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Approved Changes (5)

Algeria

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Algerian Additional Finance Law 2015 Enacted including Corporate Tax Rate Changes

The Algerian government has enacted the Additional Finance Law 2015, which generally applies from the date it was published in the Official Gazette, 23 July 2015.

The new Law increases the standard corporate tax rate from 23% to 26% for most sectors, maintains the 23% rate for tourism and construction sectors and reintroduces the 19% rate for manufacturing. The 19% rate and a higher 25% rate had been replaced with a unified 23% rate effective 1 January 2015. When a company performs activities subject to different rates, separate accounting records much be kept to determine the tax base for each type.

Other measures include a reduction in the tax on professional activities from 2% to 1.5% for construction and 1% for manufacturing, and increasing the rate to 3% rate for hydrocarbon transport by pipeline. For other activities, the rate remains 2%.

Colombia

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Colombia Issues Electronic Filing Requirements for Transfer Pricing Documentation

Colombia's National Tax Authority (DIAN) recently issued requirements for the electronic filing of the transfer pricing informative return and supporting documentation for the 2014 tax year and partial tax year 2015. The general requirements are as follows:

  • Both the informative return and supporting documentation must be filed electronically using the prescribed forms digitally signed by the person responsible for reporting;
  • The informative return should include:
    • The type of identification document, tax number, registered name and country code;
    • The type of transaction and transaction amount;
    • The transfer pricing method used;
    • The comparables and benchmarks used and type of adjustments made; and
    • Any other relevant information as required such as transactions with tax havens, cost sharing arrangements, etc.; and
  • Documentation supporting a transaction must include an executive summary and functional, market and economic analyses

DIAN will generally not accept technical issues with the electronic reporting platform as a valid cause for late filing, but if DIAN acknowledges that technical issues exist, taxpayers are allowed to submit up to 1 day following the repair to the system.

Under Colombia's transfer pricing rules, the informative return and supporting documentation must be filed if the gross assets of a company is equal to or exceeds 100,000 tax value units (TVU) as of 31 December of the previous year, or the gross income of a company is equal to or exceeds 61,000 TVU in the previous year. The documentation is required for related party transactions and transactions with residents of tax havens. Failure to file will result in penalties of up to 20,000 TVU.

A TVU is currently equal to approximately USD 9.89.

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Peru Issues Residence Certificate Requirements for the Claiming of Tax Treaty Withholding Tax Benefits

On 3 July 2015, the Peruvian Tax Authority issued Notice 094-2015, which includes the certificate of residence requirements when claiming tax treaty withholding tax benefits. According to the notice, in order for a non-resident to claim a reduced withholding tax rate provided for by a tax treaty, the non-resident must provide the Peruvian payer a certificate of residence at the time the expense is accrued by the payer. In order for a certificate to be accepted, the withholding date must fall within the period for which the certificate is granted, and the certificate may not be more than 4 months old at the time of withholding.

Singapore

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Singapore Publishes Release on Allowing All Companies to E-File

On 28 July 2015, the Inland Revenue Authority of Singapore published a release announcing that from June 2015, all companies are allowed to e-file their tax returns.

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All companies, regardless of annual revenue, can now e-File their Corporate Income Tax returns. E-Filing of Simplified Form C (Form C-S) was first introduced for small companies in 2012, and the take-up has been encouraging. IRAS is now extending the convenience of e-Filing of Form C to all companies, allowing companies with annual revenue of more than $1 million to enjoy the benefits of e-Filing for the first time from Jun 2015.

The availability of e-Filing for Form C also means that companies can go fully paperless when it comes to tax matters, thanks to a full suite of e-Services for companies – whether it is filing of GST returns, Corporate Income Tax returns, or Withholding Tax, companies can benefit from reduced compliance costs and productivity gains while enjoying the convenience of going paperless.

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Click the following link for the full media release.

Ukraine

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Ukraine Adopts Transfer Pricing Rules Amendments

On 15 July 2015, the Ukrainian parliament adopted amendments to the country's transfer pricing rules. The main amendments include changes to controlled transaction thresholds, penalty adjustments and others.

Non-Application to VAT Clarified

The amendments clarify that the transfer pricing rules apply only to corporate income tax and not value added tax (VAT).

Thresholds for Controlled Transactions Increased

The thresholds for recognition of transactions as controlled are as follows:

  • The taxpayer and/or the related party's annual income exceeds UAH 50 million (increased from UAH 20 million), and
  • The value of the annual transactions with the related party exceeds UAH 5 million (increased from UAH 1 million)

Penalties Adjusted

The penalties for failing to comply with the documentation requirements are adjusted as follows:

  • The penalty for failing to file the report on controlled transactions is increased from 100 minimum wages to 300 minimum wages; and
  • The penalty for failing to include a controlled transaction in the report is reduced from 5% of the transaction value amount to 1% of the amount with a penalty cap of 300 minimum wages

The penalty for failing to submit TP documentation is unchanged: 3% of the total amount of transactions, capped at 200 minimum wages.

1 minimum wage = UAH 1,218 (2015) or ~USD 55

Transfer Pricing Annex Canceled

The additional requirement to submit an annex to corporate the income tax return with information on controlled transactions is canceled.

Information Request Period Extended

The timeframe for responding to a request from the tax authorities for additional transfer pricing information is extended from 10 days to 30 days.

Conditions Considered for CMU Tax Haven List Reduced

One of the conditions for including a jurisdiction in the tax haven list set by the Cabinet of Ministers of Ukraine (CMU) is removed. The condition removed is whether a jurisdiction publically discloses information on the ultimate beneficial owners of legal entities. The conditions that remain include:

  • Whether a jurisdiction applies a corporate tax rate lower than the rate applied in Ukraine by 5% or more (i.e. 13% or less given Ukraine's current 2015 rate of 18%); and
  • Whether a jurisdiction has international agreements on information exchange.

The list is important for transfer pricing purposes because transactions with residents of listed jurisdictions, whether related or not, are subject to the transfer pricing rules if the thresholds are met.

Entry into Force and Effect

The amending legislation will enter into force after it is signed by the president and published in the Official Gazette, and will apply for transactions performed in 2015 and subsequent years.

Treaty Changes (1)

Netherlands-Kenya

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Update -Tax Treaty between Kenya and the Netherlands

The income tax treaty between Kenya and the Netherlands was signed on 22 July 2015. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Kenyan income tax, and Dutch income tax, wages tax, company tax, and dividend tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company (the capital of which is divided into shares) that directly holds at least 10% of the paying company's capital; otherwise:
    • 10% if the paying company is a resident of Kenya; and
    • 15% if the paying company is a resident of the Netherlands
  • Interest - 10%
  • Royalties - 10%

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

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; 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

Kenya applies the credit method for the elimination of double taxation while the Netherlands may apply the exemption or credit method depending on the type of income and the applicable provisions of its domestic law.

Entry into Force and Effect

The treaty will enter into force on the last day of the month following the month in which the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

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