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Approved Changes (3)


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China to Introduce Dividends Withholding Tax Deferral and other Measures to Promote Foreign Investment

The Chinese government has announced that the State Council has approved a number of measures meant to promote foreign investment in China during a Council meeting held 28 July 2017.

One of the main measures is a dividends withholding tax deferral for non-residents that reinvest dividends from Chinese companies into qualifying Chinese projects. In addition, the State Council has agreed on measures to:

  • Speed up registration of foreign investments enterprises,
  • Expand preferential policies for technologically advanced business services outsourcing,
  • Encourage local establishment of regional headquarters
  • Allow the establishment of foreign-invested enterprises by way of mergers and acquisitions.
  • Strengthen the protection of foreign investment in intellectual property rights.
  • Promote foreign investment in western regions and the old northeast industrial base in areas of science and technology, environmental protection, and other areas
  • Improve the work visa process for foreign nationals, including an extension of the validity period

The State Council also agreed to study measures to further relax foreign investment restrictions on certain manufacturing and service sectors.

The above measures should in principle be implemented by the end of September 2017. Details of the particular measures will likely be published by China's State Administration of Taxation in the future.

European Union-Belgium-France

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European Commission Announces Decision Requiring Belgium and France to Abolish Tax Exemption for Ports

The European Commission issued a release on 27 January 2017 announcing its decision to require Belgium and France to abolish the corporate tax exemptions granted to their ports, so as to align their tax regime with EU state aid rules. The Commission opened illegal State aid investigations into the port exemptions in July 2016 due to inaction by both Belgium and France to comply with initial requests in January 2016 that the exemptions be abolished. According to the release, the Commission considers that the corporate tax exemptions granted to Belgian and French ports provide them with a selective advantage, in breach of EU state aid rules. In particular, the tax exemptions do not pursue a clear objective of public interest, such as the promotion of mobility or multimodal transport.

Belgium and France now have until the end of 2017 to take the necessary steps to remove the tax exemption in order to ensure that, from 1 January 2018, all ports are subject to the same corporate taxation rules as other companies. Because the exemptions existed prior to the accession of France and Belgium to the EU, they are considered existing State aid and not subject to recovery.

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OECD Publishes Report on Neutralizing the tax effects of branch mismatch arrangements

On 27 July 2017, the OECD published a report on Neutralizing the Effects of Branch Mismatch Arrangements. The following is the summary provided with the OECD report:

This 2017 report sets out recommendations for branch mismatch rules that would bring the treatment of these structures into line with the treatment of hybrid mismatch arrangements as set out in the 2015 Report on Neutralizing the Effects of Hybrids Mismatch Arrangements (Action 2 Report). Branch mismatches arise where the ordinary rules for allocating income and expenditure between the branch and head office result in a portion of the net income of the taxpayer escaping the charge to taxation in both the branch and residence jurisdiction. Unlike hybrid mismatches, which result from conflicts in the legal treatment of entities or instruments, branch mismatches are the result of differences in the way the branch and head office account for a payment made by or to the branch.

The 2017 report identifies five basic types of branch mismatch arrangements that give rise to one of three types of mismatches: deduction / no inclusion (D/NI) outcomes, double deduction (DD) outcomes, and indirect deduction / no inclusion (indirect D/NI) outcomes. This report includes specific recommendations for improvements to domestic law intended to reduce the frequency of branch mismatches as well as targeted branch mismatch rules which adjust the tax consequences in either the residence or branch jurisdiction in order to neutralize the hybrid mismatch without disturbing any of the other tax, commercial or regulatory outcomes. The annexes of the report summarize the recommendations and set out a number of examples illustrating the intended operation of the recommended rules.

Proposed Changes (1)

United States

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Joint Statement Published on Commitment to U.S. Tax Reform

On 27 July 2017, the Office of the Press Secretary of the Trump administration published a joint statement on U.S. tax reform from House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT), and House Ways and Means Committee Chairman Kevin Brady (R-TX):

"For the first time in many years, the American people have elected a President and Congress that are fully committed to ensuring that ordinary Americans keep more of their hard-earned money and that our tax policies encourage employers to invest, hire, and grow. And under the leadership of President Trump, the White House and Treasury have met with over 200 members of the House and Senate and hundreds of grassroots and business groups to talk and listen to ideas about tax reform. |P "We are all united in the belief that the single most important action we can take to grow our economy and help the middle class get ahead is to fix our broken tax code for families, small business, and American job creators competing at home and around the globe. Our shared commitment to fixing America’s broken tax code represents a once-in-a-generation opportunity, and so for three months we have been meeting regularly to develop a shared template for tax reform.

