Worldwide Tax News
Alberta, New Brunswick, Newfoundland and Labrador, and Prince Edward Island 2016 Budget Tax Rate Changes
The following are summaries of the tax rate changes included in the recent 2016 budgets of Canadian provinces of Alberta, New Brunswick, Newfoundland and Labrador, and Prince Edward Island.
The small business corporate tax rate is reduced from 3% to 2% for the first CAD 500,000 in qualifying active income from 1 January 2017, while the standard corporate tax rate will remain at 12% (27% including federal corporate tax).
In addition to the earlier announced increase in the standard corporate tax rate to 14% (29% including federal corporate tax), New Brunswick has also reduced the small business corporate tax rate from 4% to 3.5% for the first CAD 500,000 in qualifying active income from 1 April 2016.
The personal income tax rates are also adjusted, with the elimination of the top 25.75% bracket for income over CAD 250,000 and a reduction in the rate for income over CAD 150,000 from 21% to 20.3% from 2016. Combined with federal personal income tax, the changes result in a top rate of 53.3%.
The standard corporate tax rate is increased from 14% to 15% effective from 1 January 2016 (30% including federal corporate tax), and the provincial portion of HST will be increased from 8% to 10% effective 1 July 2016 (15% including federal portion).
Personal Income Tax Rates are increased for 2016 and 2017 as follows:
- up to CAD 35,148 - 8.2% (2016) - 8.7% (2017)
- over CAD 35,148 up to 70,295 - 13.5% (2016) - 14.5% (2017)
- over CAD 70,295 up to 125,500 - 14.55% (2016) - 15.8% (2017)
- over CAD 125,500 up to 175,700 - 15.8% (2016) - 17.3% (2017)
- over 175,700 - 16.8% (2016) - 18.3% (2017)
Combined with federal personal income tax, the changes result in top rates of 49.8% in 2016 and 51.3% in 2017.
The provincial portion of HST will be increased from 9% to 10% effective 1 October 2016 (15% including federal portion).
The French tax authorities have reportedly issued a notice of assessment to McDonald's France for approximately EUR 300 million in unpaid tax. The assessment follows an investigation into McDonald's tax practices that began in 2013, which focused primarily on McDonald's France's royalty payments to Luxembourg-based holding company McD Europe Franchising Sàrl for the use of the McDonald's brand and franchising rights.
McDonald's, which has denied any wrongdoing, is also the subject of a formal probe by the European commission into tax rulings provided by Luxembourg that provided for limited taxation on royalty income and are suspected of being in breach of EU State aid rules (previous coverage).
Portugal's individual income tax brackets for 2016 have been adjusted as follows:
- up to EUR 7,035 - 14.5%
- over EUR 7,035 up to 20,100 - 28.5%
- over EUR 20,100 up to 40,200 - 37.0%
- over EUR 40,200 up to 80,000 - 45.0%
- over EUR 80,000 - 48.0%
The applicable rates for each bracket are unchanged.
According to recent reports, the increase in Sri Lanka's value added tax (VAT) rate from 11% to 15% is scheduled to take effect on 2 May 2016. The increase was announced in March 2016, and was to apply from 1 April, but was delayed. The increase follows the reversal of a change from the single VAT rate to a 12.5% rate for services and an 8% rate for goods in January.
Trinidad and Tobago's Minister of Finance Colm Imbert has announced plans to introduce a 7% tax to be levied on purchases from foreign online retailers. The tax is in addition to the current duties and value added tax that are due when goods arrive in the country, and is to apply from September 2016. The actual collection mechanisms are not yet finalized, but will involve coordination with the relevant banks and credit card companies involved in the purchases. Additional details will be published once available.
The Kazakhstan government is currently planning a number of tax reforms, including changes to improve the tax system overall and to meet World Trade Organization (WTO) obligations (Kazakhstan became a full WTO member in November 2015). Reforms the government is considering include:
- Consolidating the Tax Code and the Customs Code into a single code;
- Introducing three separate tax regimes, including a general regime, a special regime for SMEs and agricultural enterprises, and a special regime for individual entrepreneurs;
- Introducing progressive individual income tax rates;
- Reviewing and abolishing all tax incentives that are ineffective or not in accordance with WTO rules;
- Replacing value added tax with a sales tax; and
- Implementing tax administration measures to improve collection of unpaid taxes and customs duties and the monitoring of large taxpayers.
The reform measures must be drafted into proposed legislation, and if adopted and signed into law, are to apply from 1 January 2017.
The Norwegian government has proposed amendments to the value added tax (VAT) Act that would relax VAT representative requirements for non-resident businesses. Under the current rules, non-residents without a place of business in Norway that make taxable supplies in the country are required to appoint a representative in order to fulfill their VAT obligations. Under the proposed amendments, non-residents that are resident in EU or EEA counties will have the option to instead register for VAT directly provided their country of residence has an agreement for the exchange of information with Norway.
On 23 April 2016, the Finnish Ministry of Finance announced that negotiations for a new income tax treaty with Portugal have concluded. The conclusion follows several years of negotiation to replace the current 1970 income tax treaty, including recent preparations by Finland to terminate the current treaty unless negotiations progressed. The new treaty must be signed and ratified before entering into force, and once in force and effective will replace the 1970 treaty.
Additional details will be published once available.
On 13 April 2016, a decree authorizing the Hungarian Minister for National Economy to negotiate and sign an income tax treaty with Ecuador was published in the Official Gazette. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.
On 6 April 2016, officials from the Netherlands and Norway signed a memorandum of understating (MoU) on the automatic exchange of information in tax matters. According to the MoU, the tax authorities of the two sides will automatically exchange information concerning:
- Immovable property;
- Income from independent personal services;
- Income consisting of salaries, wages and other similar remunerations;
- Directors' fees;
- Income of artists and sportsmen;
- Income from pensions, annuities, social security benefits and other similar remunerations;
- Payments to students for education and training;
- Other income; and
- Changes of tax residency.
The information is to be provided periodically and at least once per calendar year.
The MoU applies from the date of its signature regarding information from the 2014 and subsequent calendar years.