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Approved Changes (2)

Argentina

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Argentina Increase Maximum Basis Cap for Social Security Contributions

Argentina has increased the maximum basis cap for social security contributions from monthly salary of ARS 56,057.93 to ARS 63,995.73 effective 1 September 2016. The employer social security contribution ranges from 23% and 27% of gross salary (subject to the cap) depending on the size and type of the company.

China

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China Notice on Deferred Taxation of Stock Incentives and Technology Contributions for Shares

On 20 September 2016, China's State Administration of Taxation published Notice 101/2016 on improving stock incentives schemes and tax policies related to technology contributions for shares. The main aspects of the notice include:

  • Individual income tax (20% for property transfer) on stock options, bonus shares, etc. granted by an unlisted company as part of a stock incentives scheme may be deferred until the time of disposal, provided that the scheme has been registered with the tax authority and certain conditions are met;
  • Individual income tax on stock options, bonus shares, etc. granted by a listed company as part of a stock incentives scheme may be deferred up to 12 months from the time they are granted (12 months from the expiration of the lock-up period if applicable), provided that the scheme has been registered with the tax authority; and
  • Companies and individuals that contribute technology for shares in a resident company may defer the realization of the value of the technology until the shares are disposed of, provided that the consideration for the contribution is fully in shares and has been registered with the tax authority.

The Notice is effective from 1 September 2016.

Proposed Changes (3)

Bulgaria

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Bulgaria Publishes Draft Law for Tax Ruling Exchange and CbC Reporting

The Bulgarian Ministry of Finance has published draft legislation to transpose into domestic law the amendments made to the EU Directive on administrative cooperation in the field of taxation (2011/16/EU) concerning the exchange of cross border tax rulings and advance pricing agreements (APAs) and Country-by-Country (CbC) reports. The amendments were made by Council Directive (EU) 2015/2376 (previous coverage) and Council Directive (EU) 2016/881 (previous coverage) respectively.

Tax Ruling Exchange

The draft legislation provides for the automatic exchange of cross border tax rulings and APAs with other EU Member States from 1 January 2017. The exchange also includes rulings and APAs issued, amended or renewed prior to that date subject to certain conditions.

CbC Reporting

The draft provides for the implementation of CbC reporting requirements for MNE groups operating in Bulgaria meeting a consolidated annual revenue threshold in the previous year of:

  • BGN 100 million (~EUR 51 million) if the ultimate parent of the group is resident in Bulgaria; or
  • BGN 1,466,872,500 (~EUR 750 million) if the ultimate parent of the group is not resident in Bulgaria.

The requirements will apply for fiscal years beginning on or after 1 January 2016, and when required, the CbC report must be submitted electronically with 12 months of the close of the fiscal year concerned. In addition, the ultimate parent or surrogate parent resident in Bulgaria must submit notification of its status by the end of the fiscal year concerned, while non-reporting constituent entities resident in Bulgaria must provide notification on the reporting entity and its jurisdiction of residence by the end of the fiscal year concerned.

The draft also provides for secondary reporting requirements, whereby a local constituent entity is required to file a CbC report if Bulgaria is unable to obtain the report through exchange from the ultimate parent's jurisdiction of residence. In such cases, the local entity must file the CbC report based on the information available. If the ultimate parent has not provided the full information for the report to the local entity, a report must still be filed and penalties will apply. This secondary requirement will apply for fiscal years beginning on or after 1 January 2017.

CbC compliance penalties are included in the draft legislation as follows:

  • Up to BGN 200,000 for failure to submit a CbC report;
  • Up to BGN 150,000 for submitting an incomplete report or incorrect information (including when incomplete due to failure of the ultimate parent to provide full information); and
  • Up to BGN 200,000 for failure to submit required notifications.

Each of the above penalties may be increased due to repeated violations.

Click the following links for the draft legislation (Bulgarian language) and the explanatory note (Bulgarian language). Subject to approval, the legislation will enter into force on 1 January 2017.

United Kingdom

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UK Issues Draft Guidance on Northern Ireland Corporation Tax Rate

UK HMRC published draft guidance for the Northern Ireland Corporation Tax (NICT) regime on 26 September 2016. The NICT regime is allowed under the Corporation Tax (Northern Ireland) Act 2015, which received Royal Assent in March 2015 and provides for the devolution of tax powers to the Northern Ireland Assembly to set a different rate of Corporation Tax from the rest of the UK. The government will commence the Act and devolution of the power can be completed once the Northern Ireland Executive demonstrates its finances are on a sustainable footing.

