Worldwide Tax News
On 22 October 2015, the Inland Revenue Board of Malaysia published Public Ruling (PR) No. 7/2015 - Appeal against an Assessment and Application for Relief. The public ruling updates previous guidance by providing additional guidance on the right to appeal and the procedure and application for relief in respect of a taxpayer error or mistake.
The general procedures are not changed, which include the filing of Form Q with the Director General of Inland Revenue within 30 days of the notice of assessment being appealed, and the filing of Form N if a time extension to appeal is needed.
PR No. 7/2015 replaces PR No. 3/2012.
Click the following link for PR No. 7/2015 on the Inland Revenue Board of Malaysia website.
The Russian Ministry of Finance recently published Letter No. 03-08-05/57368, which provides guidance on corporate tax exemptions provided for profits of certain controlled foreign corporations (CFC). According to the letter, the profits of a CFC will be exempt from tax in Russia if it meets at least one of the following conditions:
- The CFC is a noncommercial entity that does not distribute its profits among its shareholders or other persons;
- The CFC was created in a Eurasian Economic Union member country (Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia) and has permanent tax residency in that country;
- The effective tax rate for the CFC's profits is not less than 75% of the Russian corporate tax rate;
- The CFC is an active foreign company, an active foreign holding company; or an active foreign sub-holding company;
- The CFC is a bank or an insurance company carrying out its activities on the basis of a license or other special permit;
- The CFC is an issuer of circulating bonds, an entity authorized to receive interest paid under circulating bonds, or an entity that has been assigned the rights and obligations of circulating bonds issued by another foreign entity;
- The CFC is engaged in the extraction of natural resources on the basis of a production sharing agreement or similar agreement with the relevant foreign country, and the CFC's share of profits is at least 90% of its total profits; or
- The CFC operates a new offshore deposit of hydrocarbon fuels, or is a direct shareholder of the operator of a new offshore hydrocarbon deposit.
Even if the profits of a CFC are exempt, the controlling person in Russia must still provide notification to the Russian tax authority within one month after the conditions for being deemed a controlling person arise (notification of participation). In 2015, a Russian resident with 50% or greater participation in a foreign company is deemed a controlling person. In 2016 and subsequent years, a Russian resident with 25% or greater participation in a foreign company is deemed a controlling person, although a 10% participation rule also applies in the case of an aggregate participation of 50% or more in a foreign company by multiple Russian residents.
On 28 October 2015, the UK HMRC published its plans to improve access to Research and Development (R&D) tax relief for small businesses. According to the plan, some of the specific actions HMRC will take include:
- Launching an Advance Assurance program on R&D tax relief in November 2015 for companies with turnover under GBP 2 million and fewer than 50 employees;
- Increasing communication between HMRC and customers on R&D policy and technical developments;
- launching a project to identify companies that have carried out R&D, but have not claimed relief; and
- Issuing improved guidance on the interaction of R&D tax relief and grant schemes in a state aid context, as well as providing bespoke guidance on R&D tax relief for SMEs.
Click the following link for additional information, including links to the plan and an overview of the timing for the actions to be taken.
On 21 October 2015, the U.S. Internal Revenue Service announced annual inflation adjustments for more than 50 tax provisions, including the tax rate schedules, and other tax changes. For 2016, the brackets and rates for unmarried individuals (other than surviving spouses and heads of households) are as follows:
- up to USD 9,275 - 10%
- over USD 9,275 up to 37,650 - 15%
- over USD 37,650 up to 91,150 - 25%
- over USD 91,150 up to 190,150 - 28%
- over USD 190,150 up to 413,350 - 33%
- over USD 413,350 up to 415,050 - 35%
- over USD 415,050 - 39.6%
The top marginal bracket (39.6%) for surviving spouses and married couples filing jointly is USD 466,950, for heads of household is USD 441,000, and for married filing separately is USD 233,475.
Having won control of parliament on 25 October 2015, Poland's Law and Justice Party has already made a number of proposals for the country's tax system. The main proposals include:
- Reducing the standard VAT rate from 23% to 22%;
- Requiring all taxpayers to settle VAT monthly, with no quarterly option for small taxpayers as currently provided;
- Implementing a split VAT payment system, where VAT due on an invoice would be directly deposited in a temporary bank account administered by the tax office when the payment is made, with net amount of the payment going to the supplier;
- Introducing a reduced corporate tax rate of 15% for small taxpayers (annual income under EUR 1.2 million);
- Introducing a 0.39% tax on bank assets; and
- Introducing a 2% tax on the revenue of stores with retail space over 250 square meters.
The reduction in the standard VAT rate and the introduction of the bank and retail taxes are planned for 2016, while the timing of the other planned changes is uncertain.
On 8 May 2015, officials from China and Russia signed a protocol to the pending 2014 income tax treaty between the two countries. The main amendment made by the protocol is the replacement of Article 11 (Interest), which reduces the interest withholding tax rate on interest payments from 5% to 0%.
Both the pending treaty and the protocol will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following their entry into force.
Once in force and effective, the treaty replaces the 1994 income tax treaty between the two countries, which currently applies.
On 28 October 2015, officials from the European Union and Liechtenstein signed a new agreement for the automatic exchange of financial account information. Under the agreement, information on the financial accounts of residents of EU Member States and Liechtenstein will be automatically exchanged from 2017. The agreement is similar to the pending agreement the EU signed with Switzerland in May 2015.
According to recent reports, Qatar ratified the pending income tax treaty with Latvia on 27 October 2015. The treaty, signed 26 September 2014, is the first of its kind between the two countries. It will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force. Click the following link for details of the treaty.
Note - previous reports that the treaty entered into force on 1 June 2015 have been amended.