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Approved Changes (2)
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OECD Consults on the Tax Challenges of Digitalization

On 22 September 2017, the OECD announced that it is seeking public comments in relation to the tax challenges raised by digitalization and the potential options to address them. The request is part of the ongoing follow-up work for BEPS Action 1, Addressing the Tax Challenges of the Digital Economy, which is being conducted by the Task Force on the Digital Economy.

The request for input outlines the background on the work regarding the tax challenges of digitalization and invites comments on the impact of digitalization on business models and value creation, challenges and opportunities for tax systems, the implementation of the measures outlined in the BEPS package, and potential options to address the direct tax challenges of digitalization, including:

  • Tax nexus concept of significant economic presence;
  • Withholding tax on certain types of digital transactions; and
  • Digital equalization levy.

Comments are due by 13 October 2017 and a public consultation will be held 1 November 2017 in Berkeley, California.

Panama

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Panama Introduces New Requirements for Multinational Enterprises Headquarters Regime

Panama has published Resolution No. 20-17 of 11 September 2017, which amends the country's Multinational Enterprises Headquarters regime (Sedes de Empresas Multinacionales - SEM). The SEM regime provides a number of benefits, including an income tax exemption on services provided to foreign related parties, dividends tax exemption, and relaxed requirements on foreign personnel. One of the main changes to the regime included in the Resolution is that in order to apply for the regime, the applicant's group must either have assets of at least USD 200 million or the group must have operations involving the same business under the same brand/commercial name in at least 40 countries. Whether either requirement is met may be evidenced by consolidated financial statements of the group audited/certified by an independent CPA or an affidavit issued by the group's legal representative detailing the group's global operations.

The Resolution is effective 13 September 2017.

Proposed Changes (2)

Poland

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Poland Planning to Expand Special Economic Zone Incentives Nationwide

The Polish Government is planning to amend the Special Economic Zone (SEZ) regime so that the incentives under the regime may be applied anywhere in the country. Under the current regime, companies operating with the necessary permit in one of fourteen SEZs are eligible for certain exemptions and other benefits, including a corporate tax exemption for a set number of years and a real estate tax exemption. The planned amendments to the regime would allow companies to apply for these benefits to varying degrees for investments in any part of the country, subject to certain criteria in relation to the location of investment, size of investment, rate of employment in the area, etc. For companies that have already obtained SEZ permits, the current incentives and rules would continue to apply up to 2026.

Switzerland

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Switzerland Consults on Revised Withholding Tax Ordinance for Employment Income

On 21 September 2017, the Swiss Federal Department of Finance announced the submission of a draft revision of the Withholding Tax Ordinance for individual employment income for consultation. The revision more precisely defines the prerequisites for so-called quasi-residents to be entitled to a subsequent ordinary tax assessment. Quasi-residents are employees who are not domiciled in Switzerland but earn a major part of their income from an activity they perform in Switzerland. As per a 2010 Federal Supreme Court ruling, such quasi-residents must be granted the same deduction options as residents under ordinary assessment. According to the draft ordinance, in order that a subsequent ordinary tax assessment can be requested, at least 90% of their gross global income must be earned in Switzerland.

Treaty Changes (6)

Brazil-Switzerland

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Brazil Approves Pending TIEA with Switzerland

On 21 September 2017, Brazil's Chamber of Deputies (lower house of congress) approved the ratification of the pending tax information exchange agreement with Switzerland. The agreement, signed 23 November 2015, is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged, and will apply from that date for requests made in respect of taxable periods beginning on or after 1 January of the year following its entry into force or, where there is no taxable period, for all charges to tax arising on or after 1 January of the year following its entry into force.

Canada-Serbia

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SSA between Quebec and Serbia under Negotiation

According to recent reports, negotiations are underway for a social security agreement between Quebec, Canada and Serbia. Any resulting agreement would be the first of its kind between the two jurisdictions, and must be finalized, signed, and ratified before entering into force.

China-Kenya

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Tax Treaty between China and Kenya Signed

On 21 September 2017, officials from China and Kenya 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 will be published once available.

Indonesia-Malaysia

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Indonesia Ratifies Protocol to Tax Treaty with Malaysia

Indonesia has published Presidential Decree No. 77 of 3 August 2017, which ratifies the pending protocol to the 1991 income tax treaty with Malaysia. The protocol, signed 20 October 2011, replaces Article 25 (Exchange of Information) to bring it in line with the OECD standard for information exchange. It is the second protocol to amend the treaty and will enter into force and generally apply once the ratification instruments are exchanged.

United States-Greece

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U.S. Negotiating CbC Exchange Arrangement with Greece

According to an update to the IRS Country-by-Country Reporting Jurisdiction Status Table, the U.S. had begun negotiations for a competent authority arrangement on the exchange of Country-by-Country (CbC) Reports with Greece. Once finalized and signed, the exchange arrangement will likely apply with respect to fiscal years beginning on or after 1 January 2016.

United States-United Kingdom

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U.S. Publishes CbC Exchange Arrangement with the United Kingdom

The U.S. IRS has published the bilateral competent authority arrangement signed with the United Kingdom on the exchange of Country-by-Country (CbC) reports. The arrangement was signed on and is effective from 16 August 2017.

The arrangement provides that pursuant to the provisions of Article 27 (Exchange of Information and Administrative Assistance) of the 2001 income and capital tax treaty between the two countries, each competent authority intends to automatically exchange CbC reports received from each reporting entity resident for tax purposes in its jurisdiction, provided that, on the basis of the information provided in the CbC report, one or more constituent entities of the MNE group of the reporting entity are resident for tax purposes in the jurisdiction of the other competent authority, or are subject to tax with respect to the business carried out through a permanent establishment situated in the other jurisdiction.

With respect to fiscal years beginning on or after 1 January 2016, CbC reports are to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. With respect to fiscal years beginning on or after 1 January 2017, reports are to be exchanged no later than 15 months after the last day of the fiscal year.

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