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Worldwide Tax News

Approved Changes (1)

Poland

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Poland Expands Simplified Financial Reporting to Small-Undertakings

On 12 August 2015, Poland's President Andrzej Duda signed into law a bill making the simplified financial reporting requirements for micro-undertakings available to small-undertakings as well. Under the rules, small-undertakings meeting certain conditions:

  • May prepare abridged annual financial statements that include basic information on the balance sheet and profits and loss account;
  • Are exempt from the requirement to prepare additional reports and statements; and
  • Are not required to apply the fair value and adjusted purchase price when valuing their assets and liabilities

In order to qualify for the simplified requirements, at least two of the following conditions must be met in the previous and current year:

  • PLN 17 million or less balance sheet total;
  • PLN 34 million or less net turnover; and
  • 50 or less average number of full-time employees during the year

The change will enter into force 14 days after the law is published in Poland's Official Journal.

Proposed Changes (2)

Brazil

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Brazil Considering Amendment to Definition of Low-Tax Jurisdiction

The Brazilian Senate is currently reviewing Senate Law Project 275/2014 (PLS 275), which would amend the definition of low-tax jurisdiction (LTJ). The amendment includes that a jurisdiction would be considered an LTJ under Brazilian law if recognized as such by independent and internationally recognized bodies, entities or organizations instead of the current criteria, which includes a jurisdiction with a tax rate of 17% or lower. The bodies, entities or organizations referred to would be listed in a separate executive act. Designation as an LTJ impacts several areas of Brazilian taxation, including withholding tax rates, the deductibility of expenses, thin capitalization rules, CFC rules and transfer pricing.

United States

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U.S. Congressmen Reiterate Concerns with Treasury's Plans to Implement CbC Reporting

In a recent letter to U.S. Secretary of the Treasury Jack Lew, Senate Finance Committee Chairman Orrin Hatch R-UT and House Ways & Means Committee Chairman Paul Ryan R-WI reiterated their concerns with the implementation of country-by-country reporting requirements, and asked that Treasury consider the results of a GAO analysis of the BEPS project before moving forward (previous coverage). See below for the text of the letter, dated 27 August 2015.

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Dear Secretary Lew:

The Treasury Department released its 2015-2016 Priority Guidance Plan (Plan) on July 31, 2015, identifying 277 projects that Treasury and the Internal Revenue Service (IRS) consider priorities and intends to work on actively during the period July 2015 – June 2016. One of the projects listed in the Plan is:

Regulations under §§6011 and 6038 relating to the country-by-country reporting of income, earnings, taxes paid, and certain economic activity for transfer pricing risk assessment.

Given our past correspondence to you on the Organisation for Economic Co-operation and Development (OECD) base erosion and profit shifting (BEPS) project in general, and country-by-country (CbC) reporting in particular, we are very concerned that this project was included in the Plan.

As described more fully in our June 9, 2015 letter to you, we are not convinced that Treasury has the authority to require CbC reporting by certain U.S. companies (including sharing the information with foreign governments). In addition, the benefits to the U.S. government, businesses, and workers from providing sensitive information in the CbC reports (and, just as importantly, the master file document) is unclear, at best. To that end, a request has been made of the Government Accountability Office (GAO) to analyze, among other things, tradeoffs surrounding BEPS recommendations, including CbC reporting and associated possible effects, including costs and risks for U.S. businesses and their workers and effects on the U.S. economy, including employment, investment, and federal revenue.

Rather than expend additional administrative resources on the CbC regulatory project, we encourage Treasury to focus in the near term on preparing and providing the legal memorandum and other documentation requested in our June 9 letter to you. In addition, we ask that Treasury officials consider the results of the GAO analysis of the BEPS project and recommendations before moving forward with any CbC-related guidance.

Thank you for your attention to this important matter. Please provide the legal memorandum and other documentation that we requested early in June to us no later than August 31, 2015.

Treaty Changes (5)

Belgium-Panama

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Belgium and Panama to Resume Tax Treaty Negotiations

On 26 August 2015, the Panama Ministry of Foreign Affairs announced that Panama would resume negotiations for an income tax treaty with Belgium. 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.

Germany-OECD

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Germany Deposits Ratification Instrument for Mutual Assistance Convention

On 28 August 2015, Germany deposited the ratification instrument for the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. Germany signed the original convention on 17 April 2008 and signed the protocol to the convention on 3 November 2011.

The convention as amended will enter into force and apply in Germany on 1 December 2015.

Guernsey-New Zealand

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Competent Authority Arrangement between Guernsey and New Zealand Signed

A competent authority arrangement concerning the 2009 tax information exchange agreement between Guernsey and New Zealand was signed by Guernsey on 18 August 2015 and by New Zealand on 26 August 2015. The arrangement is effective 26 August 2015. The following is the text of the arrangement.

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The Competent Authorities of New Zealand and Guernsey have reached an understanding on the interpretation of Articles 9 and 12 of the Agreement as follows:

Salaries, wages and other similar remuneration

For the purposes of interpretation of Article 9 of the Agreement, the Competent Authorities have reached the common understanding that the term “salaries, wages and other similar remuneration” does not include a pension.

Prejudicial or restrictive measures based on harmful tax practices

For the purposes of interpretation of Article 12 of the Agreement, the Competent Authorities have reached the common understanding that the term “prejudicial or restrictive measures based on harmful tax practices” is intended to refer to the Project on Harmful Tax Practices initiated by the Organisation for Economic Cooperation and Development in 1998 and carried on by the Global Forum on Transparency and Exchange of Information for Tax Purposes in respect of exchange of information on request and the term is not intended to refer to any international initiative undertaken after the date of entry into force of the Agreement.

India-Seychelles

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TIEA between India and Seychelles Signed

On 26 August 2015, officials from India and Seychelles signed a tax information exchange agreement. The agreement is the first of its kind between the two counties and will enter into force after the ratification instruments are exchanged.

Moldova-Luxembourg

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Protocol to the Tax Treaty between Moldova and Luxembourg to be Negotiated

According to recent reports, the government of Moldova has decided to begin negotiations for a protocol to the 2007 income and capital tax treaty with Luxembourg to amend Articles 23 (Non-Discrimination), 24 (Mutual Agreement Procedure) and 25 (Exchange of Information). The protocol will be the first to amend the treaty, and must be finalized, signed and ratified before entering into force.

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