The Tax Hub

Daily Tax Newsletter

Worldwide Tax News

Proposed Changes (4)

European Union

Responsive image

European Parliament Approves Automatic Exchange of Bank Account Information and Access to Beneficial Ownership Information

The European Parliament has approved a proposed directive that will enable and oblige tax authorities in EU Member States to automatically share information such as bank account balances, interest income, and dividends with their counterparts in other Member States (press release). This also includes access to beneficial ownership information that would enable tax authorities to identify the real owners behind any entity and legal arrangement, such as trusts.

With the proposed directive approved by Parliament, it is expected to be approved by the EU Council in the near future.

Macao-Mauritius-Ukraine-OECD

Responsive image

Macau, Mauritius, and Ukraine Join Inclusive Framework for Implementation of BEPS Measures

According to a 25 November 2016 update from the OECD, Macau, Mauritius, and Ukraine have joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 90. As a member of the Framework, the three jurisdictions have committed to the implementation of four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse) and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).

Click the following link for the list of participants.

Switzerland

Responsive image

Swiss Federal Council Adopts Dispatch on Exchange of CbC Reports

On 23 November 2016, the Swiss Federal Council adopted the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA) and the Federal Act on the International Automatic Exchange of Country-by-Country Reports of Multinationals. If Parliament approves the proposal and a referendum is not held, the CbC MCAA and the Federal Act could enter into force at the end of 2017. As such, MNE groups operating in Switzerland will be required to submit CbC reports from the 2018 fiscal year, and will be allowed to file reports voluntarily for previous years.

Click the following link for the media release.

United Kingdom

Responsive image

UK Autumn Statement 2016 Delivered

On 23 November 2016, UK Chancellor of the Exchequer Philip Hammond delivered the Autumn Statement 2016 to parliament. The main tax-related measures include:

Individual Income Tax

The individual income tax brackets and threshold will be as follows from 6 April 2017:

  • up to GBP 33,500 - 20%
  • GBP 33,501 up to 150,000 - 40%
  • over GBP 150,000 - 45%

The annual personal allowance will be increased from GBP 11,000 to GBP 11,500.

Commitment to Cutting Corporation Tax to 17% by 2020

The main rate of corporation tax has already been cut from 28% in 2010 to 20%, and will be cut again to 17% by 2020, by far the lowest in the G20 and benefitting over 1 million businesses.

Interest Deduction Limitation

The government will introduce rules that limit the tax deductions that large groups can claim for their UK interest expenses from April 2017. These rules will limit deductions where a group has net interest expenses of more than GBP 2 million, net interest expenses exceed 30% of UK taxable earnings, and the group’s net interest to earnings ratio in the UK exceeds that of the worldwide group.

Loss Carry Forward Restriction

The government will legislate for reforms announced at Budget 2016 that will restrict the amount of profit that can be offset by carried-forward losses to 50% from April 2017, while allowing greater flexibility over the types of profit that can be relieved by losses incurred after that date. The restriction will be subject to a GBP 5 million allowance for each standalone company or group. The amount of profit that banks can offset with losses incurred prior to April 2015 will continue to be restricted to 25% in recognition of the exceptional nature and scale of losses in the sector.

Taxation of Non-Resident Companies

The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime. At Budget 2017, the government will consult on the case and options for implementing this change. The government wants to deliver equal tax treatment to ensure that all companies are subject to the rules which apply generally for the purposes of corporation tax, including the limitation of corporate interest expense deductibility and loss relief rules.

Northern Ireland Corporation Tax

The government will amend the Northern Ireland Corporation Tax regime in Finance Bill 2017 to give all small and medium sized enterprises (SMEs) trading in Northern Ireland the potential to benefit. Other amendments will minimize the risk of abuse and ensure the regime is prepared for commencement if the Northern Ireland Executive demonstrates its finances are on a sustainable footing.

Patent Box Rules

The government will legislate in Finance Bill 2017 to add specific provisions to the Patent Box rules, covering the case where Research and Development (R&D) is undertaken collaboratively by two or more companies under a ‘cost sharing arrangement’. The provisions ensure that such companies are neither penalized nor able to gain an advantage under these rules by organizing their R&D in this way. This will have effect for accounting periods commencing on or after 1 April 2017.