According to the guidance, Northern Ireland is planning to implement the NICT from April 2018 at a rate of 12.5% on a defined scope of trading profits. Most trading activity will qualify, but exclusions apply for the oil and gas ring fence trade, and for most financial activities, including lending and investment, investment management, long-term insurance business, and re-insurance activity (general property and casualty insurance is not excluded). NICT will be levied on qualifying profits depending on the category of the taxpayer as follows:

  • Profits of SMEs if employee time and costs fall largely (75%) in Northern Ireland, and the share of profits of a corporate partner of a partnership if both the partner and the partnership meet the SME criteria and the partnership’s employee time and costs fall largely in Northern Ireland - no attribution of profits is required in these cases;
  • Profits of large companies that are attributable to a Northern Ireland trading presence, and the share of profits of a corporate partner of a partnership that are attributable to a Northern Ireland trading presence.

The draft guidance also covers several other issues in relation to the NICT regime, including the calculation of profits and losses, rules governing capital allowances and balancing charges, and rules governing intangible fixed assets.

Click the following link for Northern Ireland Corporation Tax regime: Draft guidance. Comments are due by 1 January 2017.

United States

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U.S. Legislation Would Introduce New Tax on Imports from Countries that Provide Indirect Tax Rebates

U.S. Representative Bill Pascrell Jr., D-NJ, plans to introduce legislation that would impose a tax on imports from countries that are under an indirect tax system in certain cases.

The Border Tax Equity Act of 2016, which is expected to be introduced this week, targets countries benefiting from the WTO rules that allow rebates of indirect taxes such as VAT. Such rebates are seen as export subsidies to foreign exporters, given that there is not a similar benefit for U.S. companies because the U.S. largely relies on a direct tax system.

Pascrell's bill proposes that border taxes be addressed in negotiations with the WTO. Within 60 days following the completion of the negotiations, the U.S. trade representative would then be required to report on whether countries relying on indirect taxes have taken actions regarding border tax treatment to redress the disadvantages faced by countries relying on direct taxes. If no action has been taken, a new tax would take effect on imports that is equal to the excess of the indirect taxes rebated upon export, over any indirect taxes imposed at the U.S. border.

Treaty Changes (4)

Argentina-United States

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Tax Treaty between Argentina and the U.S. under Negotiation

According to U.S. Treasury Secretary Jacob Lew, the U.S. and Argentina are negotiating an income tax treaty, including provisions that will allow for the exchange of tax information. The announcement comes after a 26 September meeting in Buenos Aires with Argentine Finance Minister Alfonso Prat-Gay. To accelerate the process, the two countries will immediately begin examining Argentina's readiness to engage in information exchange.

Note - A tax treaty between the two countries was signed in 1981, but was never ratified.

Colombia-Spain

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Colombian Tax Authority Issues Ruling on the Availability of Treaty Benefits for Dividends Paid out of Untaxed Profits

Colombia's National Tax Authority (DIAN) recently issued a ruling concerning the availability of benefits under the 2005 tax treaty with Spain for dividends paid out of untaxed profits. Under Colombia's domestic withholding tax rules, dividends paid out of untaxed profits to a non-resident are subject to a 33% withholding tax. If the profits have been taxed, no tax is withheld. According to the ruling, the same applies under the treaty. However, based on the provisions concerning Article 10 (Dividends) included in the final protocol to the treaty, an exemption may still apply if the amount is reinvested in the same income producing activity in Colombia for a term of at least three years.

Korea, Rep of-Brunei-Hong Kong-India-Kenya-Tajikistan-Turkmenistan

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Korea Ratifies Pending Tax Treaties with Multiple Countries

On 7 September 2016, the Korean National Assembly ratified the following pending tax treaties:

  • The income tax treaty with Brunei, signed 9 December 2014;
  • The income tax treaty with Hong Kong, signed 8 July 2014;
  • The new income tax treaty with India, signed 18 May 2015 (will replace the 1985 tax treaty currently in force;
  • The income tax treaty with Kenya, signed 8 July 2014;
  • The income tax treaty with Tajikistan, signed 31 July 2013; and
  • The income tax treaty with Turkmenistan, signed 13 April 2015.

Each of the treaties will enter into force after the ratification instruments are exchanged, and will generally apply from 1 January of the year following their entry into force. However, the India-Korea treaty will apply in India from 1 April of the year following its entry into force and in Korea from 1 January, with the 1985 treaty ceasing to have effect on the dates the new treaty is effective in the respective countries.

Portugal-Bahrain

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Portugal Ratifies Tax Treaty with Bahrain

On 19 September 2016, Portugal ratified the pending income tax treaty with Bahrain via Presidential Decree No. 79/2016, which was published in the Official Gazette on 22 September. The treaty, signed 26 May 2015, is the first of its kind between the two countries. It will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Click the following link for details of the treaty.

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