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Approved Changes (4)

Brazil

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Brazil Cross-border Payments under Cost Sharing Agreement for Software License Taxed as Royalties

Brazil has published Private Ruling 442 of 18 September 2017, concerning the withholding tax treatment of payments made by a Brazilian resident company to its Italian parent under a cost sharing agreement for a foreign software license acquired by the parent from a third party (software used by the Brazilian company). The ruling provides that because the payment is for the reimbursement of the cost of acquisition of the software license, such payment can be considered and treated as a royalty payment. As such, the payment is subject to the standard withholding tax rate of 15%. The ruling also notes that the same rate applies under the 1979 Brazil-Italy tax treaty.

Gibraltar

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Gibraltar Publishes CbC Reporting Notification Template and Explanatory Notes

The Gibraltar Income Tax Office has published the Country-by-Country (CbC) reporting notification template and explanatory notes. Gibraltar's CbC reporting requirements apply for fiscal years beginning on or after 1 January 2016 for MNE groups meeting the standard EUR 750 million threshold (from 1 Jan 2017 for foreign parented groups). The initial notification is due 30 September 2017 on which entity within an MNE group will file the CbC report and where. A second notification is due by 31 December 2017 where a Gibraltar resident has been designated as a surrogate parent, and where a constituent is otherwise required to file a CbC report and is unable to obtain necessary information from its ultimate parent to complete the CbC report. Notifications are to be sent via email to CbCR@gibraltar.gov.gi.

Panama

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Panama Reduces Property Tax Rates

On 18 September 2017, Panama's National Assembly approved legislation for the reduction of property tax rates, as well as certain other property tax changes. For commercial property, industrial property, and non-primary residences, the progressive rates up to 2.1% based on the value of the property are reduced to the following:

  • 0.00% on the taxable amount up to PAB 30,000;
  • 0.60% on the taxable amount over PAB 30,000 up to 250,000;
  • 0.80% on the taxable amount over PAB 250,000.00 up to 500,000; and
  • 1.00% on the taxable amount over PAB 500,000.

For primary family residences, the legislation provides for a top rate of 0.7%, increases the exemption to PAB 120,000, and makes certain other changes. The changes generally apply from 1 January 2019.

South Africa

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South Africa Updates Interest Rates on Outstanding Taxes, Certain Refunds, and Credit Amounts

On 28 September 2017, the South African Revenue Service published updated rate tables for interest charged on outstanding taxes, duties and levies and those payable in respect of refunds of tax on successful appeals and certain delayed refunds, as well as for interest payable on credit amounts (overpayment of provisional tax). For overdue taxes and refunds, the interest rate is 10.50% for the period 1 July to 31 October 2017 and will be reduced to 10.25% from 1 November. For credit amounts, the interest rate is 6.50% for the period 1 July to 31 October 2017 and will be reduced to 6.25% from 1 November.

Proposed Changes (4)

France-European Union

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French President Speaks on Proposals for EU Tax Measures including Standardized Corporate Tax Rates

On 26 September 2017, French President Emmanuel Macron delivered a speech at the Sorbonne University in Paris on the need for rebuilding a sovereign, united, and democratic Europe, including in relation to taxation. Main proposals put forward include:

  • A European carbon tax on imports;
  • A new tax system for the taxation of digital companies (France supports an equalization tax); and
  • Convergence of EU tax models, including a defined "corridor" for corporation tax rates (minimum/maximum).

Click the following link for an English-language summary of the speech.

