tax rates applicable in the Azores Islands region from 10% and 5% to 9% and 4% respectively. The standard rate applicable in the region remains 18%.

The change applies from 1 July 2015.

Russia

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Russia Clarifies Eligibility for Zero Rate VAT on Exports

The Russian Ministry of Finance recently issued Guidance Letter 03-03-06/1/42961, which clarifies eligibility requirements for a taxpayer to zero rate exports for value added tax purposes. According to the letter, transactions involving the export of goods may only be zero rated if the taxpayer submits required documentation to the tax authorities. Such documentation must be submitted within 180 days from the date the goods are exported abroad, and includes:

  • The purchase and sale contract;
  • Copies of the transportation documents;
  • Documents of title;
  • Customs declarations certified by the customs authority; and
  • Any other relevant documents confirming the export of the goods.

If the taxpayer fails to submit the required documentation within the 180-day period, the export transaction will be subject to VAT at the applicable rate for the goods, 18% or 10%. The basis for the VAT is the applicable market price for the goods.

Proposed Changes (2)

Australia

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Australian Treasurers Agree to Expand the Scope of GST to Cover All Online Sales from Foreign Suppliers

During a meeting of Australian state and territory treasurers on 21 August 2015, it was agreed that from 1 July 2017, the scope of goods and services tax (GST) would be expanded to include all online sales to Australian residents by foreign suppliers, and that the AUD 1,000 low-value exemption threshold will no longer apply. In addition, all foreign suppliers with annual sales to Australia exceeding AUD 75,000 will be required to register for GST and collect and remit the amount due on online sales of both digital services and physical goods. Australia's standard VAT rate is 10%.

The change was included as part of Australia's 2015 Budget, and requires approval from the treasurers of all states and territories prior to implementation. Although the planned implementation date is currently 1 July 2017, Australian Treasurer Joe Hockey has reportedly stated that, if possible, the change may be implemented earlier.

Legislation for the change will be issued later in the year.

Belarus

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Belarus Planning New Transfer Pricing Documentation Requirements and Extension of Free Zone Tax Exemptions

The Belarusian Ministry of Finance has recently submitted draft amendments legislation to the Council of Ministers. The main amendments concern transfer pricing documentation requirements and an extension of the free economic zones profits tax exemption.

Transfer Pricing Documentation

The proposed transfer pricing documentation requirements include the obligation for taxpayers to submit an annual transfer pricing report along with their tax return for any transactions with non-resident and related parties exceeding BYR 1 billion (~USD 60,000) in a year. In addition, certain transfer pricing documentation must be submitted within 15 days of a request by the tax authorities, including:

  • Details of the counter party to a covered transaction, including its country of incorporation and primary business activities;
  • Details of the transaction, including a description of the relevant goods or services, the delivery and payment terms, etc.;
  • Details of the transfer pricing method and comparables used to determine the price; and
  • Any other relevant information.

Free Economic Zones Tax Exemption

It is proposed that the profits tax exemption for eligible companies registered in a free economic zone (FEZ) be extended from 5 years to 10 years. This would apply for companies that become resident in FEZs on or after 1 January 2012. In general, companies must invest at least EUR 1 million to register in an FEZ.

Treaty Changes (3)

Bangladesh-South Africa

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Tax Treaty between Bangladesh and South Africa to be Negotiated

During a meeting held 19 August 2015, officials from Bangladesh and South Africa agreed to begin negotiations for an income tax treaty. Any resulting treaty will be the first of its kind between the two counties, and must be finalized, signed and ratified before entering into force.

India-Seychelles

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TIEA between India and Seychelles to be Signed

According to an announcement issued by the Press Information Bureau of the Indian government, the Indian (Union) Cabinet has approved for signature the draft tax information exchange agreement with Seychelles. The agreement will be the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Morocco-Guinea-bissau

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Morocco Approves Tax Treaty with Guinea-Bissau

On 19 August 2015, the Moroccan government approved for ratification the pending income tax treaty with Guinea-Bissau. The treaty, signed 28 May 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Moroccan income tax and corporation tax, and the following Guinea-Bissau taxes:

  • Tax on professional income;
  • Tax on industrial income;
  • Tax on income from movable capital;
  • Tax on urban real property; and
  • Tax on rural real 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 10%
  • 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 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 in the capital of a company the assets of which consist principally, directly or indirectly, of 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.

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