Worldwide Tax News
Brazil Extends Provisional Measure that Amends Taxation of Certain Intangible Assets and the Digital Inclusion Exemption Incentive
On 21 October 2015, Brazil published National Congress Act 39/2015 in the Official Gazette. The Act extends the validity of Provisional Measure (PM) 690/2015, which was published on 31 August 2015 (previous coverage).
PM 690 introduced a restriction on the use of a 32% presumed profit margin for tax purpose for income from the use of copyrights and other intellectual property when the owner of the rights is a shareholder in the legal entity receiving the income. PM 690 also restricts the PIS/COFINS exemption under the Digital inclusion Program for income from the sale of listed equipment and machinery.
PM 690 must be approved within 60 days to remain in effect.
As previously reported, the Greek parliament recently adopted an omnibus bill (Law 4337/2015), which includes a number reform measures required as part of its bailout plan with the EU. One of the main areas of change in the adopted reform is an overall reduction in the country's penalties for tax-related violations, as well as strengthened rules regarding criminal tax evasion.
Penalties for violations related to corporate tax, withholding tax and VAT are reduced overall. The new penalties are as follows:
- Failure to file or filing inaccurate corporate tax returns - Penalty of 10%, 25%, or 50% of the outstanding tax due, depending on the amount;
- Failure to file or filing inaccurate withholding tax returns - Penalty of 50% of the tax not withheld;
- Violations related to VAT, such as failing to issue or issuing inaccurate fiscal documentation, failing to file or filing inaccurate returns, etc. - Penalty of 50% of the amount of VAT that was not charged or paid.
The new penalties apply for assessments that take place after the new law was submitted for violations that occurred in fiscal years beginning on or after 1 January 2014. The new penalties may also be applied for tax disputes that are currently pending, provided the taxpayer withdraws from the dispute and accepts the findings of the tax audit (must be accepted by 16 January 2016 to apply).
Maximum penalties for failing to meet certain transfer pricing requirements are generally reduced by 80% to 90%, and penalties are abolished in certain cases. The new penalties are as follows:
- Late filing of intra-group transactions report - Penalty equal to 0.1% of the transaction value amount with a minimum penalty of EUR 500 and a maximum of EUR 2,000;
- Amending intra-group transactions report - No penalty if report was initially filed on time and the impact of the amendments on the transactions amount does not exceed EUR 200,000, otherwise a penalty of EUR 500 to EUR 2,000 depending on the amount;
- Inaccurate intra-group transactions report - No penalty if the impact of the inaccuracies does not affect more than 10% of the transactions performed, otherwise a penalty of EUR 500 to EUR 2,000;
- Failure to file intra-group transactions report - Penalty equal to 0.1% of the transaction value amount with a minimum penalty of EUR 2,500 and a maximum of EUR 10,000;
- Filing of transfer pricing documentation later than 30 days following a request - EUR 5,000 to EUR 20,000 depending on the length of the delay (EUR 20,000 for failure to submit).
The rules and penalties for criminal tax evasion are generally strengthened, and include:
- The scope of violations deemed to be criminal evasion is broadened to include undisclosed taxable assets, including non-disclosure resulting in non-payment of real estate taxes;
- In addition to persons holding executive positions, any person performing management duties in a company may be held liable for criminal evasion concerning company tax violations; and
- Proxies of a taxpayer that sign tax inaccurate returns or persons serving as legal representatives of an entity may be held liable for criminal evasion.
Some of the main penalties for criminal tax evasion are as follows:
- For concealment of taxable income or assets, or withholding tax greater than EUR 100,000 per fiscal year:
- Imprisonment of 2 to 5 years if the tax liability is less than EUR 150,000;
- Imprisonment of 5 to 20 years if the tax liability is greater than EUR 150,000.
- For concealment of VAT greater than EUR 50,000:
- Imprisonment of 2 to 5 years if the tax liability is less than EUR 100,000;
- Imprisonment of 5 to 20 years if the tax liability is greater than EUR 100,000.
Persons that may be subject to imprisonment include members of the board of directors, managing directors, general managers, and other persons performing management duties as described above.
