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Approved Changes (4)

Australia

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Australia Individual Income Tax Change for 2016-2017

The Australian Taxation Office has updated the individual income tax rate brackets for the 2016-2017 tax year beginning 1 July 2016. The only change is an increase in the threshold for the 37% marginal rate from AUD 80,000 to AUD 87,000. The increase applies for both resident and non-resident individual taxpayers.

Click the following link for the Individual income tax rates page.

Ireland

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Ireland Publishes eBriefs on Treatment of Certain Royalties Paid to Non-Residents and on Period of Validity for Opinions issued by the RTS

On 21 October 2016, Irish Revenue published eBriefs No. 88/2016 and No. 89/2016 on an update to the statement of practice concerning the treatment of certain royalties paid to non-resident companies and an update to the Revenue Technical Services guidelines.

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Update of Statement of Practice CT 01/10 "Treatment of Certain Royalties Paid to Companies Resident Outside the State"

Statement of Practice (SP – CT 01/10), "Treatment of Certain Royalties Paid to Companies Resident Outside the State", has been updated to replace the requirement to seek advance clearance from Revenue for the application of the administrative practice with a requirement to make a notification to Revenue. A company that is applying the administrative practice, to pay a royalty to a non-resident company without deduction of tax on or after 18 October 2016, is required to notify Revenue that it is availing of the administrative practice. The notification must be made in respect of each accounting period during which relevant royalties are paid and the administrative practice is applied.

This Statement of Practice has now been incorporated into Tax and Duty Manual Part 08-01-04. (108KB).

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Revenue Technical Services

The Guidelines (711KB) in relation to the Revenue Technical Services (RTS) have been updated to reflect the fact that any opinion issued by the RTS will have a maximum validity of 5 years. Paragraph 4.7 refers.

Portugal

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New Surtax for Portugal's Azores Region

On 17 October 2016, Regional Law-Decree No. 21/2016/A was published in the Official Gazette, which introduces a new corporate surtax for the Azores autonomous region that replaces the standard state surtax (Derrama Estadual). As with the state surtax, the Azores surtax applies for both resident taxpayers and non-resident taxpayers with a permanent establishment in the region. The surtax is levied as follows:

  • Taxable profit over EUR 1.5 million up to 7.5 million - 2.4%
  • Taxable profit over EUR 7.5 Million up to 35 million - 4.0%
  • Taxable profit over EUR 35 million - 5.6%

Advance payment of the surtax is due in the 7th, 9th, and 12th months of the current year based on the taxable profit of the previous year. The same brackets apply, although the rates applied are 2.0%, 3.6%, and 5.2% respectively. For members of a consolidated group, each company is treated individually.

The Azores surtax entered into force on the day after the Law-Decree was published.

Spain

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Spanish Parliament Approves Decree Increasing Advance Payments for Large Companies

On 20 October 2016, the Spanish parliament approved Royal Decree Law 2/2016, which includes an increase in the advance tax payments required from companies with turnover in excess of EUR 10 million in the previous year. The Royal Decree was published 30 September 2016 with immediate effect, but required parliamentary approval within 30 days to remain so (previous coverage).

Proposed Changes (2)

European Union

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European Commission Issues EU Tax Reform Proposals including a Common Consolidated Corporate Tax Base

On 25 October 2016, the European Commission issued its proposals for EU tax reform, including proposals for a Common Consolidated Corporate Tax Base for large MNE groups, the improvement of dispute resolution on double taxation, and the strengthening of hybrid-mismatch rules.

Common Consolidated Corporate Tax Base

The Commission has proposed a two-step approach that would begin with a Council Directive on a Common Corporate Tax Base (CCTB), followed by a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB).

CCTB Directive

The proposed CCTB directive provides uniform rules for the determination of taxable income, including the rules related to:

  • Calculation of the tax base;
  • Timing and quantification;
  • Depreciation of fixed assets;
  • Losses;
  • Entering and leaving the system of the tax base;
  • Relations between the taxpayer and other entities;
  • Transactions between associated enterprises;
  • Anti-abuse;
  • Transparent entities; and
  • Administration and procedures.

The CCTB will be mandatory for a company that meets the following conditions:

  1. It takes one of the EU company forms listed in Annex I to the directive;
  2. It is subject to one of the EU corporate taxes listed in Annex II to the directive, or to a similar tax subsequently introduced;
  3. It belongs to a consolidated group for financial accounting purposes with a total consolidated group revenue exceeding EUR 750 million in the previous year; and
  4. It qualifies as a parent company or qualifying subsidiary (parent holds 50% voting rights, and 75% capital or profit rights) and/or has one or more permanent establishments in other EU Member States.

The CCTB rules will also apply to a company that is established under the laws of a third country in respect of its permanent establishments situated in the EU if meeting the 2nd, 3rd, and 4th conditions and the form of the company is similar to one of the EU company forms listed in Annex I.

