viernes, 21 de abril de 2017

Dbriefs Bytes - 21 April 2017


Oman makes wide-ranging changes to tax law

Amendments to Oman’s income tax law were announced in a royal decree issued on 19 February 2017 and published in the official gazette on 26 February 2017. Among other changes, the amendments increase the standard corporate income tax rate, introduce a lower tax rate for qualifying small companies, expand the types of payments subject to withholding tax and impose stricter noncompliance penalties. Certain changes are effective from the date the decree was published, others are effective for tax years commencing on or after 1 January 2017 and the effective dates for
some changes will be announced when further guidelines are issued.

Corporate tax rates
The standard corporate tax rate is increased to 15% (from 12%) for Omani companies and permanent establishments (PEs) of foreign companies, and the standard taxable income exemption threshold for companies of OMR 30,000 is removed, which will bring more taxpayers within the tax net. At the same time, however, a new, lower tax rate of 3% is introduced for “small taxpayers” that fulfill the following conditions for the relevant tax year:

  • The taxpayer’s registered capital at the start of the tax year does not exceed OMR 50,000;
  • The taxpayer’s average number of employees does not exceed 15; and
  • The taxpayer’s gross income does not exceed OMR 100,000.

To qualify for the 3% rate, the small taxpayer may not be involved in certain business activities, such as banking and finance, insurance, public utilities concessions, air and sea transport, extraction of natural resources or other business activities identified by the Council of Ministers. In addition to the lower rate, small taxpayers are allowed to file a simplified, hard copy tax declaration. The tax authorities may use anti-avoidance provisions to reallocate income among companies if they suspect that a taxpayer has planned its activities to split larger businesses into smaller units that fulfill the above conditions in order to benefit from the lower small-taxpayer rate.
The corporate tax rate changes are effective for tax years beginning on or after 1 January 2017.

Source & more info: Deloitte

jueves, 20 de abril de 2017

Austria: Taxation of cross-border short-term employment income clarified

The Austrian Ministry of Finance (MOF) released official guidance on 17 January 2017 concerning the tax treatment of employment income of German-resident employees that are “hired out” (seconded) from a German company to arelated Austrian company, if the German seconding  company does not maintain a permanent establishment in Austria.
The guidance clarifies which company (i.e. the German company or the Austrian company) will be considered to be the employer for purposes of determining which country has the right to tax the income under article 15 of the AustriaGermany tax treaty.
According to the MOF guidance, the employer is the company that economically bears the remuneration for the employment services, and this definition applies irrespective of whether the secondment takes place between related or unrelated companies. If the remuneration is paid by, or on behalf of, the German seconding company, only Germany is authorized to tax the employment income if the seconded employee is present in Austria for a period or periods not exceeding, in the aggregate, 183 days in the calendar year concerned. Conversely, only Austria will have the right to tax the income if the Austrian company bears the remuneration, even if the secondment period is 183
days or less.
Although the guidance addresses only the Austria-Germany treaty, the definition of an employer in this guidance also should apply to other Austrian tax treaties.
The “substance-over-form” approach adopted by the MOF does not rely on the formal contracts between the companies involved or the formal employment contract to determine which company is the employer for treaty purposes; this may provide scope for companies to tailor such contracts without causing undesired tax consequences.
The reasoning of the MOF guidance also is in line with prior decisions of the Austrian Supreme Administrative Court that address the issue of which country is allowed to tax salaries in cross-border situations. By accepting the substance-over-form approach for determining the employer under a tax treaty, the MOF has aligned Austria with the practice used by most other countries to prevent double taxation of cross-border employment.

Source: Deloitte

miércoles, 19 de abril de 2017

Italy issues dates for implementation of country-by-country reporting

In its Decree of February 23, 2017 (the Decree), the Italian Ministry of Economy and Finance implemented EU Directive 2016/881 dated May 25, 2016 (the EU Directive), setting out the procedures to be applied in meeting country-by-country (CbC) reporting requirements in Italy and establishing January 1, 2016 as the relevant date for its application.

