A Closer Look

GLOBAL TAX WEEKLY ISSUE 293 | JUNE 21, 2018 a closer look SUBJECTS TRANSFER PRICING INTELLECTUAL PROPERTY VAT, GST AND SALES TAX CORPORATE TAXATION INDIVIDUAL TAXATION REAL ESTATE AND PROPERTY TAXES INTERNATIONAL FISCAL GOVERNANCE BUDGETS COMPLIANCE OFFSHORE SECTORS MANUFACTURING RETAIL/WHOLESALE INSURANCE BANKS/FINANCIAL INSTITUTIONS RESTAURANTS/FOOD SERVICE CONSTRUCTION AEROSPACE ENERGY AUTOMOTIVE MINING AND MINERALS ENTERTAINMENT AND MEDIA OIL AND GAS COUNTRIES AND REGIONS EUROPE AUSTRIA BELGIUM BULGARIA CYPRUS CZECH REPUBLIC DENMARK ESTONIA FINLAND FRANCE GERMANY GREECE HUNGARY IRELAND ITALY LATVIA LITHUANIA LUXEMBOURG MALTA NETHERLANDS POLAND PORTUGAL ROMANIA SLOVAKIA SLOVENIA SPAIN SWEDEN SWITZERLAND UNITED KINGDOM EMERGING MARKETS ARGENTINA BRAZIL CHILE CHINA INDIA ISRAEL MEXICO RUSSIA SOUTH AFRICA SOUTH KOREA TAIWAN VIETNAM CENTRAL AND EASTERN EUROPE ARMENIA AZERBAIJAN BOSNIA CROATIA FAROE ISLANDS GEORGIA KAZAKHSTAN MONTENEGRO NORWAY SERBIA TURKEY UKRAINE UZBEKISTAN ASIA-PAC AUSTRALIA BANGLADESH BRUNEI HONG KONG INDONESIA JAPAN MALAYSIA NEW ZEALAND PAKISTAN PHILIPPINES SINGAPORE THAILAND AMERICAS BOLIVIA CANADA COLOMBIA COSTA RICA ECUADOR EL SALVADOR GUATEMALA PANAMA PERU PUERTO RICO URUGUAY UNITED STATES VENEZUELA MIDDLE EAST ALGERIA BAHRAIN BOTSWANA DUBAI EGYPT ETHIOPIA EQUATORIAL GUINEA IRAQ KUWAIT MOROCCO NIGERIA OMAN QATAR SAUDI ARABIA TUNISIA LOW-TAX JURISDICTIONS ANDORRA ARUBA BAHAMAS BARBADOS BELIZE BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS COOK ISLANDS CURACAO GIBRALTAR GUERNSEY ISLE OF MAN JERSEY LABUAN LIECHTENSTEIN MAURITIUS MONACO TURKS AND CAICOS ISLANDS VANUATU GLOBAL TAX WEEKLY a closer look Global Tax Weekly – A Closer Look Combining expert industry thought leadership and team of editors outputting 100 tax news stories a the unrivalled worldwide multi-lingual research week. GTW highlights 20 of these stories each week capabilities of leading law and tax publisher Wolters under a series of useful headings, including industry Kluwer, CCH publishes Global Tax Weekly –– A Closer sectors (e.g. manufacturing), subjects (e.g. transfer Look (GTW) as an indispensable up-to-the minute pricing) and regions (e.g. asia-pacific). guide to today's shifting tax landscape for all tax Alongside the news analyses are a wealth of feature practitioners and international finance executives. articles each week covering key current topics in Unique contributions from the Big4 and other leading depth, written by a team of senior international tax firms provide unparalleled insight into the issues that and legal experts and supplemented by commentative matter, from today’s thought leaders. topical news analyses. Supporting features include a round-up of tax treaty developments, a report on Topicality, thoroughness and relevance are our important new judgments, a calendar of upcoming tax watchwords: CCH's network of expert local researchers conferences, and “The Jester's Column,” a lighthearted covers 130 countries and provides input to a US/UK but merciless commentary on the week's tax events. © 2018 CCH Incorporated and/or its affiliates. All rights reserved. GLOBAL TAX WEEKLY ISSUE 293 | JUNE 21, 2018 a closer look CONTENTS FEATURED ARTICLES The New Double Taxation Agreement Topical News Briefing: Followers Of Between Cyprus And Andorra Corporate Tax Fashion Constantinos Christofi, Elias Neocleous & Co. LLC 5 The Global Tax Weekly Editorial Team 31 DAC 6: The European Union Homes IRS Adds Foreign Trust Information Reporting In On Tax Avoidance Schemes to Compliance Campaign Program Stuart Gray, Senior Editor, Global Tax Weekly 13 Arielle M. Borsos, Victor A. Jaramillo, Kirsten Burmester, Dianne C. Mehany, Anne J. O'Brien, and Italy Releases Final Regulations On Transfer Michael G. Pfeifer, Caplin & Drysdale 33 Pricing Federico Pacelli and Monia Volpato, DLA Piper 25 Topical News Briefing: A Tax Reform That's Somewhat Off-BEAT Is FATCA A Mere Flash In The Pan … Or Here The Global Tax Weekly Editorial Team 36 To Stay? Mike DeBlis, DeBlis Law 28 NEWS ROUNDUP VAT, GST, Sales Tax 38 Country Focus: United States 41 Russia To Raise VAT To 20 Percent IMF Calls On US To Tweak New Corporate Tax System Liberia To Table Law To Introduce VAT In 2019 US Announces Final Round Of Opportunity Zone Designations Bangladesh Announces VAT Overhaul In Latest Budget US Further Delays Foreign Currency Regulations Mauritian VAT Amendments Effective June 15 Congress To Quiz IRS On Return Of Seized Funds US CPAs Urge IRS To Prioritize TCJA Guidance Compliance Matters 47 TAX TREATY ROUND-UP 59 Cayman Considering Legal Challenge To UK Beneficial CONFERENCE CALENDAR 61 Ownership Law IN THE COURTS 71 Hong Kong Issues Tax Compliance Guide For Property Owners THE JESTER'S COLUMN: 78 The unacceptable face of tax journalism