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Approved Changes (2)

Colombia

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Colombia Regulates Filing of Foreign Assets Return

Colombia's National Tax Authority (DIAN) has issued Administrative Regulation 96 of 2015 concerning the foreign assets return introduced under Colombia's Tax Reform Act (Act 1739), which was passed the end of 2014. The return requirement applies for Colombian resident taxpayers with assets held abroad as of 1 January 2015, with the first return (Form 160) due October 2015. The return must be filed electronically, and includes:

  • Identification of the taxpayer;
  • Details of each foreign asset with a value exceeding 3,580 tax value units (approximately USD 33,745 for 2015); and
  • The aggregate value per jurisdiction of foreign assets owned that do not exceed 3,580 tax value units individually.

The exact deadline depends on the taxpayer's tax identification number (NIT). Failure to file will result in penalties applicable for failure to submit information.

Italy

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Italy Publishes Reform Legislation Including Several Changes Regarding Cross Border Business

On 22 September 2015, Italy published Legislative Decree No. 147 in the Official Gazette. The Decree includes a number of changes aimed at simplifying tax rules for cross border business and promoting the growth and internationalization of enterprises. The Decree will enter into force on 7 October 2015, although the individual changes apply either from the 2015 tax year or from 2016, or will be determined through subsequent regulations. The main changes are summarized as follows.

Advance Tax Agreements for Companies with International Operations

The scope of advanced tax agreements for international operations is expanded to include:

  • Agreements on asset bases in the case of inbound and outbound migrations; and
  • Agreements on the fair market value of costs incurred with black list entities for deduction purposes for taxpayers taking part in the Cooperative Compliance Program (previous coverage).

Rollback provisions are added as follows:

  • Advance tax agreements based on arrangements reached with other jurisdictions under the mutual agreement procedures of applicable tax treaties will apply from the date the request was filed; and
  • For other agreements, including APA's, taxpayers will be able to rollback the terms of the agreement to the year the request was filed.

The effective date will be set through regulation to be issued within 90 days of the Decree's entry into force.

Advance Tax Ruling for New Investments

A new type of advanced tax ruling is introduced that covers investments of at least EUR 30 million that will have a long-term positive impact on employment in Italy. Such rulings may be requested by both resident and non-resident companies, and will cover the tax treatment of the entire investment plan.

A request for an advance tax ruling for qualifying new investments should be responded to within 120 days, but this may be extended 90 days if additional information is required.

The effective date will be set through regulation to be issued within 90 days of the Decree's entry into force.

Beneficial Foreign Tax Credit Rules Expanded

The beneficial foreign tax credit rules that apply for income derived through a foreign PE or a foreign subsidiary included in the international tax consolidation regime are expanded to cover any foreign income. The beneficial rules include:

  • An immediate recognition of the credit in the tax return related to the year in which the foreign income is subject to tax in Italy even if the foreign tax is not yet paid, provided it will be paid by the deadline to file the tax return for the subsequent tax period; and
  • The possibility to carry back and carry forward any excess tax credits.

The Decree also provides taxpayer's with the ability to request a tax ruling on whether a foreign tax credit can be claimed on foreign taxes not covered by an applicable tax treaty.

The change applies from the 2015 tax year.

CFC Rules Exemption

The filing of an advance ruling request for an exemption from the CFC rules is no longer required, as the conditions for exemption may instead be proven during a tax audit. However, an advance ruling request remains optional, and if a ruling has not been obtained, the taxpayer must disclose in its tax return if the ownership of shares meets the conditions for the application of the CFC rules. Failure to disclose will result in penalties.

The new rules apply from the 2015 tax year.

Changes in Treatment of Dividends and Capital Gains from Black List Companies

The taxation of dividends and capital gains from black list companies is changed as follows:

  • Full taxation will only apply for dividends or capital gains derived directly or indirectly through a white list subsidiaries with participation in black list companies;
  • An exemption may be obtained without an advance tax ruling if it can be shown during an audit that the income has been subject to an adequate level of tax; and
  • If an exemption from the CFC rules has been previously provided, full taxation will still apply, but the taxpayer will be allowed a foreign tax credit for foreign taxes paid by the black list company.

The new rules apply from the 2015 tax year.

Relaxed Deduction Restriction for Payments to Black List Companies

The requirement that proof be provided on the business substance of black list companies in order to deduct payments for the purchase of goods and services from such companies is abolished, and a safe harbor limit is implemented equal to the fair market value of the transaction.

Amounts exceeding the safe harbor will not be deductible unless proof is provided that the transaction relates to an actual business interest and that the transaction has been carried out.

The new rules apply from the 2015 tax year.

Horizontal Consolidation

Horizontal consolidation will be allowed for Italian resident companies with a common parent resident in a qualifying EU or EEA Member State with which Italy has adequate exchange of information. This includes Italian PEs of companies resident in qualifying Member States.