A company meeting the 1st and 2nd conditions, but not the 3rd and 4th conditions, may also opt to apply the CCTB rules for a period of five years. The period will automatically be extended for successive terms of five tax years, unless there is a notice of termination.

As proposed, the CCTB directive is to be transposed into the domestic legislation of the EU Member States by the end of 2018 and have effect from 1 January 2019.

CCCTB Directive

The proposed CCCTB directive provides for the consolidation of companies that are subject to the CCTB directive as covered above. The directive sets out the rules on how a common consolidated corporate tax base will be allocated to Member States and administered by the national tax authorities. In general, companies subject to the directive will cease to be subject to the national corporate tax law in respect of all matters regulated by the directive.

As proposed, the CCCTB directive is to be transposed into the domestic legislation of the EU Member States by the end of 2020 and have effect from 1 January 2021.

Dispute Resolution

The Commission has proposed that current dispute resolution mechanisms be adjusted to better meet the needs of businesses. In particular, the proposal includes:

  • The explicit and enforceable requirement to eliminate double taxation for businesses in all cases;
  • Recourse for taxpayers to national courts to unblock procedures;
  • Clearly defined and enforceable timelines, with a standard period of 15 months for the arbitration phase;
  • The extension of the scope of dispute resolution to all cross-border issues; and
  • The obligation to notify taxpayers and publish arbitration.

Hybrid-Mismatches

The Commission has proposed amendments to the Anti Tax Avoidance Directive (previous coverage) to introduce rules against hybrid mismatches involving third countries. Furthermore, the proposed amendments address hybrid mismatches involving permanent establishments, both in their intra-EU and third-country dimension, hybrid transfers, imported mismatches, and dual resident mismatches. In general, the rules require that an EU Member State address mismatches by denying a deduction or requiring an inclusion as the case may be, unless the third country has already done so to address the mismatch.

Poland

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Poland to Suspend Retail Sales Tax until 2018

Draft legislation was submitted to the Polish parliament on 20 October 2016 that would suspend the country's retail sales tax until 1 January 2018. The tax entered into force 1 September 2016, but was suspended by an injunction from the European Commission pending the completion of an illegal State aid investigation (previous coverage).

Treaty Changes (4)

Belgium-Kosovo

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SSA between Belgium and Kosovo under Negotiation

The Belgian government has announced that the first round of negotiations for a social security agreement with Kosovo was held 17 to 21 October 2016. The agreement must be finalized, signed, and ratified before entering into force. Once in force and effective, it will replace the 1954 social security agreement between Belgium and the former Yugoslavia as it applies in respect of Belgium and Kosovo.

Brunei-Korea, Rep of

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Tax Treaty between Brunei and South Korea has Entered into Force

The income tax treaty between Brunei and South Korea entered into force on 14 October 2016. The treaty, signed 9 December 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Brunei income tax and petroleum income tax. It covers Korean income tax, corporation tax, special tax for rural development, and local income tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 0% for interest paid in connection with the sale on credit of any industrial, commercial or scientific equipment, or paid in connection with the sale on credit of any merchandise by one enterprise to another enterprise; otherwise 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 alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated 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

Both countries apply the credit method for the elimination of double taxation. In respect of dividends received by a Korean resident company that owns at least 10% of the voting shares issued by the paying company, Korea will also provide a credit for the Brunei tax payable on the profits out of which the dividends are paid.

Limitation on Benefits

Article 27 (Limitation on Benefits) includes the provision that a resident of a Contracting State will not be entitled to the benefits of the treaty in respect of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), 13 (Capital Gains), and 21 (Other Income), if:

  • The resident is controlled directly or indirectly by one or more persons that are not residents of that Contracting State; and
  • The main purpose or one of the main purposes of any person concerned with the creation or assignment of a share, a debt-claim, or a right in respect of which the income is paid is to take advantage of these Articles by means of that creation or assignment.

Effective Date

The treaty applies from 1 January 2017.

Italy-Bermuda-Liechtenstein-Turkmenistan

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Italian Senate Approves TIEAs with Bermuda, Liechtenstein, and Turkmenistan

On 18 October 2016, the Italian Senate approved the laws for the ratification of Italy's pending tax information exchange agreements with Bermuda, Liechtenstein, and Turkmenistan. The agreements are the first of their kind between Italy and the respective jurisdictions, and will enter into force once the ratification instruments are exchanged. The agreements with Bermuda and Turkmenistan will generally apply from the date of their entry into force, while the agreement with Liechtenstein will apply from the date the agreement was signed, 26 February 2015.

Poland-Taiwan

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Tax Treaty between Poland and Taiwan Signed

On 21 October 2016, officials from Poland and Taiwan signed an income tax treaty. The treaty is the first of its kind between the two jurisdictions and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

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