Month: February 2017

Colombia sets maximum deductible amount to investment for 2017

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Under the recently published Administrative Regulation 16 of 2016, the National Council of Tax Benefits in Science, Technology and Innovation (CNBT) has set out the maximum amounts deductible for investments made in science, technology and innovation projects for tax year 2017.

The maximum annual amount of investments made by a taxpayer that can be eligible for the tax benefit provided for under article 158-1 of the Tax Code (TC) is COP 600 billion and the maximum annual amount that can be deducted by taxpayers when investing in qualified projects under article 158-1 of the TC is COP 75 billion per project.

Australia: ATO releases PCG on simplified transfer pricing record-keeping

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On 22 February 2017 the Australian Taxation Office (ATO) released Practical Compliance Guideline (PCG) 2017/2 dealing with simplified transfer pricing (TP) record-keeping options and assisting taxpayers in complying with relevant tax laws.

The PCG outlines transaction types or activities identified as low risk for international related party dealings. The PCG also specifies the criteria for taxpayers to self-assess their eligibility to use one or more of the eight simplification options:

  • small taxpayers
  • distributors
  • intra-group services
  • low-level inbound loans
  • materiality
  • management and administration services
  • technical services
  • low-level outbound loans.

This PCG replaces the current information provided on the ATO website and provides the additional low-level outbound loans option.

Singapore: Competent authority agreement on automatic exchange of information with Australia enters into force

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The Competent Authority Agreements (CAA) agreements to exchange financial information for tax purposes under the Common Reporting Standard between Singapore and Australia entered into force on 27 February 2017.

According to the agreement, the Inland Revenue Authority of Singapore (IRAS) will automatically exchange information with the revenue authority of Australia about the Singaporean financial account of an Australian resident and Australian revenue authority will exchange information with the Inland Revenue Authority of Singapore about the financial account information held by Singapore tax residents in Australia.

The first exchange of information will take place by September 2018 and the first submission by Singapore financial information is scheduled for 31 May 2018.

Sweden: No new bank tax before 2018

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The government announced on 24 February 2017 its decision to withdraw plans to introduce a special tax on banks and other financial institutions. The bank tax was originally intended to eliminate the tax advantage the banking sector receives due to the fact that financial services are exempt from VAT.

Indonesia, Laos DTA enters into force

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The Double Taxation Agreement (DTA) between Indonesia and Laos was entered into force for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, on 11 October 2016. The treaty was applied from 1 January 2017 for withholding taxes and from 1 January 2018 for other tax matters.

India: Clarification on determination of POEM provision

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The Central Board of Direct Taxes (CBDT) has issued Circular No. 8/2017 of 23 February 2017 clarifying that the existing provisions in place of effective management (POEM) will not apply to a company with a turnover or gross receipts of INR 500 million or less in a financial year.

The concept of POEM in determining the residential status of a company, other than an Indian company, was introduced by the Finance Act, 2015 and will take effect from 1 April 2017. The CBDT previously issued Circular No. 6/2017 of 24 January 2017 providing guiding principles for determining the POEM of a company.

Pakistan: Modified Income Tax Rules 2002

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The Federal Board of Revenue (FBR) has published the Income Tax Rules 2002 as amended  up to 10 February 2017.

The main changes are summarised below:

Capital gains:

  • In cases of portfolio transfers where the ownership of securities does not change, the date and cost of acquisition of the securities will remain the same and capital gains tax will not arise. In other cases, including transfers made by an investor from a fund held by an Asset Management Company to another fund maintained by the same or another Asset Management Company, such transfers will be subject to tax.
  • Disposals of securities are taxable at the settlement date. Capital gains will be computed using the first-in-first-out (FIFO) method and computed in accordance with section 37A of the Income Tax Ordinance 2001.
  • With effect from 1 July 2016, investors in open-ended mutual funds and future commodity contracts will be entitled to set off capital losses against capital gains in accordance with Rule 13N(6). The National Clearing Company of Pakistan Limited (NCCPL) will calculate the capital gains tax after adjusting for capital losses in accordance with Rule 13N(10).
  • The NCCPL will compute capital gains tax on future commodity contracts entered into by members of the Pakistan Mercantile Exchange in accordance with Rule 13N effective from 1 July 2016.
  • Capital gains from the disposal of shares in book building and shares obtained in an initial public offering will be computed by applying the FIFO method and in accordance with Section 37A of the Income Tax Ordinance 2001.

Individual tax returns:

  • The person responsible for deducting tax from an employee’s salary under section 149 of the Income Tax Ordinance 2001 will have to submit a prescribed annual statement to the authorities by 31 July of the year following the end of the relevant financial year.
  • An individual earning taxable income of PKR 1 million or more, or with the turnover exceeding PKR 50 million will have to file an income tax return and withholding tax statement electronically from 1 July 2016.

Others:

  • Taxpayers governed by both the final tax regime and the normal tax regime must prorate the allowable deductions and allowances accordingly.
  • Rules 13Q to 13ZH apply to builders and developers under section 7C and 7D of the Income Tax Ordinance 2001. The rules set out, among other things, the advance tax to be imposed, the method of tax collection and the responsibilities of the relevant authorities and taxpayers.
  • A listed company may apply a reduced tax rate of 2% if it meets the Shari’ah-compliant criteria provided in Rule 231H.

Valuation:

  • The value of immovable property under section 111 of the Income Tax Ordinance 2001 will be the higher of the sales price and:
  • The fair market value provided by the FBR or, if such value is not available, the fair market value provided by the District Officer (Revenue), provincial authority or other authority determining the stamp duty; and
  • The average of the recorded sales price for the agricultural land.
  • The value of bonus shares issued by a company not quoted on the stock exchange will be the higher of the face value and break-up value.