Worldwide Tax News
The Australia Taxation Office has issued Taxation Determination (TD) 2017/1 concerning the capital gains tax (CGT) treatment of intangible capital improvements to pre-CGT assets. Pre-CGT assets are those acquired before 20 September 1985 (the date Australia introduced its capital gains tax). Subject to certain conditions, when a capital improvement is made to a pre-CGT asset, the improvement is treated as a separate asset for CGT purposes.
According to TD 2017/1, intangible capital improvements can be treated as a separate CGT asset from the pre-CGT asset to which the improvements are made, provided that the relevant thresholds as per Section 108-85 of the Income Tax Act are satisfied. These threshold amounts are indexed annually. For 2015-16, the threshold amount is AUD 143,392.
Belgium's Ministry of Finance has published the individual income tax brackets and rates for 2017. Although the tax rates for each bracket remain the same, each bracket is increased as follows:
- up to EUR 11,070 - 25%
- over EUR 11,070 up to 12,720 - 30%
- over EUR 12,720 up to 21,190 - 40%
- over EUR 21,190 up to 38,830 - 45%
- over EUR 38,830 - 50%
In addition to the bracket threshold increases, the various allowances that apply in determining tax payable are generally increased for 2017 as well.
The EU Parliament Committee on Economic and Monetary Affairs (ECON) has published a briefing paper on the priorities of the ECOFIN Council under the Maltese presidency, which begin 1 January 2017. The priorities are set out as follows:
The Maltese Presidency will:
- Carry forward the cycle of economic policy coordination in line with the revamped European Semester, including achieving a political agreement on the Structural Reform Support Programme Regulation;
- Discuss the future architecture of the Economic and Monetary Union (EMU), based on the Commission white paper (expected in March 2017);
- Continue to push forward the Action Plan on Capital Markets Union, including common rules on securitization, revision of the European Venture Capital and European Social Entrepreneurship Funds;
- Make progress on the legislative proposals on banking, including amending the Capital Requirements Directive, the Capital Requirements Regulation, the Bank Recovery and Resolution Directive and the Single Resolution Mechanism Regulation, which include the EU’s implementation of international standards;
- Continue the work on the legislative proposal on Central Counterparties and initiate work on the review of the European Market Infrastructure Regulation;
- Continue "constructive work" at the technical level on the European Deposit Insurance Scheme (EDIS) while aiming to progress on the risk reduction measures in the banking proposals (see above);
- Carry forward work on a number of ongoing taxation files, including amendment to the Anti-Tax Avoidance Directive; an initiative on dispute resolution mechanism; the re-launch of the Common Consolidated Corporate Tax Base; the e-commerce proposals; and the reduced rates on e-publications proposals; and
- Seek to conclude the negotiations on the proposal amending the 4th Anti-Money Laundering Directive.
Furthermore, the European Fund for Strategic Investment 2.0 and the European Investment Bank (EIB) External Lending Mandate are priority files that will be worked on together with the European Parliament during the Maltese Presidency and all efforts will be made to ensure a political agreement.
Click the following link for the full briefing paper.
The South African Revenue Service (SARS) has published the 2016 Amendments Acts that were promulgated on 19 January 2017. The Amendment Acts include:
- The Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2016 (Act No. 13 of 2016);
- The Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Act, 2016 (Act No. 14 of 2016);
- The Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016); and
- The Tax Administration Laws Amendment Act, 2016 (Act No. 16 of 2016).