The Decree renders operative the provisions of the 2015 Finance Act, which implemented the original proposals on CbC reporting.  The underlying law was discussed in Tax Insight dated January 11, 2016 entitled Italy introduces legislation to implement country-by-country reporting. Further guidance on CbC report compilation and on linguistic arrangements is still to be issued by the Italian Revenue Agency in the form of a Regulation.

Source & more info: PwC

martes, 18 de abril de 2017

Increase in transfer pricing tax audits in the Czech Republic

In recent years, the number of tax audits focused on transfer pricing and the amounts of the resulting tax adjustments have skyrocketed in the Czech Republic. This largely has been caused by the Czech Tax Administration’s systematic risk assessments, which are subsequently used to select taxpayers for transfer pricing audits. With country-by-country reporting on the way and transfer pricing in the spotlight, the figures are expected to escalate further.
Source & more info: PwC

lunes, 17 de abril de 2017

UK 2017 budget reaffirms previously announced measures

UK Chancellor of the Exchequer Philip Hammond on March 8, 2017, announced his first budget with respect to plans for the UK economy.  The budget proposals will be reflected in Finance Bill 2017, which will be published on March 20, 2017, for enactment this summer.The budget includes no significant new announcements regarding the UK corporation tax. It reaffirms the new government’s commitment to previously announced measures, including cutting the UK corporate tax rate to 17%, changing the interest deductibility and loss relief rules, and simplifying the UK participation exemption (the substantial shareholdings exemption, or SSE).  The budget also includes announcements of several reviews and consultations, giving rise to the potential for some legislative changes in the forthcoming 2017 Autumn Budget.
Source & more info: PwC

viernes, 14 de abril de 2017

Vietnam issues new transfer pricing decree effective 1 May 2017

On 24 February 2017, Vietnam’s Government issued Decree No. 20/2017/ND-CP on the tax administration of enterprises with related party transactions (the Decree). The Decree is effective from 1 May 2017.

The Decree introduces various new concepts, including but not limited to:


  • Principle of “substance over form”
  • Three-tiered transfer pricing (TP) documentation
  • Specific guidance on the tax treatment of intra-group service charges, interest, intangibles, purchase of fixed assets and profit allocation to routine functions

The Decree also provides guidance on comparability and benchmarking analysis, introduces certain changes to the annual TP disclosure form and provides certain exemptions with respect to TP compliance obligations.

Related party relationships and transactions

The Decree expands and covers more detailed types of related party transactions subject to TP compliance, including specifically the use of common resources such as group synergies, a shared service center and cost sharing between related parties.

The Decree increases the 20% direct or indirect ownership threshold to 25% when determining whether parties are related. In addition, enterprises are also related if they are under the common control of an individual through that person’s contributed capital or direct management.

The Decree removes specific percentages in determining a control element; however, where a company is in substance controlled or managed by the other party, the parties will generally be considered related for TP purposes.

Three-tiered TP documentation and annual TP disclosure

The Decree introduces three-tiered TP documentation requirements in line with the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting Action Plan 13 covering:

  • Group business information (or Global Master file)
  • Local TP documentation (or Local file)
  • Report on the transactional profitability results in the form of a Country-by-Country (CbC) Report

The Decree requires taxpayers to prepare their TP documentation before the submission of their annual corporate income tax (CIT) return. Given that CIT returns are due within 90 days of the taxpayer’s year-end, preparation of the TP documentation requirements will become extremely challenging.

In addition, taxpayers must submit their TP documentation to the tax authorities within 15 working days upon request during a tax/TP audit, reducing the period from the current 30 working days; accordingly, it is crucial that taxpayers have their TP documentation completed prior to receiving notification of a tax audit.

The revised TP Disclosure Form has some additional information requirements including the quantum of reimbursements and the allocated revenue/expenses to a permanent establishment as well as further detail on the arm’s length pricing breakdowns based on the income statement.

