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Approved Changes (4)

Canada

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Canadian Budget Implementation Act, 2017, No. 2 Receives Royal Assent

The Canadian Government has announced that the Budget Implementation Act, 2017, No. 2 received Royal Assent on 14 December 2017. The Act implements a number of tax measures proposed in the Federal Budget 2017 (previous coverage), as well as certain others. As provided in the legislation summary, the budget income tax measures implemented by the Act include:

  • Removing the classification of the costs of drilling a discovery well as "Canadian exploration expenses";
  • Eliminating the ability for small oil and gas companies to reclassify up to $1 million of "Canadian development expenses" as "Canadian exploration expenses";
  • Revising the anti-avoidance rules for registered education savings plans and registered disability savings plans;
  • Eliminating the use of billed-basis accounting by designated professionals;
  • Providing enhanced tax treatment for eligible geothermal energy equipment;
  • Extending the base erosion rules to foreign branches of Canadian insurers;
  • Clarifying who has factual control of a corporation for income tax purposes;
  • Introducing an election that would allow taxpayers to mark to market their eligible derivatives;
  • Introducing a specific anti-avoidance rule that targets straddle transactions;
  • Allowing tax-deferred mergers of switch corporations into multiple mutual fund trusts and allowing tax-deferred mergers of segregated funds; and
  • Enhancing the protection of ecologically sensitive land donated to conservation charities and broadening the types of donations permitted.

The budget goods and services tax/harmonized sales tax (GST/HST) measures implemented by the Act include:

  • Introducing clarifications and technical improvements to the GST/HST rules applicable to certain pension plans and financial institutions;
  • Revising the GST/HST rules applicable to pension plans so that they apply to pension plans that use master trusts or master corporations;
  • Revising and modernizing the GST/HST drop shipment rules to enhance the effectiveness of these rules and introduce technical improvements;
  • Clarifying the application of the GST/HST to supplies of municipal transit services to accommodate the modern ways in which those services are provided and paid for; and
  • Introducing housekeeping amendments to improve the accuracy and consistency of the GST/HST legislation.

Click the following link for the full text of the Budget Implementation Act, 2017, No. 2, which includes a summary of all measures at the top.

European Union-Belgium-France

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State Aid Decisions for Belgian and French Ports Published

On 14 December 2017, the State aid decisions of the European Commission concerning the exemption from corporate tax provided for ports in Belgium and France were published in the Official Journal of the European Union. The decisions were originally made 27 July 2017 (previous coverage). As a result of the decisions, both Belgium and France are required to remove their respective corporate tax exemptions for ports and subject the entities for which the exemptions apply to corporate tax. Measures to remove the exemption are to be adopted by the end of 2017 and apply from 1 January 2018.

Luxembourg-European Union-United States

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Luxembourg Appeals Amazon State Aid Decision

On 15 December 2017, the Luxembourg Ministry of Finance announced the decision to appeal the recent decision of the European Commission that tax benefits granted to Amazon in Luxembourg are illegal under EU State aid rules (previous coverage).

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The Luxembourg government has decided to appeal the European Commission's decision in the Amazon case.

Luxembourg believes that the Commission has not established the existence of a selective advantage within the meaning of article 107 TFEU. Furthermore, Luxembourg does not share the Commission's analysis with regard to transfer pricing.

This appeal seeks to obtain legal certainty, and does not put into question Luxembourg's strong commitment to tax transparency and the fight against harmful tax practices. Luxembourg fully adheres to the OECD/G20 BEPS project, which will modernize international tax rules and create a global level playing field.

Philippines

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Philippines Congress Ratifies Tax Reform Bill

On 14 December 2017, the Congress of the Philippines ratified the Tax Reform for Acceleration and Inclusion (TRAIN) bill, which is to be signed into law by the president before the end of the year and enter into force on 1 January 2018. The reform measures include a reduction in the personal income tax burden, including an exemption for income up to 250,000 annually, as well as the expansion of the value added tax base with the removal of certain VAT exemptions, the introduction of a tax on sugary beverages, the increase of documentary stamp taxes, and the increase of excises taxes on fuels and automobiles. Additional details of the final measures will be published once available.

