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Worldwide Tax News

Approved Changes (3)

Gibraltar

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Gibraltar's Expanded Tax Return Requirements

For tax year's beginning on or after 1 January 2016, all companies registered in Gibraltar are required to file tax returns. For prior years, only companies assessable to tax in Gibraltar were required to file.

Along with the return, companies are also required to submit certain documentation depending on the size of the company:

  • Large companies: Balance sheet, profit and loss account, directors report and auditors report;
  • Medium companies (meeting two of the following - turnover not exceeding GIP 25.9 million, less than GIP 12.9 million net assets, and less than 250 employees): Balance sheet, abridged profit and loss account, directors report and auditors report;
  • Small companies (meeting two of the following - turnover not exceeding GIP 6.5 million, less than GIP 3.26 million net assets, and less than 50 employees): Abridged balance sheet only

The deadline for filing tax returns and additional documentation is 9 months after the close of the company's tax year. Failure to file by the deadline will result in a penalty of GIP 50 plus an additional GIP 300 if not filed within three months of the deadline and an additional GIP 500 if not filed with six months (total up to GIP 850).  

South Africa

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South Africa Updates Tax Return for Companies including Additional Info on Donations, VC Investments and Transfer Pricing

The South African Revenue service has published an update on changes to the Income Tax Return for Companies (ITR14) that apply from 18 April 2016. In particular, the following changes apply:

  • The separate disclosure of donations, with allowable donations limited to 10% of taxable income and the remaining balance carried over to the next year of assessment;
  • The addition of details of investments in venture capital companies; and
  • The expansion of information required on transfer pricing related transactions, including details of the number of tax jurisdictions, countries and value per country.

Click the following link for the update on the SARS website, for additional information on submitting ITR14.

United States

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U.S. Court Dismisses Challenge of the Constitutionality of FATCA

On 26 April 2016, the U.S. District Court for the Southern District of Ohio issued its decision dismissing a lawsuit challenging the constitutionality of the U.S. Foreign Account Tax Compliance Act (FATCA) and other foreign bank account report requirements.

Initially, the plaintiffs filed a motion for a preliminary injunction barring the U.S. Treasury Department (the defendant) from enforcing FATCA provisions. This request was rejected in a September 2015 Court decision because the plaintiffs failed to show that they had suffered, or were about to suffer, injury as a result of the provisions. Following the rejection, the U.S. Treasury filed a motion to dismiss, after which the plaintiffs filed a memorandum in opposition to the motion to dismiss and a motion for leave to file an amended verified complaint. The proposed amended verified complaint included claims challenging:

  • The validity of the Canadian, Czech, Israeli, French, Danish, and Swiss FATCA Intergovernmental Agreements (IGA) used by the Treasury Department;
  • The information reporting provisions FATCA and the IGAs impose on foreign financial institutions (FFI);
  • The heightened reporting requirements for foreign bank accounts under FATCA, the IGAs, and the Report of Foreign Bank and Financial Accounts (FBAR);
  • The 30% tax imposed by FATCA on payments to FFIs from U.S. sources when these foreign institutions choose not to report to the IRS about the bank accounts of their U.S. customers;
  • The 30% tax imposed by FATCA on account holders who exercise their rights under the statute not to identify themselves as United States citizens to their banks and to refuse to waive privacy protections afforded their accounts by foreign law;
  • The penalty imposed under the Bank Secrecy Act for "willful" failures to file an FBAR for foreign accounts, which can be as much as the greater of $100,000 or 50% of the value of the unreported account; and
  • The information reporting requirements of FATCA and the IGAs as unconstitutional under the Fourth Amendment (two separate claims).

Despite the plaintiffs' proposed amended verified complaint, the Court found that there was still no standing that any of the plaintiffs has suffered an invasion of a legally protected interest or that any alleged injury is traceable to the actions of the U.S. Treasury. As a result, the Court denied the plaintiffs' motion for leave to file an amended verified complaint and granted the U.S. Treasury's motion to dismiss.

Click the following link for the full text of the court order.