Country-by-Country Reporting (CbCR)

The content of a CbC report includes key financial and tax indicators of an international group (such as revenue, profit, taxes payable, number of employees, amount of registered capital and tangible assets) for each jurisdiction in which an international group operates, along with identification details and information on the main business activities/functions of all subsidiaries in the group.

A Vietnamese taxpayer is required to file CbCR information if it has an overseas parent and the ultimate parent company overseas is required to prepare and maintain such report in its country of residence. Where a taxpayer has its ultimate parent in Vietnam and has global consolidated revenue in the tax period of VND18,000 billion or more (US$789 million or more), it is also required to prepare this report.

TP compliance exemption

The following exemptions are provided to a taxpayer that:

  • Has sales revenue of less than VND50 billion (US$2.5 million) and the value of its related party transactions is less than VND30 billion (US$1.5 million).
  • Engages in simple functions, has revenue of less than VND200 billion (US$100 million) and achieves a ratio of earnings before interest and taxes to revenue of at least 5% for distribution function; 10% for manufacturing function; and 15% for processing function).
  • Has signed an Advance Pricing Agreement (APA) and submitted annual APA report(s).

In addition, a partial exemption is available if:

  • The taxpayer only has transactions with related parties who are subject to CIT in Vietnam.
  • The taxpayer and its related parties apply the same CIT rate and enjoy no CIT incentives.

Substance over form principle

The Decree introduces the “substance over form” principle for deductibility of related party services and interest expense.

Under the Decree, the following requirements and conditions must be satisfied for inter-group service expense to be deductible:


  • Services provided must be directly beneficial to the business operation of the taxpayer
  • Services from related parties are determined to “have been provided” only if independent companies under similar circumstances pay for such services
  • Service fees are paid at arms’ length, the TP method or allocation keys are consistently applied among the group members and the taxpayer provides documents to substantiate the receipt of services

The maximum total deductible interest expenses paid to related parties in a tax period is capped at 20% of earnings before interest, taxes, depreciation and amortization.

Application of TP methods

The Decree provides guidance on the application of TP methods as follows:

  • Application of the Comparable Uncontrolled Price Method and supporting documents are required for fixed asset purchase transactions
  • Direct costs and total costs are distinguished as different cost bases for the application of the Cost Plus Method and Comparable Profit Method (CPM) respectively
  • In applying the CPM, a taxpayer with simple functions, low added-value transactions and non-strategic decisions must not incur losses

Benchmarking analysis and TP adjustments

The following guidance applies to comparability analysis and TP adjustments:

  • Comparable financial data is generally required to be in the same financial year as that of the tested party
  • Hierarchy for the selection of comparable transactions/companies is stipulated
  • Comparability analysis of intangible assets with unique characteristics is provided
  • Material adjustments must take into account the location-specific advantages
  • Conditions for the use of the median of the interquartile range
  • Limitation on taxpayer’s use of TP adjustments

Implications

The newly introduced three-tiered TP documentation requirement carries a heavy administrative burden for Vietnamese-based subsidiaries. In addition, taxpayers may expect a more aggressive TP enforcement environment in Vietnam.

A Circular that provides more detailed guidance and instruction on the Decree will be expected to be issued later this year.

Source: EY

jueves, 13 de abril de 2017

First cost sharing agreement APA concluded in China

The China State Administration of Taxation (SAT) recently concluded the first advance pricing agreement for a cost sharing agreement (CSA-APA) with a Fortune 500 enterprise in Guangdong Province.  The successful signing of the first CSA-APA is an important milestone for Chinese taxpayers and tax authorities and opens a new page in the China tax authorities’ history of administering transfer pricing for intangibles. We expect more taxpayers and tax authorities will follow suit to conclude CSA-APAs, particularly given the heightened international focus on the value contributed by intangibles as a result of the OECD and G20 Base Erosion and Profit Shifting (BEPS) project.

