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Approved Changes (3)

Canada

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Canadian Budget Implementation Act, 2017, No. 1 Receives Royal Assent

The Canadian Government has announced that the Budget Implementation Act, 2017, No. 1 received Royal Assent on 22 June 2017. The Act implements certain tax measures proposed in the Federal Budget 2017 (previous coverage), including several measures related to personal income tax. The business related measures are mainly limited to the elimination of certain incentives, including

  • The 50% additional deduction for donations of medicine;
  • The investment tax credit for child care spaces; and
  • The tax exemption for insurers of farming and fishing property.

Also included is the amendment of the definition of a taxi business to require providers of ride-sharing services to register for the GST/HST and charge tax on their fares in the same manner as taxi operators. The other business-related measures proposed in the budget will likely be approved in separate legislation later in the year.

Click the following link for the Budget Implementation Act, 2017, No. 1, which includes a summary of all measures at the top.

Norway-EFTA

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EFTA Approves Temporary Extension of Norwegian Tonnage Tax System

The EFTA Surveillance Authority (ESA) announced on 23 June 2017 that it has approved a six-month extension of the Norwegian special tax system for shipping (tonnage tax). The current tax scheme was originally approved by ESA as from the fiscal year 2007 and was to expire 31 December 2016. The extension is to allow Norway time to finalize a new tonnage tax system that will apply for ten years and includes new rates and method of calculation.

Pakistan

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Pakistan Companies Act 2017 Signed and Effective

On 20 June 2017, the Securities and Exchange Commission of Pakistan (SECP) published the Companies Act, 2017, which was signed into law by the president on 30 May 2017. The new law replaces the Companies Ordinance 1984 and is meant to facilitate the growth of the economy in general and the corporate sector in particular by providing simplified procedures for ease of starting and doing businesses. Additionally, a number of new reporting and other requirements are introduced. Some of the main changes include:

  • Relaxed general and board meeting requirements to allow company members and directors to attend and participate in meeting via video link, and relaxed resolution requirements to allow smaller companies to pass resolutions without having to hold a general meeting;
  • The introduction of a Mediation and Conciliation Panel set up by the SECP to handle disputes between a company, its management, or its members or creditors;
  • Relaxed requirements for mergers, demergers, and other arrangements, including a change in the approving authority from the High Court to the SECP and no longer requiring formal approval for:
    • Mergers between a holding company and its wholly owned subsidiary; and
    • Mergers between companies owned by the same person;
  • Changes for inactive and defunct companies, including the creation of a registrar for inactive companies that allows inactive companies to apply for inactive status and be subject to a lower level of filing and regulation, and allowing defunct companies to simply apply in a prescribed form to have the company deregistered;
  • Clarification on the meaning of a sizeable undertaking with respect to disposals, which requires board approval, to mean company assets valued at over 25% of total assets as per the audited financial statements of the preceding year;
  • Change in ownership disclosure requirements, including that any 25% or greater change of ownership must be reported to the SECP regardless of size or whether involving a public or private company;
  • Disclosure requirement for substantial shareholders (10%) of Pakistani companies, which includes that such shareholders must report on shareholdings in a foreign company or body corporate or any other interest to the Pakistani company, which in turn reports the information to the registrar of companies;
  • Compliance requirements on officers of a company in relation to the Anti-Money Laundering Act 2010;
  • Real estate investment approval and permission requirements handled by the SECP;
  • Corporate social responsibility requirements for public interest companies, including the requirement to have female directors, and the requirement to employ persons with disabilities if employing 100 or more employees - public interest companies include listed companies, as well as non-listed companies, subject to certain conditions;
  • New certification requirements regarding Shariah compliant companies and securities, as well as Shariah advisors;
  • The introduction of a standard penalty scale with three levels for non-compliance with the Companies Act, including:
    • up to PKR 25,000 (up to PKR 500 per day default continues);
    • up to PKR 500,000 (up to PKR 1,000 per day default continues); and
    • up to PKR 100 million (up to PKR 500,000 per day default continues).

Click the following link for the Companies Act, 2017, which is generally effective from the date it was signed, 30 May 2017.

Proposed Changes (2)

Hong Kong

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Hong Kong Publishes Bill to Exempt Privately Offered Open-Ended Fund Companies from Profits Tax

The Hong Kong Government has announced the publication of the Inland Revenue (Amendment) (No. 4) Bill 2017 in the Official Gazette on 23 June 2017. The Bill provides for the implementation of the 2017-18 Budget measure to extend profits tax exemption to privately offered open-ended fund companies (OFCs) with their central management and control exercised in Hong Kong. An OFC is a collective investment scheme with variable capital set up in the form of a company, but with the flexibility to create and cancel shares for investors' subscription and redemption in the funds, which is currently not enjoyed by conventional companies.

The bill will be introduced in the Legislative Council on 28 June.

United States

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U.S. House Speaker Ryan Confident in Passing Tax Reform in 2017

The Press Office of House Speaker Paul Ryan has published the text of his first major speech on tax reform, which was given at the National Association of Manufacturers 2017 Manufacturing Summit on 20 June 2017. According to Ryan, Congress is currently working with the Trump administration to turn Trump's tax reform principles into a transformational tax reform plan that includes:

  • With respect to individual income tax:
    • Eliminating the estate (death) tax and alternative minimum tax;
    • Clearing out special interest carve outs and excessive deductions, and focusing on keeping those that make the most sense: home ownership, charitable giving, and retirement savings; and
    • Consolidating the existing seven brackets into three and doubling the standard deduction, while using the savings from eliminating loopholes to lower individual income tax rates.
  • With respect to business income tax:
    • Moving to a territorial tax system;
    • Resolving current issues with the repatriation of offshore earnings (or lack thereof); and
    • Slashing the corporate tax rate as low as possible, including the creation of new lower tax specifically for small businesses.

With respect to the timing of tax reform, Ryan stated, "We are going to get this done in 2017. We need to get this done in 2017."

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

Treaty Changes (4)

Austria-Israel

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Austrian Parliament Committee Approves Pending Tax Treaty with Israel

On 21 June 2017, the Finance Committee of the Austrian parliament approved the ratification of the pending income and capital tax treaty with Israel (previous coverage). The treaty, signed on 28 November 2016, will enter in to force on the first day of the third month following the exchange of the ratification instruments and will apply from 1 January of the year following its entry into force. Once in force and effective, it will replace the 1970 tax treaty between the two countries.

India-Netherlands

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India Approves Amendment of SSA with Netherlands

The Indian Press Information Bureau issued a release on 22 June 2017 announcing that the Union Cabinet has approved amendment of the social security agreement with the Netherlands by incorporating the "Country of Residence" principle into the agreement. The amended agreement will come into operation from the third month following the date India notifies the amendment to the Netherlands.

Indonesia-Macao-Singapore-Switzerland

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Indonesia to Sign Financial Account Information Exchange Agreement with Macau, Singapore, and Switzerland

According to recent reports, Indonesia will sign competent authority agreements for the exchange of financial account information with Macau, Singapore, and Switzerland. Under the agreements, Indonesia will automatically exchange information on accounts held in Indonesia by tax residents of the other respective jurisdictions on a reciprocal basis under the OECD Common Reporting Standard (CRS). Indonesia is planning to begin exchange in 2018.

South Africa-Monaco

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TIEA between Monaco and South Africa in Force

According to a 23 June 2017 notification from the South African Government, the tax information exchange agreement with Monaco entered into force on 6 December 2014. The agreement, signed 23 September 2013, is the first of its kind between the two countries and applies on the date of its entry into force for criminal tax matters and for tax periods beginning on or after that date for other matters.

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