Hong Kong: Inland Revenue (Amendment) (No. 2) Ordinance 2017 gazetted

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Inland Revenue (Amendment) (No. 2) Ordinance 2017 (Amendment Ordinance) was gazetted June 16 and will come into effect on July 1, 2017. The Amendment Ordinance enables Hong Kong to implement automatic exchange of financial account information in tax matters (AEOI) more effectively.

As an international financial centre Hong Kong has been committed to enhancing tax transparency and combatting cross-border tax evasion. Hong Kong has been making preparations for the implementation of the common reporting standard for AEOI as set out by the Organisation for Economic Cooperation and Development (OECD). At the same time, both the OECD and the European Union (EU) have been closely monitoring jurisdictions’ progress in the implementation of AEOI.

The Amendment Ordinance can ensure that Hong Kong preserves the financial account information from the second half of 2017 for exchanging with other jurisdictions. This enables the effective implementation of AEOI without introducing an undue compliance burden to financial institutions.

To implement AEOI, from July 1, 2017, the list of “reportable jurisdictions” under the Inland Revenue Ordinance will be expanded to cover 75 jurisdictions, comprising 13 confirmed AEOI partners and 62 prospective AEOI partners. The 62 prospective AEOI partners include the following three categories:

(a) jurisdictions which have expressed an interest in conducting AEOI with Hong Kong or jurisdictions suggested by the OECD;

(b) Hong Kong’s tax treaty partners which have committed to AEOI; and

(c) all member states of the EU.

The Amendment Ordinance does not alter the privacy and data protection requirements on AEOI under the Inland Revenue Ordinance. Hong Kong would only conduct AEOI with jurisdictions which have signed dedicated exchange agreements with Hong Kong and have fulfilled the OECD’s standard and relevant safeguards for protecting data privacy and confidentiality of the information exchanged.

Hong Kong signs AEOI agreement with Indonesia

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Hong Kong has signed an agreement with Indonesia for conducting automatic exchange of financial account information in tax matters (AEOI), a Government spokesman said on June 16, 2017.

The spokesman added that they have been seeking to expand Hong Kong’s AEOI network with their tax treaty partners. Including the agreement with Indonesia, Hong Kong now has 13 AEOI partners. The others are Belgium, Canada, Guernsey, Ireland, Italy, Japan, Korea, Mexico, the Netherlands, Portugal, South Africa and the United Kingdom.

The spokesman also added that the Government plans to extend the application of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters to Hong Kong. An amendment bill will be introduced into the Legislative Council in late 2017.

Costa Rica: Tax administration temporarily suspends filing date for TP information return

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The Costa Rican Tax Administration has temporarily suspended the filing date for the transfer pricing information return. On 5 June 2017 Resolution DGT-R-28-2017 was published in the Official Gazette to give effect to this measure. The resolution modifies Article 4 of Resolution DGT-R-044-2016 to temporarily suspend the due date for filing the information return.

According to a previous ruling transfer pricing information returns for fiscal years 2015 and 2016 would have been due on 30 June 2017. This deadline is suspended until further notice. However, taxpayers should maintain the information that would be included on those information returns for filing when the tax administration requests the information.

India: CBDT publishes a draft notice on special transitional provisions for a foreign company based in India

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The Finance Ministry on 15 June 2017, issued a draft notification of transitional provisions for foreign companies in the first year of becoming resident based on their place of effective management.

The notification has clarified that the tax on foreign companies qualifying as resident firms due to their place of effective management (POEM) will be the same as that for any foreign company and will be imposed at a rate of 40%.

The draft notification by the Central Board of Direct Taxes (CBDT) provides exceptions, modifications and adaptations for computation of total income, treatment of unabsorbed depreciation, set off or carry forward of losses, collection, recovery and special provisions for tax avoidance.

The notification, once finalised, will come into effect from April 1, 2017.

Canada: Minister announces consultations on changes to the Voluntary Disclosures Program

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The Canadians pay their tax shares and expect a responsive and fair tax system. Unfortunately, some rich Canadians continue to find ways to not pay what they owe, which places an unfair burden for this country.

The Canadian Government and the Canada Revenue Agency (CRA) have taken action by highlighting resources in the highest risky areas, both domestically and internationally. The Minister of National Revenue, Diane Lebouthillier, on 9th of June 2017, announced an online consultation to give Canadians a say about the CRA proposed changes to tighten its Voluntary Disclosures Program.

The proposed changes to the Voluntary Disclosures Program (VDP) follow an extensive review of the program that was completed over the past months in response to the recommendation by the Standing Finance Committee. The proposed changes to the Voluntary Disclosures Program contains:

  • narrowing the criteria of who is eligible;
  • confirming that severe cases of non-compliance do not benefit from the same level of penalty and interest relief;
  • ensuring that requests that reveal proceeds of crime are excluded from relief; and
  • requiring payment of the estimated taxes owing as a condition to qualify for the program.

Voluntary Disclosures Program applies to disclosures relating to income tax, excise tax, excise duties under the Excise Act, 2001, source deductions, GST/HST and charges under the Air Travelers Security Charge Act and the Softwood Lumber Products Export Charge Act, 2006. The CRA’s online consultations on the Voluntary Disclosures Program will be open for 60 days. The CRA will announce changes to the program in the fall of 2017. The Voluntary Disclosures Program gives taxpayers a chance to voluntarily come forward and correct preceding omissions in their dealings with the CRA.

A new guidelines was proposed by the Canada Revenue Agency (CRA) to limit voluntary disclosures program’s use. Large Canadian companies would no longer be allowed to qualify for the program regarding income tax matters according to these proposed changes. But, some relief remains present for GST/HST matters. Additionally, the CRA has proposed to give only reduced relief in some cases. To show the eligibility for the program, taxpayers would have to pay their estimated taxes at the time of submitting an application. The CRA is inviting public comments on its proposed changes on or before 8th of August 2017. The official announcement of the amendments to the voluntary disclosures program would be announced in the fall of 2017, with effect for 2018.

Ireland amends Capital Acquisitions Tax manual

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On 12 June 2017, Irish Revenue has published the amended Capital Acquisitions Tax manual that dealing with business relief Part 12 to incorporate material from Tax Briefing No. 33 (September 1998) in relation to the treatment of debts attributable to assets that are not used for the purposes of the business concerned.

Ireland: Interaction of PAYE and Self Assessment Procedures

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On 12 June 2017, Irish Revenue published the amended Part 42-04-13 of the Income Tax, Capital Gains Tax and Corporation Tax Manual. The amendments reflect the changes to the income thresholds which are applied in determining whether an individual with sources of PAYE and non-PAYE income is a chargeable person for self-assessment purposes.

The changes, which apply for the tax year 2016 and subsequent years are as follows:

  • The income threshold in section 959B(1)(a) of the TCA 1997 has been increased from €3,174 to €5,000.
  • The gross income threshold has been reduced from €50,000 to €30,000.