Some of the main measures include:
- Rules in relation to the special voluntary disclosure program, which already commenced 1 October 2016 and runs through 30 June 2017 (previous coverage);
- Extension of the Employment Tax Incentive through 28 February 2019 and extension of the Learnership Tax Incentive to 1 April 2022;
- Changes to the anti-avoidance rules dealing with cross-border hybrid debt instruments so that the reclassification of interest payments as dividends only applies for instruments issued by South African residents, and instruments solely attributable to a permanent establishment in South Africa of a non-resident or a controlled foreign company whose profits are attributed to a South African resident (changes are meant to address abuses of the reclassification rules by non-residents and are effective from 24 February 2016) (previous coverage);
- New rules effective 1 March 2017 in relation to a loan or credit advanced to a trust by a connected person (natural person or through a connected company), which include that:
- No deduction, loss, allowance or capital loss may be claimed in respect of (a) a disposal, including by way of a reduction or waiver; or (b) the failure, wholly or partly, of a claim for the payment, of any amount owing in respect of a loan, advance or credit to a trust; and
- If a trust incurs no interest in respect of a loan, advance or credit, or incurs interest at a rate lower than the official rate of interest, the interest-free or low-rate loan, advance or credit is treated as a donation in the hands of the lender, as opposed to deemed income (the amount is the difference between the amount actually incurred and the amount that would be incurred based on the official rate of interest for the year);
- An increase in the inclusion rate for capital gains from 33.3% to 40% for individuals and from 66.6% to 80% for companies, resulting in a maximum effective capital gains tax rate of 16.4% for individuals and 22.4% for companies;
- Adjustments to the progressive brackets for qualifying small companies as follows:
- up to ZAR 75,000 - 0%
- over ZAR 75,000 up to 365,000 - 7%
- over ZAR 365,000 up to 550,000 - 21%
- over ZAR 550,00 - 28%
- Adjustments to the individual income tax brackets as follows:
- up to ZAR 188,000 - 18%
- over ZAR 188,000 up to 293,600 - 26%
- over ZAR 293,600 up to 406,400 - 31%
- over ZAR 406,400 up to 550,100 - 36%
- over ZAR 550,100 up to 701,300 - 39%
- over ZAR 701,300 - 41%
The corporate and individual income tax rates/brackets apply for the 12 month periods ending 31 March and 28 February 2017 respectively. The changes in the inclusion rates for capital gains apply in respect of years of assessment commencing on or after 1 March 2016.
Corrections to the U.S. IRS final and temporary regulations concerning the treatment of certain interests in corporations as stock or indebtedness (TD 9790) have been published in the Federal Register. The final and temporary regulations, which are meant to address corporate inversions and earnings stripping, were published 21 October 2016 (previous coverage). The correcting documents provide correct errors in the final and temporary regulations that may prove to be misleading and need to be clarified.
German Cabinet Adopts Draft Law Limiting Deductions of Related Party Royalty Payments Benefiting from Harmful IP Regimes
On 25 January 2017, The German Federal Cabinet announced the adoption of the draft law targeting profit shifting by multinational groups through royalty payments (previous coverage). The law includes measures to limit the deduction of royalty payments to related parties if the income is taxed at a rate of less than 25% as a result of the benefits of an IP regime not in compliance with the nexus approach developed as part of BEPS Action 5. The limits would also apply to structures involving intermediary companies. As provided in the draft law, also published 25 January, the non-deductible portion of such royalty expenses is equal to (25% - the actual tax rate on the income) / 25%.
Click the following links for the Federal Cabinet announcement (German language) and a release from the Ministry of Finance (German language), which includes a link to the draft law. Subject to legislative approval, the deduction limits will apply from 2018.
The Norwegian tax administration has published a report on the taxation of the sharing economy. According to the press release for the report, the tax administration proposes:
- The introduction of reporting requirements for sharing economy companies;
- The introduction of a simple framework for the determination of business activities, including a possible threshold equal to the VAT registration threshold as well as other potential safe harbor limits; and
- Changes in the current rules for the rental of own homes (currently exempt in most cases) to distinguish between different situations.
Click the following link for the press release and report (Norwegian language).
The protocol to the 2000 income tax treaty between Armenia and Belarus entered into force on 26 December 2016. The protocol is the first to amend the treaty, and includes:
- Amendments to Article 2 (Taxes Covered) with respect to Armenian taxes;
- Amendments to Article 3 (General Definitions) with respect to the definition of the terms competent authority, enterprise, entrepreneurial activity, professional services, and place of effective management;
- Amendments to Article 4 (Resident) to provide reference to place of effective management in determining residence;
- Amendments to Article 6 (Income from Immovable Property) regarding the definition of the term immovable property;
- Amendments to Article 12 (Royalties) to add payments for the use of, or the right to use, computer programs within the scope of royalties;
- Amendments to Article 13 (Capital Gains) to provide for the taxation of gains by a Contracting State that are derived from the alienation of shares or other interests in a company deriving more than 50% of their value from immovable property situated in that State; and
- The replacement of Article 26 (Exchange of Information) to bring it line with the OECD standard for information exchange.
The protocol applies from 1 January 2017.
Switzerland-Australia-Canada-Guernsey-Iceland-Isle Of Man-Japan-Jersey-Norway-Korea, Rep of-European Union
Swiss Agreements for Automatic Exchange of Financial Account Information in Force with Nine Jurisdictions and the EU
According to an update from the Swiss government, the agreements for the automatic exchange of financial account information with nine jurisdictions and the EU entered into force on 1 January 2017. The agreements are with Australia, Canada, Guernsey, Iceland, Isle of Man, Japan, Jersey, Norway, South Korea, and the EU (applies for all 28 EU Member States). Switzerland will start collecting data in 2017 and exchange it for the first time in 2018.