The new rules apply from the 2015 tax year.

Outbound and Inbound Migration

Regarding the exit tax regime for an outbound migration to an EU or EEA Member State (previous coverage), the Decree provides that the regime may also apply in cases of a cross border merger or other reorganization that results in no PE remaining in Italy.

Regarding an inbound migration, the Decree provides that a migration from a white list jurisdiction to Italy will involve the step up of the company’s assets and liabilities at fair market value, whether or not an exit tax applied in the jurisdiction of origin. However, If a migration is from a black list jurisdiction, the tax basis of the assets will be lower of the acquisition cost, market value or book value, and the tax basis of the liabilities will be the higher.

For both outbound and inbound migrations, an advance tax agreement may be requested.

The new rules apply from the 2015 tax year.

Net Interest Deduction Limit Determination Change

Italian companies will be able to include dividends received from foreign controlled subsidiaries in their EBITDA when determining the net interest deduction limit (30% of EBITDA). However, the use of foreign controlled subsidiaries' EBITDA for the determination will no longer be allowed.

In addition, the limitation on the deduction of interest expenses arising from bonds issued by certain non-qualified companies is repealed.

The new rules apply from the 2016 tax year.

Income Attribution for Italian PEs of Foreign Companies

The Decree redefines the approach to the attribution of income to PEs in Italy in line with the Authorized OECD Approach. Under the new approach, the income of Italian PEs will be determined according to the ordinary rules for resident companies and the limited PE force of attraction provisions will be abolished.

In addition, transactions between Italian PEs and foreign headquarters are subject to Italian transfer pricing rules, with the PE treated as separate and independent from its headquarters.

The new rules apply from the 2016 tax year.

Income Exemption for Foreign PEs of Italian Companies

An election is introduced where an Italian company may have income of foreign PEs exempted instead of applying the standard foreign tax credit rules. Once made, the election is irrevocable and must be applied for the income of all qualifying PEs of the Italian company, and the income of the PE(s) must be separately disclosed in the tax return. PEs located in black list jurisdictions will not qualify unless the conditions for a CFC exemption are met.

For existing PEs, tax losses derived through a PE prior to the election will be recaptured. If the election is not made and a PE is transferred to another group company that has made the election, tax loss recapture will apply as well.

The new rules apply from the 2016 tax year.

Transfer Pricing between Resident Entities

The Decree clarifies that Italy's transfer pricing rules do not apply for transactions between Italian resident entities.

Proposed Changes (2)

Bulgaria

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Bulgaria Publishes Draft Tax Reform Legislation

The Bulgarian Ministry of Finance published draft tax reform legislation on 12 September 2015. The main amendments include:

  • Implementation of the amendment to EU Parent-Subsidiary Directive that denies the participation exemption if a distribution received is tax deductible for the distributing subsidiary;
  • The introduction of a municipal-level personal income tax that may be set at a rate of up to 2%, and is in addition to the standard 10% personal income tax rate; and
  • The introduction of an advance approval certification procedure for taxpayer's seeking State aid in the form of tax relief for regional development investment.

Subject to approval by the Bulgarian National Assembly, the changes are expected to apply for 2016.

European Union-France

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EU Commission asks France to Apply the same Rules for Dividend Withholding Tax Refunds to French and European Investors

According to the September infringements package: key decisions, issued 24 September 2015, the EU Commission has asked France to amend its rules regarding the refund of excess tax withheld on dividends to non-residents.

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The Commission has asked France to comply with the procedural rules when it refunds to non-residents the tax deducted at source which was not due on dividends.

Current tax provisions require non-resident taxpayers who have invested in companies established in France to provide proof of payment by the French paying agent of the amount deducted from dividends when they apply for reimbursement of the part not due. In the event of a complaint, non-residents are allowed less time to make their application, as their starting point is the time when the amount is deducted on distribution of the dividends, whereas for taxpayers resident in France it is the time the tax notice is received.

The Commission believes that these provisions give rise to disproportionate procedures contrary to the principles of equivalence and effectiveness on which the Court of Justice of the EU bases its case-law regarding the reimbursement of payments not due ( C-310/09, Accor SA). According to the Court, the procedural provisions of a Member State must not make it impossible or excessively difficult to repay tax levied contrary to European Law.

The French authorities are asked to amend the rules in question.

The request is addressed in the form of a reasoned opinion and the French authorities have two months to notify the Commission of the measures taken in order to correctly apply European principles. Failing this the Commission may decide to refer France to the Court of Justice of the EU.

Treaty Changes (2)

Andorra-Portugal

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Tax Treaty between Andorra and Portugal Signed

On 27 September 2015, officials from Andorra and Portugal signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Nepal-Untd A Emirates

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Tax Treaty between Nepal the U.A.E. under Negotiation

On 27 September 2015, officials from Nepal and the United Arab Emirates met to begin negotiations for 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.

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