World Tax Brief: January 2017

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Argentina Special corporate tax rate: Argentina has introduced a new special corporate income tax rate for gambling. According to the Law 27,346 that amends article 69 of the Income Tax Law (LIAG), a 41.5% corporate income tax rate applies to gambling income derived by casinos and similar businesses, instead of the normal 35% rate.
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Colombia Corporate income tax: According to law 1819 of 2016, Colombia adopted the structural tax reform bill and it introduces the following major changes to the corporate income tax regime.  As from 1 January 2019, the fairness tax, the CREE surcharge and the wealth tax are no longer applicable. As from the tax year 2019, the single income tax rate will be 33%.
Green taxes: Colombia has introduced a carbon tax and also announced a tax on plastic bags.
Withholding tax: A 15% income tax withholding applies to foreign payments of interest, commission, fees, royalties, technical services and advisory services. A 15% income tax withholding applies to administration or management fee payments made to headquarters, whether Colombian source income or foreign income.
Dividend tax: Colombia has introduced a dividend tax rate on profits derived from non-resident companies as from 1 January 2017. The rates are -5% final withholding on non-taxable dividends; and 35% final withholding on taxable dividends.
GAAR: Colombian tax reform also introduced detailed definitions of behaviours that could be deemed to be the abuse of tax law and it simplifies and regulates the procedure for applying the anti-avoidance provision.
CFC: Colombian Law 1819 of 2016, introduced the controlled foreign company (CFC) rules with the structural tax reform bill approved on 23 December 2016.
Losses carry-forward: Under the Colombian structural tax reform bill, the carry-forward of tax losses may be allowed up to 12 tax years.
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The tax reform Bill also introduces some major changes to the tax administration, tax procedures and penalties:
Assessment: According to the reform Bill, the tax authority may issue a provisional assessment of the taxes due by taxpayers in the following cases as non-reporting or inaccuracy of the information provided in tax returns on taxes, surtaxes, advance payments and withholding taxes.
Audit: According to the reform Bill, the statute of limitation for tax authorities to audit tax returns is 3 years following the date of filing of the tax return or the last day of the deadline for filing the tax return.
Withholding tax return: According to the reform Bill, withholding tax agents may file withholding tax returns without payment if they are entitled to a credit balance exceeding two times the amount of the withholding tax reported, as it can be offset against the credit balance.
Penalties: The tax reform Bill introduces and amends the provisions related to the application of penalties. Therefore, taxpayers failing to report assets or providing inaccurate information on assets in their income tax returns, or reporting non-existent liabilities exceeding an amount of 7.250 monthly minimum legal wages, will be subject to imprisonment between 48 and 108 months and a fine of 20% of the value of the non-reported asset, the asset that was incorrectly reported or the non-existent liability. However, if the taxpayer amends the income tax return and pays the amounts due, no criminal offence will have been committed.
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Costa Rica Corporate tax rate: The Costa Rican government recently increased the specific tax rate levied on alcoholic beverages by Resolution RES-DGH-002-2017 which is published in the Official Gazette. The resolution provides for an increase of 0.27% on alcoholic beverages, pursuant to article 1 of Law 7972. The Resolution will be effective from 1 February 2017.
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Cyprus Incentive: Cyprus has introduced new tax relief for investors in qualifying small and medium sized innovative enterprises. The relief adopted by the Council of Ministers on 27 July 2016 which was approved by the parliament on 2 December 2016 and entered into force on 1 January 2017.
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Finland Dividends: Recently, the Supreme Administrative Court gave a ruling on a case involving a life insurance company from Luxembourg that among other products also deals in investment-linked insurance products. The company had received Finnish dividends subject to tax at source. The Court’s ruling only applies to the taxes at source paid by life insurance companies with receipts of dividends on the shares they own due to investment-linked insurance. The Finnish Tax Administration only applies the ruling’s interpretation to life insurance policies that are linked with such investments.
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Germany Royalties: The Federal Ministry of Finance recently approved a draft bill on the limitation of the deduction of royalties as from 2018. The new bill offers for a limitation of the deductibility of royalties paid by a German corporation or permanent establishment to a foreign related party or to its head office, respectively.
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Iceland Corporate tax rate: Iceland has published corporate tax rates for 2017 accordingly, the corporate income tax is 20% for public and private limited liability companies and cooperatives, and 36% for other legal entities.
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India Incentives: The Indian Union Cabinet has modified and introduced a Special Incentive Package Scheme to further incentivize investments in Electronic Sector and moving towards the goal of ‘Net Zero imports’ in electronics by 2020.
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GAAR: The Union Finance Ministry has stated that the General Anti-Avoidance Rule (GAAR) will be effective from the 1 April 2017. The General Anti-Avoidance Rule (GAAR) provisions shall be effective from the Assessment Year 2018-19 onwards (i.e. Financial Year 2017-18 onwards).
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Liability to tax: India has issued the guiding principles to be followed for determination of the place of effective management of a company (POEM). The concept of PoEM for deciding the residential status of a company was introduced by the Finance Act, 2015. The guideline was effective from 01.04.2016, and accordingly, shall apply from the assessment year 2017-18 onwards.