Hybrids and Other Mismatches

The government will legislate in Finance Bill 2017 to make minor changes to ensure that the hybrid and other mismatches legislation works as intended. The changes will have effect from 1 January 2017.

VAT Flat Rate Scheme

The government will introduce a new 16.5% VAT rate from 1 April 2017 for businesses with limited costs, such as many labor-only businesses.

Updating the VAT Avoidance Disclosure Regime

As announced at Budget 2016 and following consultation, legislation will be introduced in Finance Bill 2017 to strengthen the regime for disclosure of avoidance of indirect tax. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC, and the scope of the regime will be extended to include all indirect taxes. This will have effect from 1 September 2017.

A Penalty for Participating in VAT Fraud

As announced at Budget 2016 and following consultation, the government will legislate in Finance Bill 2017 to introduce a new and more effective penalty for participating in VAT fraud. It will be applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud. The penalty will improve the application of penalties to those facilitating orchestrated VAT fraud. The new penalty will be a fixed rate penalty of 30% for participants in VAT fraud. This will be implemented following Royal Assent of the Finance Bill 2017.

Click the following link for the Autumn Statement 2016 webpage on the Gov.UK site, which includes links to the full statement and related documentation.

Treaty Changes (6)

Belarus-Estonia

Responsive image

SSA between Belarus and Estonia under Negotiation

On 14 to 16 November 2016, officials from Belarus and Estonia met for the third round of negotiations for a social security agreement. The agreement will be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Kosovo-Austria

Responsive image

Kosovo to Negotiate Tax Treaty with Austria

On 16 November 2016, the Kosovo government authorized the negotiation of an income tax treaty with Austria. 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.

Oman-Switzerland

Responsive image

Tax Treaty between Oman and Switzerland has Entered into Force

According to an update from the Swiss Federal Council, the income tax treaty with Oman entered into force on 13 October 2016. The treaty, signed 22 May 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Omani income tax and Swiss federal, cantonal, and communal taxes on income.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 5%, although an exemption is granted for interest paid in respect of the sale on credit of any equipment, merchandise, or services; any loan granted by a bank; and intercompany loans
  • Royalties - 8%

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 movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or other corporate rights in a company the assets of which consist directly or indirectly of more than 50% of immovable property situated 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

Oman applies the credit method for the elimination of double taxation while Switzerland generally applies the exemption method. However, for dividend and interest income, Switzerland may allow a deduction of the Omani tax, a lump sum reduction of the Swiss tax, or a partial exemption.

Limitation on Benefits

The final protocol to the treaty includes that the provisions of Articles 10 (Dividends), 11 (Interest), and 12 (Royalties) will not apply if the main purpose of any person concerned with the creation or assignment of any shares, debt-claims, or other rights in respect of which the dividends, interest, or royalties are paid is to obtain a tax advantage under those Articles by means of that creation or assignment.

MFN Clause

The final protocol to the treaty includes that if Oman signs any convention, agreement, or protocol with a third state that provides for a lower rate of withholding tax on royalties than provided for in the Oman-Switzerland treaty, that lower rate will apply between Oman and Switzerland from the date such convention, agreement, or protocol between Oman and a third state enters into force.

Effective Date

The treaty applies from 1 January 2017. The 2007 air transport agreement between the two countries ceases to have effect on that date.

Singapore-Finland

Responsive image

Singapore and Finland Sign Competent Authority Agreement for Exchange of Financial Account Information

According to an update from the Inland Revenue Authority of Singapore, a competent authority agreement for the automatic exchange of financial account information was signed with Finland on 22 November 2016. Under the agreement, each country will automatically exchange information on accounts held in the respective country by tax residents of the other country based on the OECD Common Reporting Standard (CRS). The automatic exchange is to begin by September 2018 for information collected on the 2017 reporting year.

South Africa-Switzerland

Responsive image

South Africa and Switzerland Sign Joint Declaration on the Automatic Exchange of Financial Account Information

On 24 November 2016, officials from South Africa and Switzerland signed a joint declaration on the automatic exchange of financial account information on a reciprocal basis, according to a release from the Swiss Federal Council. The information exchange will be carried out based on the OECD Common Reporting Standard (CRS). South Africa and Switzerland intend to start collecting data in 2018 and to exchange it from 2019.

