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March 2018 Edition

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March 2018 Edition www.pwc.com/its Welcome Keeping up with the constant flow of international tax developments worldwide International can be a real challenge for multinational companies. International Tax News is a monthly Tax News publication that offers updates and analysis on developments taking place around the world, authored by specialists in PwC’s global Edition 61 international tax network. We hope that you will find this publication March 2018 helpful, and look forward to your comments. Shi‑Chieh ‘Suchi’ Lee Global Leader International Tax Services Network T: +1 646 471 5315 E: [email protected] www.pwc.com/its In this issue Legislation Administrative Treaties www.pwc.com/its Legislation Hong Kong Hong Kong government issues BEPS Actions Bill Please see our PwC Insight for more information. Hong Kong Inland Revenue (Amendment) (No.6) Bill 2017 For discussion of the Bill’s TP-related provisions, please refer to our Transfer Pricing Insight – Draft transfer pricing legislation comes to (the Bill) was gazetted on December 29, 2017. The Bill Hong Kong. introduces a transfer pricing (TP) regulatory regime and a mandatory TP documentation requirement. It also would implement the minimum standards under the OECD’s BEPS PwC observation: Action Plan and revise the advance ruling applications fees. Hong Kong is closer to implementing the minimum standards under the OECD’s BEPS package. The Bill was introduced into the In addition to the TP regulatory regime and documentation, the Bill’s Legislative Council in January 2018. Even though it will take a few key BEPS-related provisions: months before the Bill’s enactment, Hong Kong companies should assess the potential impact of the Bill’s proposed legislative changes • introduce an effective and efficient statutory dispute resolution on their existing holding structures and business operations and mechanism by giving effect to mutual agreements made with other monitor any developments in this area, including any guidance treaty jurisdictions under the Mutual Agreement Procedure (MAP) issued by the Inland Revenue Department. or arbitration process of a tax treaty • clarify the double tax relief available with or without a tax treaty • extend the time limit for making a fresh foreign tax credit (FTC) claim from two years to six years after the end of the relevant assessment year • remove the ring-fencing features in the existing concessionary tax regimes for corporate treasury centers (CTCs), reinsurance businesses, and captive insurance businesses, and • empower the Commissioner of Inland Revenue (CIR) to prescribe a threshold requirement for determining whether profit-producing activities are carried out in Hong Kong with respect to existing concessionary tax regimes. Qiming Lu Clara Tsui Jennifer Zhang New York New York New York T: +1 646 313 3179 T: +1 646 471 2518 T: +1 646 746 4136 E: [email protected] E: [email protected] E: [email protected] www.pwc.com/its Hong Kong Hong Kong AEOI implementation ordinance 15% stamp duty on transfer of enacted in Hong Kong PwC observation: residential property enacted in PwC observation: Despite the Ordinance’s enactment, the Hong Kong Foreign investors who are interested in investing Multilateral Convention does not apply yet in Hong Kong’s property market should consider The Ordinance facilitating the in Hong Kong. The following two steps are the increased transaction costs as a result of implementation of the Multilateral required still: (i) deposition of the declaration The Stamp Duty (Amendment) Ordinance the Hong Kong Special Administrative Region’s Convention on Mutual Administrative for territorial extension of the Multilateral 2018 was enacted on January 19, 2018. It current policy to prioritize the home ownership Assistance in Tax Matters (Multilateral Convention by the Chinese government to introduces a 15% ad valorem stamp duty needs of HKPRs and other measures aimed at Convention) and refining the AEOI regime the OECD and (ii) gazetting of the CE Order (AVD) on transfers of Hong Kong residential curbing property speculation in Hong Kong. declaring that the Multilateral Convention shall in Hong Kong was gazetted on February have effect in Hong Kong and a negative vetting property. The Ordinance is deemed to have 2, 2018. The Ordinance empowers the of the Order at the Legislative Council. become effective on November 5, 2016 and Hong Kong Chief Executive (CE) to give applies retroactively to residential property effect to the Multilateral Convention and As for the financial account information reporting transactions executed on or after November other tax agreements for international tax by Hong Kong financial institutions , the existing 5, 2016, with certain exemptions. AEOI provisions in the IRO will continue to cooperation that apply to Hong Kong. The apply to reporting that covers 2018 data, and the For example, the 15% rate does not apply to Ordinance also amends