Europe

Ukraine: The Ministry of Finance publishes a route map for the implementation of the BEPS Action Plan

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On 16 May 2017, the Ministry of Finance published a route map for the implementation of the BEPS Action Plan and presented it to experts.

Minister of Finance Oleksandr Danyliuk said that the government must ensure that profit tax is collected where added value is generated and where business activity is pursued. They will be resisting deliberate profit shifting aiming to evade taxes in Ukraine.

On January 1, 2017, Ukraine joined the Extended Cooperation Program of the OECD and obliged itself to implement the so-called minimum standards of the BEPS Action Plan. The implementation of the minimum standards will enable Ukraine to effectively tackle aggressive tax planning, base erosion and profit shifting.

Guernsey signs OECD Agreement to prevent corporate tax avoidance

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Guernsey has signed the Multilateral Convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). On 7 June 2017, the President of the Policy & Resources Committee, Deputy Gavin St Pier signed the agreement alongside over 60 other countries and jurisdictions in Paris.

The convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS project into bilateral tax treaties worldwide.

Deputy St Pier said that it is an honour to sign this OECD agreement on behalf of Guernsey alongside so many other countries, including the major global economies.  Guernsey was one of only four smaller jurisdictions invited to participate in the group that drafted this treaty.

The agreement is also the first multilateral agreement that Guernsey has signed itself in line with the development of the country’s international personality as envisaged by the Constitutional Investigation Committee during the last States’ term.

The convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD.

Iceland signs new multilateral convention to prevent tax avoidance

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Iceland has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). On 7 June 2017, over 70 Ministers and other high-level representatives participated in the signing ceremony at Paris.

The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.

The Convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6. The Convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD.

Switzerland signs OECD Multilateral Treaty on Double Taxation

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Switzerland signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) on 7th June 2017 in Paris.

The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.

The Convention will serve to efficiently amend double taxation agreements in line with the minimum standards agreed upon in the BEPS project. According to the Switzerland’s media release, Switzerland will implement these minimum standards either within the framework of the Multilateral Convention or by means of the bilateral negotiation of double taxation agreements.

About 70 countries at all levels of development have signed this Multilateral Instrument (MLI) at the OECD Centre in the presence of Secretary-General OECD at the same time. A number of jurisdictions have also expressed their intention to sign the MLI as soon as possible and other jurisdictions are also actively working towards participation in the multilateral instrument.

The Federal Council will submit the BEPS Convention for public consultation towards the end of 2017. It will undergo the standard parliamentary approval process before entering into force.

Canada: DTA negotiations with Switzerland

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The Finance Department of Canada has declared that negotiations to update its Double Tax Agreements (DTA) with the Swiss Confederation will be held in June 2017. The main objective of this release is to ensure that persons whose interests are affected have an opportunity to inform the Government of any particular issues of double taxation that might be resolved in a tax treaty. The Government is particularly interested in gathering knowledge of any difficulties encountered by Canadians under the German tax system so that these issues might be considered in negotiations. Persons are invited to give their comments regarding this negotiations and send it to the Finance Department.

Belarus ratifies tax treaty with Hong Kong

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On 3 May 2017, the government of Belarus ratified the agreement with Hong Kong for the avoidance of double taxation. The agreement was signed on 16 January 2017 and was adopted by the Belarus House of Representatives on April 19, 2017. The agreement was approved by the Belarus Council of Republic on April 21, 2017.

Under the agreement, double taxation will be avoided using the credit method. Any Belarus tax paid by Hong Kong companies will be allowed as a credit against the tax payable in Hong Kong on the same profits, subject to the provisions of the tax laws of Hong Kong. Likewise, for Belarus companies, the tax they paid in Hong Kong will be allowed as a credit against the tax payable on the same income in Belarus.

Under the agreement, the withholding tax rate on dividends will be limited to 5% (currently at 12 per cent for companies and 13 per cent for individuals) of the gross amount. Interest will be capped at 5% (currently at 10 per cent for companies and 13 per cent for individuals). The withholding tax rate on royalties will be at 5 per cent (currently at 15 per cent for companies and 13 per cent for individuals) and it will be further reduced to 3 per cent if the royalties are for the use of, or the right to use, aircraft.

Switzerland: Partial Revision of the VAT Act adopted by Parliament

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The Swiss Federal Department of Finance announced that during its meeting on 2 June 2017, it decided that the partial revision of the Value Added Tax Act adopted by the Parliament will come into force on 1st January 2018.

Under the new regime, to become VAT liable, worldwide turnover ought to be considered rather than recently Swiss turnover. Consequently, organizations whose worldwide turnover is no less than 100,000 CHF will be obligated to VAT from the principal franc of turnover in Switzerland. Previously, foreign companies could provide their services in Switzerland without VAT up to a turnover level of CHF 100,000.

The Federal Council will delay the execution of the reconsidered framework until January 1, 2019, for mail-arrange organizations, on the grounds that Swiss Posts needs more opportunity to actualize the specialized arrangements of the new law.

Accordance with this regime, the clients will no longer need to pay the taxes and fees imposed by customs upon importation, however it will be an obligation of the mail-order companies to bill clients for VAT if the mail-order annual turnover from small consignments is at least CHF 100,000.