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Israel Main Corporate tax rate: The government has to introduce amendments to the Income Tax Ordinance (ITO) in the agenda of the 2017-2018 Law on Economic Arrangements. In accordance with the amendments, the corporate tax rate will be reduced from 25% to 23% gradually during 2017 to 2018.
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Malaysia

Withholding tax: The Finance Act 2016, has been gazette and proposed that special classes of income are subject to withholding tax regardless of place of performance of service. The Act also redefined the royalty income and the definition of “royalty” has been expanded significantly to include items such as software and communications via satellite.
Penalties for incorrect returns: Under the proposed act new penalties also introduced for incorrect returns. Accordingly, any person who is convicted of an offence under these new provisions will be liable to a fine of not less than RM 20,000 and not more than RM 100,000 or imprisonment for a term not exceeding six months.
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Corporate tax rate: Malaysia has enacted the Finance Act 2017 and the act reduced the corporate tax for the year of assessment 2017 and 2018. As per the Finance Act 2017, the reduce tax rate will be between 1 and 4 percentage points for companies with significant increase in taxable income for the year of assessment 2017 and 2018. Reduce tax rate from 19% to 18% will be applicable for SMEs with taxable income up to first RM500,000.
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Mexico Tax Compliance: The tax administration (Servicio de Administración Tributaria) of Mexico has been introduced a guidance on tax purposes in January 2017. The guidance provided forth standards for compliance the rule for electronically or digitally provided tax receipts.
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Netherlands Reduced rate: Netherland government introduces a 2.5% energy investment reduction from on 1 January 2017 in the official gazette (No. 544.) on 29 December 2016.
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Oman Corporate tax rate: Oman with the state budget 2017, has proposed to impose a 15% tax on all the corporates annual income without any exception or discrimination. Revenue from other taxes, customs duties, and fees is expected to increase.
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Pakistan Reduced rate: Pakistan has permitted the tax reduction proposal of 2% for Shariah-compliant listed companies through Finance Act 2016. These criteria provided in sub-clause (a) of clause (18B) of the Second Schedule to the Income Tax Ordinance 2001 (vide SRO 1173(I)/2016).
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Audit rules: The new Audit Policy 2016, approved by the Pakistan Federal Board of Revenue (FBR) for selection of taxpayers for audit. According to the new audit policy, the audit selection will be conducted via computer ballot using a parametric basis based on 7.5% of the cases out of the total returns of Income Tax, Sales Tax and Federal Excise Duty filed for the tax year 2015 and tax periods from July 2014 to June 2015.
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Peru Corporate tax rate: Peru has published certain amendments to the Income Tax Law, accordingly the general corporate income tax rate has been increased from 28% to 29.5%.
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Puerto Rico Transfer Pricing Rules: The Department of Treasury released a proposed transfer pricing regulations which are aimed to arrange in a line Puerto Rico’s Transfer Pricing rules with global norms. The proposed regulations strongly reflect US transfer pricing rules as well as the OECD Transfer Pricing Guidelines. Furthermore, they outline the globally recognised benchmark for intercompany transactions, i.e. the arm’s length principle.
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Saudi Arabia Liability to tax: The General Authority for Zakat and Tax (GAZT) changed the determination procedure of Zakat and income tax liabilities of listed companies by the Circular 6768/16/1438 of 4 December 2016. According to the Circular listed shares will also be taken into consideration for determining the income tax and/or Zakat liabilities.
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Sweden PE rules: Swedish Administrative Court of Appeal has issued a decision in in Gothenburg case regarding permanent establishment. According to the court decision, a German company that was considered to have a fixed place of business in Sweden because a part of the company’s core business was being carried out in Sweden. The Court determined the company had created a permanent establishment.
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Taiwan Corporate tax rate: The tax reform research team commissioned by the Ministry of Finance proposes some reforms regarding the dividend imputation tax system. In order to resolve the controversial issues, the tax reform research team proposed, increasing the corporate tax rate from 17% to 20%. The proposals for these changes are expected to be submitted to the Legislation Yuan (Congress) in May 2017. The government intends to implement this tax reform before the end of 2017 to pursue economic efficiency, simplification of tax administration, equity of the tax system, improvement of fiscal revenue and a stronger capital market.
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E-filing: Taiwan has introduced electronic filing for non-resident taxpayers in the same way as resident taxpayers from 1 January 2017. Additionally, withholding agents of non-resident taxpayers are requisite to withhold taxes within the approved period and submit the tax payable to the tax authority by filing the tax return electronically and timely.
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Turkey Corporate tax rate: Turkey has introduced amendments to the Corporate Income Tax Law (CITL), which introduces a reduced corporate income tax rate for mergers of SMEs. Also, according to the amendment, manufacturing profits of the target company realised until the date of acquisition and manufacturing profits of the buying company realised for a period of 3 years starting from the year of acquisition are subject to the reduced corporate income tax rate. The upper limit of the reduced corporate tax rate is set at 75%. Law 6770 authorises the Council of Ministers to set the reduced corporate income tax rate.
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UK Tax losses: The Government of UK published a draft legislation on the reform of the Corporation Tax loss relief rules. This new draft legislation now includes provisions catering for group relief for carried forward losses in the context of companies owned by a consortium and various anti-avoidance provisions. There are also specific rules for insurance companies and creative industries.
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