EU TAXE Committee Approves Draft Report on Tax Rulings and other Measures Similar in Nature or Effect
On 26 October 2015, the European Parliament’s Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE Committee) approved the final draft of its report including recommended measures to make corporate taxes in the EU fairer and more transparent.
Some of the recommended measures include:
- Country-by-country (CbC) reporting requirements in the EU for multinational companies on financial data, including profits made, taxes paid and subsidies received (separate from the CbC reporting requirements developed as part of the OECD BEPS Project);
- A compulsory EU-wide common consolidated corporate tax base (CCCTB);
- Mandatory tax ruling and other tax information exchange between EU Member States and with the European Commission;
- Reform of the Council's Code of Conduct Group on Taxation; and
- Better protections for whistle-blowers.
Although the TAXE Committee has approved the final draft, additional changes may be made to take into account input from multinational companies during a 16 November 2015 meeting. The final report and recommendations will then be put to a vote during a plenary session of the EU Parliament in the last week of November 2015.
On 20 October 2015, Jersey's Treasury Minister lodged the Draft Budget for 2016. The main tax-related changes include:
- The tax credit for dividends received will no longer be repaid for dividends received by companies subject to the 0% corporate tax rate from the date the budget was lodged (20 October);
- The tax credit for dividends received by financial services companies will be limited to the lower of the tax deducted from the dividend or the gross dividend at the rate of 10% from the date the budget was lodged (20 October);
- The residency rules that allow a company incorporated in Jersey to be considered tax resident in another jurisdiction will be amended so that companies currently treated as UK tax residents will not be affected by the UK's planned reduction in the corporation tax rate to 19% in 2017 (to be considered tax resident in another jurisdiction, the company must be managed and controlled in a jurisdiction where the highest rate of tax on income is at least 20%); and
- The deadline for filing the corporate tax return will be extended from the last Friday in July following the year of assessment to 31 December following the year of assessment.
The measures must be approved by the States Assembly before entering into force. Aside from the dividend tax credit changes, the budget measures will generally apply from 1 January 2016.
Click the following link for the Draft Budget Statement 2016.
According to an update from the OECD, on 26 October 2015 Bulgaria signed the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The convention must now be ratified by Bulgaria and the ratification instrument deposited before entering into force in the country.
The new income tax treaty signed 12 April 2012 between Germany and the Netherlands will enter into force on 1 December 2015. Once in force and effective it will replace the 1959 income and capital tax treaty between the two countries, which currently applies.
The treaty covers German income tax, corporation tax and trade tax. It covers Dutch income tax, wages tax, company tax and dividend tax.
The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise of one Contracting State carries on offshore activities in the territorial sea of the other State for a period or periods aggregating 30 days or more within any 12-month period. In determining the period, activities performed by an associated enterprise as a continuation of the same project are included.
- Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; 10% if the beneficial owner is a pension fund resident in the Netherlands, subject to certain conditions; otherwise 15%
- Interest - 0%
- Royalties - 0%
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, not listed in a recognized stock exchange, deriving more than 75% of their value directly or indirectly from immovable property situated in the other State, other than immovable property in which that company or the holders of those interests carry on their business. An exemption also applies when:
- The alienator owned less than 50% of the shares or comparable interests prior to the first alienation; or
- The gains are derived in the course of a corporate reorganization, amalgamation, division or similar transaction; 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.
Both countries may apply the exemption or credit method for the elimination of double taxation depending on the type of income and the applicable provisions of the domestic laws of each country.
The provisions of the treaty may be extended to any part of the Kingdom of the Netherlands that is not situated in Europe and imposes taxes substantially similar to those covered by the treaty.
The treaty applies from 1 January 2016.
The 1959 income and capital tax treaty between the two countries will cease to have effect once the new treaty enters into force, but will continue to be applied to taxes, taxable years and periods for which the new treaty does not yet apply.
On 1 October 2015, Germany's Bundestag (lower house of parliament) approved the pending tax information exchange agreement with St. Kitts and Nevis. The agreement, signed 19 October 2010, is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged, and will generally apply from that date.
On 26 October 2015, officials from Macedonia and the United Arab Emirates 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.