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Worldwide Tax News

Approved Changes (4)

France

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Public Access to French Trust Register Ruled Unconstitutional

On 21 October 2016, the French Constitutional Council (Conseil Constitutionnel) issued its decision concerning public access to the French Trust Register. The Trust Register was made accessible to the public from 30 June 2016, but access was suspended shortly after by a decision from the State Council (Conseil d'État) due to a challenge that public access to the register violated privacy rights guaranteed under the French Constitution. After review by the Constitutional Council, the Council has determined that the unrestricted public access to this information brings about a disproportionate restriction to the right to privacy of the persons involved in trusts, and this restriction cannot be justified by the transparency objectives pursued.

As a result of the decision, access to the French Trust Register in its current form will not be available to the public, but it is expected that transparency advocates will continue to push for some version of public access.

Ireland

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Ireland Updates FAQ on CbC Reporting Concerning Voluntary Filing, Notifications and Investments Funds

Irish Revenue has published an updated version of its FAQ on Country-by-Country (CbC) reporting. The main additional areas covered by the FAQ are as follows.

Voluntary filing

Where an MNE group's ultimate parent is resident in jurisdiction that has not implemented CbC reporting requirements from 1 January 2016, but such jurisdiction accepts voluntary filing (like the U.S. plans to), Ireland will not require a local constituent entity to file a CbC report if the following conditions are met:

  1. The ultimate parent entity of the MNE group makes available a CbC report to the tax authority of its jurisdiction of tax residence by the filing deadline, i.e. 12 months after the last day of the 2016 fiscal year of the MNE group;
  2. By the first filing deadline of the CbC Report, the jurisdiction of tax residence of the ultimate parent entity has laws in place to require CbC Reporting (even if the filing of a CbC Report for the 2016 fiscal year is not required under those laws);
  3. By the first filing deadline of the CbC Report for the fiscal year 2016, a qualifying competent authority agreement is in effect between the jurisdiction of tax residence of the ultimate parent entity and Ireland;
  4. The jurisdiction of tax residence of the ultimate parent entity has not notified Revenue of a systemic failure; and
  5. An Irish tax resident constituent entity of the MNE group has, by the last day of the fiscal year, notified Revenue of the name and jurisdiction of tax residence of the reporting entity.

Notifications

Notifications regarding CbC reporting must be submitted electronically to Revenue by the end of the fiscal year concerned (i.e. 31 December 2016 for calendar fiscal year beginning 1 January 2016) using the Revenue On-Line Service (ROS), including:

  • Where the ultimate parent entity of the MNE group is tax resident in Ireland, then the ultimate parent entity must notify Revenue that it is the reporting entity;
  • Where a surrogate parent entity has been appointed and that surrogate parent entity is tax resident in Ireland, then that surrogate parent entity must notify Revenue that it is the reporting entity; and
  • All domestic constituent entities must notify Revenue of the name and jurisdiction of tax residence of the reporting entity.

Detailed instructions on the notification process are provided in the appendix to the FAQ.

Investment Funds

If an investment entity does not consolidate investee companies based on accounting consolidation rules, then those investee companies should not form part of an MNE group and should not be considered constituent entities for CbC reporting purposes. However, if the accounting rules require that an investment entity consolidate with an investee company, then the investee company should be part of an MNE group and considered a constituent entity.

Click the following link to download the latest version of the CbC FAQ.

Lebanon

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Lebanon Allows for the Automatic Exchange of Tax Information

In a late night session held 20 October 2016, the Lebanese parliament adopted the laws and regulations allowing for the automatic exchange of tax information with other countries. Lebanon was reportedly given a November 2016 deadline by the OECD to adopt measures allowing for automatic exchange or risk being listed as a non-cooperative jurisdiction.

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OECD Releases MAP Peer Review Documents

On 20 October 2016, the OECD released the peer review documents approved by the members of the Inclusive Framework on BEPS that will form the basis of the Mutual Agreement Procedure (MAP) peer review and monitoring process under BEPS Action 14. The key documents cover:

  • Terms of Reference, which are used to assess a member's legal and administrative framework, including the practical implementation of this framework to determine how its MAP regime performs relative to 21 elements in the following four key areas:  (A) preventing disputes; (B) availability and access to MAP; (C) resolution of MAP cases; and (D) implementation of MAP agreements;
  • Assessment Methodology, which establishes the detailed procedures and guidelines for a two-stage approach to the peer review and monitoring process: Stage 1 involves the review of a member’s implementation of the minimum standard based on its legal framework for MAP and the application of this framework in practice; Stage 2 involves the review of the measures taken by the member to address any shortcomings identified in its Stage 1 peer review;
  • MAP Statistics Reporting Framework, which reflects a collaborative approach for the resolution of MAP cases through the adoption of common timeline for both competent authorities to resolve MAP cases; and
  • Guidance on Specific Information and Documentation Required to be Submitted with a Request for MAP Assistance, which can be used by members in drawing up their own MAP guidance and could also provide guidance to taxpayers in their preparation of a MAP submission.

