US: IRS releases practice units on APAs for tangible goods transactions

On November 6, 2017, the Internal Revenue Service (IRS) released two new international Practice Units (IPUs) in connection with Advance Pricing Agreements (APAs) for inbound and outbound tangible goods transactions. The IPUs provide a summary of the APA process, the types of APA and the interpretation and impact of an APA. The IPUs focus on the APA analysis for inbound distributors and outbound distributors.

Pakistan: Ministry orders compliance with tobacco control laws

On 10 November 2017, the Ministry of National Health Services has requested to all federal secretaries and provincial chief secretaries to take steps for ensuring compliance of tobacco control laws in best public interest. The Secretary Health Naveed Kamran Baloch has raised the issue of violations of tobacco control laws as discussed in the Senate Standing Committee meeting held on October 31, 2017. In this context, he quoted different sections of The Prohibition of Smoking …

Germany: Capital gains 100% tax-exempt for foreign corporate shareholders

On 25 October 2017, German Federal Tax Court (decision dated 31 May 2017) ruled in favor of foreign shareholders selling shares in a German corporation. Capital gains realized upon sale of shares in a German resident corporation by non-resident corporate shareholders should be 100% tax-exempt instead of only 95%. This decision is in particular relevant for holding entities in the real estate sector and holding entities in jurisdictions without a double tax treaty.

Bahrain: Cabinet approves draft law regarding excise tax

The Cabinet approved a draft-law on ratifying the Gulf Cooperation Council (GCC) unified selective excise tax on unhealthy drinks on 16th October 2017. The Cabinet has endorsed an excise tax bill that would impose a 100% tax on tobacco products, energy drinks and harmful goods to human health and 50% tax on carbonated beverages. The bill also regulates the treatment of tax exemption cases, tax evasion procedures, tax retrieval, and also regulates registration and licensing …

India: GST rate reduced to 18% from 28%

On 10 November 2017, the Goods and Services Tax (GST) Council reduced the tax rate on 178 items from 28% to 18%. GST Council also brought all AC and non-AC restaurants in the 5% GST bracket without the input tax credit (ITC). Only 50 items, mostly demerit, sin and luxury goods will be in the 28% tax bracket. Taxpayers with turnover up to Rs 1 crore will have to file invoices once every quarter, whereas …

UAE: MoF announces Executive Regulation for VAT

The Finance Ministry (MoF) announced the Executive Regulation for the Federal Decree-Law No. (8) of 2017 regarding Value Added Tax (VAT) at a Cabinet meeting on November 7, 2017, directed by the Vice President and Prime Minister of the UAE, Sheikh Mohammed bin Rashid Al Maktoum. This Executive Regulation will be effective on January 1, 2018. The draft text of the Executive Regulation for Federal Decree-Law No. (8) of 2017 related to VAT will be …

WTO: Fewer trade restrictive measures introduced by G20 countries

The eighteenth monitoring report by the World Trade Organisation (WTO) on G20 trade measures was issued on 9 November 2017. The report covers the period from mid-May to mid-October 2017 and reveals that compared to the previous review period G20 countries introduced fewer trade restrictive measures. The estimated trade coverage of those restrictions was however slightly more than the estimated coverage of trade facilitation measures passed in the same period. The report noted that G20 …

EU follows OECD with digital tax consultation

On 26 October 2017, the European Commission published a public consultation on digital taxation.  This follows on from the Commission’s September Communication setting out its vision for the need to address digital taxation and some possible methods for doing so. The consultation document repeats the need for action, in particular to address the threats to fair competition between businesses and the risk of an otherwise uncoordinated approach to the problem by individual Member States. As …

UK offshore finance companies possibly illegal under EU law

The European Commission announced on 26 October that it has initiated proceedings against the UK on the grounds that its CFC rules may infringe EU State Aid law. The Commission’s challenge focuses on the fact that certain offshore group financing subsidiaries of UK parented groups are effectively excluded from the UK’s CFC rules. As a result, these subsidiaries not only pay little or no foreign tax in the country they are located but also little …

European Commission calls for more flexible rule making

In its work programme for 2018, published on 24 October 2017, the European Commission  has expressed support for moving from unanimity to qualified majority voting by EU Member States on certain EU legislation, including tax legislation. The Commission’s announcement echoes a call by EU President Juncker for similar reform in his state of the union speech earlier in the year. Although the announcement was made in the European Commission’s work programme for 2018 it is …

Dutch government contingency plans to restrict domestic tax consolidation

On 25 October 2017 the Dutch government announced emergency measures to prevent the Dutch tax consolidation rules being used in international tax avoidance structures. The measures are a direct response to ongoing litigation before the EU Court of Justice, in case the court rules against the Dutch tax authorities. The case itself involves a Dutch company that was denied a deduction for an intra-group loan that it had used to fund equity capital in an …

EU takes action against Amazon and Apple in tax cases

The European Commission issued a statement on 4 October 2017 to the effect that it had ordered Amazon to repay EUR 250 million plus interest that it claims Amazon should have paid in taxes on European sales made by the group through its Luxembourg subsidiaries. The legal basis for the decision is that the endorsement of the group’s transfer pricing arrangements by the Luxembourg tax authorities infringed the EU’s state aid rules. These rules are …

Spain and Romania sign an agreement to avoid double taxation

On 18 October 2017, the Double Taxation Agreement (DTA) between Spain and Romania was signed for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, in Bucharest. Once in force and effective, the new treaty will replace the existing DTA of 1979.

