Worldwide Tax News
Algeria's Finance Law 2016 Published
Algeria's Finance Law 2016 was published in the Official Gazette on 31 December 2015. Some of key measures, which apply from 1 January 2016, are summarized as follows.
The requirement that taxpayers reinvest profits exempted from corporate tax or tax on business activities under an incentive regime are relaxed. Instead of being required to reinvest all exempted profits, only 30% of the exempted profits must be reinvested within a 4-year period following the year the incentive ends.
If imported goods are exempt from VAT and Customs duties under incentives introduced in the Finance Law 2015 and similar goods are produced locally, then consumption tax at a rate of 5% to 30% will apply.
Certain requirements under the foreign investment restrictions introduced in 2009 (minimum 51% domestic ownership among others) are relaxed. These include:
- The requirement that conformity with the 51% domestic ownership rule must be demonstrated when making a change in the commercial registration no longer applies for changes in:
- Capital structure that does not affect the minimum ownership rule;
- Activity of the company;
- Company's address;
- Members of the board of directors; and
- Certain other changes; and
- Foreign funding will be allowed for contributions in an Algerian investment project, subject to government approval and certain conditions.
The measure that would have extended the 23% reduced corporate tax rate to the mining sector was not adopted in the final legislation.
Ukraine Issues Guidance on Changes Resulting from the 2016 Budget
Ukraine's State Fiscal Service recently issued a guidance letter clarifying changes implemented as part of the 2016 Budget (previous coverage), including changes to corporate tax reporting and advance payment requirements, and certain deductions. The changes are generally effective from 1 January 2016.
Under the new requirements, taxpayers must file a quarterly tax return within 40 days following the end of each quarter. However, an annual tax return is instead required within 60 days following the end of the tax year for:
- Newly created corporate taxpayers;
- Agricultural producers; and
- Corporate taxpayers with annual income of UAH 20 million (~USD 800,000) or less in the preceding tax year.
The provision that annual tax returns are due by 1 June is removed.
The requirement to estimate and make monthly advance tax payments based on the previous year's income is abolished. However, taxpayers required to file quarterly returns must make an advance payment for the fourth quarter of the year by 31 December. The advance payment is equal to two-ninths of the corporate tax due for the first three quarters of the year, and the calculated amount should be included in the tax return for the third quarter.
Property tax is made deductible for corporate income tax purposes. However, a taxpayer is not allowed to carry forward any excess property tax paid not used to offset corporate tax liabilities in the current tax period.
Dividends received are made deductible from taxable income if received from entities that are required to make advance corporate tax payments on the dividend payments.
Romania Issues Draft Order on Transfer Pricing Documentation Preparation and Submission Requirements
Romania's Ministry of Finance recently issued a draft order for transfer pricing documentation preparation and submission requirements.
Under the draft order, documentation should be prepared by large taxpayers with aggregate transactions with related parties that equal or exceed the following thresholds, excluding VAT:
- EUR 200,000 for interest registered for financial services;
- EUR 250,000 for the provision of services; and
- EUR 350,000 for transactions consisting of the acquisition/sale of tangible or intangible goods.
For the purpose of determining if the thresholds are met for non-EUR transactions, the exchange rate is the exchange rate of the National Bank of Romania on the last day of the fiscal year concerned.
For large taxpayers with transactions meeting the above thresholds, transfer pricing documentation should be prepared by the annual tax return deadline. If requested by the tax authorities, the documentation should be should be submitted within 10 days of request, but no sooner than 10 days after the deadline for preparation.
For large taxpayers not meeting the thresholds and other taxpayers with related party transactions, transfer pricing documentation is to be prepared upon request by the tax authorities. The documentation should be submitted within 30 to 60 days of the request, with the possibility for a 30-day extension.
If a taxpayer fails to submit documentation for a transaction by the applicable deadline or the documentation is incomplete, the tax authorities will proceed to make an estimation of the appropriate transfer price and make any necessary adjustments.
The draft order must be finalized and published in the Official Gazette before entering into force, and is to be effective from 1 January 2016.
Tax Treaty between Chile and Uruguay Initialed
On 21 January 2016, officials from Chile and Uruguay initialed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.
Additional details will be published once available.
Protocol to the Tax Treaty between France and Germany has Entered into Force
The 2015 protocol to the 1959 income and capital tax treaty between France and Germany entered into force on 24 December 2015. The protocol, signed 31 March 2015, is the fourth to amend the treaty. Key amendments are summarized as follows.
A new paragraph is added to Article 1, specifying that the treaty only applies to persons resident in one or both of the Contracting States, and the meaning of the term "resident of a Contracting State" is amended.
Article 7 of the treaty, which covers certain capital gains, is replaced in line with Article 13 of the OECD Model, including that 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 or comparable rights deriving more that 50% of their value directly or indirectly from immovable property situated in the other State, excluding immovable property used directly for its own business activities
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Article 9 of the treaty, which covers dividends, is amended with the addition of a new provision that the beneficial withholding tax rates on dividends provided by the treaty will not apply for dividends paid out of income or gains from immovable property if:
- Paid by an investment vehicle that distributes most of the income or gains annually;
- The income or gains from immovable property are tax exempt; and
- The beneficial owner of the dividends directly or indirectly holds 10% or more of the capital of the investment vehicle paying the dividends.
In such a case, the dividends may be taxed at the rate provided by the domestic laws of the source State.
Article 20, which covers the elimination of double taxation, is amended with the addition of a new paragraph with the provision that Germany will apply the credit method for certain items of income in accordance with German tax law.
In regard to France, the income covered by Article 20 is changed from "profits and other positive income" to "items of income", and a provision is added that the Article does not cover income that is exempt under French domestic law.
Article 23, which covers the assistance in the collection of taxes, is replaced, bringing it in line with Article 27 of the OECD Model.
Articles 25 and 25(a), which cover mutual agreement procedure and arbitration respectively, are replaced with a new single Article 25 in line with Article 25 of the OECD Model.
The protocol applies from 1 January 2016.
OECD Announces that Over 30 Countries to Sign Multilateral Agreement for the Exchange of CbC Reports
The OECD has issued a press release that over 30 countries are to sign the Multilateral Competent Authority Agreement for the exchange of Country-by-Country (CbC) reports on 27 January 2016.
22/01/2016 - Ministers and top tax officials from more than 30 countries will sign an international agreement at the OECD on Wednesday 27 January 2016 that will significantly advance the fight against corporate tax avoidance.
OECD Secretary-General Angel Gurría and French Finance Minister Michel Sapin will brief the media at 17:00 at the OECD, after which Mr. Sapin and representatives of more than 30 countries will sign the Multilateral Competent Authority Agreement (MCAA).
This is the first signing ceremony for adhesion to the MCAA, which will facilitate automatic exchange of Country-by-Country reporting called for in the OECD/G20 Base Erosion and Profit Shifting Project.
The MCAA will enable consistent and swift implementation of new transfer pricing reporting standards developed under Action 13 of the BEPS Action Plan, ensuring that tax administrations obtain a complete understanding of the way multinational enterprises (MNEs) structure their operations, while also ensuring that the confidentiality of such information is safeguarded.
Additional details will be published once available.
Tax Treaty Negotiations between Qatar and Turkey Concluded
Officials from Qatar and Turkey have concluded income tax treaty negotiations with the initialing of a treaty on 21 January 2016. The treaty must be signed and ratified before entering into force, and once in force and effective, will replace the 2001 income tax treaty between the two countries, which currently applies.