World Tax Brief: February 2017

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India Corporate income tax rate: On 1 February 2017, the Finance Minister has presented the Budget for 2017-18. According to the budget, the corporate tax rate is reduced to 25% for enterprises with annual turnover up to INR 500 million.
Taxation of capital gains: Under the budget, the holding period for categorizing immovable property as long-term capital assets are reduced from 3 to 2 years. Foreign portfolio investors (Categories 1 and 2) will be exempt from tax under provisions relating to the indirect transfer of capital assets. Furthermore, the base year for calculating capital gains will be changed from 1981 to 2001.
Carry forward losses: Under the budget, loss carry-forward subject to 51% shareholding restriction (under section 79 of the ITA) for eligible start-up companies will be relaxed.
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Liability to Tax: 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.
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Australia Sanctions for non-compliance: According to the 2016-17 Budget, the Government of Australia has announced that it would increase administrative penalties imposed on companies with global revenue of $1 billion or more who fail to adhere to tax disclosure obligations. Therefore, from 1 July 2017, penalties relating to the lodgment of tax documents to the Australian Taxation Office (ATO) will be increased by a factor of 100. This will raise the maximum penalty from $4,500 to $450,000, which will encourage multinational companies to meet their reporting obligations. In addition, from 1 July 2017, penalties relating to making false and misleading statements to the ATO will be doubled, which is aimed at discouraging multinational companies from being reckless or careless in their tax affairs.
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Latvia SME: On 1 January 2017, the amendments to the Law on Micro-Enterprise Tax come into force. Thus, from 2017, micro-enterprise tax is levied at the following rates, subject to further conditions and exceptions: EUR 0 – 7,000: 12% (15% from 2018); EUR 7,000.01 – 100,000: 15%; and EUR 100,000.01 and above: 20%.
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Serbia Submission of returns: The Serbian Ministry of Finance has issued a rulebook on 16 December, 2016 that is effective 1 January 2017 and applies for purposes of preparing the 2016 tax return. The rulebook is on amendments and changes to the rulebook on the contents of the tax Balance and other issues relevant for the assessment of corporate income Tax.
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Kazakhstan Incentives: On 24 January 2017, Government Resolution No. 10 of 20 January 2017 on priority business activities within Special Economic Zones (SEZs) has been published. According to current legislation, to receive tax incentives, a company active within a SEZ must fulfil certain conditions, such as carrying out priority business activities listed by the government. The Resolution provides for this list of priority business activities for each of the ten SEZs.
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Brazil Taxation of capital gains: According to a Private Ruling 88/2017, published in the Official Gazette of 31 January 2017, simplifies the tax treatment of exchange of shares transactions in Brazil where the shareholders are non-resident persons, as follows: income tax is due at a rate of 15% if non-resident shareholders derive capital gains from the transactions, and the new parent company (as a result of the transaction) is responsible for withholding and paying the income tax due on behalf of the non-resident shareholders.
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Chile Interest rate: The Ministry of Finance announced the modifications introduced by Law 20,956 to the tax treatment of bonds issued by both the Central Bank and Treasury. Therefore, as from 1 February 2017, these institutions are obliged to withhold a 4% income tax on the interest accrued at the moment of coupon payment.
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Ireland Directors’ fees: On 12 January 2017, The Irish Revenue published Finance Act 2016, which includes an exemption for resident relevant directors is introduced on certain emoluments not more than EUR 5,000.
Incentives:  Under the Finance Act, the regulation of the new 20% WHT deduction for Irish real estate funds is also expanded with new elements as an anti-avoidance provision regarding multiple funds.
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El Salvador Late payments interest rate: The Ministry of Finance has published the new late payment interest rates on 31 January 2017. According to the announcement, an annual interest rate of 6.37% will apply to late payments of taxes made from 1 February to 31 July 2017. However, such annual interest rate will be 10.37% if the late payments are made after 60 days have passed since the deadline.
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Mauritius Tax Management: According to the 2016-2017 Budget, The Minister of Finance has introduced an alternative dispute resolution mechanism to expedite cases where the amount of tax payable under dispute exceeds Rs10 million (approximately US$285,000).
