Worldwide Tax News
According to an email notice from the Australian Taxation Office (ATO), the ATO has decided to grant an extension for the lodgment of Country-by-Country (CbC) statements for the first reporting year (year ending 31 December 2016), with the deadline extended from 31 December 2017 to 15 February 2018. CbC Statements include the Local file, Master file, and CbC report. Details of the extension will be published on the ATO website in the coming days.
The Colombian tax authority (DIAN) has announced the adjusted tax value unit (UVT) value for 2018. The UVT value is set at COP 33,156 (~USD 11.12 Nov 2017), an increase from the 2017 value of COP 31,859. The UVT is used in Colombian tax regulations, including for incentives eligibility, tax penalties, and individual income tax brackets, as well as for transfer pricing documentation requirement thresholds, including for Local file, Master file, and Country-by-Country reporting. It is adjusted yearly based on the accumulated variation in the retail price index.
UK HMRC has published a policy paper on the new corporation tax installment payment requirements for very large companies, which will apply for accounting periods beginning on or after 1 April 2019 for companies with annual taxable profits of over GBP 20 million. Under the new rules, such companies will be required to make installment payments four months earlier than under current law, with payments due the 3rd, 6th, 9th, and 12th months of the current accounting period. Further, companies that are a member of a 51% group may also be subject to the new installment payment schedule. A company is a related 51% company of another if either company is a 51% subsidiary of the other or both are 51% subsidiaries of a third company. In such case, the threshold for earlier installment payments is GBP 20 million divided by the number of related 51% group companies plus 1. For example, if a company has three related 51% group companies, the threshold is GBP 5 million (GBP 20 million / (3+1).
Click the following link for the policy paper page, Corporation Tax: installment payments by very large companies, which also includes links to the regulations and additional technical guidance.
The U.S. IRS has released two international practice units concerning common ownership and control under IRC Section 482 (transfer pricing), including Common Ownership or Control Under IRC 482 - Inbound, and Common Ownership or Control Under IRC 482 - Outbound. Each practice unit covers the general determination of common ownership and control, with a focus on factors of control, including voting control, management control, acting in concert, and other control considerations.
International practice units are developed by the Large Business and International Division of the IRS to provide staff with explanations of general international tax concepts as well as information about specific transaction types. They are not an official pronouncement of law and cannot be used, cited, or relied upon as such.
Click the following link for the International Practice Units page on the IRS website.
According to a 23 November 2017 update from the OECD, Trinidad and Tobago has joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 108. As a member of the Framework, Trinidad and Tobago has committed to the implementation of the four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse), and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).
The UK Autumn Budget was delivered by Chancellor of the Exchequer Philip Hammond on 22 November 2017. Some of the main tax-related aspects of the Budget as summarized in the Budget overview of tax legislation and rates are as follows:
Measures as part of Finance Bill 2017-18 (will be published on 1 December 2017)
The government will legislate in both 'Finance Bill 2017-18' and 'Finance Bill 2018-19' to make technical amendments to the corporate interest restriction rules. This will ensure the regime works as intended. Certain of these amendments are treated as having effect on and after 1 April 2017, when the corporate interest restriction rules commenced. The remainder of the amendments will have effect on and after 1 January 2018.
Tax information and impact note (TIIN): Corporation Tax: amendments to the corporate interest restriction rules
The government will legislate in 'Finance Bill 2017-18' to restrict the amount of credit allowed, or deduction given, for foreign tax suffered by an overseas PE of a company, where the company has received relief in the foreign jurisdiction for the losses of the PE against profits other than those of the PE. The change will have effect on and after 22 November 2017.
The government will legislate in 'Finance Bill 2017-18' to make minor technical changes to the Hybrid and other Mismatches regime (Part 6A of Taxation (International and Other Provisions) Act 2010) to ensure that those rules operate as intended. The change in relation to taxes charged at a nil rate will have effect on and after 1 January 2018. The remaining changes will have effect on and after 1 January 2017.
The government will legislate in 'Finance Bill 2017-18' to increase the rate of the R&D expenditure credit from 11% to 12%, in order to support business investment in R&D. This change will have effect on and after 1 January 2018.
The government will legislate in 'Finance Bill 2017-18' to freeze indexation allowance on corporate Capital Gains for disposals on and after 1 January 2018. The allowance for subsequent disposals will be frozen at the amount that would be due based on the Retail Price Index for December 2017. The change will have effect for disposals on and after 1 January 2018.
The government will legislate in 'Finance Bill 2017-18' to correct an anomaly whereby a postponed tax charge may become payable when a new holding company is inserted directly above an overseas company to which a UK company has previously transferred the trade and assets of a foreign branch in return for shares. The change will have effect for disposals on and after 22 November 2017.