UK Announces Record-Low Tax Gap In 2016-17 Corporate Taxation 50 Germany Under Pressure From Tax Competition: OECD Jordan's PM Withdraws Tax Bill From Parliament Luxembourg Cabinet Approves BEPS Laws Irish Corporate Tax Reform Pushed By MPs, To Shore Up Tax Base Country Focus: Australia 55 Australian Corporate Tax Reform Proposals Tabled In Parliament ATO To Administer Early Super Release Australia To Clarify Taxation Of Managed Fund Industry EU-Australia Trade Talks Launched For article guidelines and submissions, contact [email protected] © 2018 CCH Incorporated and its affiliates. All rights reserved. FEATURED ARTICLES ISSUE 293 | JUNE 21, 2018 The New Double Taxation Agreement Between Cyprus And Andorra by Constantinos Christofi, Elias Neocleous & Co. LLC Contact: [email protected], Tel. +357 2511 0144 Introduction On May 18, 2018, Cyprus and Andorra signed a double taxation agreement (DTA), the first between the two countries. The agreement is closely based on the latest OECD Model Convention and, in line with the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, also includes a preamble making clear that it is not designed to create opportunities for double non-taxation or reduced taxation through evasion or avoidance, and a principal purpose test-based general anti-avoidance rule. A protocol to the agreement sets out residence provisions for pension and investment funds and elaborates the provisions regarding exchange of information. The principal features of the agreement and the protocol are analyzed below. Taxes Covered The agreement covers the following categories of taxes: ■ In Andorra — Corporate income tax (Impost sobre les societats); — Personal income tax (Impost sobre la renda de les persones físiques); — Tax on income for fiscal non-residents (Impost sobre la renda dels no-residents fiscals); and — Tax payable on the increase in value in immovable property transfers (Impost sobre les plus- vàlues en les transmissions patrimonials immobiliàries). ■ In Cyprus — Income tax; — Corporate income tax; 5 — Capital gains tax; and — Special Contribution for the Defence of the Republic (commonly referred to as SDC tax). Its provisions will also apply to any identical or substantially similar taxes that may be imposed in future in addition to, or in place of, the existing taxes. Residence The "tie-break" provisions for determining residence for individuals who are resident in both countries are identical to those contained in the OECD Model Convention, namely permanent home and center of vital interests, country of habitual residence, and nationality, in descending order. If none of these criteria is decisive, residence is to be settled by mutual agreement between the tax authorities of the two parties. For legal persons, residence is the place of effective management. The protocol to the agreement contains specific provisions regarding residence of investment funds and pension funds and specifies the criteria for qualification. Permanent Establishment Article 5 of the DTA, which defines a permanent establishment, reproduces the corresponding article of the OECD Model Convention and adds agricultural or forestry sites to the list of pos- sible permanent establishments. A building site or construction or installation project will consti- tute a permanent establishment if it lasts more than 12 months. If an enterprise has a representative in the territory of one of the parties who has, and habitually exercises, authority to conclude contracts in the name of the enterprise, the enterprise concerned is deemed to have a permanent establishment in respect of any activities which the representative undertakes on its behalf. Like the OECD Model, the DTA provides that an independent broker or agent who represents the enterprise in the ordinary course of business will not fall within the scope of this provision. Care needs to be taken regarding the issuing of general powers of attorney so as not to risk inadvertently creating a permanent establishment, with potentially unfavorable consequences. 6 Income From Immovable Property This article is identical to the corresponding article of the OECD Model Convention and provides that income from immovable property may be taxed in the contracting state where the property is situated. Business Profits The profits of an enterprise are taxable only in the country in which it is resident unless it carries on business in the other country through a permanent establishment there, in which case the profit attributable to the permanent establishment may be taxed in the country in which it is located. Profits are to be calculated on an arm's length basis, as if the permanent establishment was a distinct and separate enterprise, after

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