Proposed Changes (2)

Bahamas-Zambia-OECD

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The Bahamas and Zambia Join Inclusive Framework for Implementation of BEPS Measures and Global Forum on Transparency and Exchange of Information

According to a 14 December 2017 update from the OECD, the Bahamas and Zambia have joined the Inclusive Framework for the global implementation of the BEPS Project, bringing the total number of participants to 110. As members of the Framework, both countries have committed to the implementation of the four minimum standards, including those developed under Action 5 (Countering Harmful Tax Practices), Action 6 (Preventing Treaty Abuse), and Action 14 (Dispute Resolution), as well as Country-by-Country (CbC) reporting under Action 13 (Transfer Pricing Documentation).

United States

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Conference Report Published on Reconciled U.S. Tax Cuts And Jobs Act

On 15 December 2017, the U.S. House of Representatives published the conference report on the reconciled version of the Tax Cuts And Jobs Act (previous coverage). The report includes the full text of the bill, as well a detailed breakdown of the provisions including both the House and Senate proposals for the respective measures and the final measure agreed to in conference. Final votes on the bill are to take place this week.

Treaty Changes (4)

Argentina-Turkey

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Tax Treaty between Argentina and Turkey under Negotiation

On 5 to 7 December 2017, officials from Argentina and Turkey met for the first round of negotiations for an income tax treaty. Any resulting treaty would be the first of its kind between the two countries, and must be finalized, signed, and ratified before entering into force.

Jersey-United States

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Jersey Publishes CbC Exchange Arrangement with the U.S.

The Jersey Government has published the bilateral competent authority arrangement on the exchange of Country-by-Country (CbC) reports with the United States. The arrangement was signed by Jersey on 29 November 2017 and by the U.S. on 7 December 2017, and is operative (effective) from the latter date of signature.

The arrangement provides that pursuant to Article 5A (Automatic Exchange of Information) of the 2002 Jersey-U.S. tax information exchange agreement, as amended, each competent authority intends to automatically exchange CbC reports received from each reporting entity resident for tax purposes in its jurisdiction, provided that, on the basis of the information provided in the CbC report, one or more constituent entities of the MNE group of the reporting entity are resident for tax purposes in the jurisdiction of the other competent authority, or are subject to tax with respect to the business carried out through a permanent establishment situated in the other jurisdiction.

With respect to fiscal years beginning on or after 1 January 2016, CbC reports are to be exchanged as soon as possible and no later than 18 months after the last day of the fiscal year of the MNE Group to which the CbC report relates. With respect to fiscal years beginning on or after 1 January 2017, reports are to be exchanged no later than 15 months after the last day of the fiscal year.

Jordan-Tajikistan

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Tax Treaty between Jordan and Tajikistan Signed

According to a release from the Tajikistan Ministry of Finance, officials from Jordan and Tajikistan signed an income tax treaty on 10 December 2017. The treaty is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged. Details of the treaty will be published once available.

Switzerland-United Kingdom

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Update - Protocol to Tax Treaty between Switzerland and the UK

Switzerland and the United Kingdom signed an amending protocol to the 1977 income tax treaty between the two countries on 30 November 2017. The protocol:

  • Amends the Preamble to include language developed as part of the BEPS Project;
  • Deletes subparagraph (l) of paragraph 1 of Article 3 (General definitions), which states the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;
  • Replaces paragraph 2 of Article 9 (Associated enterprises) with updated provisions regarding appropriate adjustments where profits charged to tax in one Contracting State would have accrued to an enterprise of the other State if the conditions made between the two enterprises had been those which would have been made between independent enterprises;
  • Deletes the provisions limiting the benefits with respect to items of income paid under, or as part of, a conduit arrangement as included in Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 21 (Other Income);
  • Adds a new paragraph 7 to Article 22 (Elimination of double taxation), which provides that the Swiss exemption from tax for items of income provided in paragraph 2 of Article 22 will not apply where the UK applies the provisions of the treaty to exempt such income from tax or applies the provisions of paragraph 2 of Article 10 (Dividends) to such income (withholding tax rate limits);
  • Updates Article 24 (Mutual Agreement Procedure) with a new paragraph 1, which states that where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of either Contracting State; and
  • Inserts a new Article 27A (Entitlement to Benefits), which provides that a benefit under the treaty shall not be granted in respect of an item of income or capital gains if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

The protocol will enter into force once the ratification instruments are exchanged. It will apply in the UK from 1 January of the year followings its entry into force in respect of withholding taxes, from 1 April next followings its entry into force in respect of corporation tax, and from 6 April next following its entry into force in respect of income tax and capital gains tax. It will apply in Switzerland from 1 January of the year following its entry into force.

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