The government will legislate in 'Finance Bill 2017-18' to extend the scope of existing JSL rules to hold an online marketplace jointly and severally liable for:
- any future VAT that a UK business selling goods via the online marketplace fails to account for after HMRC has issued a notice to the online marketplace, ensuring that all sellers are in scope
- any VAT that a non-UK business selling goods via the online marketplace fails to account for, where the business was not registered for VAT in the UK and that online marketplace knew or should have known that that business should be registered for VAT in the UK
The government will also legislate in 'Finance Bill 2017-18' to require online marketplaces to ensure that VAT numbers displayed for third party sellers on their websites are valid. They will also be required to display a valid VAT number when they are provided with one by a third party seller operating on their platform. These requirements will be supported by a regulatory penalty. The changes will have effect on and after Royal Assent of Finance Bill 2017-18.
The government will legislate in 'Finance Bill 2017-18' to make two changes to the Double Taxation Relief Targeted Anti-Avoidance Rule (DTR TAAR). The first change will remove the need for HMRC to give a counteraction notice before the DTR TAAR applies. The second change will extend the scope of one of the categories of prescribed schemes to with the TAAR applies, to include tax payable by any connected persons. The first change will have effect on and after 1 April 2018 and the second change will have effect on and after 22 November 2017.
As announced at Autumn Budget 2017, the government will legislate in 'Finance Bill 2017-18' to amend the powers by which double taxation arrangements with other territories are given effect in the UK. The changes are being made to ensure that the powers are sufficient to give full effect to the Multilateral Convention to Implement Tax Treaty Related Measures to prevent BEPS (the MLI), which was signed by the UK in June 2017. The changes will have effect on and after Royal Assent of Finance Bill 2017-18.
Future tax changes
The government will increase the Income Tax Personal Allowance to GBP 11,850 for the tax year 2018 to 2019. The basic rate limit will also be increased to GBP 34,500 in 2018 to 2019. Changes to the basic rate limit will apply to England, Wales and Northern Ireland. Since April 2017, the Scottish Parliament sets the basic rate limit for Scotland. Taken together, these changes will increase the higher rate threshold, above which individuals in England, Wales and Northern Ireland pay income tax at 40%, to GBP 46,350 in 2018 to 2019. The increases are based on the September 2017 Consumer Prices Index and will be introduced by statutory instrument later in 2017.
The rates and brackets for taxable income exceeding the Personal allowance will be as follows for the tax year 2018 to 2019:
- Basic rate (20%) - GBP 1 to 34,500
- Higher rate (40%) - GBP 34,501 to 150,000
- Additional rate (45%) - over GBP 150,000
The government will publish a consultation on 1 December 2017 on the design of rules expanding the circumstances in which a royalty payment to persons not resident in the UK has a liability to Income Tax. Legislation will be introduced in 'Finance Bill 2018-19', and the changes will have effect from April 2019.
The government will pilot a new Advanced Clearance service for R&D expenditure credit claims, to provide pre-filing agreement for 3 years. The government will also launch a campaign to increase awareness of eligibility for R&D tax credits among SMEs, working with businesses that develop and use key emerging technologies to ensure that there are no barriers to them claiming R&D tax credits.
The government will legislate in 'Finance Bill 2018-19' to introduce transferable tax history for oil and gas companies. This follows publication of a discussion document at Spring Budget 2017 on tax issues for late-life oil and gas assets, and the establishment of an expert panel to examine the issue. This change will have effect on and after 1 November 2018.
The government will legislate so that non-UK resident companies that carry on a UK property business or have other UK property income will be charged to corporation tax, rather than being charged to income tax as at present. A non-UK resident company that has chargeable gains on the disposal of UK residential property will also be charged to corporation tax, instead of capital gains tax as at present. This follows consultation published in March 2017. The government plans to publish draft legislation for consultation in summer 2018. The change will have effect on and after 6 April 2020.
As announced at Autumn Budget 2017, the government has published a consultation on taxing non-residents' gains on immovable property. This measure will broaden the UK's tax base to include disposals of UK commercial property by non-residents, both directly and indirectly, and will bring all companies into charge on disposals of residential property, and all persons into charge on indirect disposals of residential property. A table of impacts is included the consultation document. Legislation will be introduced in 'Finance Bill 2018-19'. The changes will have effect on and after 1 April 2019 for companies, and on and after 6 April 2019 for those in charge to capital gains tax. An anti-forestalling measure to support this reform will have effect on and after 22 November 2017.
The VAT registration and deregistration thresholds will not be uprated for a period of two years. There will be no revisions to existing legislation and no new legal provisions will be introduced.
Therefore legislation will continue as follows:
- the taxable turnover threshold that determines whether a person must be registered for VAT will remain at GBP 85,000
- the taxable turnover threshold that determines whether a person may apply for deregistration will remain at GBP 83,000
- the registration and deregistration threshold for relevant acquisitions from other EU Member States will also remain at GBP 85,000
The two year period ends on 31 March 2020. The government will consult on the design of the VAT threshold.
The government will publish on 1 December 2017 a response document to the call for evidence to develop a split payment model that was launched after Spring Budget 2017. A split payment model would allow VAT to be extracted from online payments in real time. The responses to the call for evidence were broadly positive about the concept but highlighted the complexities of implementation. The response document will set out plans for further engagement with external stakeholders, in preparation for a full consultation in 2018.
