Worldwide Tax News
On 17 December 2015, the French parliament adopted the Finance Bill for 2016, which includes the introduction of Country-by-Country (CbC) reporting requirements based on the guidelines developed as part of Action 13 of the OECD BEPS Project.
The main aspects of the CbC reporting requirements as adopted are summarized as follows.
A CbC report must be filed within 12 months following the end of the year concerned by legal entities (ultimate parent) established in France that meet the following criteria:
- It prepares consolidated financial accounts;
- It holds one or more entities established outside France;
- Its consolidated annual group revenue is greater than EUR 750 million; and
- It is not owned by one or more legal entities established in France or abroad.
A legal entity established in France that does not meet the above criteria may need to file a CbC report if it is owned or controlled, directly or indirectly, by a legal entity established in another jurisdiction if:
- The foreign entity would meet the above criteria for filing if it were established in France; and
- The jurisdiction of residence of the foreign entity has not implemented CbC reporting requirements or concluded an agreement with France that allows for the automatic exchange of the reports.
In such cases, the local entity must file the report when:
- It has been designated as the reporting entity for the group; or
- It cannot show that another group entity has been designated as the reporting entity in France or in another jurisdiction that has implemented CbC reporting requirements and has concluded an agreement with France for the automatic exchange of the reports.
Failure to comply with the CbC reporting requirements will result in a penalty of up to EUR 100,000.
The CbC reporting requirements are effective for tax years beginning on or after 1 January 2016. Additional details on the implementation of the requirements and the exact form and content of the CbC report will be issued through subsequent decrees.
Greece's new debt settlement regime took effect 15 December 2015. From that date, new outstanding tax liabilities for income tax, value added tax and others must be paid within 30 days of this initial due date for penalty relief to apply. From 1 July 2016, this will be reduced to 15 days from the initial due date, and from 1 January 2018, no relief period will be provided.
The new regime was introduced as part of the measures in Law 4336/2015 (previous coverage) required under Greece's bailout agreement with the EU.
According to recent reports, Apple has agreed to pay EUR 318 Million to the Italian tax office to settle a tax dispute involving profits generated in Italy through Apple Italia, Apple's Italian subsidiary under Apple Ireland. The dispute reportedly involved EUR 880 million in underpaid tax during the period 2008 to 2013. Although the tax dispute has been settled, a criminal investigation into three Apple Italia executives remains open.
The settlement comes at a time of greater scrutiny of the tax practices of MNEs and suspected tax evasion, with a number of investigations underway involving Ireland. France is reportedly in the process of performing an investigation into Google Ireland's French operations involving a EUR 1 billion reassessment, and the EU commission earlier in the year launched a State Aid investigation involving Apple Ireland that may result in Apple being required to pay taxes on tens of billions of euro in past profits.
On 19 December 2015, Law No. 438-V entered into force, which establishes the Astana International Financial Center in Astana, Kazakhstan. The law provides for an exemption from corporate income tax, property tax and land tax for companies established in the Financial Centre that provide specified financial services, as well as an individual income tax exemption for foreign persons employed by such companies. It also provides for an exemption from individual and corporate income tax on capital gains and dividends derived by owners of shares in companies established in the Financial Center.
Under the law, the exemptions will apply through 1 January 2066.
Slovenia recently adopted amendments to the Tax Procedure Act, including changes regarding the availability of advance pricing agreements (APA). From 1 January 2017, taxpayers will be able to enter into an APA with the Slovenian tax authorities. This will include unilateral, bilateral and multilateral agreements. Currently, no APAs are available.
