Free Trade Agreements

Australia: FTA negotiation with Peru

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On 24 May, Australia and Peru launched negotiations for a free trade agreement (FTA). A fellow signatory to the Trans-Pacific Partnership (TPP) Agreement, Peru has been one of the fastest growing economies in Latin America. A Peru-Australia FTA would enable Australian businesses to access the opportunities presented by that growing market.

Furthermore, Peru is a growing market for Australian goods and services exporters. In 2015-16, total two-way trade in goods and services with Peru was worth $504 million, up 19.4% from the previous year. An FTA with Peru would provide Australian businesses with an opportunity to expand engagement with this emerging market.

Ukraine: Parliament ratifies the free trade agreement with Canada

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The Ukrainian parliament passed a law on 14 March 2017 ratifying the free trade agreement between Canada and Ukraine, signed on 11 July 2016 in Kiev.

The Canada-Ukraine Free Trade Agreement represents a significant milestone in the relationship between Canada and Ukraine. It will bolster their economies, spur innovation, and lead to long term benefits for the middle class and those working hard to join it.

Russia: Publishes the draft procedure on multilateral APAs

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The Russian Finance Ministry on 3 March 2017, published a draft Procedure outlining the process for handling multilateral Advanced Pricing Agreements (APAs). The Procedure is intended to enable a taxpayer to conclude an APA in relation to a foreign trade transaction with Russia’s tax treaty partner countries. Such APAs may prevent transfer pricing disputes, as recommended, inter alia, by Action 14 of the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting Action Plan.

The Russian Finance Ministry is regarded as the competent tax authority of Russia for purposes of tax treaties. As far as bilateral or multilateral APAs are concerned, the Ministry is going to representative the competent authority powers to the Federal Tax Service (FTS) which will enable the FTS to conduct mutual agreement procedures with competent tax authorities of tax treaty partner countries.

The draft procedure sets out the following stages of the bilateral APA process:

1) Preliminary discussion with the FTS: This stage is generally informal and optional. Whatever the outcome of the preliminary discussion, the taxpayer may still apply to the FTS for the conclusion of an APA in relation to foreign trade transactions.

2) Formal application: The Procedure contains the recommended form of an APA application and a list of documents required to initiate the APA process. Under the Procedure, a formal APA application should be submitted in both jurisdictions in order for the FTS to commence communication with the competent authority of the other state. All documents (information) submitted to the foreign competent authority must also be presented to the FTS.

3)Review of the Application: At this stage, the FTS may conduct:

-Discussions with the taxpayer on matters relating to the conclusion of the APA

-Mutual consultations with the foreign competent authority

-The Federal Tax Service will consider the application from the standpoint of whether:

  • The proposed transfer pricing methodology meets the arm’s length standard as outlined by the Russian Tax Code;
  • The proposed pricing methodology enables the elimination of double taxation;
  • In the absence of an APA, there are uncertainties or significant technical issues related to the pricing approach;
  • A transaction is of a long-term nature; and
  • There is the possibility of an unjustified tax benefit as a result of the transaction.

4) Negotiations between competent authorities: An An important stage in the process of the conclusion of a pricing agreement is the conduct of negotiations between the FTS and the foreign competent authority, which may result in a mutual agreement between them.

5) Implementation of the mutual agreement of the competent authorities: If a mutual agreement is reached between the FTS and the foreign competent authority, the FTS will suggest to the taxpayer the conclusion of an APA on the terms agreed to in the mutual agreement or to amend the draft APA in order to comply with the mutual agreement. If the taxpayer agrees, an APA will be concluded.

6) Timing: An Agreement is is valid for the period agreed by the parties, but cannot exceed 3 years. The period may be prolonged for a further 2 years at the request of the taxpayer.

7) Termination of the APA :  However, APA can be terminated for the following reasons:

  • Upon expiry of the validity period;
  • By decision of the head (or deputy head) of the Russian FTS if the terms and conditions of the APA have been violated by the taxpayer (as identified during an audit review of the APA) and this has resulted in an underpayment of taxes;
  • By mutual agreement of the parties;
  • By decision of a court.

Peru-FTA with Honduras entered into force

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The Free Trade Agreement (FTA) between Peru and Honduras entered into force on 1 January 2017.

The new trade agreement immediately abolished Honduran taxes on 84% of Peruvian exports and provided that the remaining duties will be eliminated within a maximum of five years.

The main Peruvian products benefiting from the FTA are: asparagus, artichokes, grapes, pineapples, mangoes, avocados, quinoa, kiwi, cañihua, peppers, coffee and maize which will have immediate access to the Honduran market with zero obligations.

The 9th Round of China-GCC FTA Negotiation Concluded

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On December 19 to 21, the 9th Round of China-GCC Free Trade Agreement (FTA) negotiation was held in Riyadh, Saudi Arabia. Wang Shouwen, Vice Chinese Minister of Commerce and Al-Bazai, General Coordinator for GCC FTA Negotiations and the Vice Minister of Finance of Saudi Arabia led delegations to attend the negotiation respectively. Delegation of GCC came from the six member states of GCC such as Saudi Arabia, Oman, United Arab Emirates, Bahrain, Qatar and Kuwait and the secretariat of GCC.

During the 3-day negotiation, both sides conducted profound negotiation on the content of leftover problems such as service trade, investment, e-commerce and trade in goods, and concluded the negotiation on chapters such as the economic and technical cooperation. So far, both sides have completed nine negotiations among fifteen topics, close to reaching consensuses on the content of three chapters such as the TBT, the articles of law and e-commerce, making positive progress in the fields such as core goods and service.

Both sides agreed to hold the next round of negotiation at the end of March 2017.

Ireland: Entity registration form

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The Irish Revenue Commissioners released a “reporting entity” registration form which is required to be filed by entities that do not already have an Irish Tax Reference Number or a Revenue Customer Number (RCN), and that have reporting obligations in Ireland under FATCA / CRS / DAC2 regimes. The Revenue Commissioners also updated a list of participating countries for CRS and DAC2 purposes.

TIEA between Switzerland and Brazil approved

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The tax information exchange agreement (TIEA) between Switzerland and Brazil has been approved by the Swiss parliament on 16 December 2016. The agreement was signed on November 23 2015. This TIEA contains tax-related information on request excluding automatic exchanges of information.