Click the following link for the Autumn Budget 2017 webpage for more information.
The U.S. Senate Finance Committee has published the full legislative text of its version of the Tax Cuts and Jobs Act (previous coverage). The legislative text of the bill has been made available on the Committee's tax reform webpage, which also includes links to a section-by-section summary of the reform plan and other related information. The tax reform bill will go to the Senate floor this week and, if approved, will then need to be reconciled with the House version that was passed on 16 November.
On 21 November 2017, Bahrain's Council of Representatives approved the draft law for the ratification of the pending protocol to the 2001 income and capital tax treaty with the Philippines. The protocol clarifies that the State of Bahrain became known as the Kingdom of Bahrain as of 14 February 2002 and adds a new Article 26A (Exchange of Information) in line with the OECD standard for information exchange. The protocol will enter into force once the ratification instruments are exchanged and will generally apply from that date.
On 22 November 2017, the Bulgarian government announced its approval of a draft income tax treaty with Saudi Arabia for signature. The treaty will be the first of its kind between the two countries, and must be signed and ratified before entering into force. Details of the treaty will be published once available.
The OECD has announced that on 21 November 2017, the OECD Council approved the 2017 Update to the OECD Model Tax Convention. Changes to the Model Convention as summarized in the OECD announcement are as follows.
The 2017 Update primarily comprises changes to the OECD Model that were developed through the OECD/G20 BEPS Project. The introduction to the contents of the 2017 Update describes in detail all of these changes, which include, in particular:
- changes to the Title and Preamble of the OECD Model, changes to the section of the Commentary on Article 1 (Persons covered) on "Improper use of the Convention", and a new Article 29 (Entitlement to Benefits), which includes in the OECD Model a limitation-on-benefits (LOB) rule (simplified and detailed versions), an anti-abuse rule for permanent establishments situated in third States, and a principal purposes test (PPT) rule (these changes were contained in the Report on Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances) or were finalised as part of the follow-up work on Action 6);
- changes to Article 5 (Permanent establishment) and its Commentary resulting from the Report on Action 7 (Preventing the Artificial Avoidance of Permanent Establishment Status) and follow-up work on Action 7; and
- changes to Article 25 (Mutual agreement procedure) and to the Commentaries on Articles 2, 7, 9 and 25 contained in the Report on Action 14 (Making Dispute Resolution Procedures More Effective) or which that Report indicated would be developed as part of the follow-up work on Action 14 — changes related to the OECD Model MAP arbitration provision and its Commentary are intended to reflect the MAP arbitration provision developed in the negotiation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) adopted on 24 November 2016.
The 2017 Update also includes certain other changes to the OECD Model that were previously released for comments and were not developed as part of the work on the treaty-related BEPS measures. These changes include:
- changes to the Commentary on Article 5 integrating the changes resulting from the work on Action 7 of the BEPS Project with previous work on the interpretation and application of Article 5. The proposals that resulted from that earlier work – which was based on the pre-2017 Update version of Article 5 – were originally published in an October 2011 discussion draft, discussed at a 7 September 2012 public consultation and subsequently released in a revised October 2012 discussion draft; and
- changes to Article 8 (International shipping and air transport), related changes to subparagraph 1 e) of Article 3 (the definition of "international traffic") and paragraph 3 of Article 15 (concerning the taxation of the crews of ships and aircraft operated in international traffic), and consequential changes to Articles 6, 13 and 22. The changes include related Commentary changes (these changes were released in a November 2013 discussion draft).
The 2017 Update additionally includes the following four changes that were included in an 11 July 2017 public release:
- changes to the Commentary on Article 4 (Resident) related to the issue whether a house rented to an unrelated person can be considered to be a "permanent home available to" the landlord for purposes of the tie-breaker rule in Article 4(2) a);
- changes to the Commentary on Article 4 intended to clarify the meaning of "habitual abode" in the tie-breaker rule in Article 4(2) c);
- the addition of a new paragraph to the Commentary on Article 5 which indicates that registration for the purposes of a value added tax or goods and services tax is, by itself, irrelevant for the purposes of the application and interpretation of the permanent establishment definition — in response to public comments, an addition was made to clarify the paragraph and to provide a cross-reference to similar language in the Report on Action 1 (Addressing the Tax Challenges of the Digital Economy) and to the International VAT/GST Guidelines; and
- deletion of the parenthetical reference "(other than a partnership)" from subparagraph 2 a) of Article 10 (Dividends), which is intended to ensure that the reduced rate of source taxation on dividends provided by that subparagraph is applicable in circumstances in which the new Article 1(2) (the transparent entity provision) would apply.
Finally, the 2017 Update includes the changes and additions made to the observations and reservations of OECD member countries and to the positions of non-OECD economies.
Uruguay published the law for the ratification of the pending income and capital tax treaty with Chile in the 9 November 2017 edition of the Official Gazette. The treaty, signed 1 April 2016, is the first of its kind between the two countries (previous coverage). It will enter into force 15 days after the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.