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Approved Changes (2)

Australia

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Australia Updates APA Overview and Replaces APA Practice Statement

On 21 July 2015, the Australian Taxation Office (ATO) updated its advance pricing arrangements overview and replaced the 2011 APA Practice Statement. The APA practice statement was replaced to reflect:

  • A principle-based approach;
  • A Streamlined process and practices to improve timeliness; and
  • A Reduction of red tape

According to the overview, the ATO has also established a new APA/MAP program management unit and appointed new Competent Authorities to strengthen the existing network. The management unit will be responsible for managing enquiries regarding the program, triaging and allocating applications, monitoring and administration of the program and continually developing procedures and processes.

Click the following links for the Advance pricing arrangements –overview and the Practice Statement Law Administration PS LA 2015/4 - Advance Pricing Arrangements

Russia

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Russia Issues Guidance on the Determination of CFCs and Controlling Persons

The Russian Ministry of Finance has recently issued guidance dated 30 June 2015, which clarifies the determination of controlled foreign companies (CFC) and controlling persons. Major reform of the Country's CFC rules was signed into law in November 2014 (previous coverage), and additional revisions were signed into law in June 2015.

Under the reform, the criteria for determining if a Russian resident is a controlling person (natural or legal) of a CFC are transitioned as follows:

  • In 2015, a Russian resident with 50% or greater participation in a foreign company will be deemed a controlling person; and
  • In 2016 and subsequent years, a Russian resident with 25% or greater participation in a foreign company will be deemed a controlling person, and 10% in the case of an aggregate participation of 50% or more in a foreign company by Russian residents

The recent guidance also states that if the above criteria are not met, a person may still be regarded as a controlling person if it exercises control over the company for its own benefit or for an individual. The exercise of control means the ability to exert decisive influence over a company's decisions on the distribution of its after-tax profits through direct or indirect participation in the company, through a contract providing such management control, or through another special relationship.  

For an unincorporated foreign structure, the exercise of control means the ability to exert decisive influence over the decisions of the person managing the assets of such a structure for the distribution of its after-tax profits to its participants or other beneficiaries.

Proposed Changes (1)

South Africa

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South Africa Issues Draft 2015 Taxation Laws Amendment Bill and Tax Administration Laws Amendment Bill for Public Comment

On 22 July 2015, the South African National Treasury issued the draft 2015 Taxation Laws Amendment Bill and Tax Administration Laws Amendment Bill for public comment. The Bills include the amendments needed to implement several of the tax measures included in the 2015 Budget. Rate related measures, however, are included in the Rates and Monetary Amounts and Amendment of Revenue Laws Bill (previous coverage).

Some of the main measures in the draft 2015 Taxation Laws Amendment Bill include:

  • Amending the rules regarding the special interest deduction for debt-financed acquisitions of controlling share interests;
  • Allowing real estate investments trusts (REIT) and controlled companies of a REIT to deduct tax deductible donations and foreign tax credits;
  • Disqualifying companies from special economic zone tax incentives if more than 20% of its deductible expenditure or gross income arises from transactions with connected persons;
  • Relaxing capital gains tax rules applicable to the cross issue of shares and introducing counter measures for tax-free corporate migrations;
  • Withdrawing special foreign tax credits for service fees sourced in South Africa;
  • Reinstating the controlled foreign company diversionary income rules; and
  • Allowing municipalities to demarcate more areas as Urban Development Zones

Some of the main measures in the draft 2015 Tax Administration Laws Amendment Bill include:

  • Enabling the collection of information by South African financial institutions and an associated obligation on the financial institutions to register with SARS;
  • Extending the period of limitations for issuance of assessments under narrow circumstances; and
  • Clarifying qualifying persons for voluntary disclosure, relaxing the requirements for voluntary disclosure and broadening the ambit of voluntary disclosure relief

Click the following links for the:

Comments on the draft legislation must be submitted by email to Nomalizo Bulisile at Nomalizo.bulisile@treasury.gov.za and Adele Collins at acollins@sars.gov.za by close of business on 24 August 2015.

Treaty Changes (4)

Japan-United Kingdom

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Exchange of Notes Regarding the Tax Treaty between Japan and the UK has Entered into Force

The exchange of notes regarding Article 7 (Business Profits) of the 2006 income tax treaty between Japan and the United Kingdom has entered into force. The exchange of notes makes effective Article 7 (Business Profits) of the treaty as amended by the 2013 protocol. The change will apply in Japan from 1 April 2016, and in the UK from 1 April 2016 for corporation tax and from 6 April 2016 for income and capital gains taxes.

Kenya-Netherlands

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Tax Treaty between Kenya and the Netherlands Signed

On 22 July 2015, officials from Kenya and the Netherlands signed 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.

San Marino-OECD

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San Marino Ratifies Mutual Assistance Convention

On 23 July 2015, San Marino ratified the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The convention as amended was signed by San Marino on 21 November 2013, and will enter into force in the country on the first day of the third month following the deposit of the ratification instrument.

Senegal-Turkey

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Senegal and Turkey Conclude Tax Treaty Negotiations

According to an announcement issued by the Turkish Revenue Administration, officials from Senegal and Turkey have concluded tax treaty negotiations with the initialing of an income tax treaty following the second round of negotiations held 8-10 July 2015. The treaty will be the first of its kind between the two countries, and must be signed and ratified before entering into force.

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