World Tax Brief: July 2017

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Belgium Corporate income tax rate: The federal government of Belgium announced the budget for 2018. The budget has reduced the corporate income tax rate. Currently, the normal rate is 33.99%, will be reduced to 29% in 2018 and in 2019, and will further reduce to 25% in 2020. Small and medium-sized enterprises will entitle a reduced tax rate of 20% will apply as of 2018 on that part of the taxable profit not exceeding 100,000 EUR.
Taxation of capital gains: Under the Budget, if certain conditions are fulfilled, companies benefit from a full tax exemption on capital gains realised on shares of which they are the legal owner. This tax exemption will apply if share participation held at least 1 year and amounts at least 10% or has a value of at least 2.5 million EUR.
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Denmark Incentives: The Danish Ministry of Taxation published the draft bill on 26 June 2017 regarding the tax incentives for the Danish hydrocarbon activities. The draft law will be subject to a public hearing period until 14 August 2017 after that it will be submitted to the Danish Parliament, presumably at the beginning of October 2017.
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France Corporate income tax rate: The Prime Minister of France has confirmed that the Government would cut the corporate tax from 33% to 25% by 2022 with the hope of attracting Businesses so that they set up and develop in France rather than any other country.
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Incentives: The French Government is also planning to remove the competitiveness and employment (CICE) tax credit and reduce social security contributions. As an approach on this, the CICE tax credit will be converted into a reduction in payroll charges beginning on 1 January 2019.
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Hong Kong SME: Hong Kong plans to introduce a new tax relief for small and medium enterprises and providing additional tax deductions for research and development. The Government has stated that a new tax policy unit has been instructed to consider the proposals. In addition, the Chief Executive would be required to introduce a two-tier profit tax system and reduce the profit tax rate for the first HKD2m (USD 256,000) of the profit from the current 16.5 percent to 10 percent; As well as to provide additional tax deductions for business expenses for research and development activities.
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India PE rules:  A recent decision of the Bengaluru Bench of the Income-tax Appellate Tribunal in the case of: ABB FZ-LLC v. DCIT [ITA(TP) No. 1103/Bang/2013 held that Physical presence in the source state is not necessary to constitute a service permanent establishment (PE), and services can be rendered through virtual presence. With current technology services, information, consultancy, management, etc. can be provided through various virtual modes such as email, the internet, video conferencing, remote monitoring, remote access to the desktop, etc. The Service PE is not dependent upon a fixed place of business as it is only dependent upon the continuation of the activity. As a result, the ruling was in favour of the Indian Revenue Service and the Tribunal held that the consideration for providing services is taxable in India.
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Ireland Incentives: The Government published its annual summer economic statement on 12 July 2017. It revolves six key principles: ensuring sound and sustainable public finances; managing public expenditure carefully; targeted increases in investment; a tax system that is growth friendly and fair; ensuring inclusive growth; and facilitating access to SMEs.
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Italy  Taxation of capital gains: The Italian Ministry of Finance on 26 May 2017, approved a Decree which establishes a new percentage of capital gains and losses achieved by non-resident taxpayers from the transfer of ‘qualifying’ shares in Italian companies and included in taxable income of the seller for the purposes of the Italian corporate income tax (IRES).
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Japan CFC rule: The 2017 tax reform bills were passed by the 193rd ordinary session of the Japanese National Diet on 27 March 2017. Accordingly, the Japanese regulations on controlled foreign companies (CFC) have been fundamentally revised, taking into account the recommendations of Action 3 of the BEPS Final Reports in October 2015. The new rules are scheduled to apply with respect to fiscal years of foreign subsidiaries beginning on or after April 1, 2018.
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Korea Tax base: Recently the Korean government has introduced various tax development for new growth in industries and facilitating corporate restructuring. With this development, the foreign tax included in gross income for purposes of calculating a corporate tax base, by selecting the tax credit method under the corporate income tax law, cannot be deducted from the tax base of the local income tax. In addition, foreign corporate branches in Korea shall be added to the scope of companies subject to the restriction of net operating loss deductions.
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Netherlands Thin capitalisation rules: The Dutch Ministry of Finance on 10 July 2017 published a consultation document for implementing adjustments to the Dutch Corporate Income Tax Act (CITA) in respect of the first EU Anti-Tax Avoidance Directive (ATAD) as agreed by the EU Member States in June 2016. According to the draft bill, the (excessive) interest expenses are only deductible up until 30% of the corrected Dutch taxable profit, or tax available EBITDA.
CFC rules: According to the draft bill, the CFC rule targets taxpayers that directly or indirectly hold more than 50% of capital or voting rights or are entitled to receive more than 50% of the profits of low-taxed foreign entities and low-taxed PEs.
