Month: May 2017

Saudi Arabia: Excise Tax Law officially published in the local Gazette

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The Saudi Arabian Cabinet approved the Excise Tax Law on 2 May 2017 after also approving the GCC framework agreement in relation to Excise Taxes. The Excise Tax Law was published in the Saudi Official Gazette (UM-AL QURA), Issue no. 4672 on 26 May 2017.  The Law will enter into force after 15 days from its publishing date.

The Excise Tax Executive regulation is expected to be issued soon to provide additional guidance to taxpayers on the procedures relating to this new tax and their responsibilities regarding registration and compliance. Businesses that perform any of the following activities will have to register for Excise Tax purposes, according to article 6 of the Excise Tax Law:

  • Import of excisable goods;
  • Production of excisable goods; or
  • Acquisition of excisable goods under duty suspension arrangements.

There is no detailed list of goods subject to Excise Tax in the Excise Tax Law, however, according to information published by the tax authority (GAZT) the following products are expected to be subject to Excise Tax in Saudi Arabia:

  • Tobacco products – 100%;
  • Carbonated soft drinks – 50%; and
  • Energy drinks – 100%.

Registration for Excise Tax purposes in the GAZT electronic filing system “ERAD” is possible and can be found using the following link:

https://www.gazt.gov.sa/irj/portal?ume.logon.locale=ar&login=X

Malaysia: IRBM issues amended tax audit framework for 2017

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The Inland Revenue Board of Malaysia (IRBM) issued an amended tax audit framework on 1 May 2017. The aim the amended framework is to ensure that tax audits are carried out in a fair, transparent and impartial manner. The framework outlines the rights and responsibilities of audit officers, taxpayers and tax agents in respect of a tax audit. In addition, the aims of the framework include assisting audit officers to carry out their tasks efficiently and effectively, and assisting taxpayers in fulfilling their obligations.

Generally, a tax audit covers a period of one year of assessment, determined in accordance with the audit focus criteria of the department. However, the tax audit may be extended to cover a period up to five years of assessment, pursuant to the issues uncovered during an audit. This five year time limit is not applicable to cases involving fraud and tax evasion whether intentional or unintentional.

If it is discovered following an audit that there has been an understatement or omission of income, a penalty will be imposed under subsection 113(2) or paragraph 44B(7)(b) of the ITA under which the penalty rate is equal to the amount of tax undercharged.

Where a taxpayer, after submitting a return and being assessed to tax, makes a voluntary disclosure after the due date but not later than 6 months from the due date, the penalty rates are ranging from 10% to 15.5% depending on the amount of time passing before the voluntary disclosure is made.

The concessionary penalty rates for voluntary disclosure other than cases mentioned above range from 20% to 35% depending on the period from the due date of submitting the tax return form.

The amended framework is effective from 1 May 2017 and replaces the tax audit framework dated 1 February 2015.

Germany: Government approves signing of MLI to implement tax treaty related BEPS measures

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The German Federal Parliament on 21 December 2016, approved the signing of the Multilateral Instrument (MLI) to implement into bilateral tax treaties the tax treaty-related measures arising from the OECD / G20 BEPS Project to tackle base erosion and profit shifting. A signing ceremony is scheduled to be held on 7th June 2017 in Paris.

The BEPS recommendations combat tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The multilateral instrument will enable countries to adjust their bilateral tax treaties to include BEPS treaty-related recommendations without having to renegotiate each bilateral treaty.

Russia: Government approves signing of MLI to implement tax treaty related BEPS measures

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The Russian government on 20 May 2017, approved the signing of the Multilateral Instrument (MLI) to implement into bilateral tax treaties the tax treaty-related measures arising from the OECD / G20 BEPS Project to tackle base erosion and profit shifting. A signing ceremony is scheduled to be held on 7th June 2017 in Paris.

The BEPS recommendations combat tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The multilateral instrument will enable countries to adjust their bilateral tax treaties to include BEPS treaty-related recommendations without having to renegotiate each bilateral treaty.

Japan and Iceland agree on a DTA

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On 29 May 2017, the Japanese Ministry of Finance announced that the Government of Japan and the Government of Iceland have agreed in principle on the tax convention between Japan and Iceland.

This new agreement will be signed after the necessary internal procedures have been completed by each of the two governments. Thereafter, the new Convention will enter into force after the completion of the approval procedure in both countries.

India: SC rules that income from the sub-licensing of property is not taxable as business income

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The Supreme Court (SC) in the case of Raj Dadarkar and Associates v. ACIT (Civil Appeal No. 6455-6460 OF 2017), decided that the income from the sub-licensing of the property is taxable as house property income and not business income. Simply because there is an entry in the object clause of the business showing a particular object, would not be the determinative factor to arrive at a conclusion that the income is to be treated as business income.

Based on the facts of the case the Supreme Court recognised that the income earned by the taxpayer is not taxable as business income but would be taxable as income from house property.

Saudi Arabia: Tax rates changed for oil producers, hydrocarbons

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The Government of Saudi Arabia has set a range of income tax rates for producers of oil and hydrocarbons, through a royal decree on 27 March 2017.

According to the decree, the tax rate for investments exceeding 375 billion riyals ($99.96 billion) will be 50% and the rates will increase for producers with smaller investments.

These new rates are effective from 1 January 2017.