Source & more info: PwC

miércoles, 12 de abril de 2017

Taiwan: Foreign e-service providers required to register and pay VAT

Taiwan’s Executive Yuan announced on 13 February 2017 that the new VAT rules requiring nonresident business entities providing electronic services (e-services) to domestic individuals to register with Taiwan’s tax authorities for VAT purposes and pay a 5% VAT in Taiwan will apply as from 1 May 2017 .
The changes to the Value-Added and Non-Value-Added Business Tax Act were promulgated on 28 December 2016 to bring the VAT rules governing the provision of cross-border e-services in line with international standards (particularly those based on the OECD BEPS project).
The main changes to the VAT rules are as follows:

  • A foreign enterprise, institution, group or organization that does not have a fixed place of business within Taiwan and that provides e-services to domestic individuals (a nonresident e-service provider) will be deemed to be the VAT payer in these cases.
  • A nonresident e-service provider will be required to register with the competent tax authorities and file a VAT return or appoint a VAT filing agent to handle the compliance obligations. The Ministry of Finance (MOF) announced on 15 February 2017 that the proposed annual sales threshold for a nonresident e-services provider to be required to register for Taiwan VAT purposes will be NTD 480,000 (around USD 15,500).
  • Penalties will be imposed on the VAT filing agent if the VAT return and payment on behalf of a nonresident eservice provider are not made in a timely manner.

The MOF is expected to issue implementing regulations and to create a dedicated website for simplified VAT registration and filing.

Source: Deloitte

martes, 11 de abril de 2017

New Zealand issues BEPS consultation papers

On 3 March 2017, New Zealand’s Minister of Revenue and the Finance Minister released three BEPS consultation papers that address the following:

  • Tackling concerns relating to transfer pricing and avoidance of permanent establishment (PE) status, regarding multinationals booking profits from their New Zealand sales offshore, even where the sales are driven by New Zealand-based staff;
  • Preventing multinationals from using interest payments to shift profits offshore by strengthening the rules governing limits on the deductibility of interest expenses; and
  • Implementing the multilateral instrument (MLI) to align New Zealand’s tax treaties with the OECD recommendations.

In a media statement that accompanied the release of the consultation papers, the ministers acknowledged that, although New Zealand’s broad-base, low-rate tax system operates well by global standards, it is important that the system continue to evolve, to ensure that all companies operating in the country are paying their fair share of tax.
Submissions on the consultation document on implementing the MLI are open until 7 April 2017; submissions on the other two consultations are open until 18 April 2017.

Source & more info: Deloitte

lunes, 10 de abril de 2017

Korea: Changes made to flat rate income tax regime for foreign employees

In December 2016, the Korean National Assembly approved changes to the income tax law that included revisions to the flat income tax rate regime for foreign employees working in Korea. The changes to the regime limit the period in which a foreign employee can qualify for the flat tax rate. Additional information is now available on how the limitation will be applied, and on an increase in the flat income tax rate. The changes are effective as from 1 January 2017.
Under the Tax Incentives Limitation Law, foreigners are allowed to elect a flat income tax rate as an alternative to the regular, progressive individual income tax rates (ranging from 6% to 40% (6.6.% to 44%, including a local income tax surcharge)) when calculating the individual income tax liability on earned income. If a flat tax rate is elected, it is applied as a withholding tax to all gross income earned in Korea, with no deductions, income exclusions or tax credits
allowed.
In connection with numerous tax law revisions designed to achieve fair and equal taxation, the Ministry of Strategy and Finance approved increasing the flat income tax rate to 20.9% (including a local income tax surcharge of 1.9%) from 18.7%, to reduce the taxation disparity between Korean nationals and foreign taxpayers.
The application of the flat income tax rate election is limited to a maximum of five years from the start date of Korean employment for foreign employees arriving in Korea for the first time on any day between 1 January 2014 and 31 December 2018. For example, if a foreign employee started work in Korea on 1 March 2016, that employee is eligible to elect the flat income tax rate through the end of tax year 2020.
For cases in which a foreign employee began working in Korea before 1 January 2014, the flat income tax rate election will be allowed until the end of 2018, even if five years have elapsed from the date the employee began working in Korea.
Foreign employees starting work in Korea after 1 January 2019 are not eligible for the flat income tax rate, unless they work for “qualified regional headquarters” of foreign companies.
Companies should take into account their foreign employees’ eligibility period to qualify for the flat income tax rate, since this could have a significant impact on the overall tax costs for the deployment. Companies also should ensure that the relevant income tax is withheld.