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Cyprus Payment of tax: The Parliament of Cyprus has approved a new law on 27 January 2017, which provides for the payment of overdue taxes by monthly installments. Under the provisions of the bill payments relating to income taxes are eligible for the payment of overdue taxes by monthly installments. According to the new law amount overdue can be repaid by 54 monthly installments for tax obligations below €100,000 and in up to 60 monthly installments for tax obligations exceeding EUR 100,000.
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Italy Corporate tax rate: The Budget Law for 2017 entered into force on 1 January 2017 and accordingly it has been confirmed that, with effect from 2017, the corporate income tax rate is decreased to 24%. However, qualifying banks and financial institutions, except qualifying investment fund management companies, are subject to a surtax of 3.5%.
Besides, the applicable allowance for corporate equity rate is 2.3% in 2017 and will be increased to 2.7% in 2018.
Withholding tax rate: In addition, the reduced withholding tax levied on dividends paid out to a company resident and subject to corporate income tax in another EEA country that allows an adequate exchange of information with Italy is decreased to 1.2%.
Interest income: Effective from 2017, interest paid by qualifying banks and financial institutions are fully deductible. But insurance companies, parent companies of insurance groups and qualifying investment fund management companies are able to interest deduction only up to 96% of the total amount.
Losses: Subject to certain conditions, a company may be able to transfer tax losses acquired in the first 3 years of functioning of the business to a related company which directly or indirectly holds an equity interest in the transferor granting voting rights and a profit share not lower than 20%, at the end of the fiscal year in which the transfer is made.
Incentives: The tax credit also available for the tourism sector under Law Decree No. 83 of 31 May 2014 has been amended and extended for fiscal years 2017 and 2018. Subject to certain conditions, Hotels and other accommodation facilities will be able to get benefit from a tax credit equal to 65% on documented expenses incurred for renovation and improvement of energy efficiency and seismic performance. Likewise, the tax credit regime available for research and development (R&D) activities under Law Decree No. 145 of 23 December 2013 and subsequently amended by Law No. 190 of 23 December 2014 has been amended and extended.
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Slovenia Payment of tax: The tax authority has issued guidelines on clarifying monthly advance payments of corporate income tax resulting from the increase in the corporate income tax rate from 17% to 19% as from 1 January 2017. Accordingly, the tax authority has specified that, despite the increase in the tax rate, companies will continue to pay monthly advance payments at a rate of 17%. However, this will be effective only until the date at which taxpayers file their corporate income tax returns for the tax year 2016 (i.e. 31 March 2017).
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Colombia Incentives: Law 1819 of 2016, adopting the structural tax reform bill approved on 23 December 2016 and introduces amendments to the corporate income tax (CIT) incentives applicable to small enterprises benefiting from Law 1429 of 2010. Please click below for the details.
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Compliance calendar: The Colombian National Tax Authority (DIAN) issued an official communiqué providing the tax calendar for the tax year 2017, on 22 February 2017. The 2017 tax calendar provides the deadlines for complying with formal and substantial tax obligations regarding withholding taxes, VAT, income tax for large taxpayers, individuals and companies, fairness tax, consumption tax, foreign assets reporting, gas tax and the carbon tax.
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Computation of taxable income: In a recently published regulation, the National Council of Tax Benefits in Science, Technology and Innovation provided the maximum amount deductible for investments made in science, technology and innovation projects (qualified projects) for the tax year 2017, as follows: the maximum annual amount of investments to be made by taxpayers that are 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.
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Zambia Incentives: The fiscal Budget for 2017 has proposed, the capital allowances for plant, equipment and machinery used in farming and agro-processing to increase from 50% to 100%.
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Finland Withholding tax payment procedures: The Finnish tax administration on 9 February 2017 released an updated version of the guidance on withholding tax on dividends, interest and royalties paid to non-residents. The updated version clarifies the obligation for the payer of such income to report and remit the withholding tax to the tax authorities, and reflects the amendments made in respect of the collection of taxes and tax procedures. Accordingly, tax returns on self-assessed taxes, including dividend withholding tax, are to be filed electronically. The due date for filing and paying self-assessed taxes is the 12th of each month.
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Israel Incentives: Israel published an amendment to the Law for the Encouragement of Capital Investments on 29 December 2016. The amendment, which aims at increasing the international competitive advantage, promoting the growth of the Israeli high-tech industry and creating high-productivity jobs.
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Austria Incentives: The Ministry of Finance updated the guidance on tax incentives for start-up companies on 14 February 2017. The incentives for start-up companies are granted if certain requirements are met.
