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Approved Changes (3)

France

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France to Introduce PAYE System for Individual Income Tax

The French government has announced that a pay-as-you-earn (PAYE) system will be introduced for individual income tax purposes by 2018. Under the current system, individuals pay their income tax in the year following the year the income is earned. Under the new PAYE system, employers, or in certain cases banks, will be required to withhold and remit tax due on a monthly basis. Although tax will be paid monthly, annual returns will still be required.

Gibraltar

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Gibraltar's 2015/2016 Budget Presented

On 22 June 2015, Gibraltar's 2015/2016 Budget was presented to parliament. The tax measures are primarily focused on the support of smaller businesses and individuals, and will generally apply from 1 July 2015. Main measures include:

  • Companies, partnerships and self-employed individuals will be able to claim 100% of the eligible capital allowance in the first year of operation.
  • Training costs will be allowed as an expense against the profits of a business or company at the rate of 150%.
  • The revenue threshold for the requirement to have audited accounts is increased from GIP 1 million to GIP 1.25 million.
  • A Social Insurance Credit is introduced of GIP 100 per employee in respect of the employer contributions for companies that have 10 or fewer employees. For a new company, the credit will apply to companies with up to 20 employees in the first year of operation.
  • A one-off tax deduction is introduced against assessable income (with the percentage to be verified and subject to the discretion of the Commissioner of Income Tax) on the investment made by an individual, company or business that makes a significant improvement to the Energy Performance Certificate (EPC) rating of their premises.
  • The individual income tax rates under the allowance-based system are reduced by 1%, i.e.:
    • 14% on the first GIP 4,000;
    • 17% on GIP 4,001 to 16,000; and
    • 39% on income exceeding GIP 16,000.

In addition to the set measures, the government will also consider changes in the tax treatment of intangibles and the possible introduction of an allowance for R&D expenditure.

Click the following link for the Chief Minister’s Budget Address 2015 for additional details of all the Budget measures.

Russia

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Russia Publishes Guidance on the Offset of Foreign Tax Paid by Russian Residents and the Associated Time Limit

The Russian Ministry of Finance recently published Letter No. 03¬08¬05/25712, which clarifies the offset of foreign taxes paid by Russian resident companies. The Letter is summarized as follows.

According to Article 311 of the Tax Code, the amount of tax paid/withheld in accordance with the laws of a foreign country may be offset against Russian tax due, with the offset limited to the amount of Russian tax that would have been payable on such income. In order to claim the offset, the taxpayer must provide a certificate issued by the tax authority of the foreign state that tax was in fact paid/withheld.

When the conditions are met, the foreign tax paid/withheld may be offset against the Russian tax payable in the year the foreign-source income, including associated costs, is included in the tax base for Russian tax purposes or in the following three periods. If a tax year results in a loss, no offset may be claimed.

Proposed Changes (3)

Netherlands

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Netherlands' General Tax Reform Plans

On 19 June 2015, the Dutch government sent a letter to parliament outlining their plans for tax reform. The main areas of reform include:

  • Introducing measures to even out the tax treatment of debt and equity;
  • Reducing the corporate tax rate;
  • Reducing the tax rates for the second and third individual income tax brackets and increasing the income threshold for the top 52% bracket; and
  • Supporting international tax measures to counter avoidance, including those resulting from the OECD BEPS Project.

Additional details will be published as the tax reform plans are developed.

United States

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U.S. House Subcommittee Hearing Held on Repatriation of Foreign Earnings as a Source of Funding for the Highway Trust Fund

On 24 June 2015, a public hearing before the Subcommittee on Select Revenue Measures of the House Committee on Ways and Means was held to discuss the repatriation of foreign earnings in order to fund the Highway Trust Fund. During the hearing, a report on the matter issued by the Joint Committee on Taxation was discussed.

The report covers:

  • Present law and background;
  • A description of proposals for tax on historic foreign earnings, including Chairman Camp’s Tax Reform Act of 2014 and the Administration’s fiscal year 2016 revenue proposals; and
  • An economic analysis and design of a mandatory one-time tax on historic foreign earnings.

Although the repatriation of earnings has long been viewed as a potential source for funding the Highway Trust Fund, legislators from both sides of the aisle expressed concerns. U.S. House Ways and Means Committee member Richard E. Neal, D-MA and David G. Reichert, R-WA both issued opening statements that repatriation cannot be a stand-alone fix for funding issues and that broader tax reform is needed, including in the context of the OECD BEPS Project.

Click the following links for the:

Joint Committee on Taxation Report (JCX-96-15)

Neal's opening statement

Reichert's opening statement

United States

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U.S. Treasury Official Says no New Regulations Needed to Implement Transfer Pricing Guidelines under BEPS Actions 8, 9 and 10

According to recent reports, U.S. Treasury Attorney Advisor Brian Jenn has stated that the U.S. won't need to issue any new regulations to implement changes to the OECD transfer pricing guidelines developed as part of Actions 8, 9, and 10 of the Base Erosion and Profit Shifting (BEPS) Project. According to Jenn, the U.S. already has detailed guidance under Internal Revenue Code section 482 that goes beyond the OECD guidelines being developed and doesn't feel that any final deliverables from the OECD work on those BEPS Actions need to be added in U.S. regulations. As the work on the Actions continues, the U.S. will work to ensure that the guidelines remain consistent with the U.S. view of the arm's-length principle.

Action 8 covers issues related to hard-to-value intangibles and cost contribution arrangements; Action 9 covers issues related to the transfer of risk or allocation of excessive capital to group members; and Action 10 covers issues related to other high-risk transactions, including low value-adding intra-group services, profit splits and cross-border commodity transactions.

Treaty Changes (2)

China-Taiwan

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Tax Arrangement between China and Taiwan may be Signed by the End of the Year

According to recent statements by Taiwanese officials, China and Taiwan may sign a tax arrangement for the avoidance of double taxation by the end of the year. The two sides began negotiations for the arrangement in 2009, which eventually stalled. However, significant progress was made when negotiations resumed in 2014.

The arrangement would be the first of its kind between the two jurisdictions, and must be finalized signed and ratified before entering into force.

Kazakhstan-Mexico

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Tax Treaty between Kazakhstan and Mexico to be Negotiated

Kazakhstan has expressed its intent to negotiate an income tax treaty with Mexico during a recent meeting between officials from the two countries. Any resulting treaty would be the first of its kind between Kazakhstan and Mexico, and would need to be finalized, signed and ratified before entering into force.

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