On 24 December 2015, the Ukrainian Parliament adopted Law No. 3688, which includes a number of tax reform measures of the 2016 Budget. The main changes include:
- The 15% and 20% individual income tax rates are replaced with a flat 18% rate;
- The social security contribution based on payroll is unified with a single 22% contribution rate paid by employers, and the basis cap is set at 25 minimum monthly salaries (under the previous system, a 3.6% contribution was withheld from employee salary and employers paid approximately 41% depending on industry);
- Monthly advance corporate income tax payments are abolished and quarterly reporting is introduced (certain exceptions apply);
- Property tax is made deductible for corporate income tax purposes;
- The VAT exemption for agricultural products is abolished;
- The special import duties (5% to 10%) that were enacted in 2015 are eliminated; and
- Excise duties on alcohol and tobacco are increased.
Previously proposed changes in the corporate income tax and value added tax rates were not adopted.
The changes apply from 1 January 2016.
The IRS has announced that the interest rates for overpaid and underpaid tax will not be changed for the first quarter of the year beginning 1 January 2016. The rates are 3% for both underpayment and overpayment by individuals, and 2% and 3% for corporate overpayments and underpayments respectively.
The rate for a corporate overpayments exceeding USD 10,000 in a tax period will remain 0.5% on the portion exceeding that amount, and the rate for large corporate underpayments exceeding USD 100,000 will remain at 5%.
China's Minister of Finance reportedly stated during a recent Ministry of Finance meeting that the transition from business tax to value added tax (VAT) for all sectors will be completed in 2016. The transition from business tax to VAT began in 2012. The main sectors that have not yet transitioned to VAT include the construction, real estate, financial and consumer service sectors.
Additional details will be published as the regulations required to make the change are issued.
The Turkish government has recently published its proposed tax plans for 2016. The measures being considered are primarily aimed at simplifying and improving compliance, including:
- A new income tax regime that would apply for both individual and corporate taxpayers;
- Measures to reduce compliance costs and streamline tax dispute resolution;
- The introduction of a voluntary adjustments process with reduced penalties; and
- Measures to protect taxpayers' rights.
Measures are also being considered to promote investment in the construction and manufacturing sectors.
Additional details will be published once available.
On 9 December 2015, Brazil published Law 13,202/2015, which clarifies that the social contribution on profits (CSLL) is to be included when determining the taxes covered by tax treaties Brazil has entered into. The clarification was needed because most tax treaties signed by Brazil only refer to corporate income tax (IRPJ) without expressly including CSLL. According to Law 13,202/2015, the inclusion of CSLL as a tax covered by tax treaties may be applied retroactively.
According to a recent announcement from the Taiwan government, negotiations are underway for an income tax treaty with Brunei. 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.
On 31 December 2015, the tax information exchange agreement between Grenada and Sweden entered into force. The agreement, signed 19 May 2010, is the first of its kind between the two countries and is in line with the OECD standard for information exchange. It generally applies from the date of its entry into force.
The income tax treaty between Portugal and San Marino entered into force on 3 December 2015. The treaty, signed 18 November 2010, is the first of its kind between the two countries.
The treaty covers Portuguese personal income tax, corporate income tax, and local surtax on corporate income tax. It covers San Marino general income tax on individuals and on bodies corporate and proprietorships.
- Dividends - 10% if the beneficial owner is a company directly holding at least 25% of the paying company's capital, otherwise 15%
- Interest - 10%
- Royalties - 10%
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
- Gains from the alienation of immovable property situated in the other State;
- Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
- Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other State
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Portugal applies the credit method for the elimination of double taxation, while San Marino generally applies the exemption with progression method. However, in the case of income covered by Articles 10 (Dividends), 11 (Interest) and 12 (Royalties), San Marino applies the credit method.
Article 28 (Limitation on Benefits) includes the provision that the benefits of the treaty will not apply for income derived by a resident of one Contracting State from the other State if the main purpose or one of the main purposes of any person concerned with the creation or assignment of such income was to take advantage of the treaty.
In addition, a company that is entitled to special fiscal treatment under the provisions of any legislation or administrative practice of either Contracting State will not be entitled to the benefits of the treaty. The same applies to income received by a resident of a Contracting state from companies that are entitled to such special fiscal treatment, or in respect of shares or other corporate rights in the capital of such companies.
The treaty applies from 1 January 2016.