Russia

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Russia Ministry of Finance Finalizing Draft Amendments to Clarify CFC Regime

The Russian Ministry of Finance has completed a public consultation on draft amendments meant to clarify the country's controlled foreign company (CFC) regime as it applies from 1 January 2015. The main amendments include:

  • Clarifying the rules on the carry forward of losses of a CFC in the three years immediately preceding 2015;
  • Clarifying the procedure of taxation on financial asset transactions of CFCs (including securities), which includes that the income is determined based on the sales price of the assets and the expense is determined based on the acquisition cost, if acquired in 2015 or later, and based on accounting data as of the first day of the 2015 financial year, if acquired prior to 2015;
  • Clarifying the procedure for calculating tax paid by a CFC that is part of a foreign consolidated group, which may be based on the portion of CFC revenue, profit before tax, or net assets as compared with the respective total for the consolidated group;
  • Eliminating the need for multiple documents confirming that the conditions for CFC profit exemption are met when part of multi-level chain of ownership in Russia;
  • Clarifying the taxation of individuals upon the disposal of securities and other assets (property rights) acquired in the liquidation (termination) of a CFC, and in particular, providing a fixed uniform procedure regardless of the method of disposal; and
  • Clarifying certain provisions of the concept of tax residency of foreign companies to provide that certain planning and control activities of a foreign company carried out in Russia will not result in recognition of the foreign company as tax resident in Russia, including the following activities:
    • Implementation of strategic planning and budgeting;
    • Preparation of consolidated financial and management reports;
    • Performance analysis;
    • Implementation of internal audit and internal control;
    • Preparation and organization of fundraising;
    • Management of investment, financial, production, and other risks;
    • Adoption (approval) of standards, methodologies, and (or) policies that apply to foreign companies or separate business units; and
    • Monitoring compliance in relation to above standards, methodologies, and (or) policies.

The draft amendments must be finalized and submitted for approval, and are to generally apply from the 2017 income year of the controlling person.

Turkey

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Turkey Planning Increased Tax Rate for Financial Sector, Retained Earnings Tax, and Other Tax Measures

According to recent reports, Turkey's Ministry of Finance is currently finalizing plans for a number of tax measures. Some of the main measures include:

  • The introduction of a 22% tax rate for the financial sector (standard rate 20%);
  • The introduction of 1% tax on retained earnings that will be levied on profits not capitalized or distributed within two months of the annual tax return deadline;
  • A reduction in the capital gains exemption for immovable property held for at least two years from 75% to 50%;
  • The introduction of a VAT registration requirement for foreign suppliers of e-services to Turkish consumers; and
  • An increase in the third bracket individual income tax rate from 27% to 30%, resulting in brackets of 15%, 20%, 30%, and 35%.

The measures are expected to enter into force in 2018. Additional details will be published once available.

United States

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U.S. IRS Consults on New APA Template

The IRS’s Advance Pricing and Mutual Agreement Program (APMA) is seeking comment on a proposed revision to the template for advance pricing agreements (APAs). The revision is intended to:

  • Facilitate quicker and more accurate drafting of APAs;
  • Provide more guidance to taxpayers in preparing the proposed draft APA that is required as part of an APA Request;
  • Facilitate APMA’s review of draft APAs; and
  • Facilitate the Mutual Agreement process for bilateral and multilateral APAs.

To achieve these goals, the template presents menus of options for selection that cover a wide range of situations in order to minimize the need for custom drafting and negotiation over the text of the APA.

Click the following link for the consultation page. The deadline for comments is 31 October 2017.

Treaty Changes (3)

Argentina-Romania

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SSA between Argentina and Romania to be Negotiated

According to recent reports, the Romania government authorized the negotiation of a social security agreement with Argentina on 27 September 2017. Any resulting agreement will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Burkina Faso-Turkey

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Burkina Faso and Turkey Conclude Tax Treaty Negotiations

According to a release from Turkey's Revenue Administration, officials from Burkina Faso and Turkey concluded the first round of negotiations with the initialing of an income tax treaty on 22 September 2017. The treaty will be the first of its kind between the two countries, and must be signed and ratified before entering into force.

Luxembourg-Sri Lanka

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Luxembourg and Sri Lanka to Revise Tax Treaty

The Luxembourg government has announced that officials from Luxembourg and Sri Lanka met on 27 September 2017 to discuss bilateral relations, including the need to revise the 2013 income and capital tax treaty between the two countries in order to bring it in line with the latest OECD standards. Any revisions would be the first to the treaty, and must be finalized, signed, and ratified before entering into force.

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