Proposed Changes (2)

Greece

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Greek Legislation Increasing Individual Income Tax, Solidarity Tax and Dividends Tax

Greece's Ministry of Finance has recently submitted proposed legislation to parliament that includes increases to individual income tax rates, special solidarity tax rates and dividends withholding tax rates as part of efforts to balance the country's budget. The changes are summarized as follows:

Individual Income Tax

The individual income tax rates are increased overall for employment and pension income and the brackets are adjusted with the addition of a fourth bracket as follows:

  • up to EUR 20,000 - 22%
  • over EUR 20,000 up to 30,000 - 29%
  • over EUR 30,000 up to 40,000 - 37%
  • over EUR 40,000  - 45%

The rates for individual business income are also changed to match the above rates.

Solidarity Tax

The solidarity tax rates that apply for individual income are increased and the threshold for the top rate is reduced as follows:

  • up to EUR 12,000 - 0%
  • over EUR 12,000 up to 20,000 - 2.2%
  • over EUR 20,000 up to 30,000 - 5%
  • over EUR 30,000 up to 40,000 - 6.5%
  • over EUR 40,000 up to 65,000 - 7.5%
  • over EUR 65,000 up to 220,000 - 9%
  • over EUR 220,000 - 10%

Dividends Withholding Tax

The dividends withholding tax rate for both individual and legal entity recipients is increased from 10% to 15%. The exemption under the EU Parent-Subsidiary Directive still applies.

Effective Date

If adopted by parliament, the changes are to apply from 1 January 2016.

Poland

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Polish Government Working on Amendments to Counter VAT Abuse

The Polish government is currently working on a number of amendments to the value added tax (VAT) law to counter VAT abuse. Proposed amendments include:

  • Abolishing the optional quarterly filing of VAT returns;
  • Requiring electronic submission of returns for certain VAT payers;
  • Introducing a threshold for applying the reverse charge for VAT on the sale of certain goods;
  • Extending the VAT liability of suppliers to purchasers and representatives;
  • Modifying protections granted under VAT rulings; and
  • Increasing penalties for VAT abuse, including abuses related to invoicing.

Additional details will be published once available.

Treaty Changes (3)

Algeria-Saudi Arabia

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Tax Treaty between Algeria and Saudi Arabia has Entered into Force

The income and capital tax treaty between Algeria and Saudi Arabia reportedly entered into force on 1 March 2016. The treaty, signed 19 December 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Algerian tax on global income, tax on corporate profits, tax on mining profits, tax on professional activity, wealth tax, and royalties and taxes on income from hydrocarbons. It covers Saudi Zakat and income tax, including the natural gas investment tax.

Service PE

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

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 7%

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 in the capital of a company resident 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 apply the credit method for the elimination of double taxation.

Non-Discrimination

The treaty does not include a non-discrimination article.

Effective Date

The treaty applies from 1 January 2017.

European Union-San Marino

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EU Council Approves Automatic Financial Account Information Exchange Agreement with San Marino

On 21 April 2016, the EU Council approved the agreement with San Marino for the automatic exchange of financial account information. The agreement, signed 8 December 2015, upgrades a 2004 agreement that ensures that San Marino applies measures equivalent to those in the Council Directive (2003/48/EC) on the taxation of savings income. Under the agreement, information on the financial accounts of residents of EU Member States and San Marino will be automatically exchanged from 2017.

Finland-Germany

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Update - Finland Ratifies Tax Treaty with Germany

Finland's President Sauli Niinistö ratified the pending income tax treaty with Germany on 22 April 2016. The treaty, signed 19 February 2016, will replace the 1979 tax treaty between the two countries, which is currently in force.

Taxes Covered

The treaty covers Finnish state income tax, corporate income tax, communal tax, church tax, interest withholding tax, and non-resident income withholding tax. It covers German income tax, corporation tax, and trade tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is company (other than a partnership or German REIT) directly holding at least 10% of the paying company's capital; otherwise 15%
  • Interest - 0%
  • Royalties - 0%

The protocol to the treaty, signed the same date, includes that Germany retains the right to withhold tax at domestic rates, which will be refunded on application by the taxpayer.

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 other interests in a company the assets of which are comprised of more than 50% of 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

Finland uses the credit method for the elimination of double taxation, while Germany generally applies the exemption method. However, Germany may apply the credit method for dividends, capital gains from the sale of shares deriving value from immovable property, and certain other items of income in accordance with German tax law.

Entry into Force and 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. The 1979 tax treaty between the two countries will cease to have effect once the new treaty is in force and effective.

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