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Approved Changes (5)

Belgium

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Belgium to Abolish Advance VAT Payments for Quarterly Return Filers

The Belgian Ministry of Finance has announced that it will abolish the advance value added tax (VAT) payments required of taxpayers that file VAT returns quarterly effective 1 April 2017. Under standard  rules, the VAT period is monthly with returns and payment due by the 20th of the month following the period. However, taxpayers with annual turnover below 2.5 million may opt to file returns on quarterly basis, but must make advance payments by the 20th of the second and third months of the quarter that are equal to 1/3 of the VAT due for the previous quarter.

With the abolishment of the advance payment requirements, quarterly filers will generally only need to pay the amount of VAT due by the 20th of the month following each quarter. However, quarterly filers will need to pay an installment of tax due for the final period of the year by 24 December, which is a requirement that already applies for monthly filers.

IMF, OECD, UN, World Bank

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Platform for Collaboration on Tax Invites Comments on a Draft Transfer Pricing Toolkit for Developing Countries

The Platform for Collaboration on Tax (a joint initiative of the IMF, OECD, UN and World Bank Group) has published a draft toolkit designed to assist developing countries in the area of transfer pricing. The toolkit focuses on addressing the difficulties in performing comparability analyses, including the issues that arise when conducting a comparability analysis and approaches to applying internationally accepted principles in the absence of comparables. Also published is draft supplementary material addressing information gaps on prices of minerals sold in an intermediate form.

Click the following links for the draft toolkit press release, which includes the questions to consider, the draft transfer pricing toolkit, and the draft supplementary material. Comments should be sent no later than 21 February 2017.

Ireland

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Irish Minister for Finance Speaks on BEPS, CCCTB, and other Tax Issues

Ireland's Department of Finance has published an address given by Minister for Finance Michael Noonan at the recent Irish Times International Tax Event. The address covers Ireland's tax system in relation to the world, including with regard to the OECD BEPS Project and the EU proposal for the Common Consolidated Corporate Tax Base (CCCTB).

BEPS

Regarding BEPS, Minister Noon stated the following:

Ireland has committed to the BEPS process and will play its full part in implementation.

  • We began by implementing Country by Country Reporting in Finance Act 2015 and many other countries have since followed suit.
  • Ireland is committed to the highest international standards in tax transparency. Ireland has consistently attained the highest international rating on transparency and has been an early adopter of many new reforms emerging at international level.
  • The BEPS multilateral instrument is close to being agreed by more than 90 countries. This will provide the mechanism for extensive changes to tax treaties globally. Ireland has played an active part in this work.

Ireland will continue to take actions needed to implement the BEPS reports. The review of Ireland’s corporation tax code, which was launched with Budget 2017, will include consideration of what further actions Ireland may need to take to ensure we are fully compliant with the OECD BEPS recommendations.

CCCTB

Regarding the CCCTB proposal, Minister Noon stated the following:

The CCCTB proposal does contain some interesting ideas.

I certainly agree with the view that Research and Development can be supported by the tax system as I have done with our own Research and Development Credit. The proposal also makes an interesting case for giving tax relief for equity investment in a business, which is something which should be examined further. The CCCTB proposals on tax avoidance have already been agreed in the Anti-Tax Avoidance Directive and so I would expect that these will be enacted under that Directive.

There are a number of points which are more difficult.

We should be clear about the real fiscal impact of proposals like the CCCTB. The Commission’s own analysis of the proposal does not sit well with the fiscal rules. The Commission acknowledges that the CCCTB would involve a significant tax cut for multinationals operating in Ireland by significantly narrowing our tax base. Under the fiscal rules, this tax cut would have to be paid for by raising other taxes or reducing spending. Any increased economic growth as a result of the CCCTB -- as predicted by the Commission -- could not be considered in drawing up a Budget that complies with the fiscal rules.

As I have stated on many occasions, the choice of tax rates is an important sovereign competence of Member States. Ireland has three rates of corporation tax:

  • 12.5% for trading profits;
  • 25% for non-trading profits; and
  • 33% for capital gains.

While CCCTB does not require a harmonisation of rates across Europe, it would require Ireland to choose just one of these rates. We would lose the flexibility to tax some profits and capital gains at a higher rate. This is not acceptable to Ireland.

These issues relate only to agreeing a common base. Though I won’t discuss them here, further complications arise in the area of consolidation.

Ireland will engage fully in discussions on this proposal while assessing whether it is in our best interests. Taxation remains an area for unanimous decision making at Council, as laid out in the Treaties. Ireland continues to disagree with any harmonisation of tax rates, minimum levels of taxation or the inappropriate encroachment of State aid rules into the core Member State competence of taxation.

Click the following link for the full text of the address.

Isle Of Man

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Isle of Man New Record Keeping Regulations Come into Operation

The Isle of Man Tynwald (parliament) has approved the Income Tax (Accounting Records) (Retention) Regulations 2016. The new regulations are meant to bring the Isle of Man in line with international standards and include the required retention of adequate accounting records for five years. The requirements apply to:

  • All corporate taxpayers that are:
    • Resident in the Isle of Man for income tax purposes, and their officers; or
    • Resident outside the Isle of Man for income tax purposes and who carry on a business in the Island or who receive income arising from the rents of land, and their officers;
  • All non-corporate taxpayers who carry on a business or who receive income arising from the rents of land;
  • All partners resident in the Isle of Man, either individuals or corporate;
  • All trustees resident in the Isle of Man; and
  • The registered agent, enforcer, and members of the council of foundations.

