According to a press release of 27 January 2017, published by the OECD, as part of continuing efforts to boost transparency by multinational enterprises (MNEs), Gabon, Hungary, Indonesia, Lithuania, Malta, Mauritius and the Russian Federation have signed the Multilateral Competent Authority Agreement for Country-by-Country Reporting (CbC MCAA), bringing the total number of signatories to 57. Lithuania and Hungary joined the Agreement in October and December 2016 respectively.
The CbC MCAA is an efficient mechanism that allows signatories to bilaterally and automatically exchange Country-by-Country Reports with each other, as contemplated by Action 13 of the BEPS Action Plan. It will help ensure that tax administrations obtain a better understanding of how MNEs structure their operations, while also ensuring that the confidentiality and appropriate use of such information is safeguarded. Information on the activation of exchange relationships under the MCAA will be released in due course.
Gabon, Indonesia, Malta, Mauritius and the Russian Federation signed the Agreement at a signing ceremony held during the second meeting of the Inclusive Framework on BEPS on 26-27 January 2017. The inclusive framework brings together over 100 countries and jurisdictions to collaborate on the implementation of the OECD/G20 Base Erosion and Profit Shifting (BEPS) package.
Following a visit to Lithuania from 6 to 12 September 2016 for consultation on economic developments the IMF has issued a press release setting out its preliminary findings.
Lithuania’s economic activity is expanding and GDP growth is expected to reach around 2.5% in 2016 and rise to around 3% in 2017. This economic performance combined with possible gains from improvement in tax administration could give scope for new initiatives next year including cuts in social contributions and higher allowances under the personal income tax.
The IMF considers that the focus can now shift to structural reforms. These would include tax changes to reduce the tax burden on low wage earners and increase tax revenue from higher income groups, tax on income from capital and tax on wealth. This could reduce income inequality and increase employment. The efforts to strengthen the tax administration should also continue.
The report also emphasizes the importance of education to move the economy towards higher value goods and services. This includes increasing information about job market needs and raising the profile of vocational training. The report emphasizes the importance of innovation in reducing the income gap with Western Europe.
Draft amendments to various tax laws were approved by the parliament in the first reading on 17 November 2015. If adopted by the parliament in the final reading, the amendments will enter into force from January 2016.
The modifications are summarized below:
The draft amendments introduce a single date rule for:
(1) Filing tax returns and (2) Payment of taxes by legal entities.
Accordingly, the deadline for filing tax returns and for payment of taxes is to be the 15th day of the month following the end of the relevant tax period. Relevant annual tax returns must be filed in due time and final taxes must be paid by the 15th day of the reporting month.
The single date rule will apply to the following taxes:
(1) Withholding tax on dividends; (2) Advance corporate income tax; (3) Annual corporate income tax; (4) Environmental pollution tax; (5) lottery and gaming tax; and (6) Hydrocarbon resources tax.
The draft amendments also propose to increase the threshold of annual real estate tax up to which legal entities are not required to pay advance real estate tax from EUR 435 to EUR 500; change advance corporate income tax reporting proportions if advance corporate income tax is calculated based on the results of previous tax periods; and change the advance corporate income tax return filing deadlines.
In particular, if advance corporate income tax is calculated based on the results of previous tax periods, (i) the first advance corporate income tax return must be filed before the 15th day of the third month of the first quarter of the relevant tax year; and (ii) the second advance corporate income tax return must be filed before the 15th day of the third month of the third quarter of the relevant tax year.
However, if advance corporate income tax is calculated on the basis of forecast results, only one advance corporate income tax return needs to be filed, before the 15th day of the third month of the first quarter of the relevant tax year. Advance payments of corporate income tax must be made before the 15th day of the third month of the relevant quarter, irrespective of the calculation method chosen.
The Ministry of Finance of Lithuania issued a proposal to amend the Law on Corporate Income Tax on 3 September 2015. If approved by parliament the amendments will enter into force on 31 December 2015.
Under the proposed amendments, anti-abuse rules adopted under the European Union Parent-Subsidiary Directive (recast) (2011) will be incorporated into the Law on Corporate Income Tax as follows:
- Dividends will not be exempt from withholding tax if a tax benefit is the main purpose or one of the main purposes of the relevant transaction. This rule will be enforced in relation to cases of tax avoidance concerning transactions performed without commercial reasons reflecting economic reality; and
- Dividends will not be tax exempt if such dividends are tax deductible by the subsidiary.
The IMF has published a report of its preliminary findings following a visit to Lithuania for consultations on economic policy. The report finds that Lithuania’s economic growth in recent years has been among the strongest in Europe. Growth is expected to be 2.8% in 2015, a similar rate to 2014, but in the medium term growth should rise to more than 3% owing to an improving external environment. The fiscal deficit has gone down to 1.3% but the total public debt has not gone down materially.
With pressures on public expenditure from an ageing population with increasing health and pension costs, increases in public spending and reductions in labor tax to support jobs will need to be offset by revenue raised elsewhere. The IMF considers that strengthening of wealth taxation should be considered by the government.
The IMF also recommends adopting a clear medium term fiscal policy to reduce uncertainty. This would involve
- strengthening the tax base in areas where this is not yet fully developed;
- reduction of taxes on labor; and
- efforts to improve the tax administration.
Pension reform is also necessary but outcomes should be carefully calculated as regards changes to pension benefits and contribution rates and the effect on public finances.
A pending income tax treaty with Lithuania was approved by Kuwait’s National Assembly on January 27, 2015. Both countries apply the credit method to eliminate double taxation.
Under the treaty, dividends are taxable at a maximum rate of 5% if the beneficial owner is a company other than a partnership that directly holds at least 10% of the capital of the payer company. In all other cases it is 15%. Interest and royalties are taxable at a maximum rate of 10%. The treaty will enter into force after the countries exchange ratification instruments, and its provisions will apply from January 1 of the year following its entry into force.