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Approved Changes (6)

European Union

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Fourth EU Anti-Money Laundering Directive has Entered into Force

On 26 June 2017, the Fourth EU Anti-Money Laundering Directive (Directive (EU) 2015/849) entered into force. As provided in the press release from the European Commission, the Fourth Anti-Money Laundering reinforces the existing rules by introducing the following changes:

  • Reinforcing the risk assessment obligation for banks, lawyers, and accountants;
  • Setting clear transparency requirements about beneficial ownership for companies, which will be stored in a central register, such as commercial registers, and will be available to national authorities and obliged entities;
  • Facilitating cooperation and exchange of information between Financial Intelligence Units from different EU Member States to identify and follow suspicious transfers of money to prevent and detect crime or terrorist activities;
  • Establishing a coherent policy towards non-EU countries that have deficient anti-money laundering and counter-terrorist financing rules; and
  • Reinforcing the sanctioning powers of competent authorities.

As required by the Directive, all EU Member States were to have implemented the required laws, regulations, and administrative provisions to comply with the Directive by 26 June. The Commission will now review implementation to ensure that all Member States have complied.

Click the following link for the Commission press release, which includes links to the Directive and other related information.

Italy

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Italian Law Decree including Patent Box, Arm's Length Principle, and VAT Changes Converted in Law

Italy has published Law No. 96 of 21 June 2017 in the Official Gazette, which converted Law Decree No. 50 of 24 April 2017 into law. Law Decree No. 50 introduced a number of urgent tax measures, including changes to the definition of "normal value" for the purpose of the arm's length principle to bring it more in line with OECD principles, excluding trademarks from Italy's patent box regime to bring the regime in line with BEPS Action 5 guidelines, several value added tax changes, and other measures (previous coverage).

Although most measures of the Law Decree were converted into law, Law No. 96 also makes certain amendments, including:

  • The repeal of the change provided in Law Decree to determine the allowance for corporate equity (notional interest deduction) based on the fifth preceding year, and a reduction in the allowance rate to 1.6% for 2017 and 1.5% for 2018; and
  • The introduction of special rules to allow qualifying non-residents to request a tax ruling to determine whether activities in Italy constitute a permanent establishment (PE) and to voluntarily disclose an unreported PE with the benefit of lower penalties (tax and interest still due) - conditions to qualify include that the non-resident is a member of an MNE group with consolidated revenue of at least EUR 1 billion and Italian sales of at least EUR 50 million.

Click the following link for Law No. 96 of 21 June 2017, which entered into force on 24 June.

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OECD Webcast on International Tax Work including BEPS and Tax Transparency Work

On 26 June 2017, the OECD held a webcast to provide updates on recent and upcoming developments. Main topics covered include:

BEPS related work, including:

  • The Multilateral Convention on Tax Treaty Related Measures to Prevent BEPS (MLI), including a preview of the MLI matching database being developed to match the covered tax agreements between jurisdiction pairs and the applicable changes based on options and reservations taken by a particular jurisdiction - planning to make available in July 2017;
  • Peer review work on Action 5 (Counter Harmful Tax Practices), including:
    • 125 preferential regimes identified, with reports to be published on whether an identified regime is harmful and what changes will be made (first report to be published shortly); and
    • First peer review reports on tax ruling exchange to be published beginning of 2018;
  • Peer review work on Action 14 (Dispute Resolution), with the first batch of six countries approved, and the first and second batch reports to be published in 2017 and the subsequent batch reports to be published in 2018;
  • Work on Action 13 (Transfer Pricing Documentation), including the additional CbC report guidance issued in April and the activation of CbC exchange relationships in May, as well ongoing work on a capacity building action plan for developing countries to benefit from CbC reporting; and
  • Peer review work on Action 6 (Prevent Treaty Abuse), which will be conducted after jurisdictions have had the chance to update their tax treaties, including through the MLI;
  • Ongoing standard-setting work, including:
    • The recently released discussion drafts on revised guidance on profit splits and the attribution of profits to permanent establishments, with a public consultation on both to be held in November 2017; and
    • A branch mismatch report to be published in July 2017 that sets out recommendations for domestic law in line with BEPS Action 2 and the EU Anti Tax Avoidance Directive; and
  • The 2017 edition of the Transfer Pricing Guidelines, which is to be published early July 2017.

