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Worldwide Tax News

Approved Changes (4)

European Union

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European Commission Publishes Updated VAT MOSS Rules for All Member States

On 27 July 2016, the European Commission published an updated report providing an overview of the national rules applied in EU Member States for the use of the mini one-stop shop (MOSS). MOSS may be used by suppliers of telecommunications, broadcasting and electronic services to account for value added tax (VAT) on supplies made to non-VAT taxable consumers (B2C) in the EU. The report provides the following for each Member State:

  • Use and enjoyment rules;
  • Time of supply / chargeability;
  • Re-valuation of services at open market value;
  • Bad Debt relief;
  • Reduced and standard VAT rates;
  • Invoicing obligations;
  • Anti-avoidance measures;
  • Exemptions;
  • VAT registration process;
  • Appointment of a VAT agent; and
  • Penalties for non-compliance

Click the following link for the report, which can be downloaded as a single file (excel), or as separate files for each Member State (PDF).

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Peru Publishes Guidance on the Treatment of Foreign Losses and Tax Credits

Peru's tax administration (SUNAT) has recently published guidance originally issued in April 2016 on the treatment of foreign losses and tax credits for Peru tax purposes. The key points of the guidance are as follows:

  • Foreign-source losses may only be offset against foreign-source income;
  • Where total foreign-source income and losses results in a net loss for the year, such excess loss may not be carried forward in determining net foreign-source income in subsequent years;
  • Where foreign tax has been paid on foreign-source income subject to tax in Peru, a credit will be available that is limited to the lower of the foreign tax actually paid and the Peruvian tax that would be payable on the net foreign-source income using the average effective rate.

Click the following link for the guidance (Spanish language).

South Africa

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South Africa Issues Interpretation Note on Accelerated Depreciation for Small Businesses

On 26 July 2016, the South African Revenue Service issued Interpretation Note No. 9 (Issue 6), which concerns the accelerated depreciation for qualifying small businesses corporations (SBC). The accelerated depreciation is a 100% write-off in the year an asset is brought into use for the process of manufacture or similar process, and a three-year write-off (50%, 30%, 20%) for other qualifying assets.

The Note covers:

  • The requirements to qualify as an SBC, including:
    • Legal entity requirements (close corporation, co-operative or private company);
    • Shareholder requirements (must be natural persons);
    • Gross income limitation requirements (ZAR 20 million per year of assessment);
    • Business activity requirements (20% limit on investment income and income from personal services);
  • The assets qualifying for accelerated depreciation;
  • Recoupment and roll-over relief upon disposal;
  • Loss on disposal of depreciable assets;
  • Impact of a fluctuating small business corporation status on the accelerated allowance; and
  • Objection and appeal regarding the accelerated depreciation.

Click the following link for Interpretation Note No. 9 (Issue 6).

Ukraine

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Ukraine Eases Foreign Currency Exchange Restrictions for Dividends Paid to Non-Residents

The Ukraine National Bank has announced the easing of restrictions on foreign currency exchange and payment of dividends accrued to foreign investors for 2014-2015. Resolution No. 342, issued in June, allows the repatriation of dividends by issuers of equity rights and shares on which dividends are payable and depository institutions that maintain securities accounts of foreign investors. However, dividends repatriated per month may not exceed 10% of the total amount of dividends payable, subject to a cap of an equivalent of USD 5 million per month. For dividend payments to be processed, certain documentation must be provided, including details of the beneficial owner, proof of payment of withholding tax, documentation confirming the genuineness of the transaction, and others that may be requested by the processing bank.

Proposed Changes (3)

Estonia

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Estonia to Increase VAT Registration Threshold

According to a 21 July release from the Estonian Ministry of Finance, the government has approved proposed amendments to the Value Added Tax (VAT) Act to increase the registration threshold and make certain other changes. With the amendments, the VAT registration threshold will be increased from the current EUR 16,000 in annual sales to EUR 40,000. Businesses below the threshold may still register voluntarily in order to claim input VAT deductions.

The other main change approved is the introduction of the reverse charge for certain metal products used in the construction and engineering sectors. The change is meant to reduce VAT fraud in those sectors.

The registration threshold change is to apply from 1 January 2018, while the reverse charge for metal products is to apply from 1 January 2017.

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OECD Issues Public Discussion Draft on BEPS Involving Interest in the Banking and Insurance Sectors

On 28 July 2016, the OECD issued a public discussion draft on approaches to address BEPS involving interest in the banking and insurance sectors. The discussion draft has been issued as part of the follow-up work for BEPS Project Action 4 (Limiting Base Erosion Involving Interest Deductions and Other Financial Payments). The draft focuses on:

  • The risks posed by banking and insurance groups to be addressed under Action 4;
  • Approaches to address risks posed by banks and insurance companies; and
  • Approaches to address risks posed by entities in a group with a bank or insurance company.

Click the following link for the discussion draft. Comments are due by 8 September 2016.

United Kingdom

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UK Consultation on Look-through Basis of Taxation

The UK Office of Tax Simplification (OTS) has issued a discussion paper for consultation on a look-through basis of taxation for small companies. The paper seeks input on five main issues:

  • Who would look-through apply to (or be available for); is it possible to define easily the affected taxpayers?
  • How would it apply: how would profits be allocated to proprietors?
  • What tax consequences ensue: how would the tax be collected?
  • Would this be an optional, default or compulsory system?
  • Overall, would this deliver simplification?

Click the following link for the consultation page on the Gov.UK website. Comments are due by 12 September 2016. The OTS will publish its conclusion in a final report in October.

Treaty Changes (3)

Bahrain-Morocco

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Bahrain Approves Protocol to Tax Treaty with Morocco

On 25 July 2016, the Bahrain Cabinet approved the law for the ratification of the pending protocol to the 2000 income tax treaty with Morocco. The protocol, signed 22 April 2016, is the first to amend the treaty. It replaces Article 26 (Exchange of Information) to bring it in line with the OECD standard for information exchange. The protocol will enter into force on the first day of the second month following the exchange of the ratification instruments.

Madagascar-Korea, Rep of

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Madagascar and South Korea to Negotiate Tax Treaty

On 22 July 2016, officials from Madagascar and South Korea met to discuss bilateral relations and agreed to the negotiation of an income tax treaty. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Ukraine-Malaysia

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Ukraine to Sign Tax Treaty with Malaysia

On 27 July 2016, the Ukraine Ministry of Finance announced that the government has authorized the signature of an income tax treaty with Malaysia. According to the announcement, the treaty will provide for the following withholding tax rates:

  • Dividends - 5% if the beneficial owner is a company holding at least 20% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 8%

The treaty must be signed and ratified before entering into force. Once in force and effective, the treaty will replace the 1987 tax treaty between Malaysia and the former Soviet Union, which continues to be applied in respect of Ukraine and Malaysia in certain cases.

Additional details will be published once available.

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