Source: Deloitte

viernes, 7 de abril de 2017

Finland: Refund opportunities for portfolio dividends received by non-listed SICAVs limited

In a decision dated 19 December 2016, Finland’s Supreme Administrative Court (SAC) confirmed that portfolio dividends paid by Finnish publicly listed companies to a Maltese non-listed SICAV (i.e. an open-ended collective investment scheme with variable capital) are subject to Finnish withholding tax.

Background
The case before the SAC involved a Maltese multi-fund investment company (fund) that was planning to invest in Finnish publicly traded companies and that sought an advance ruling from Finland’s Central Tax Board (CTB) on whether it could be deemed comparable to a tax-exempt Finnish investment fund. If comparable to a Finnish investment fund, the Maltese fund could receive portfolio dividends from Finnish listed companies free from Finnish withholding tax. (Portfolio dividends are those earned on investments of less than 10% in the capital of the distributing company.)
The Maltese fund, established as a SICAV with variable capital, was a non-listed, public limited liability company and a separate legal person. The fund was not an investment company as defined under the EU undertakings for collective investment in transferable securities (UCITS) directive. The fund also was licensed and supervised by the Malta financial services authority. The fund had a separate management company, and the assets of its sub-fund were held by an appointed custodian or a prime broker.
The fund was entitled to benefits under Malta’s tax treaties, including the treaty with Finland, based on a tax residence certificate issued by the Maltese tax authorities. Under Maltese tax rules, the fund was not required to pay Malta income tax (or other direct taxes) on the dividends derived from the investments in the Finnish publicly listed companies because of its status as a “non-prescribed fund” under the Maltese Collective Investment Schemes (Investment Income) Regulations, 2001. Thus, there was no tax in Malta against which the Finnish withholding tax could be credited.
The CTB took the position that the fund was comparable to a Finnish limited liability company and, as such, subject to Finnish withholding tax on portfolio dividends from Finnish publicly listed companies. The fund appealed this decision to the SAC, arguing that the Finnish rules violate the free movement of capital principle in EU law.

SAC decision
The SAC agreed with the CTB’s findings and held that the fund was not objectively comparable to a tax-exempt Finnish investment fund, but instead was comparable to a Finnish limited liability company, which is taxable in Finland. In
making its decision, the SAC reasoned that, unlike a Finnish investment fund, whose investments are collectively owned by its investors, the Maltese SICAV is a separate legal person that owns the investment assets it holds.
As a result, the SAC found that because the portfolio dividends from Finnish publicly listed companies would be fully taxable in Finland if received by a non-listed Finnish limited liability company, Finland’s rules that tax portfolio dividends paid to a comparable nonresident fund cannot be deemed incompatible with the free movement of capital under EU law.

Source: Deloitte

jueves, 6 de abril de 2017

Brazil issues guidance on exchange of information on rulings

Brazil’s tax authorities published a normative ruling on 21 February 2017 that contains guidance on measures to implement the OECD recommendations under BEPS action 5 (harmful tax practices). This initiative had been subject to
a recent public consultation, and the NR is consistent with the wording of the draft document.
The NR introduces a new article to a 2013 NR that regulates ruling procedures relating to the interpretation of the tax law.
Rulings on transfer pricing, permanent establishments and certain R&D incentives will be subject to the mandatory exchange of information with other tax authorities. Private letter rulings, resolution acts and interpretative acts also
will fall within the scope of the exchange of information.
The new NR applies as from the date of publication.
Source: Deloitte

