Bilateral Investment Agreements
On 11 April 207, Pakistan and Hungary signed an agreement in Islamabad to enhance economic cooperation and trade ties in various areas including machine industry, electronics industry, food and agriculture, water management, environmental and energy sectors. The Finance Minister of Pakistan said while addressing the signing ceremony that the agreement is a step forward towards closer relations between the two countries.
The Hungarian Deputy Minister said that signing of the agreement is a major milestone and the next step would be the formation of the joint economic commission. He invited Pakistani businessmen to explore opportunities for cooperation with their Hungarian counterparts. He said that Pakistan is one of the hubs of economic growth and Hungary looks forward to developing strong economic ties with Pakistan.
The Joint Commission on Economic Cooperation to be established under the agreement shall monitor the effective implementation of the agreement and propose recommendations for the development of bilateral economic cooperation.
The Governments of Japan and Austria have agreed in principle to amend their double taxation avoidance agreement to further promote trade and investment between the two countries. The new agreement would enable arbitration under the mutual agreement procedure to ensure settlement of disputes concerning the application of the treaty. The changes to the agreement will come into force after the completion of the approval process in both countries.
Under this new agreement, the withholding tax rate at source on investment income (dividends, interest, and royalties) will reduce, and expand cooperation between the tax authorities of the two countries by providing for assistance in the collection of taxes.
The parliament approved a draft law on tax disputes resolution on 30 August 2016. The purpose of the law is to streamline the settlement of pending tax cases. The law covers ongoing tax disputes related to all types of taxes, including individual income tax and corporate income tax.
The most important features of the law are summarised here:
The resolution of tax disputes will be conducted by one or several committees created by the decision of the Minister of Finance. The disputes resolution committees are led by independent tax experts and must include as members a judge and a technical expert from the Egyptian Tax Authority (ETA). A request to end an existing dispute is to be filed with the ETA by the taxpayer. The ETA must allocate the request to the relevant disputes resolution committee within a maximum period of 1 week. The committee will assess the seriousness of the taxpayer’s request within a maximum period of 30 days and notify the court or appeal committee, as the case may be.
The notification will trigger the suspension of the court (or appeal committee) proceedings for 3 months. The suspension is renewable for an additional 3-month period unless the ETA will inform the court (or appeal committee) that the dispute resolution was not successful. If the taxpayer agrees in writing to the recommendation of the disputes resolution committee, the agreement must be reflected in minutes to be signed by the taxpayer. Once approved by the ETA, the minutes become enforceable. Furthermore, the ETA must inform the court or tax appeal committee about the agreement. If the taxpayer does not agree to the recommendation of the disputes resolution committee before the suspension period expires, the court (or appeal committee) is informed accordingly and the proceedings will be resumed.
The tax disputes resolution law will apply for 1 year as of the day following its publication in the Official Gazette. The draft law will abolish Law No. 163 for 2013 and Law No. 159 for 1997.
The Minister of Taxation announced on 2 May 2016, for transfer pricing cases they are planning for the introduction of alternative dispute resolution (ADR) system. The introduction of ADR is considered essential in order to assurance that transfer pricing disputes are handled in a smooth and timely manner.
On 23 January 2015 the OECD held a public discussion on action 14 of the base erosion and profit shifting (BEPS) action plan on how to make dispute resolution mechanisms more effective. The Chair of the Focus Group on Dispute Resolution presented to the meeting the aims of action 14 and the discussion draft produced by the OECD in 2014. General comments were also made on behalf of the OECD’s business and industry advisory committee (BIAC).
Discussion on achieving a step change in resolving mutual agreement procedure (MAP) cases looked at promoting the use of arbitration. The OECD Model includes a provision for compulsory arbitration in the MAP article, if the competent authorities cannot reach agreement within two years, but not many tax treaties have incorporated this provision. Increased use of arbitration in treaties could therefore achieve progress in giving taxpayers more certainty that the MAP procedure if used will lead to a resolution of the issues concerned.
The consultation discussed a three pronged approach to improving the dispute resolution process involving declaration, commitment and monitoring. There would need to be political commitments to eliminate taxation that is not in accordance with a double taxation convention. There would be new measures to improve access by taxpayers to the MAP and the procedures involved in this would be made more efficient. A monitoring mechanism would be put in place to make sure that the political commitments were being followed through with practical measures.
The meeting then considered the practical measures that could be taken by tax administrations to bring about a climate in which the competent authorities can implement the mandate given to them by the tax treaty in the MAP article. The options for achieving this put forward in the discussion document were examined.
Another important consideration is to make sure that a taxpayer is able to access the MAP when eligible to do so. The meeting discussed the options put forward in the discussion document to improve access to the MAP, and looked at procedural obstacles that could hold up the efficient resolution of cases.
On January 15, 2015, the Japan-Australia Economic Partnership Agreement entered into force, opening up opportunities for increased trade and investment by Australia with Japan which is the third largest economy in the world and Australia’s second largest trading partner.
Australian Prime Minister Tony Abbott and Japanese Prime Minister Shinzo Abe released a joint statement welcoming the entry into force of the Japan-Australia Economic Partnership Agreement, saying the agreement lays the foundation for the next phase of bilateral economic relations, and will strengthen ‘the special strategic partnership’ between Japan and Australia.
The South African Revenue Service has released a ‘Dispute Resolution Guide’ promulgated in terms of section 103 of the Tax Administration Act that was enacted on October 1, 2012.
The guide confirms that when taxpayers are discontented by an assessment or a decision they have a right to dispute it which is contained in the Chapter 9, section 103 of the TA with effect from July 11, 2014.
Interim procedures are also contained in the rules. They facilitate that disputes not finalized at the commencement date of the new rules (that is, July 11, 2014) will generally be dealt with and finalized under the new rules issued under the TA Act. For example, if a taxpayer has objected under the old rules and the objection has not been dealt with by SARS upon commencement of the new rules, the dispute must continue and the objection must be dealt with by SARS under the new rules “as if taken or instituted under the new rules.”