Tax transparency work, including:

  • The results of the special fast-track review procedure put in place to allow jurisdictions to demonstrate progress made regarding transparency and exchange by the July 2017 G20 Leaders Summit; and
  • The implementation of the automatic exchange of information under the Common Reporting Standard (CRS), as well as the development of a standardized and secure transmission system for bilateral exchange, which is scheduled to be fully operational for the first CRS exchanges in September 2017, and later used for CbC report and ruling exchanges.

Next steps, including:

  • A report by the OECD Secretary-General that will be delivered to the G20 Leaders in July;
  • Ongoing BEPS peer reviews; and
  • Additional work on the tax challenges of the digital economy, including a public consultation to be held in October or November 2017 and an interim report to be published by April 2018.

Click the following link to view a video of the OECD webcast.

Spain

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Spain Publishes Resolution on Business Activity Tax Payment

On 26 June 2017, Spain published a resolution in the Official Gazette concerning the payment of the annual business (economic) activity tax (Impuesto de Actividades Económicas - IAE). The resolution provides that for the national and provincial quotas of the IAE for the 2017 fiscal year, the voluntary payment period will run from 15 September to 20 November 2017.

Note - The IAE amount is not based on income, but rather on the location of a business, the activity type, the size of the business premises, and other factors. Businesses in operation for less than two years or with income below EUR 1 million are exempt.

United Kingdom

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UK Office of Tax Simplification Publishes Annual Report

On 26 June 2017, the UK Office of Tax Simplification (OTS) published its first annual report for 2016-2017. The OTS is the independent adviser to government on simplifying the UK tax system. The annual report provides a general overview of the role of the OTS, how it operates, the projects it has completed, and the projects it is working on, which include:

  • Corporation Tax Computation review (progress report and call for evidence published in November 2016 and due to report summer 2017);  
  • Paper Stamp Duty Review (progress report and call for evidence published in March 2017 and due to report summer 2017); and
  • VAT Review (progress report and call for evidence published in March 2017 and due to report autumn 2017).

Click the following link for the annual report and a related press release.

United States

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U.S. IRS Publishes CbC Report FAQ

The U.S. IRS has published a Country-by-Country (CbC) FAQ dated 23 June 2017. The FAQ covers general questions, data format and structure, exchange of information, and reporting requirements. With regard to reporting requirements in particular, the FAQ provides that CbC report Form 8975 and Schedules A may be filed from 1 September 2017, including on a voluntary basis for periods beginning on or after 1 January 2016 but before the U.S. mandatory reporting period (periods beginning on or after 30 June 2016). The CbC report should be filed using the IRS-approved XML schema submitted via the Modernized e-File (MeF) system. However, paper filing will be accepted in limited cases where electronic filing is not available.

Click the following link for the IRS CbC FAQ.

Treaty Changes (3)

India-Portugal

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Protocol to Tax Treaty between India and Portugal Signed

According to a release from the Indian Ministry of External Affairs, officials from India and Portugal signed an amending protocol to the 1998 income tax treaty between the two countries on 23 June 2017 along with ten other bilateral MoUs/agreements. As previously announced by the Indian government, the protocol updates the treaty's exchange of information provisions to help the tax authorities of both countries curb tax evasion. It is the first to amend the treaty and will enter into force after the ratification instruments are exchanged.

Ireland-Uruguay

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Ireland and Uruguay Conclude Tax Treaty Negotiations

According to a recent update from Irish Revenue, negotiations have concluded for an income tax treaty with Uruguay. 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.

Kyrgyzstan-Georgia

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Kyrgyzstan Approves Pending Tax Treaty with Georgia

On 22 June 2017, the Kyrgyzstan Supreme Council approved the law for the ratification of the pending income tax treaty with Georgia (previous coverage). The treaty, signed 13 October 2016, is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.

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