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Worldwide Tax News

Approved Changes (3)

Canada

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Canada Personal Income Tax Brackets for 2017

According to the latest update to the indexation adjustment table from the Canada Revenue Agency, the federal personal income tax brackets and rates for 2017 will be as follows:

  • up to CAD 45,916 - 15%
  • over CAD 45,916 up to 91,831 - 20.5%
  • over CAD 91,831 up to 142,353 - 26%
  • over CAD 142,353 up to 202,800 - 29%
  • over CAD 202,800 - 33%

In addition to federal income tax, personal income is also subject to tax at the provincial/territorial level, resulting in a top progressive rate of up to 54% depending on the province/territory.

Note - From the 2016 tax year, the second bracket rate is reduced from 22% to 20.5% and a new top bracket of 33% is added. The legislation for the changes (Bill C-2) received royal assent on 15 December 2016.

Finland

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Finland 2017 Budget Measures Approved by Parliament

The Finnish parliament has reportedly approved the country's budget measures for 2017. Some of the measures include:

  • The mandatory requirement to file tax returns electronically (including value added tax (VAT) returns);
  • An increase in the thresholds for quarterly and annual VAT return filing from annual revenue of EUR 50,000 and EUR 25,000 to annual revenue of EUR 100,000 and EUR 30,000 respectively (standard default VAT return period remains monthly);
  • The introduction of a cash basis accounting option for VAT payers with annual revenue below EUR 500,000; and
  • Adjustments to the individual income tax brackets and rates (previous coverage).

Additional details will be published once available.

Ireland

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Ireland Publishes eBrief on Updates to USC Rates and Bands

On 21 December 2016, Irish Revenue published eBrief No. 101/16 concerning updates to the Universal Social Charge (USC) Tax and Duty Manual to reflect the changes of rates and rate bands announced in Budget 2016. The updated rates and bands are:

  • 0.5% on the first EUR 12,012;
  • 2.5% on the next EUR 6,760;
  • 5% on the next EUR 51,272; and
  • 8% on the balance.

These new rates and rate bands apply for the tax year 2017 and subsequent years.

Proposed Changes (1)

Brazil

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Brazil to Amend the Municipal Services Tax including an Increase in the Minimum Rate

According to recent reports, the Brazilian Senate approved amendments to the municipal services tax (ISS) on 14 December 2016. The amendments include an increase in the minimum ISS rate to 2% and the introduction of rules disallowing municipalities from granting exemptions, reductions, or other benefits with regard to the levy of ISS.

The amendments must be approved by the president before entering into force.

Treaty Changes (6)

Andorra-Korea, Rep of

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TIEA between Andorra and South Korea has Entered into Force

The tax information exchange agreement between Andorra and South Korea entered into force on 21 December 2016. The agreement, signed 23 October 2014, is the first of its kind between the two countries and applies for criminal tax matters on the date of its entry into force, and for other matters for taxable periods beginning on or after that date.

Austria-Iceland-Liechtenstein-Switzerland

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Austria Approves Pending Tax Instruments with Iceland, Liechtenstein, and Switzerland

On 21 December 2016 Austria's upper house of parliament approved the following pending tax instruments:

  • The pending income and capital tax treaty with Iceland, signed 30 June 2016 (previous coverage);
  • The pending protocol to the 1969 income and capital tax treaty with Liechtenstein, signed 15 September 2016 (previous coverage);
  • The pending protocol to the 2013 withholding tax agreement with Liechtenstein, signed 17 October 2016 (previous coverage); and
  • The termination agreement for the 2012 withholding tax agreement with Switzerland, which is no longer needed with the entry into force of the agreement between Switzerland and the EU on the automatic exchange of information in tax matters on 1 January 2017.

The pending instruments will generally enter into force after the ratification instruments are exchanged.

Canada-Israel

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Tax Treaty between Canada and Israel has Entered into Force

The new income tax treaty between Canada and Israel entered into force on 21 December 2016. The treaty, signed 21 September 2016, replaces the 1975 tax treaty between the two countries.

