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Approved Changes (1)

Switzerland

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Switzerland Related Party Interest Rate Safe Harbor Limits for 2015

The Swiss Federal Tax Administration has published the minimum and maximum interest rate safe harbor limits for shareholder and related party financing for 2015. The rates depend on whether the financing is in Swiss francs or in a foreign currency.

Swiss Francs Financing

  • Loans to shareholders or related parties:
    • Financed through equity - minimum 0.25%
    • Financed through debt - actual interest expense plus 0.50% on loans up to CHF 10 million, and 0.25% on amounts exceeding CHF 10 million
  • Loans from shareholders or related parties:
    • Real estate loans - at most 1% to 2.25% depending on loan type
    • Operations loans - for loans up to CHF 1 million, the rate is 3.0% for commercial and industrial companies, and 2.5% for holding and asset management companies; for amounts exceeding CHF 1 million, the rate is 1% for commercial and industrial companies and 0.75% for holding and asset management companies

Foreign Currency Financing (to or from Shareholders or Related Parties)

  • Financed through equity - 1.0% if in EUR, 2.25% if in USD, and up to 7.5% for other currencies
  • Financed through debt - actual interest expense plus 0.50%, with a minimum of 1.0% if in EUR, 2.25% if in USD, and up to 7.5% for other currencies

The safe harbor rates may be deviated from if it can be shown the rate is appropriate given the circumstances and is at arm's length. If the rates are deviated from and not shown to be at arm's length, excess interest paid will be treated as a hidden profit distribution subject to tax.

Proposed Changes (3)

Puerto Rico

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Puerto Rico's Proposed Corporate and Individual Income Tax Changes

As reported earlier, Puerto Rico has proposed broad tax reform including changes in corporate and individual income tax. The changes for individual income tax include a reduction in the number of individual income tax brackets, and an overall reduction in rates and a greater exemption. The proposed brackets and rates are as follows:

  • up to USD 40,000 - 0%
  • USD 40,001 up to 125,000 - 15%
  • USD 125,001 up to 200,000 - 20%
  • USD 200,001 and over - 30%

In regard to corporate income tax, it's been proposed that the standard rate be increased to 30%, while the application of the gradual surtaxes be abolished. In addition, the alternative minimum tax rate would be reduced to 25%.

The legislation for the tax reform is currently pending approval, and if enacted could apply as soon as 1 April 2015.

South Africa

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South Africa to Adjust Lower Tax Bracket for Small Business Corporations

As part of South Africa's recently delivered 2015 Budget, the lowest tax bracket for qualifying small business corporations is increased from ZAR 70,700 to ZAR 73,650. The higher brackets will not be changed. The new brackets will apply for any year of assessment ending in the 12-month period ending 31 March 2016 as follows:

  • up to ZAR 73,650 - 0%
  • ZAR 73,651 up to 365,000 - 7%
  • ZAR 365,001 up to 550,000 - 21%
  • ZAR 550,001 and over - 28%

Click the following link for a previous article on the 2015 Budget changes.

United States-OECD

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U.S. Planning to Meet Proposed OECD Deadline for BEPS Country-by-Country Reporting

According to recent reports, the U.S. Treasury is currently planning to introduce a filing requirement for large U.S. based multinationals in line with the country-by-country (CbC) reporting requirements introduced by the OECD as part of its Base Erosion and Profit Shifting (BEPS) Project. Based on the recently issued OECD guidelines concerning country-by-country reporting, the first report should be filed for fiscal years beginning on or after 1 January 2016, and it is expected that the U.S. will follow the threshold for filing as provided in the guidelines, which is global turnover over EUR 750 million (~USD 839.3 million). Once implemented, the U.S. will also be required to exchange the information provided in the CbC report with other participating countries in which a U.S. based multinational operates.

Prior to implementation, there are a number of issued to be resolved, including whether the IRS has the legal authority to collect and exchange the information required in the CbC report, and how the information will be kept confidential. According to officials from the IRS, the legal authority to collect and exchange the information is in place, but may need additional regulatory guidance. In regard to keeping the CbC report information confidential when exchanging with other countries, the work will involve looking at individual countries domestic laws and procedures for collecting and keeping information confidential, as well as possibly sending teams to speak with each country directly as is done for FATCA.

Additional details of the U.S. implementation of CbC reporting requirements will be published once available.

Treaty Changes (3)

Belgium-Brazil

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SSA between Belgium and Brazil Comes into Force in Brazil

On 12 February 2015, Brazil published in the Official Gazette the presidential decree enacting the social security agreement with Belgium. Although the agreement entered into force 1 December 2014 in Belgium following the exchange of ratification instruments, in respect of Brazil, such international agreements are not officially in force in the country until the presidential decree is published.

The agreement, signed 4 October 2009, is the first of its kind between the two countries and generally applies from the dates of its entry into force.

Belgium-Uzbekistan

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Protocol to the Tax Treaty between Belgium and Uzbekistan Signed

On 18 February 2015, official from Belgium and Uzbekistan signed a protocol to the 1996 income and capital tax treaty between the two countries. The protocol amends the definition of competent authority in the case of Belgium, and replaces Article 26 Exchange of Information, bringing it line with the OECD standard for information exchange. It is the second protocol to amend the treaty.

The protocol will enter into force 15 days following the exchange of the ratification instruments, and will apply from 1 January of the year following its entry into force.

France-Canada

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France Approves New SSA with Canada

On 19 February 2015, the French National Assembly approved a new social security agreement (SSA) with Canada. The agreement, signed 14 march 2013, is the second SSA between the two countries.

The agreement will enter into force on the first day of the fourth month following the exchange of the ratification instruments. Once in force and effective, the new agreement will replace the SSA signed by Canada and France in 1979, which is currently in force.

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