The peer review process will be conducted in batches, with the first batch to commence in December 2016.

Click the following links for the peer review documents.

Proposed Changes (1)

Poland

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Poland Plan Tax Exemption for REITs

The Polish Ministry of Finance has released draft legislation that would introduce a corporate tax exemption for qualifying Real Estate Investment Trusts (REITs). In order to qualify, a REIT would need to meet the following conditions:

  • Share capital must exceed PLN 60 million;
  • Real estate assets must constitute at least 70% of total assets, with a minimum of three nonresidential properties;
  • At least 70% of total income must be derived from the sale or lease of real estate; and
  • More than 90% of annual profits must be distributed as dividends each year.

When the conditions are met, the exemption would cover income from the sale and lease of real estate and the transfer of shares in other REITs that are at least 95% held by qualifying REITs.

Treaty Changes (5)

Brazil-Guernsey-Jersey-Isle Of Man-Latvia-OECD

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Multilateral Agreement for the Exchange of CbC Reports Signed by Brazil, Guernsey, Jersey, the Isle of Man and Latvia

On 21 October 2016, officials from Brazil, Guernsey, Jersey, the Isle of Man and Latvia signed the Multilateral Competent Authority Agreement (MCAA) for the exchange of Country-by-Country (CbC) reports. The signing brings the total number of signatories to 49.

As part of the conditions for signing the CbC MCAA, signatories must be a party to the OECD Council of Europe Convention on Mutual Administrative Assistance in Tax Matters and have (or commit to introduce) CbC reporting requirements. Although none of the jurisdictions has finalized their CbC reporting requirements, plans for implementation are in progress and expected to be finalized in the near future.

Click the following link for the list of the CbC MCAA signatories to date.

Estonia-Vietnam

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Update - Tax Treaty between Estonia and Vietnam

On 19 October 2016, the Estonian parliament approved the ratification of the pending income tax treaty with Vietnam. The treaty, signed 26 September 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Estonian income tax, and Vietnamese personal income tax and business income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel if the activities continue for the same or connected project within a Contracting State for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 70% of the paying company's voting power; otherwise 10%
  • Interest - 10%
  • Royalties - 10%
  • Fees for Technical Services (managerial, technical or consultancy) - 7.5%

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, participations or comparable interests deriving more than 30% 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

Vietnam applies the credit method for the elimination of double taxation, while Estonia generally applies the exemption method. However, Estonia will apply the credit method in respect of income covered by Articles 10 (Dividends), 11 (Interest) and 12 (Royalties and Fees for Technical Services). For dividends, application of the credit method is limited to dividends that would be subject to the 10% withholding tax rate.

A provision is also included for a tax sparing credit, whereby Estonia will deem tax paid in Vietnam to include any amount which would have been payable as Vietnamese tax for any year but was exempted or reduced under specified provisions of Vietnamese law. The tax sparring credit will be available for a period of 10 years beginning the date the treaty becomes effective.

MFN Clause

The final protocol to the treaty includes the provision that in respect of Articles 10 (Dividends) and 11 (Interest), if after the Estonia-Vietnam treaty enters into force, Vietnam signs an agreement with a third state that is a member of the EU or the OECD and such agreement provides for a lower rate of withholding tax and lower participating percentages than provided in the Estonia-Vietnam treaty, then such lower rates and percentages will automatically replace those provided in the Estonia-Vietnam treaty from the date such other agreement enters into force.

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.

Finland-Korea, Rep of

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Finland Ratifies SSA with South Korea

On 14 October 2016, Finland ratified the pending social security agreement with South Korea. The agreement, signed 9 September 2015, is the first of its kind between the two countries, and will enter into force on the first day of the third month following the month in which the ratification instruments are exchanged.

Jordan-Saudi Arabia

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Tax Treaty between Jordan and Saudi Arabia Signed

On 19 October 2016, officials from Jordan and Saudi Arabia 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 of the treaty will be published once available.

Morocco-Rwanda

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Tax Treaty between Morocco and Rwanda Signed

Officials from Morocco and Rwanda signed an income tax treaty on 19 October 2016. 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 of the treaty will be published once available.

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