iSP Global Tax Newsletter May 2017
Tax administration has issued further clarification regarding the submission of CbC Reports. According to the note, corporations with a turnover exceeding EUR 750 million will be required to submit CbC Report for financial years commencing on or after 1 January 2016. The report will have to be submitted within 12 months from the end of a relevant fiscal year and additionally, tax authorities will have to be notified in writing at Ministry of Finance, Tax Administration, Central Office, Department for Normative Affairs and International Cooperation, Boškovićeva 5, Zagreb by 30th April 2017. Non-compliance can result in an administrative penalty ranging between EUR 267 and EUR 26 760.
Recently released guidelines on transfer pricing documentation include changes in local and master files as well as introduction of CbC Reports. Entities exceeding revenue threshold of USD 30 million will have to comply with the new standard of local and master file. Submission of financial statements of foreign related party will no longer be required, however taxpayer will have to include, inter alia, existing APAs, compliance with arm’s length or information by line of business (please note that local and master file as recommended by BEPS will not replace the existing transfer pricing documentation). The CbC Report will have to be submitted by 31 December 2017 (for financial year starting 1 January 2016).
Bahrain - Philippines
On 13 April 2017, an amending protocol to update the Bahrain - Philippines Income and Capital Tax Treaty (2001) was signed. Further developments will be reported as they occur.
Cyprus – Iran
On 5 March 2017, the Cyprus - Iran Income Tax Treaty (2015) entered into force. The treaty generally applies from 1 January 2018. When effective the maximum rates of withholding tax will be:
- 5 % of the dividends if the beneficial owner is a company which holds directly at least 25 % of the capital of the company paying the dividends; 10 % of the dividends in all other cases,
- 5 % of the interest,
- 6 % of the royalties,
- 0 % of the fees,
- Resident state taxation of capital gains.
LOCAL TAX NEWS
According to the press release, Estonian Parliament passed amendments to the Commercial Code which will allow to establish a company and to manage it from abroad. Under current rules both the place of management and a company must be located in Estonia. The amendments allow the place of management to be abroad, however a contact person in Estonia should be appointed (e.g. a notary, an auditor, etc.). While the Estonian legislator argues that this will help boosting the commercial activities, especially the e-trade, others argue that it might create legal entities without substance.
Tax administration published a guidance on withholding tax procedure as well as application of exemption for dividends and other forms of cross-border payments paid to non-residents. A refund can be claimed within 4 years after the end of a year when dividends where received. With effect 1 January 2017, it is presumed that dividends are received on the maturity date. However, taxpayers are also allowed to directly apply a lower treaty rate (or exemption if applicable) provided that they present a certificate of exemption issued by tax authorities in the recipient’s jurisdiction (the duration of a certificate is 3 years).
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