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Approved Changes (3)

France

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France Updates List of Jurisdictions Not Requiring Appointment of VAT Representative

On 22 April 2017, France published in the Official Gazette a correction to the Order of 28 February 2017, which adds to the list of non-EU jurisdictions provided in the Order of 15 May 2013 concerning the appointment of VAT representatives. In general, France requires that non-EU resident taxpayers appoint a VAT representative to manage reporting and payment obligations in France. However, for residents of the listed jurisdictions, the obligation to appoint a representative does not apply. Jurisdictions listed include those with an agreement for mutual assistance in the recovery of taxes with France or a tax treaty with France that includes such assistance provisions.

Jurisdictions listed in the original May 2013 Order include: Australia, Azerbaijan, Georgia, India, Iceland, Mexico, Moldova, Norway, South Korea, and Saint Barthélemy. Argentina was also originally included, but has been removed.

Jurisdictions added by the February 2017 Order as corrected include: Aruba, Curaçao, the Faroe Islands, French Polynesia, Ghana, Greenland, Japan, Mauritius, New Zealand, Saint Martin, Sint Maarten, South Africa, Tunisia, and Ukraine.

Pakistan

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Pakistan Publishes Update Withholding Tax Rates Card

The Pakistan Federal Board of Revenue has published an updated withholding tax rates card for the various withholding taxes that apply in the country for both residents and non-residents. For each withholding tax, the rates card provides the relevant sections of the law and provisions, the tax rates, the responsible party for deduction/collection, the timing, and the taxation status (final, adjustable, exceptions). The main cross border domestic withholding tax rates are:

  • Dividends - 12.5%
  • Interest (profit on debt) - 10%
  • Royalties and fees for technical services - 15%

Click the following link for the Withholding Tax Regime (Rates Card) (Guidelines for the Taxpayers, Tax Collectors & Withholding Agents), which has been updated as of 3 April 2017.

Russia

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Russia Clarifies Treatment of Excess Interest under the Thin Capitalization Rules when Status as Controlled Debt has Changed at Time of Payment

The Russian Ministry of Finance recently published Letter No. 03-08-05/14396, which clarifies treatment of excess interest under the thin capitalization rules, including when the status of debt as controlled has changed at the time the interest is paid. Russia's thin capitalization rules apply when a taxpayer has controlled debt exceeding a debt-to-equity ratio of 3:1 (12.5:1 for banks and leasing companies). With the new thin capitalization rules that apply from 1 January 2017 (previous coverage), debt is deemed controlled when:

  • The foreign lender has a direct or indirect participating interest of 25% or more in the Russian borrower;
  • The foreign lender owns more than 50% consecutively in each preceding company in a direct holding chain of the Russian borrower;
  • The foreign lender is related to a foreign person that has a 25% direct or indirect participating interest in the Russian borrower (including subsidiaries and sister companies); and
  • The debt is secured or guaranteed by a person that would meet any of the above conditions.

Where a controlled debt exists, the taxpayer must determine the maximum amount of interest expense that may be deducted on the last day of each reporting (tax) period, with the amount exceeding the 3:1 (12.5:1) ratio treated as a deemed dividend for which withholding tax must be paid. In the event a taxpayer has a controlled debt on the last day of a reporting (tax) period during which no interest is paid, but the debt is no longer deemed controlled at the time the interest is subsequently paid, the taxpayer must still calculate and pay withholding tax on the deemed dividend amount.

Proposed Changes (2)

Israel

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Israel Presumed Management and Control Test for Tax Residence Purposes

According to recent reports, the Israeli government has finalized draft legislation for the introduction of a presumed management and control test for tax residence purposes for certain offshore companies in low tax jurisdictions. Under current rules, a company is generally deemed to be resident in Israel if it is incorporated under Israeli law or is managed and controlled from Israel. Under the draft legislation, an offshore company would be presumed to be managed and controlled from Israel, and thereby resident in Israel, if:

  • Israeli residents hold 50% or more of the company,
  • The company is subject to a tax rate of less than 15%, and
  • The jurisdiction of the company does not have a tax treaty with Israel or the country has a territorial tax system.

Where the conditions are met, the burden of proof is on the taxpayer to show that the offshore company is not managed and controlled in Israel. If this cannot be shown, the offshore company will then have a tax return obligation in Israel and face possible taxation.

South Africa

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South Africa Consultation on Possible Forms of Wealth Tax

The South African Revenue Service has published a call for submissions on possible wealth taxes for South Africa. The consultation is being held by the Davis Tax Committee, which invites submissions on the desirability and feasibility of the following possible forms of wealth tax:

  • A land tax;
  • A national tax on the value of property (over and above municipal rates); and
  • An annual wealth tax.

Click the following link for the consultation media statement. Submissions are due by 31 May 2017.

Treaty Changes (4)

Bulgaria-Pakistan

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Bulgaria and Pakistan Conclude Tax Treaty Negotiations

On 26 April 2017, officials from Bulgaria and Pakistan concluded negotiations with the initialing of an income tax treaty. The treaty will be the first of its kind between the two countries, and must be signed and ratified before entering into force. Additional details will be published once available.

Cyprus-India

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India Confirms Removal of Cyprus as a Notified Jurisdictional Area

The Indian Central Board of Direct Taxes has issued Circular No. 15 of 2017, which confirms that Cyprus has been removed from the list of notified jurisdictional areas with retrospective effect from 1 November 2013. Cyprus was originally classified as a notified jurisdictional area from that date due mainly to inadequate exchange of information under the 1994 tax treaty with India in force at the time. With the entry into force of the new tax treaty between the two countries on 16 December 2016 (previous coverage), the classification is rescinded.

Ethiopia-Latvia

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Ethiopia and Latvia to Sign Tax Treaty

According to a release from the Latvian Ministry of Foreign Affairs, official from Latvia and Ethiopia met 24 to 25 April 2017 to discuss bilateral cooperation, and during the meetings agreed to the signing of an income tax treaty. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

India-Vietnam

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Protocol to Tax Treaty between India and Vietnam has Entered into Force

The protocol to the 1994 income tax treaty between India and Vietnam entered into force on 21 February 2017. The protocol, signed 3 September 2016, replaces Article 27 (Exchange of Information) to bring it in line with the OECD standard and inserts Article 27A (Assistance in the Collection of Taxes). The protocol is the first to amend the treaty and generally applies from the date of its entry into force.

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