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Worldwide Tax News

Approved Changes (1)

Ecuador

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Ecuador Publishes Coefficients for Presumptive Tax Assessments for 2016

On 21 January 2016, Ecuador published the coefficients for presumptive tax assessments for 2016 in the Official Gazette. The coefficients are used in a presumptive tax assessment when a tax return has not been filed, the return or supporting documentation are incomplete, or the taxpayer fails to cooperate with the tax administration during a direct assessment. The coefficients for 2016, which vary by industry/activity, are as follows:

  • 0.0268 to 0.65939 on total revenue;
  • 0.0275 to 1.4623 on total costs and expenses; and
  • 0.0223 to 0.4786 on total assets.

Based on the information available to the tax administration, the higher result of the three is used as the tax base for assessment.

Click the following link for the specific coefficients for each industry/activity type (Spanish language).

Proposed Changes (2)

Poland

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Poland Retail Sales Tax Proposed

According to a recent update from Poland's Ministry of Finance, a proposal for the introduction of a retail sales tax has been submitted to the Council of Ministers. The tax was included in a number of proposals made by Poland's Law and Justice Party after taking control of parliament in October 2015 (previous coverage). As proposed, the tax would apply for retail businesses with sales exceeding PLN 1.5 million per month, and would be levied progressively as follows:

  • 0.7% on the revenue not exceeding PLN 300 million per month; and
  • 1.3% on the revenue exceeding PLN 300 million per month.

However, an increased rate of 1.9% would apply for sales during weekends and holidays.

The proposed retail sales tax will need to be approved by parliament and signed into law by the president before entering into force.

United Nations

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UN to Update Transfer Pricing Manual based on OECD BEPS Project Outcomes

According to a report on the 11th session of the UN Committee of Experts on International Cooperation in Tax Matters, an updated UN Practical Manual on Transfer Pricing for Developing Countries will presented at the next session in October 2016. In particular, the updates will include new chapters on intra-group services and intangibles and guidance on cost contribution arrangements and business restructuring. The updates are to take into account the outcomes of the OECD BEPS Project Actions 8-10.

The report also mentions guidance concerning the threshold for Country-by-Country reporting requirements that will be included in the manual. Although several developing countries have called for a group revenue threshold lower than the EUR 750 million recommended by the OECD, the UN will likely not recommend a lower threshold in order to maintain consistency.

Click the following for the 11th session report, which also covers treaty issues discussed and certain other topics.

Treaty Changes (4)

Kazakhstan-Vietnam

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Tax Treaty between Kazakhstan and Vietnam has Entered into Force

According to a recent update from the Kazakhstan government, the income tax treaty with Vietnam entered into force on 18 June 2015. The treaty, signed 31 October 2011, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Kazakhstan individual income tax and corporate income tax, and covers Vietnamese personal income tax and business income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected projects for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 70% of the paying company's voting power; otherwise 15%
  • Interest - 10%
  • Royalties - 10%
  • Fees for Technical Services (any services of a technical, managerial or consultancy nature) - 15%

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 or comparable interests in a company whose assets consist directly or indirectly wholly or principally (30% or more) of immovable property situated in the other State;
  • Gains from the alienation of shares, other than the above, representing a participation of 25% or more in a company resident in the other State; 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.

Effective Date

The treaty applies from 1 January 2016.

Morocco-Sao Tome

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Tax Treaty between Morocco and Sao Tome and Principe Signed

On 25 January 2016, officials from Morocco and Sao Tome and Principe 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.

OECD-Australia-Austria-Belgium-Chile-Costa Rica-Czech Rep-Denmark-Estonia-Finland-France-Germany-Greece-Ireland-Italy-Japan-Liechtenstein-Luxembourg-Malaysia-Mexico-Netherlands-Nigeria-Norway-Poland-Portugal-Slovak Republic-Slovenia-South Africa-Spain-Sweden-Switzerland-United Kingdom

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OECD Announces that 31 Countries have Signed Multilateral Agreement for the Exchange of CbC Reports

The OECD announced that 31 countries signed the Multilateral Competent Authority Agreement for the automatic exchange of Country-by-Country (CbC) reports (MCAA) during a signing ceremony held 27 January 2016. Under the MCAA, signatories may exchange CbC reports with other signatories if they have CbC reporting requirements in place and are a party to the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters.

Meeting those conditions, however, does not mean any signatory will automatically exchange CbC reports with another. This is because when signing the CbC MCAA, the signatory must address to the OECD Secretariat either (i) a list of those other signatories it commits to exchange with or (ii) a notification that it commits to exchange with all other signatories. A signatory may also elect to be classified as a "non-reciprocal jurisdiction", which effectively means it is not entitled to receive CbC reports from other signatories. The OECD will make publically available the status of the individual signatories concerning commitment to exchange with specified countries, all countries, or be classified as non-reciprocal.

The countries that signed on 27 January include:

Australia, Austria, Belgium, Chile, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, Netherlands, Nigeria, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland and the United Kingdom.

Of the 31 countries, Australia, Denmark, France, Ireland, Italy, Mexico, the Netherlands, Poland, Spain and the United Kingdom have already implemented CbC legislation, while the others have already proposed legislation or are expected to in the near future.

Click the following link for the OECD press release.

Vietnam-India

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Vietnam Approves Signing of Protocol to the Tax Treaty with India

According to a release published by the Vietnamese government on 25 January 2016, the government has approved the signing of a protocol to the 1994 income tax treaty with India. The protocol will be the first to amend the treaty, and reportedly amends Article 27 (Exchange of Information) to bring it in line with the OECD standard for information exchange. The protocol must be signed and ratified before entering into force.

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