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Puerto Rico Withholding tax: The Department of Treasury issued Bulletin 17-02 on 3 February 2017 regarding payments received for services. These payments for services are subject to the withholding of sales and use tax at a rate of 7%.
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Netherlands Participation exemption: Decree No. BLKB2016/803M of 20 January 2017 was published in Official Gazette No. 5003 regarding the application of the participation exemption. The Decree has updated and replaces Decree No. DGB2010/2154M with effect from 24 February 2017 and has retroactive effect to 20 January 2017.
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Singapore Corporate tax rate: The fiscal Budget for 2017 has proposed and raised the existing corporate income tax (CIT) rebate cap from SGD 20,000 to SGD 25,000 for the year of assessment (YA) 2017, but the rebate rate remains unchanged at 50% of tax payable. This CIT rebate will be extended for another year to YA 2018 but there will be a reduced rate of 20% of tax payable with a cap of SGD 10,000.
Incentives: According to the Budget 2017, for the purpose of encouraging the use of IPs arising from research and development (R&D) activities, IP income will provide incentive under the new base erosion and profit shifting (BEPS)-compliant IP regime called the IP Development Incentive (IDI). However, existing incentive receivers will keep on having such income covered under their existing incentive awards until 30 June 2021.
Withholding tax exemption: The period withholding tax exemption on payments made to non-resident non-individuals for structured products offered by Financial Institutions (FI) will be extended until 31 March 2021. Also, the automatic WHT exemption regime will be extended to qualifying payments made on qualifying loans entered into on or before 31 December 2022.  Further, the existing Integrated Investment Allowance (IIA) system will be extended until 31 December 2022.
Incentives: According to the Budget, the existing set of tax incentives for project and infrastructure finance (PIF) providing: (a) tax exemption of qualifying income from qualifying project debt securities, (b) tax exemption of qualifying income from qualifying infrastructure projects or assets received by approved entities listed on the Singapore Exchange; and (c) concessionary tax rate of 10% on qualifying income derived by an approved infrastructure trustee manager or fund management company, will be extended to 31 December 2022.
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Bolivia Corporate tax rates: The Finance Minister has announced a proposal on 7 February 2017 for rising income tax in the financial sector by 3% (from 22% to 25%). The proposal had been submitted to the Assembly.
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Russia Computation of taxable income: The Federal Tax Service has clarified the deduction of expenses for Corporate Income Tax purposes.  Accordingly, a taxpayer may deduct expenses from corporate income in the tax period in which they are incurred, regardless of the tax period in which they were invoiced or paid (i.e. services were provided to a taxpayer in December 2012. The expenses incurred for the payment of these services were deducted from the corporate income received in 2012. The invoice was issued in January 2013).
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Ukraine Incentives: From 1 January 2017, the amendments to the Tax Code have been effective with some exceptions. Accordingly, incentives on tax holidays until 2021 are introduced for taxpayers with annual income less than UAH 3 million provided they meet some requirements. In addition, accelerated depreciation within 2 years is also allowed for machinery and equipment purchased and set in operation in 2017 and 2018, provided that such machinery or equipment is used solely for the purposes of the taxpayer’s own business activity.
SME: Small enterprises (companies with annual gross income below UAH 3 million) may apply a corporate income tax rate of 0% until 2021 if their employees’ wages exceed two minimum salaries.
Withholding tax rates: The withholding tax rate on interest paid to non-residents is reduced from 15% to 5% or 0% upon fulfilment of special requirements.
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Oman Corporate income tax rate: Oman has increased its corporate income tax through Royal Decree No. 9/2017 (19 February 2017) from 12% to 15% and made all entities subject to tax. In a major development, Oman has removed the OMR30,000 (USD77,912) taxable income threshold for exemption from corporate income tax, noting widespread abuse of the concession. Presently only a few thousand companies pay income tax. The change could bring about a 50-fold increase in corporate taxpayers.
Withholding tax rate: Interest and dividend payments to nonresidents are now subject to withholding tax at 10%. Further, payments to nonresidents for services now attract WHT at 10%. The WHT exemption for payments from Ministries and Government institutions has been removed.
Tax management: Oman has legislated for a simplified regime for small businesses covering tax declarations, audits, tax assessment, and record keeping.
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