Taxes Covered

The treaty covers Canadian taxes imposed by the Government of Canada under the Income Tax Act. It covers Israeli income tax and company tax (including tax on capital gains), and tax on gains from the alienation of property according to the Real Estate Taxation Law.

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 based on its place of effective management, the place where it is incorporated or otherwise constituted, and any other relevant factors. If no agreement is reached, the company will not be entitled to claim any relief or exemption from tax provided by the treaty.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15% (Distributions made by an Israeli real estate investment fund may be taxed in Canada and Israel, but the Israeli tax is limited to 15% if the beneficial owner is a company directly holding less than 10% of the fund's capital)
  • Interest - 5% if the beneficial owner is a financial institution dealing at arm's length with the payer, subject to certain limitations; otherwise 10%
  • Royalties - 0% for:
    • Copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical, or other artistic work (but excluding royalties in respect of motion picture films and royalties in respect of works on film, videotape, or other means of reproduction for use in connection with television broadcasting); and
    • Royalties for the use of, or the right to use, computer software or any patent or for information concerning industrial, commercial, or scientific experience (but not including any such royalty provided in connection with a rental or franchise agreement);
    • Otherwise 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; and
  • Gains from the alienation of shares or an interest in a partnership, trust, or other entity deriving more than 50% of their value directly or indirectly from immovable property situated in the other State at the time of the alienation or at any time during the twelve preceding months.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 13 (Capital Gains) will not apply if obtaining the benefits of the Articles was one of the main purposes of any person concerned with the creation, assignment, or alienation of the shares, debt-claims, other rights or property in respect of which the income is paid or gains are realized. The limitation is included in each of those Articles.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Effective Date

The treaty generally applies from 1 January 2017, although Article 23 (Mutual Agreement Procedure) and Article 24 (Exchange of Information) apply from the date of the treaty's entry into force.

The 1975 tax treaty between the two countries ceases to have effect from the dates the new treaty is effective, and terminates on the last date.

Chile-Japan

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Chile Approves Pending Tax Treaty with Japan

On 14 December 2016, the Chilean Senate approved for ratification the pending income tax treaty with Japan. The treaty, signed 21 January 2016 (previous coverage), 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 1 January of the year following its entry into force.

Hungary-Oman

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Update - Tax Treaty between Hungary and Oman

On 20 December 2016, Hungary published in the Official Gazette the law ratifying the pending income tax treaty with Oman. The treaty, signed 2 November 2016, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Hungarian personal income tax and corporate tax. It covers Omani income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected projects for a period or periods aggregating more than 6 months in any 12-month period.

Withholding Tax Rates

  • Dividends - 0% (10% if beneficial owner is an individual)
  • Interest - 0%
  • 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 shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State; 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.

Double Taxation Relief

Hungary generally applies the exemption method for the elimination of double taxation, although the credit method is generally applied in respect of income covered by Articles 10 (Dividends) and 12 (Royalties). Oman generally applies the credit method.

Limitation on Benefits

Article 28 (Limitation on Benefits) includes the provision that the benefit of any reduction or exemption from tax provided for in the treaty will not be allowed for a resident of a Contracting State if the main purpose or one of the main purposes of the resident or a person connected with the resident was to take advantage of the provisions of the treaty in order to obtain such reduction or exemption.

Entry into Force on Effect

The treaty 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.

Norway-Switzerland

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Protocol to the Tax Treaty between Norway and Switzerland has Entered into Force

On 22 December 2016, the Swiss Federal Council announced the entry into force of the protocol to the 1987 income and capital tax treaty with Norway on 6 December 2016. The protocol, signed 4 September 2015, is the third to amend the treaty. The main changes include:

  • Amends the competent authority in Article 3 (General Definitions);
  • Adds an arbitration clause to Article 25 (Mutual Agreement Procedure); and
  • Replaces Article 26 (Exchange of Information).

The protocol provisions regarding Articles 25 and 26 apply from 1 January 2017. Otherwise, the protocol generally applies from the date of its entry into force.

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