Worldwide Tax News
Panama's Ministry of Foreign Relations has announced that the Bulgarian government has informed the Panamanian government that immediate measures will be taken to remove Panama from Bulgaria's tax haven list. The removal is the result of Panama's progress in international tax cooperation and the pending entry into force of the Convention on Mutual Administrative Assistance in Tax Matters, which Panama signed in October 2016 and will enter into force for the country on 1 July 2017.
The New Zealand Inland Revenue Department has announced a change in the use-of-money interest rates on underpayments and overpayments as approved by Order in Council on 27 March 2017. The new rates are:
- Underpayment rate: 8.22% (previously 8.27%)
- Overpayment rate: 1.02% (previously 1.62%)
The new rates apply from 8 May 2017.
The UK National Audit Office has published a report on its findings from an investigation into the failure of online sellers based outside EU to charge value added tax (VAT) on their goods located in the UK when sold to UK customers. Under the VAT rules, sellers should pay import VAT and customs duties when the goods are imported, based on their value, and charge their customers VAT on the final sale price. The sellers should also be registered with HMRC, and are required to submit regular VAT returns. The sellers must account to HMRC for the VAT charged to customers, reclaiming any eligible import VAT through their VAT return.
The report examines three main areas with respect to VAT fraud and error resulting in the failure to pay VAT, including:
- The scale and nature of online VAT fraud and error;
- HMRC’s response to tackling online VAT fraud and error; and
- Legislative changes introduced to tackle online VAT fraud and error.
Some of the key findings in the report include:
- HMRC estimates that online VAT fraud and error cost between GBP 1 billion and GBP 1.5 billion in lost tax revenue in 2015-16.
- HMRC recognized online VAT fraud and error as a priority in 2014, although the potential risk from online trading generally was raised before this.
- HMRC’s assessment is that online VAT losses are due to a range of non-compliant behaviors, but has not yet been able to assess how much is due to lack of awareness, error or deliberate fraud.
- HMRC seeks to detect and correct online VAT non-compliance by using intelligence to identify suspected fraudulent traders.
- HMRC has decided to focus enforcement actions against online VAT fraud inland rather than at the border.
- To date, there have been no prosecutions for online VAT fraud but HMRC has carried out many civil operations against suspected evaders.
- HMRC introduced new legal powers to tackle online VAT fraud and error in September 2016, which include making online marketplaces potentially jointly and severally liable for non-payment of VAT (previous coverage);
- In the 2017 Budget (previous coverage), the government announced the possibility of a change to the VAT collection method, which would deduct VAT at the point of sale.
Click the following link for the full report: Investigation into overseas sellers failing to charge VAT on online sales.
Dutch Lower House of Parliament Adopts Legislation for CbC Reporting Amendments including Increased Non-Compliance Penalties
The Dutch House of Representatives (lower house of parliament) has reportedly adopted the legislation needed to bring the Dutch Country-by-Country (CbC) reporting requirements in line with EU rules (previous coverage). In addition to the amendments to comply with the EU rules, the legislation also makes certain other changes, which include extending CbC penalties to notification non-compliance, and in the latest draft approved, increasing the CbC non-compliance penalty from up to EUR 20,250 to up to EUR 820,000.
Subject to approval by the Senate, the legislation will enter into force 5 June 2017.
On 20 April 2017, draft legislation (Law No. 73/XIII) was submitted to the Portuguese parliament to transpose into domestic law the amendments made to the EU administrative cooperation Directive (2011/16/EU) concerning the exchange of information on cross border tax rulings and advance pricing agreements (APAs) as per Council Directive (EU) 2016/2376 and of Country-by-Country (CbC) reports as per Council Directive (EU) 2016/881. The draft legislation also includes amendments for the exchange of financial account information.
With regard to tax rulings and APAs, information will generally be exchanged for rulings and APAs issued from 1 January 2017, as well as:
- Rulings and APAs issued, amended, or renewed between 1 January 2012 and 31 December 2013, if still valid on 1 January 2014; and
- Rulings and APAs issued, amended, or renewed between 1 January 2014 and 31 December 2016.
With regard to CbC reports, Portugal already has requirements in place that are generally in line with the EU requirements, although amendments are needed to adjust certain wording and other aspects. This includes that if a non-parent constituent entity is required to file locally, such entity must request that all required information for the CbC report be provided by the foreign ultimate parent. If the ultimate parent has not provided all required information, a CbC report must still be filed using available information and notification of the parent entity's refusal to provide the information must be made to the tax authority.
In addition, the draft legislation introduces a transitional provision in accordance with EU rules, which provides that the secondary local filing requirements for non-parent entities will apply for fiscal years beginning on or after 1 January 2017. For ultimate and surrogate parents resident in Portugal, the requirements apply from 1 January 2016 as currently required.
Click the following link for draft Law No. 73/XIII (Portuguese language).The legislation must be approved by parliament, and will enter into force the day after it is published.
Taiwan's Executive Yuan has announced the approval of draft legislation including new incentives to attract foreign professionals to work in Taiwan. The main tax incentive provides that for the first three years of employment in Taiwan, qualified foreign workers residing in Taiwan will be taxed on 50% of their annual earnings exceeding TWD 2 million (~USD 66,000). Amounts up to TWD 2 million will be taxed normally. The legislation also provides for relaxed residence permit requirements and extended duration for workers and their families, as well as improved access to social security and health insurance benefits. The legislation now goes to the Legislative Yuan for approval.
On 19 April 2017, the Belarus House of Representatives (lower house of parliament) approved for ratification the pending income tax treaty with Hong Kong. The treaty, signed 16 January 2017, is the first of its kind between the two jurisdictions and will enter into force once the ratification instruments are exchanged (previous coverage).
Japan's Ministry of Finance has announced that officials from Japan and Spain began negotiations on 25 April 2017 for the amendment of the 1974 income tax treaty between the two countries. Any resulting amendments would be the first to the treaty, and must be finalized, signed, and ratified before entering into force.
On 21 April 2017, the Serbian parliament approved for ratification the pending social security agreement with Romania. The agreement, signed 28 October 2016, is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.