certain existing refined provisions will apply to reporting that residential property acquired by a Hong Kong AEOI provisions to align them with the covers data of 2019 and afterwards. permanent resident (HKPR) who does not own any international standard stipulated by other residential property in Hong Kong at the time the OECD. This includes updating the of acquisition. In addition, a HKPR who purchases definitions of certain terms including residential property for the purpose of replacing controlling person, annuity contract, their only other residential property is exempt from depository accounts, and specified the 15% AVD if the HKPR disposes of the original property within 12 months of the conveyance date insurance company. for purchasing the newly acquired property. The HKPR pays the 15% AVD first, then subsequently The amendments to the existing AEOI provisions receives a refund of that amount. The Scale 1 rates in the Hong Kong Inland Revenue Ordinance (1.5% to 8.5%) will continue to apply to transfers of (IRO) effected by the Ordinance will take effect on non-residential property in Hong Kong. January 1, 2019 whereas the Ordinance’s other provisions took effect on February 2, 2018. Fergus WT Wong Fergus WT Wong Hong Kong Hong Kong T: +852 2289 5818 T: +852 2289 5818 E: [email protected] E: [email protected] www.pwc.com/its India India 2018 budget: impact on foreign investors and multinational enterprises PwC observation: The Budget proposals lay the foundation for the Indian economy to become more resilient and achieve a high growth rate. The Budget The Indian Finance Minister presented the 2018 Union and the events leading up to it indicate the Indian government’s Budget (Budget) on February 1, 2018. The Finance Minister efforts to promote a climate of foreign investment and focus on described the Budget as focused on consolidating gains and overall development in the country. The reforms correlate with boosting the aspirations of a new India. the Indian Prime Minister’s message at Davos to transform Indian administration and maximize governance in the country. The Budget aims to strengthen India’s agriculture and rural economy, provide better health care to economically weaker segments of Indian society, develop infrastructure, and improve the quality of education. The proposals, like those of past budgets, continue to focus on supporting development, improving the ability to conduct business in India, and attracting foreign investment. The PwC Insight provides an overview of the key Budget proposals affecting foreign investors and multinational enterprises (MNEs) doing business in India. Some of the key proposals include a corporate tax rate reduction, a new regime for taxing long-term capital gains on the sale of listed equity shares, and BEPS Action Plan initiatives. The Budget proposals would take effect after the Budget passes both houses of Parliament and obtains presidential assent. Sriram Ramaswamy Saurabh Kothari New York New York T: +1 646 471 7017 T: +1 646 471 9079 E: [email protected] E: [email protected] www.pwc.com/its Netherlands Dutch corporate income tax for fiscal unities amended in response to the CJEU’s ‘per-element approach’ In response to the Court of Justice for the European Union’s (CJEU’s) decision (which is in line with the Advocate General’s opinion, covered in our November 2, 2017 Tax Insight), the Dutch Ministry of Finance (MOF) will amend several provisions in both the corporate income tax act and the dividend withholding tax act. These amendments will have retroactive effect, accomplished by implementing emergency response measures. Despite a Dutch fiscal unity presence, the amended provisions will apply as if there was no fiscal unity. This also applies to domestic situations. The MOF’s response may have a severe impact on the tax position of MNEs whose Dutch entities currently are included in a fiscal unity. Please see our PwC Insight for more information. PwC observation: The court case itself presents opportunities for Dutch entities to take more advantageous positions for past taxable periods that are still open for appeal, based on the advantages that would have been available if a cross-border fiscal unity had been allowed. The fiscal unity emergency response measures will enter into force retroactively from October 25, 2017 at 11:00 a.m. These measures may severely impact MNEs with a Dutch fiscal unity. Clark Noordhuis Arjan Fundter Ruben Bolwerk New York New York New York T: +1 646 471 7435 T: +1 646 471 6089 T: +1 212 738 6341 E: [email protected] E: [email protected] E: [email protected] www.pwc.com/its Uruguay Amendments to the Free Zone Regime Additionally, the Law establishes thematic zone exemptions for the provision of audio-visual, leisure, and entertainment services outside the metropolitan area. Law N° 19,566 (Law) became effective on March 8, 2018 and includes the following measures to improve and amend We expect the Executive Branch to issue regulatory provisions shortly.
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