"Over many years, the members of the House Ways and Means Committee and the Senate Finance Committee have examined various options for tax reform. During our meetings, the Chairmen of those committees have brought to the table the views and priorities of their committee members. Building on this work, as well as on the efforts of the Administration and input from other stakeholders, we are confident that a shared vision for tax reform exists, and are prepared for the two committees to take the lead and begin producing legislation for the President to sign. |P "Above all, the mission of the committees is to protect American jobs and make taxes simpler, fairer, and lower for hard-working American families. We have always been in agreement that tax relief for American families should be at the heart of our plan. We also believe there should be a lower tax rate for small businesses so they can compete with larger ones, and lower rates for all American businesses so they can compete with foreign ones. The goal is a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas. And we are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base. While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.

"Given our shared sense of purpose, the time has arrived for the two tax-writing committees to develop and draft legislation that will result in the first comprehensive tax reform in a generation. It will be the responsibility of the members of those committees to produce legislation that achieves the goals shared broadly within Congress, the Administration, and by citizens who have been burdened for too long by an outdated tax system. Our expectation is for this legislation to move through the committees this fall, under regular order, followed by consideration on the House and Senate floors. As the committees work toward this end, our hope is that our friends on the other side of the aisle will participate in this effort. The President fully supports these principles and is committed to this approach. American families are counting on us to deliver historic tax reform. And we will."

Treaty Changes (5)

Brazil-Russia-India-China-South Africa

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BRICS Countries Sign Memorandum of Cooperation in Tax Matters

Officials from Brazil, Russia, India, China, and South Africa (BRICS countries) signed a Memorandum of Cooperation (MoC) in tax matters during a meeting held 25 to 27 July 2017 in Hangzhou, China. The MoC is meant to further promote cooperation amongst the BRICS revenue administrations in the common areas of interest in tax matters, including financial account information exchange, and in the area of capacity building and knowledge sharing.


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Tax Treaty between Brunei and Cambodia Signed

On 27 July 2017, officials from Brunei and Cambodia 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.


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Ecuador and Italy Sign Memorandum of Cooperation on Social Security

Ecuador's Ministry of Foreign Affairs has announced the signing of a Memorandum of Cooperation on Social Security between the two countries on 26 July 2017. The agreement is meant to promote technical and administrative cooperation in the field of social security through the formation of a bilateral working group to study mechanisms for the exchange of knowledge and information. In particular, the agreement is meant to facilitate social benefits for nationals of one country living in the other.


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Kosovo to Negotiate Tax Treaty with Kuwait

On 21 July 2017, the Kosovo government reportedly authorized the negotiation of an income tax treaty with Kuwait. Any resulting treaty would be the first of its kind between the two countries and must be finalized, signed, and ratified before entering into force.

United States-Denmark-Guernsey

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U.S. Publishes CbC Exchange Arrangements with Denmark and Guernsey

The U.S. IRS has published the competent authority arrangements on the exchange of Country-by-Country (CbC) reports with Denmark and Guernsey. The arrangement with Denmark was signed 21 June 2017 and the arrangement with Guernsey was signed 22 June 2017.

The arrangements provide that pursuant to the exchange of information provisions of the 1999 income tax treaty with Denmark and the 2002 tax information exchange agreement with Guernsey, as amended (2013), each competent authority will automatically exchange CbC reports received from each reporting entity resident for tax purposes in its jurisdiction, provided that, on the basis of the information provided in the CbC report, one or more constituent entities of the MNE group of the reporting entity are resident for tax purposes in the jurisdiction of the other competent authority, or are subject to tax with respect to the business carried out through a permanent establishment situated in the other jurisdiction.

With respect to fiscal years beginning on or after 1 January 2016, CbC reports are to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. With respect to fiscal years beginning on or after 1 January 2017, reports are to be exchanged no later than 15 months after the last day of the fiscal year.


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