miércoles, 5 de abril de 2017

South Africa’s 2017 budget includes overall commitment to BEPS project

The South African Minister of Finance (MOF) presented the 2017 budget to parliament on 22 February 2017, proposing a number of changes to the tax rules for companies and individuals and reiterating South Africa’s overall commitment to the OECD BEPS project. The budget now must be approved by parliament. Once approved, the tax proposals in the budget will enter into effect on various dates: some on the date the budget was presented, some from 1 March 2017 (or from years of assessment commencing on or after 1 March 2017) and some when further legislation is promulgated (certain proposals are still subject to further investigation and public consultation before being finalized).
The 2017 budget includes a provision that would increase the top individual marginal income tax rate to 45% (from 41%), effective from 1 March 2017. No changes are proposed to the corporate income tax rate.
Source & more info: Deloitte

martes, 4 de abril de 2017

UK introduces new corporation tax limitation on interest deductibility

The draft UK Finance Bill 2017 was published in early December 2016. The Bill contains detailed draft legislation to introduce a new limitation on the deductibility of interest expense from corporate profits. These rules, which were further amended on January 26, 2017, will apply to amounts accruing after April 1, 2017. The rules limit a UK group's ability to deduct interest from taxable profit, to the lesser of a defined percentage of taxable EBITDA and the group’s worldwide consolidated net interest expense.

Source & more info: PwC

lunes, 3 de abril de 2017

Cyprus announces 2017 NID yield rates, new rules for related-party financing transactions, and CbC reporting rules

For purposes of the notional interest deduction (NID), the Cyprus Tax Authority (CTA) recently announced a list of countries’ interest yields on 10-year government bonds for December 31, 2016, the relevant date for tax year 2017.

The CTA also has informed the Institute of Certified Public Accountants of Cyprus (ICPAC) that they will cease their practice of specified minimum spreads on qualifying related-party financing transactions (based on a 2011 correspondence between the CTA and the ICPAC), effective July 1, 2017. Instead, these transactions will have to be supported by transfer pricing studies.
 
The Cyprus Minister of Finance on December 30, 2016, issued a decree that introduces a mandatory country-by-country (CbC) reporting requirement for multinational enterprises (MNEs) that generate consolidated annual turnover exceeding €750 million.

Source & more info: PwC

viernes, 31 de marzo de 2017

Dbriefs Bytes - 31 March 2017


Ukraine amends transfer pricing rules

Amendments to Ukraine’s transfer pricing rules that became effective on 1 January 2017 increase the monetary threshold for a transaction to be deemed a controlled transaction, extend the types of transactions that are considered controlled transactions and modify the penalties for transfer pricing reporting infractions. The new rules also codify certain criteria previously used in practice.
The following are the significant changes to the transfer pricing regime:

  • The threshold for a transaction to be considered a controlled transaction is met where (i) the taxpayer’s total income from all transactions exceeds UAH 150 million (increased from UAH 50 million); and (ii) the total of all transactions with one counterparty exceeds UAH 10 million (increased from UAH 5 million).
  • The types of transactions subject to the transfer pricing rules now include all of the following transactions with nonresidents:
  • Related-party transactions, including those that involve independent intermediaries with no substantial functions (these transactions also were covered by the previous rules);
  • Transactions involving the sale or purchase of goods and services through nonresident commission agents (the previous rules covered only the sale of goods);
  • Transactions with nonresidents from low-tax jurisdictions, based on a list of such jurisdictions published periodically by the Cabinet of Ministers of Ukraine (CMU); this provision covers transactions with counterparties registered in a jurisdiction that has a corporate income tax rate at least five percentage points lower than Ukraine’s rate (i.e. a rate below 13%), as well as transactions with residents of such jurisdictions (regardless of whether the entity is registered there); and
  • Transactions with nonresidents in specified organizational legal forms that do not pay corporate tax or are not tax residents of the country where they are registered. The list of relevant legal forms will be issued by the CMU.
  • If information on comparable transactions is not available, a taxpayer can use the financial data of comparable companies in calculating the market margin range, provided the comparable company (i) carries out activities and functions comparable to the taxpayer’s controlled transactions; (ii) does not hold more than 20% of (and/or is not more than 20% held by) another legal entity; and (iii) does not have losses in more than one reporting period. Some of these criteria previously were used in practice, but not codified.
  • In making a self-initiated adjustment (self-initiated adjustments are allowed, provided they do not lead to a reduced tax liability), the taxpayer can calculate its tax liabilities based on the minimum/maximum level of the arm’s length price range where there is a deviation from this range; however, during an audit, the tax authorities will make the adjustment based on the median of the arm’s length range (which may be less advantageous for a taxpayer). In the previous version of the rules the median was used for both self-initiated adjustments and adjustments made by the tax authorities.
  • The deadline for submitting the report on controlled transactions is now 1 October of the year following the reporting period (previously, the deadline was 1 May following the reporting period). As a result, the report on controlled transactions carried out in 2016 must be submitted to the tax authorities before 1 October 2017.
  • The penalty regime for failure to comply with the transfer pricing reporting rules is modified. 

