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Approved Changes (2)

Panama

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Panama Publishes Requirements for Claiming Tax Treaty Benefits

On 6 August 2015, Panama published Resolution No. 201-12083 of 29 July 2015 in the Official Gazette. The resolution sets out the requirements for claiming tax treaty benefits, and replaces resolution No. 201-10861 of 26 August 2013.

According to the new resolution, a written request for tax treaty benefits may be submitted to the tax authority up to 30 days prior to a transaction. A request must be submitted for each transaction and income type per beneficiary. For recurring transactions, a single request per fiscal period is sufficient as long as indication is given in the request that it is for a recurring transaction.

The request must include the following information and documentation:

  • Identification of the beneficiary;
  • Certificate of residence of the beneficiary issued by the country of residence;
  • A description of the transaction;
  • The legal reasoning supporting the claim for treaty benefits including the type of income and applicable provisions in the treaty;
  • A copy of the Public Registry Certificate of the applicant;
  • A copy of the ID or passport of the applicant or legal representative;
  • A notarized power of attorney, if the request is made by a legal representative; and
  • Proof of payment for the transaction

If a request is incomplete, the required information/documentation must be submitted within two months. Specific cases where a request will be rejected include:

  • The beneficiary's tax residence certificate has expired;
  • The beneficiary indicated cannot be proven as such; or
  • The legal reasoning does not demonstrate the correct application of the tax treaty benefits.

The new requirements apply from 7 August 2015.

United Kingdom

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UK Publishes Updated Guidance on VAT Partial Exemption

On 25 August 2015, the UK HMRC published updated guidance for calculating partial exemptions in VAT returns - the VAT Partial Exemption Toolkit (dated July 2015). The guidance covers several aspects of claiming input tax when making both taxable and exempt supplies, including a checklist for VAT partial exemption, and explanations and methods of mitigating risks concerning:

  • Recognition of the need for a partial exemption calculation;
  • Attribution;
  • Apportionment;
  • The annual adjustment; and
  • The Capital Goods Scheme.

The toolkit is primarily aimed at tax agents and advisors, but may be used by anyone completing a VAT return.

Click the following link for the VAT Partial Exemption Toolkit on the GOV.UK website.

Proposed Changes (3)

New Zealand

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New Zealand Property Tax Bill Submitted to Parliament

On 24 August 2015, new legislation was submitted to the New Zealand parliament, the Taxation (Bright-line Test for Residential Land) Bill. According to a statement from Inland Revenue, the bill includes a new “bright-line” test and other measures to improve compliance with the residential land sale rules.

Under the test, gains on the sale of residential land by both residents and non-residents are subject to tax if purchased and sold within two years. Residential land is defined as:

  • Land that has a dwelling on it;
  • Land for which the owner has an arrangement to erect a dwelling; or
  • Land that because of its area and nature is capable of having a dwelling erected on it.

The test does not apply to land used predominately as business premises or farmland. In addition, three specific exemptions are provided, including:

  • A disposal of property that is the main home of the transferor (in certain circumstances);
  • A disposal of inherited property; and
  • A transfer under a relationship property agreement.

The bill also includes certain anti-avoidance measures and rules limiting the use of losses. Any losses resulting from the bright-line test are ring-fenced and may only offset taxable gains arising under the land sale rules. In addition, any bright-line test losses arising from a transfer of property to an associated person may not be recognized.

Once approved, the new rules will apply for property purchased on or after 1 October 2015.

Click the following link for the Taxation (Bright-line Test for Residential Land) Bill and additional information on the Inland Revenue Tax Policy website.

Romania

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Romanian VAT Cut to 20% Uncertain

Despite recently confirming plans to cut the country's VAT rate to 20% in 2016 (previous coverage), the Romanian parliament has reportedly failed to reach final agreement on the change. The matter will be further debated when parliament reconvenes in September and it is uncertain when the VAT cut will be adopted or what the rate will be.

Untd A Emirates

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UAE Provides Latest Developments on the Implementation of VAT and Corporate Tax

On 18 August 2015, the United Arab Emirates (UAE) Ministry of Finance published an announcement on the latest developments for the implementation of value added tax (VAT) and corporate tax in the country.

Concerning VAT:

  • The UAE has been conducting studies on the implementation of a VAT draft law, along with the other GCC countries (Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia);
  • The draft law for implementation of VAT is pending final agreement between GCC countries on the tax rate and a list of tax exemptions;
  • Once final agreement is reached and the relevant laws approved, the UAE will issue an announcement and affected sectors and entities will have 18 months to prepare to meet the VAT obligations.

Concerning corporate tax:

  • The UAE has conducted a number of studies on the effects of implementing a corporate tax and is currently reviewing the draft laws and determining the rate that will be imposed;
  • Once the draft laws are finalized and approved, affected entities will have 12 months to prepare to meet the corporate tax obligations.

Click the following link for the announcement on the UAE Ministry of Finance website.

Treaty Changes (1)

Ireland-Ukraine

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Tax Treaty between Ireland and Ukraine has Entered into Force

The income and capital tax treaty between Ireland and Ukraine entered into force on 17 August 2015. The treaty, signed 19 April 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Irish income tax, universal social charge on income, corporation tax, and capital gains tax. It covers Ukrainian tax on profits of enterprises and income tax on individuals.

Natural Resources PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise of one Contracting State carries out activities in the other State in connection with the exploration or exploitation of the sea bed and the sub-soil and their natural resources situated in the other State.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
  • Interest - 5% on interest paid in respect of a sale on credit of industrial, commercial or scientific equipment; or in respect of any loan granted by a bank; otherwise 10%
  • Royalties - 5% on royalties paid in respect of any copyright of scientific work, any patent, trade mark, secret formula, process or information concerning industrial, commercial or scientific experience; otherwise 10%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of shares in a company or interest in a partnership, trust, or any other body the assets of which consist principally of immovable property situated in the other State (an exemption applies for shares quoted on a recognized stock exchange);
  • Gains from the alienation of stock, participation, or other rights in the capital of a company which is a resident of the other State if the recipient of the gains, during the 12-month period preceding such alienation, held a direct or indirect participation of at least 25% of the capital of that company (an exemption applies where such a gain has been derived as a consequence of a reorganization, merger or division of companies or similar transaction); and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

MFN Clause

A protocol to the treaty, signed the same date, includes the provision that if Ukraine should agree to an exemption or lower rate of withholding tax in any other tax treaty for income covered by Articles 11 (Interest) or 12 (Royalties) of the Ireland-Ukraine treaty, then those articles may be renegotiated  to provide such exemption or lower rate.

Effective Date

The treaty applies from 1 January 2016.

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