US: Tax reform bill published

The long awaited US tax reform bill was released by House Republicans on 3 November 2017. The impact on the deficit is estimated at $1.5tn over 10 years. The corporate tax rate would be reduced from the current 35% down to just 20% starting in 2018. This is seen as a major boost to American companies’ international competitiveness and to American jobs. The bill introduces a full exemption for dividends from 10% foreign subsidiaries, again …

Malaysia: Prime Minister announces the Budget for 2018

On October 27, 2017, Malaysian Prime Minister Najib Razak presented the budget for 2018, outlining government plans to combat rising costs and limit the country’s fiscal deficit. Some of the key fiscal tax measures are summarized as follows: Tax incentives for corporate income: The extension of a range of tax incentives until 2020, including the incentive to head office, the incentive to invest in new 4- and 5-star hotels, incentives for tour operators and incentives …

Nigeria: President presents Budget proposal 2018

The President, Muhammadu Buhari, on November 7, 2017, presented the Budget proposal 2018 to the joint session of the National Assembly for approval. While presenting the document before the joint session of the national assembly in Abuja, the president said the budget was meant to consolidate the achievements of previous budgets. From this budget, only few ministries such as power, works, housing, defense, transport and agriculture have so far received funding. The Federal Government plans …

Latvia and Pakistan sign an agreement on avoidance of double taxation

Pakistan and Latvia on October 25, 2017, after the second round of negotiations, concluded an agreement on the Avoidance of Double Taxation with regard to income tax and prevention of tax evasion and avoidance (ADTA). Avoiding the double taxation agreement between Pakistan and Latvia will reduce tax obstacles to cross-border trade and investment by supporting taxpayers and tax administrations in their respective countries. The ADTA between the two countries will help to increase bilateral trade …

Argentina: Treasury Minister announces tax reform plan

The Treasury Minister, Nicolas Dujovne, on October 31, 2017, announced a tax reform plan. This proposed tax reform includes tax procedure law, corporate income tax reduction, criminal law, individual income tax, social security contributions, capital gains tax, Value Added Tax (VAT), excise tax, fuel tax etc. This proposal has not been sent to National Congress yet. It needs to be passed by the National Congress for being law. The summary of the proposal is given …

Tax Treaty News: October 2017

Finland and Germany On 16 November 2017, the Double Taxation Agreement (DTA) between Finland and Germany will enter into force and it will apply from 1 January 2018. From this date, the new treaty will replace the existing DTA of 1979. Pakistan and Switzerland On 25 October 2017, the Swiss Federal Council adopted the dispatch for the approval of the pending Double Taxation Agreement (DTA) with Pakistan. Once in force and effective, the new treaty …

Ghana: Government plans to cut corporate income tax in 2018

Recently, the Minister of Finance and Economic Planning, Mr. Ken Ofori-Atta announced that the Government is working to reduce corporate income tax by 5% next year. This means businesses would pay 20% of their profits as corporate income tax as against the current 25%. The Finance Minister has also proposed this new measure would be presented by the 2018 budget to Parliament on 15 November 2017, subject to the approval of the House’s approval.

Ghana: Government proposes to abolish 25% corporate tax on private universities  

On 28 October 2017, the Vice President of Ghana, Dr. Mahamudu Bawumia has announced that government is working hard towards the abolishment of the 25% corporate tax on Private Universities as part of government’s support to the private Tertiary Institutions in the country. Private Universities in Ghana have appealed severally to Government to abolish the 25% corporate tax to reduce the financial burden though some civil society organizations disagree.

OECD: Tax Inspectors Without Borders discuss improving tax audit capacities

On 3 November 2017 a discussion was held at the OECD on sharing experiences and improving best practices for tax audit. The results of the discussion are to be implemented in the programs of Tax Inspectors Without Borders (TIWB). TIWB was launched in 2015 as an initiative of the OECD and the UN Development Program (UNDP). The organization channels international tax experts to partnership programs that enable them to work with the tax administrations of …

Transfer Pricing Brief: October 2017

Zambia: Compliance-Corporate residence: On 29 September 2017, the Budget for 2018 was presented to the National Assembly by the Minister of Finance. The Minister proposes to revise the definition of residence for corporate tax purposes by replacing the reference to “central management and control” by “place of effective management”. Under this, a company or similar corporate entity is tax resident if it is incorporated in Zambia or it has its place of effective management in …