Source: Deloitte

jueves, 30 de marzo de 2017

Ukraine's tax reform

Tax reform law includes withholding tax rate reduction and new limits on deductibility of royalty payments.

Tax rates
The standard corporate tax rate remains at 18%.
The withholding tax rate on interest paid to nonresidents on loans made to Ukrainian residents is reduced from 15% to 5% if the following requirements are met:

  • The amounts loaned by the nonresident were generated from the issuance of Eurobonds listed on an international stock exchange recognized by the Cabinet of Ministers;
  • The nonresident issued the Eurobonds for the purpose of providing direct or indirect financing to Ukrainian residents; and
  • The nonresident (or the person receiving interest on behalf of such nonresident) is not tax resident in a “low tax jurisdiction,” as defined by the Cabinet of Ministers on the date the Eurobonds were issued.

Thin capitalization rules
The thin capitalization (debt-to-equity) ratio remains at 3.5. Total deductions for interest on nonresident related party debt are limited to 50% of the taxpayer’s earnings before interest, taxes, depreciation and amortization (EBITDA).
Previously, the thin capitalization interest deduction restriction covered interest on all debt.

Deductibility of royalty payments to nonresidents
The restrictions on the deductibility of royalty payments made to nonresidents have been enhanced. Such payments (including payments made at arm’s length) now are nondeductible if:

  • The nonresident recipient is not the beneficial owner of the royalties;
  • The rights to the underlying intellectual property originated in Ukraine; or
  • The royalties are not subject to tax in the country where the recipient is resident.

Previously, a full deduction was allowed for royalty payments to nonresidents, provided the taxpayer could provide documentation to substantiate that the payment was made at arm’s length.

Tax administration
The law requires the tax authorities to maintain on their website a public register of applications for extension/deferral of payment of tax liabilities, a database of individual tax rulings and the annual schedule of full-scope tax audits.
In addition, the previous two separate registers used for VAT refunds are merged into a single registry, which should provide for more transparency regarding refunds.

Source: Deloitte

miércoles, 29 de marzo de 2017

France's tax authorities approves CbC form

On 2 February 2017, the French tax authorities released the form that must be used by groups of companies that are required to file the country-by-country (CbC) report. CbC reporting (in line with the OECD’s recommendations under
action 13 of the BEPS project) was adopted in the 2016 Finance Law and included in the tax code as article 223 quinquies C.
The following entities are required to file the form:

  • A French ultimate parent entity of a multinational group whose consolidated revenue is EUR 750 million or more; and
  • French entities of a foreign group that falls within the scope of article 223 quinquies C, if the CbC report has not already been filed with a tax authority that would automatically share the report with the French tax authorities.

The form (Form 2258-SD) is in line with the template provided by the OECD in the final report on BEPS action 13, as well as the EU directive on the mandatory automatic exchange of information in the field of taxation. However, the French form also requires that the intra-EU VAT number and the exact address be disclosed, and certain information and explanations must be included in English.
Under France’s CbC reporting rules, multinational companies must file an annual CbC report within 12 months of the financial year-end for financial years commencing on or after 1 January 2016.

Source: Deloitte