United Kingdom-Uruguay

Responsive image

Tax Treaty between the UK and Uruguay has Entered into Force

According to an update from the Uruguay tax administration, the income and capital tax treaty with the United Kingdom entered into force on 14 November 2016. The treaty, signed on 24 February 2016, is the first of its kind between the two countries.

Taxes Covered

The treaty covers UK income tax, corporation tax, and capital gains tax. It covers Uruguayan business income tax, personal income tax, non-residents income tax, tax for social security assistance, and capital tax.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to the benefits of the treaty, except those provided by Articles 22 (Elimination of Double Taxation), 24 (Non-Discrimination), and 25 (Mutual Agreement Procedure).

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel if the activities continue for the same or connected project within a Contracting State for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 0% if paid to a financial institution on a loan of at least three years for the financing of investment projects, or to a pension scheme; otherwise 10%
  • Royalties - 10%

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 movable property forming part of the business property of a permanent establishment in the other State;
  • Gains from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares regularly traded on a stock exchange); and
  • Gains from the alienation of shares or comparable interests that entitle the owner to the enjoyment of immovable property situated 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 generally apply the credit method for the elimination of double taxation. However, the UK will exempt dividends paid by a Uruguayan company to a company resident in the UK if the conditions for an exemption under UK law are met. Exemption may also apply for profits of a permanent establishment in Uruguay of a UK company if the conditions for an exemption are met under UK law.

Entitlement to Benefits

Article 23 (Entitlement to Benefits) provides that a benefit of the treaty will not be granted if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit would be in accordance with the object and purpose of the relevant provisions of the treaty.

Effective Date

The treaty generally applies from 1 January 2017. However, Articles 25 (Mutual Agreement Procedure) and 26 (Exchange of Information) apply from 14 November 2016. Article 21 (Capital) will not take effect until the Contracting States agree through the exchange of diplomatic notes.

Sitemap

Powerful Tax Tools

NEW

FX Rates

Global FX Rates including Tax Year Average FX Rates and Spot Rates for all Reporting Currencies.

NEW

Corporate Tax Rates

Corporate tax rates, surtaxes, and effective tax rates for the current year, as well as historical rates and approved future rates.

NEW

Country Analysis

Detailed tax guidance for companies doing business in over 100 countries, including summaries and snapshots of key tax facts and issues.

NEW

Cross Border Tax Calculator

Calculate total tax costs and benefits of a cross border transaction including withholding tax, participation exemption and foreign tax credit rules.

NEW

Cross Border Tax Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment streams.

NEW

OECD BEPS Project

Complete overview of the OECD BEPS Project, including daily BEPS news, country adoption of BEPS measures, and an overview of the 15 BEPS Actions.

NEW

Tax Calendar

Customizable calendar tool that tracks corporate income tax, value added tax and transfer pricing obligations by country or entity.

NEW

Tax Forms

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

NEW

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

NEW

Worldwide Tax Planner

Calculates the worldwide tax cost of what-if scenarios based on legal entity structure, taxable income, and cross border transactions.

NEW

Certified Rates Report

Customizable Certified Rates Report providing updated corporate and withholding tax rates at the end of each month for over 100 countries.

NEW

Withholding Tax Minimizer

Enables quick calculation of tax costs and benefits of cross border transactions considering all possible transaction combinations and optimal routes.

NEW

VAT Rates

Provides value added tax (VAT) rates, goods and services tax (GST) rates and other indirect tax rates for over 100 countries.

NEW

NOL Calculator

Country specific calculator to determine how net operating losses can be utilized in carryback and carryforward years.

NEW

Transfer Pricing Calculator

Calculates TP ratios under various TP methods and calculates the difference between target ratios and actual ratios.

NEW

Individual Income Tax Rates

Individual tax rates for over 100 countries.

Play of the Day

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

Get an immediate FREE trial of Orbitax ITRCE

Get Started with Orbitax Today

With Orbitax, you get reliable and comprehensive solutions for international tax research, compliance and planning. Contact us today to get started with Orbitax.

We’re here to help

We’re here to answer any questions you have about the Orbitax products and services.

Send us a message

Who’s behind Orbitax?

We’re committed to providing high value, low cost tax research and management solutions.

Learn More