GAAR: The Ministry of Finance further specifies that the current exit tax provision in the CITA is broadly in line with the proposed exit tax provision of ATAD. However, the option for deferral of the recovery of exit taxes from 10 years to 5 years shall be adjusted. In the preliminary proposal, it is indicated that the GAAR is already sufficiently embedded in Dutch case law ‘’fraus legis’’ and that, as such, no specific provision is proposed.
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Nigeria Mitigation of penalties: According to an announcement from the Finance Ministry, a new tax amnesty called the Voluntary Assets and Income Declaration Scheme (VAIDS), entered into force on 1 July 2017, for both individuals and corporations. It provides a nine-month timeline for taxpayers to regularize their tax position with the federal and state governments without being liable to any tax penalty or facing prosecution for default. The amnesty also offers a waiver of penalties, no prosecution of tax offences and no tax audit. The tax amnesty continues from 1 July 2017 to 31 March 2018.
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Pakistan Corporate income tax rate: The National Assembly on 13 June 2017 passed the Finance Bill 2017 by majority vote to give effect to measures announced in the annual budget proposals for the fiscal year 2017-18. Accordingly, the corporate tax rate is reduced from 32% to 31% for the tax year 2017 and will fall to 30% for the tax year 2018 onwards.
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Romania  Corporate tax rates: The Government of Romania is planning to replace the flat tax on corporate income with a tax on turnover and this could be effective as early as 2018. The company revenues in Romania are currently taxed at a rate of 16%, but this could be replaced by a progressive tax on company turnover of 1 to 3%. The Government is also planning to delay the reduction of the standard rate of value-added tax by 1% until 2019, which is currently taxed at 19%.
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UK Incentives: HMRC’s Corporate Intangibles and Research and Development (CIRD) manual has been updated to reflect a temporary extension to the available period in which to amend an R&D claim. The extension relates only to businesses which have previously restricted ‘reimbursed expenses’ as part of qualifying staff costs as a result of an HMRC R&D Consultative Committee note that stated that these expenses could not be claimed.
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Others incentives: On 20 July 2017 HMRC published updated statistics on claims for creative industries tax relief. The statistics include data for film tax relief, high end television tax relief, animation tax relief and video games tax relief, children’s television tax relief and theatre tax relief for periods up to 2016/17. In the case of children’s television tax relief and theatre tax relief, this is the first time that statistics have been published.
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Vietnam Incentives: The National Assembly of Vietnam on 19 June 2017 approved the Law on Technology Transfer and the new law (LTT 2017) comes into force on 1 July 2018. According to the new law tax incentives are introduced for various items.
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Poland CFC rule: Polish Ministry of Finance on 12th July 2017, publishes a draft bill proposing significant changes to corporate income tax. The bill changes the specification for applying the CFC rule which may widen the scope of foreign subsidiaries that meet CFC criteria. After the introduction of the planned changes, a company that pays tax at a rate 50 percent lower than the rate it would pay in Poland will be considered as a CFC. The Bill also introduces a new catalogue of types of income that are subject to CFC regulations.
Thin capitalization rules: The draft bill also introduces a new restriction in the thin capitalization rules, which limits the deduction of financing costs to 30% of an adjusted tax base. The restriction also applies to the financing of non-affiliated companies. Additionally, a safe harbour is proposed for financing costs up to US $ 32000 yearly. The planned change is highly significant for entities that incur substantial advisory and management costs, as well as for those that pay substantial royalty fees.
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Argentina Taxation of capital gains tax: The Federal Tax Authority (FTA), on July 18, 2017, published the General Resolution 4094-E on the Official Gazette establishing the mechanism for withholding and paying capital gains tax incurred by non-residents, which had been introduced into the Income Tax in 2013.  The Resolution establishes that the applicable Income Tax withholding rate will be 15%, calculated (i) over 90% of the amounts paid for the acquisition of the previously mentioned elements, or (ii) over the net income determined in accordance with section 93 of Income Tax Law.
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Cyprus Submission of returns: In Cyprus, all resident companies are required to submit a temporary tax return Form T.D.6 by 31 July 2017. Temporary tax for 2017 is also payable in two equal instalments: on 31st of July 2017 and 31st of December 2017. The final tax for the tax year 2017 should be settled by 1st August 2018.
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Estonia Dividend payments: Estonia has passed the Income Tax Act for consultation on 19 June 2017 and consequently, a lower income tax rate of 14% ( previously was 20%) will be available for regular profit distributions. Profit distributions will be considered as regular if the amount of the distribution does not exceed the company’s last three years’ average profit distributions in Estonia.  For all amounts exceeding the last three years’ average profit distribution, the previous rate of 20% will apply.
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