Accounting records may be kept inside or outside of the Isle of Man, subject to certain conditions. Failure to comply with the regulations will result in a general penalty of GBP 2,500. Further, the furnishing of false or incorrect records will result in a fine of up to GBP 2,500 if furnished negligently and up to GBP 10,000 if furnished knowingly.

Click the following link for the regulations, which came into operation on 20 January 2017.

United Kingdom-European Union

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UK Supreme Court Holds Parliamentary Approval Required to Trigger Brexit

On 24 January 2017, the UK Supreme Court issued its decision that the UK government may not initiate the withdrawal from the European Union as prescribed by Article 50 of the Treaty on European Union without an Act of the UK Parliament permitting the government to do so. The decision upholds an earlier High Court decision that the government does not the have power to give notice pursuant to Article 50. With regard to the devolved governments of Northern Ireland, Scotland and Wales, however, the Supreme Court found that consent from those governments is not required.

In response, the Prime Minister's office issued a release stating that "We respect the Supreme Court’s decision, and will set out our next steps to Parliament shortly". The release also notes that the Prime Minister still intends to trigger Article 50 by the end of March 2017 and that parliament has already indicated its support for the timetable.

Treaty Changes (4)

Brunei-Luxembourg

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Tax Treaty between Brunei and Luxembourg has Entered into Force

The income and capital tax treaty between Brunei and Luxembourg entered into force on 26 January 2017. The treaty, signed 14 July 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Brunei income tax imposed under the Income Tax Act and petroleum profits tax imposed under the Income Tax (Petroleum) Act. It covers Luxembourg individual income tax, corporation tax, capital tax, and communal trade tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10%
  • Interest - 0% if paid to a financial institution or collective investment vehicle; otherwise 10%
  • Royalties - 10%
  • Technical fees for any services of a technical, managerial, or consultancy nature - 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; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment 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

Brunei applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption method. However, Luxembourg will apply the credit method in respect of income covered by Articles 10 (Dividends), 11 (Interest), 12 (Royalties), 13 (Capital Gains), and 18 (Artistes and Sportspersons).

Effective Date

The treaty applies in Brunei from 1 January 2018 in respect of withholding taxes, and from 1 January 2019 in respect of other taxes. In Luxembourg, the treaty applies from 1 January 2018.

Bulgaria-Saudi Arabia

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Bulgaria to Negotiate Tax Treaty with Saudi Arabia

On 18 January 2017, the Bulgarian government authorized the Ministry of Finance to begin negotiations for an income tax treaty with Saudi Arabia. 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.

Hong Kong-Korea, Rep of

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Hong Kong and South Korea Sign Agreement for Automatic Exchange of Financial Account Information

South Korea's Ministry of Strategy and Finance has announced the signing of competent authority agreement with Hong Kong on 23 January 2017 for the automatic exchange of financial account information. Under the agreement, each country will automatically exchange information on accounts held in the respective country by tax residents of the other country based on the OECD Common Reporting Standard (CRS). The automatic exchange is to begin in 2019.

Turkmenistan-United Kingdom

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Tax Treaty between Turkmenistan and the UK has Entered into Force

According to an update from UK HMRC, the income and capital tax treaty with Turkmenistan entered into force on 19 December 2016. The treaty, signed 10 June 2016, is the first of its kind directly between the two countries. It replaces the 1985 tax treaty between the UK and the former Soviet Union, which had continued to apply in respect of Turkmenistan.

Taxes Covered

The treaty covers Turkmen profits tax and individual income tax, and covers UK income tax, corporation tax, and capital gains tax.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to the benefits of the treaty aside from those covered in Articles 21 (Elimination of Double Taxation), 22 (Non-Discrimination), and 23 (Mutual Agreement Procedure).

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly or indirectly holding at least 25% of the paying company's capital; otherwise 15%
  • 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 the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares substantially and regularly traded on a stock exchange); and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment 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.

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 20 (Other Income) will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the income is paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of the Articles.

Double Taxation Relief

Both countries generally apply the credit method for the elimination of double taxation. However, the UK will exempt dividends paid by a Turkmen company to a company resident in the UK if the conditions for an exemption under UK law are met. Exemption may also apply for profits of a permanent establishment in Turkmenistan of a UK company if the conditions for an exemption under UK law are met.

Effective Date

The treaty applies in Turkmenistan from 1 January 2017. In the UK, the treaty applies:

  • From 1 January 2017 in respect of withholding taxes;
  • From 1 April 2017 in respect of corporation tax; and
  • From 6 April 2017 in respect of income tax and capital gains tax.

The provisions of Articles 23 (Mutual Agreement Procedure) and 24 (Exchange of Information) apply from the date of the treaty's entry into force, without regard to the taxable year or chargeable period to which the matter relates.

The 1985 tax treaty between the UK and the former Soviet Union ceases to have effect in respect of any tax from the date the new treaty is effective.

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