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Approved Changes (4)

Brazil

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Brazil Sets Rules for State Value Added Tax (ICMS) on Digital Goods

On 5 October 2017, Brazil published ICMS Agreement 106 of 29 September 2017 in the Official Gazette, which sets out the rules for state value added tax (ICMS) on digital goods, such as apps, e-books, software, games, etc. The agreement provides that ICMS will be due on digital goods supplied to Brazilian final consumers (B2C). For domestic suppliers, the website or electronic platform that sells or makes available the digital goods is generally responsible for withholding the ICMS due. For non-resident suppliers, the credit or debit card operator or foreign exchange intermediary is responsible for withholding the ICMS due.

ICMS Agreement 106 entered into force on the date it was published and will apply from 1 April 2018.

Italy

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Italy Publishes Law Decree Including VAT Amendments

Italy has published Law Decree No. 148 of 16 October 2017 in the Official Gazette. The Law Decree contains certain urgent tax and financial measures in relation to the 2018 Budget. The Law Decree entered into force on 16 October, but must be confirmed by parliament within 60 days to remain in force and converted into law.

The main tax measures are in relation to value added tax (VAT) and include:

  • An extension of the VAT split-payment system to apply for additional public bodies, including national, regional, and local public economic entities and foundations 70% held by public administrations, as well as other subsidiary companies 70% held by the prior listed entities and for companies listed on the companies listed on the FTSE MIB index of the Italian Stock Exchange if registered for VAT in Italy; and
  • A revision of the reduced VAT rate adjustment schedule (safeguard clause) if budget targets are not met, including an increase from 10% to 11.14% in 2018; increased to 12% in 2019; and increased to 13% in 2020 (standard rate schedule unchanged).

The split-payment changes will apply from 1 January 2018. With respect to the VAT rate changes, the Italian government intends to make necessary budget changes so that the change is not triggered.

Poland

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Poland Publishes New Fillable CbC Notification Form

On 23 October 2017, Poland's Ministry of Finance announced the publication of a fillable PDF version of the CbC reporting notification (Form CbC-P). The PDF notification forms for both 2016 and 2017 are available on the Tax Portal e-declaration forms page. The announcement also notes the publication of an updated version of the notification template on the ePUAP platform, which includes certain corrections to the initial version (previous coverage).

South Africa

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South Africa Formally Publishes Notice on CbC Report, Master File, and Local File Returns

On 20 October 2017, South Africa formally published in the Government Gazette the public notice (Notice 1117) on the submission of Country-by-Country (CbC) report, Master file, and Local file information returns. The public notice sets out the persons required to submit returns and the form of returns (previous coverage).

Proposed Changes (3)

Oman-OECD

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Oman Joins Inclusive Framework for Implementation of BEPS Measures

According to a 20 October 2017 update to the list of members, Oman has joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of members to 103. As a member of the Framework, Oman has committed to the implementation of four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse), and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).

Portugal

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Portugal 2018 Budget Law Submitted to Parliament

Portugal's Budget Law for 2018 was submitted to parliament on 13 October 2017. The main tax-related measures include:

  • An extension of capital gains taxation rules so that gains from the transfer of foreign shares or similar rights may be taxed in Portugal if more than 50% of their value is derived from immovable property situated in Portugal;
  • New rules regarding foreign permanent establishments that require taxpayers to provide justification for any losses, expenses and negative capital variations;
  • A change in the reinvestment incentive for SMEs so that up to 10% retained earnings may be deducted if reinvested within three years with a deduction cap of EUR 7.5 million per tax period (cap equal to 50% of annual tax liability also applies);
  • A new rule allowing taxpayers to treat unclaimed tax credits as losses or expenses; and
  • Adjustments to the individual income tax brackets including new 23% and 35% tax brackets as follows:
    • up to EUR 7,091 - 14.5%
    • EUR 7,091 up to 10,700 - 23.0%
    • EUR 10,700 up to 20,261 - 28.5%
    • EUR 20,261 up to 25,000 - 35.0%
    • EUR 25,000 up to 36,856 - 37.0%
    • EUR 36,856 up to 80,640 - 45.0%
    • over 80,640 - 48.0%

Click the following link for the proposed Budget Law (Law no. 100/XIII) on the parliament website (Portuguese language).

United Kingdom

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UK Publishes Draft Guidance on Penalties for Enablers of Tax Avoidance Schemes

On 20 October 2017, UK HMRC published draft guidance on new legislation for enablers of defeated tax avoidance schemes. The legislation essentially provides that a person is liable for a penalty when the abusive arrangements they have enabled are defeated (tax advantage counteracted by HMRC). For this purpose, a person who has enabled abusive tax arrangements is defined as a person who:

  • Is a designer of arrangements;
  • Is a manager of arrangements;
  • Marketed the arrangements;
  • Is an enabling participant in the arrangements; or
  • Is a financial enabler in relation to the arrangements.

Where an abusive arrangement is defeated, the penalty amount payable by the enabler(s) is equal to the total amount, or value, of all the relevant consideration, which has either been received by the enabler or is receivable by them. The penalties will generally apply to a person if they have enabled abusive tax arrangements that are entered into on or after the date of Royal Assent (enactment) of the second Finance Bill for 2017, which is currently before the House of Commons.

Treaty Changes (3)

Belgium-Japan

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Belgian Cabinet Approves Pending Tax Treaty with Japan

On 19 October 2017, the Belgian Cabinet approved for ratification the pending income tax treaty with Japan (previous coverage). The treaty, signed 12 October 2016, will enter into force 30 days after the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. Once in force and effective, the treaty will replace the 1968 tax treaty between the two countries.

Latvia-Vietnam

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Tax Treaty between Latvia and Vietnam Signed

On 19 October 2017, officials from Latvia and Vietnam 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. Details of the treaty will be published once available.

Macedonia-Oman

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Tax Treaty between Macedonia and Oman to be Negotiated

On 17 October 2017, officials from Macedonia and Oman met to discuss bilateral relations, including their intent to begin negotiations for an income tax treaty. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

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