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Approved Changes (4)

Belgium

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Belgian Law for the Introduction of Beneficial Ownership Registry has Entered into Force

On 16 October 2017, the Belgian Law of 18 September 2017 on the prevention of money laundering and financing of terrorism entered into force. The Law transposes the EU Anti-Money Laundering Directive (Directive (EU) 2015/849), including rules for the establishment of a register for beneficial ownership information on resident companies, foundations, and trusts as required by the Directive.

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OECD Publishes Comments Received on the Tax Challenges of Digitalization

The OECD has published the comments received on the request for input on the tax challenges of digitalization as part of the ongoing follow-up work for BEPS Action 1, Addressing the Tax Challenges of the Digital Economy. Click the following links for the comment documents as published:

A public consultation on the tax challenges of digitalization will be held on 1 November 2017 at the University of California, Berkeley, which will be broadcast live and also made available for later viewing.

Sweden

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Sweden Updates Declarations and Reporting Guidance for CbC Reporting

On 19 October 2017, the Swedish Tax Agency (Skatteverket) updated its declarations and reporting guidance on Country-by-Country (CbC) reporting requirements (previous coverage). The update provides additional clarification based on questions that have been received by the Swedish Tax Agency, as well as the latest Guidance on the Implementation of CbC Reporting issued by the OECD, including with respect to extraordinary (exceptional) income and profits on investments, accounting principles, treatment of joint ventures, etc.

The update also notes that with respect to the secondary local filing requirement due to lack of a CbC exchange agreement, the lack of agreement by itself is not sufficient for the local filing requirement to apply. Rather, two conditions must be met: 1) the foreign parent's jurisdiction must have an international (exchange) agreement with Sweden; and 2) despite having an international agreement, there is no CbC exchange agreement. However, given Sweden's broad exchange network, it is unlikely that this technical exception from local filing would apply in most cases.

Note - As per OECD CbC implementation guidance, international (exchange) agreement means the Mutual Assistance Convention or a bilateral treaty/TIEA providing for information exchange, including automatic exchange.

United States

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U.S. 2017-2018 Priority Guidance Plan Issued

The U.S. Treasury Department and the IRS have issued the initial version of the 2017-2018 Priority Guidance Plan. The Priority Guidance Plan is developed each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance, which the Treasury and IRS hope to complete during the period from 1 July 2017 through 30 June 2018. The Priority Guidance Plan is broken down into four main parts:

  • Part 1 focuses on eight regulations from 2016 that were identified pursuant to Executive Order 13789 for the purpose of reducing regulatory burdens.
  • Part 2 describes certain projects that have been identified as burden reducing and that can be completed in the 8 ½ months remaining in the plan year.
  • Part 3 describes the various projects that comprise the implementation of the new statutory partnership audit regime.
  • Part 4 describes specific projects by subject area that will be the focus of the balance of efforts during the plan year.

The plan also sets out the schedule for routine publications for each month of the plan year.

The 2017-2018 Priority Guidance Plan and prior years' plans and updates can be found on the IRS Priority Guidance Plan webpage.

Proposed Changes (2)

Ecuador

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Ecuador Planning Tax Reform Measures for 2018 Including Increased Corporate Tax Rate

According to recent reports, Ecuador is planning a number of tax reform measures for 2018. Main measures include:

  • An increase in the standard corporate tax rate from 22% to 25%;
  • The removal of the advance tax payment obligation for companies with revenue below USD 300,000;
  • The introduction of new incentives for small and micro enterprises, including a two-year corporate tax holiday (exemption) for newly established enterprises and a general USD 11,000 tax exemption; and
  • The introduction of a five-year tax exemption for repatriated capital.

The measures must be finalized and approved by the National Assembly before entering into force. Additional details will be published once available.

Poland

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Poland to Provide APA Relief in Respect of New Expense Deduction Limits

On 24 October 2017, the public finance committee of Poland's lower chamber of parliament (Sejm) reportedly passed an amendment to provide relief in respect of the pending corporate tax measure that would limit the deduction of payments to related parties and tax haven entities for certain intangible services and licensing agreement fees (previous coverage). The amendment essentially provides that the deduction limits would not apply in relation to expenses that are covered by an advance pricing agreement (APA) entered into with Polish tax authority. If the amendment is adopted in the final legislation, taxpayers would have until the end of 2019 to enter into an APA covering their expenses affected by the new deduction limitation.

Treaty Changes (2)

Malta-Ukraine

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Tax Treaty between Malta and Ukraine has Entered into Force

The income tax treaty between Malta and Ukraine entered into force on 28 August 2017. The treaty, signed 4 September 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Malta income tax and Ukrainian tax on profits of enterprises and personal income tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 20% 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 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.

Limitation of Benefits

Article 21 (Limitation of Benefits) provides that a resident of a Contracting State shall not receive the benefit of any reduction in or exemption from tax provided by the treaty if the main purpose or one of the main purposes of such resident or a connected person was to obtain the benefits of the treaty. The limitation does not apply if the resident is engaged in substantive business operations in its State of residence and the relief claimed is with respect to income connected with such operations.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Effective Date

The treaty applies from 1 January 2018.

United States-Mexico

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U.S. Signs CbC Exchange Arrangement with Mexico

According to an update to the IRS Country-by-Country Reporting Jurisdiction Status Table, the U.S. signed a competent authority arrangement on the exchange of Country-by-Country (CbC) Reports with Mexico on 19 October 2017. The arrangement was not yet published at the time of writing, but will likely be published in the near future and is expected to apply for fiscal years beginning on or after 1 January 2016.

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