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Worldwide Tax News

Approved Changes (1)

Argentina

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Argentina Introduces Venture Capital Incentive and Simplified Company Form to Support Entrepreneurship

Argentina's Law on support for entrepreneurship (Law 27349) was published in the Official gazette on 12 April 2017 and entered into force on 21 April. The main tax-related provision of the law is an incentive for venture (entrepreneurial) capital investments. The incentive provides that taxpayers may deduct 75% of venture capital investments made in qualifying start-ups and other qualifying companies if incorporated in the past seven years. For investments in less developed areas with less access to financing, the deduction is increased to 85%. The deduction amount is limited to 10% of net taxable income per year, although any excess may be carried forward for up to five years following the year in which the investment was made. The deduction will be lost if the investment is not maintained for at least two years (including year of investment). If the investor requests a full or partial repayment of the investment within the two year limit, tax will become due with interest for the amount that had been effectively deducted.

The Law also provides for a new company form meant to reduce the administrative burden of establishing and operating a business: the simplified joint-stock company (Sociedad por acciones simplificada - SAS). An SAS may be formed by one or more natural or legal persons, with their liability limited to their contribution. They may be established through digital means with the registration process to be completed in as little as 24 hours, provided standard model constitution documents are used.

Proposed Changes (3)

European Union

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EU Council Adopts Directive on the Protection of EU Financial Interests

On 25 April 2017, the Council of the EU adopted a Directive on the fight against fraud to the Union's financial interests by means of criminal law. The directive provides common definitions of a number of offences against the EU budget. Those offences include cases of fraud and other related crimes such as active and passive corruption, the misappropriation of funds, money laundering, and others. Serious cases of cross border VAT fraud are also included in the scope of the Directive when above a threshold of EUR 10 million. For criminal offenses, the Directive provides that Member States should impose a penalty of imprisonment with a maximum of at least four years.

The Directive must now be voted on by the EU Parliament and will enter into force 20 days after it is published in the Official Journal of the EU. Member States will have 24 months to implement the provisions at national level.

Click the following link for the text of the Directive and a related press release.

United Kingdom

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Slimmed Down UK Finance Bill 2017 Passes House of Commons

A slimmed down version of the UK Finance (No. 2) Bill 2017 has passed the House of Commons and is now before the House of Lords. Going from 762 pages to 148 pages, this version of the bill maintains most of the simpler and standard provisions, such as the setting of the income and corporation tax charge and rates, while several more complex measures are removed. This includes several corporation/business tax measures, which are expected to be reintroduced after the 8 June snap general election, including the new rules on:

  • Carried-forward losses;
  • Corporate interest restriction;
  • Profits from the exploitation of patents: cost-sharing arrangements;
  • Hybrids and other mismatches; and
  • Digital tax record requirements for smaller businesses (Making Tax Digital).

Although the measures are removed from the current version of the Finance Bill, the actual impact should be limited given that effective dates of the measures are already generally set for January or April 2017 and will apply retroactively. However, the controversial measures related to Making Tax Digital, which were scheduled to apply from April 2018, will likely be debated more thoroughly in parliament and are subject to change.

United States

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Principles of Trump U.S. Tax Reform Plan

On 26 April 2017, U.S. National Economic Director Gary Cohn and Treasury Secretary Steven Mnuchin held a briefing to unveil the principles and priorities of the Trump administration's tax reform plan, which includes overall simplification and lower rates. With regard to business tax reform, main points include:

  • Lowering the business tax rate to 15%, including for pass-through companies;
  • Changing to a territorial tax system; and
  • Providing a one-time tax on profits held overseas (at a yet to be determined competitive rate).

With regard to individual tax reform, main points include:

  • Reducing the seven individual tax brackets to three tax brackets of 10%, 25%, and 35%;
  • Doubling the standard individual deduction;
  • Repealing the alternative minimum tax, the 3.8% net investment income tax, and the estate (death) tax; and
  • Eliminating most federal tax deductions, including for state and local income tax, while maintaining the mortgage interest and charitable deductions.

Click the following link for the text of the briefing on the tax reform plan. Details of the plan are to be developed throughout the month of May and will be published once available.

Treaty Changes (4)

Bahrain-Thailand

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Protocol to Tax Treaty between Bahrain and Thailand Signed

On 25 April 2017, officials from Bahrain and Thailand signed an amending protocol to the 2001 income tax treaty between the two countries. The protocol is first to amend the treaty, and must be finalized, signed, and ratified before entering into force. Additional details will be published once available.

Brazil

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Brazil Clarifies Transport Service Income Exempt from Withholding Tax under Tax Agreements

Brazil's Federal Revenue Department (RFB) has issued Interpretative Declaratory Act No. 4 of 13 April 2017, which clarifies the exemption from withholding tax on international transport service income under tax treaties or other transport tax agreements. Brazil applies a standard withholding tax of 15% on income paid abroad, and under various past rulings, the RFB has provided inconsistent interpretations on the types of transport related income that qualify as profit exempt under applicable tax agreements. The Interpretative Declaratory Act clarifies that income paid, credited, delivered, used, or remitted abroad for international transport service by Brazilian sources to nonresident transport companies should be interpreted as profit for the purpose of an applicable agreement, and therefore exempt from withholding tax. As an Interpretative Declaratory Act, the position may be applied retroactively.

Latvia-Andorra

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Latvia to Sign Tax Treaty with Andorra

According to a release from the Latvian Ministry of Foreign Affairs, Foreign Minister Edgars Rinkēvičs stated during a 24 April meeting with Andorran officials that Latvia is prepared to sign an income tax treaty. The treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Uzbekistan-Netherlands

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Uzbekistan Ratifies Pending Protocol to Tax Treaty with the Netherlands

On 19 April 2017, Uzbekistan published in the Official Gazette the decision for the ratification of the pending protocol to the 2001 income and capital tax treaty with the Netherlands. The protocol, signed 6 February 2017, is the first to amend the treaty (previous coverage). It will enter into force on the last day of the month following the month in which the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.

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