EFM

Protocol to treaty between Argentina and Brazil signed

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Argentina and Brazil signed an amending protocol to the, Argentina – Brazil Income Tax Treaty of 1980 on 21st July 2017. The protocol sets out maximum levels of taxation at source in specific categories of income; modifies the method to avoid double taxation in Argentina, and inserts a capital gains article into the treaty.

India: Multilateral Competent Authority Agreement on Exchange of CbC reports enters into force

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The Ministry of Finance on 28 July 2017 has issued a Notification (No. 75/2017), which announces that the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country (CbC) Reports entered into force for India on 12 May 2016 and is effective between India and other jurisdictions.

Zambia: Revenue Authority extends tax amnesty period on interest and penalties

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The amnesty on interest and penalties which was introduced by the Zambia Revenue Authority (ZRA) on 24th April 2017, came to a close on 31st July 2017.

During this period, taxpayers were expected to submit outstanding tax returns and pay all principal tax liabilities for tax periods prior to 1st March 2017, after which all interest and penalties accrued for the said period would be waived in full. Taxpayers were expected to pay all outstanding principal liabilities within the amnesty period. In instances where taxpayers have not been able to settle the principal liabilities before 31st July 2017, the ZRA has offered an opportunity of settling such tax liabilities in installments by entering into Time-to-Pay-Agreements (TPAS) with taxpayers to be settled before 31st December 2017.

Notwithstanding this extension, the deadline for time-to-pay agreements remains 31st December, 2017 and all other rules will remain as announced by the commissioner general during the launch of the amnesty campaign on 24th April, 2017

Turkey: TIEA ratifies with Guernsey

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The Exchange of Information Agreement regarding Tax Matters (TIEA) between Turkey and Guernsey was ratified on August 2, 2017 by the Turkish Government. This treaty was signed on March 13, 2012. It will come into force thirty days after the ratification mechanisms are swapped.

Brazil publishes amended regulation on CbC reporting

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Normative Instruction 1,722/2017 published in Brazil’s Official Gazette on 17th July 2017 amends Normative Instruction 1,681/2016 relating to guidance on CbC reporting. According to NI 1,722/2017, transitional provisions apply if a legal entity which is resident in Brazil for tax purposes and which is not the ultimate controlling company of a multinational group has not designated a substitute entity for filing the CbC report on behalf of the group.

Under the transitional mechanism the tax authorities would accept a notification that the ultimate controlling company of the multinational group is located in a jurisdiction that has no competent authority agreement for the automatic exchange of CbC reports in force with Brazil; or that it has a competent authority agreement for the automatic exchange of CbC reports in force with Brazil that is in force for years beginning from 1 January 2017.

In the latter case the Brazilian entity could be required to file a CbC report within a deadline of sixty days if the competent authority agreement is not implemented (retroactively to 1 January 2017) by 31 December 2017; or if the other jurisdiction requires a CbC report from one or more entities whose ultimate parent company is tax resident in Brazil.

 

Russia: New GAAR provisions in the Tax Code

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The Russian parliament on 5 July 2017 approved a draft law (no. 529775-6) introducing a new general anti-avoidance rule (GAAR) into the Tax Code.

The new law introduces a new Article 54.1 containing a definition of the limitations on the rights and obligations exercised by taxpayers in calculating the tax base. According to the Article, the tax base or the tax due may not be reduced on the basis of incorrect information relating to the economic facts; incorrect information about persons subject to registration for tax or for accounting registers; or incorrect information in the tax return.

Where the tax base or the tax due is reduced the principal purpose of the transaction must not be to achieve an underpayment of tax or to obtain a tax credit. The liability created by the transaction should be the responsibility of a party to a contract concluded with the taxpayer, or of another person who took over the responsibility by a contract or under the law.

India: Tribunal decision on foreign exchange fluctuation gain or loss and arm’s length pricing

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The Income-tax Appellate Tribunal in the case of ACIT v. Rajratna Metal Industries Ltd. [ITA No. 1050/Ahd/2015 with CO No. 91/Ahd/2015, AY: 2010-11] held that a foreign exchange fluctuation gain/loss is an operating item and is not to be excluded for the purpose of computing the arm’s length price (ALP).

The Tribunal also found that income generated by the taxpayer on account of a business transaction which is not related to his international transactions (generation of electricity and sale to the manufacturing business) was not considered to be operating income for this purpose and must be excluded for the purpose of calculating the ALP. However, taking into account the taxpayer’s proposal, the Tribunal agreed to also exclude the expenditure related to that income.