iSP Global Tax Newsletter November 2017

iSP Global Tax Newsletter November 2017


France - 3% Dividend Contribution Abolished
With reference to the constitutional principle of equality, the Constitutional Court ruled on 6 October 2017 that the 3% contribution provided for under article 235 ter ZCA of the General Tax Code (Code général des impôt, CGI) must be repealed. The difference of treatment between dividends that are under the scope of the Parent-Subsidiary Directive (recast) (2011) and other dividends is contrary to the constitutional principle of equality and cannot be justified by a reason of public interest.

The 3% contribution levied on French entities subject to corporate income tax has been held to be prohibited by the Directive by the Court of Justice of the European Union on 17 May 2017 (Case C-365/16), but companies paying dividends outside the scope of the Directive have remained subject to the dividend contribution. With effect from the date of the publication of the decision in the Official Journal by the Constitutional Court on 8 October 2017, the dividend contribution is entirely abolished, in line with the proposal in the Finance Bill 2018. The decision by the Court can be relied on by taxpayers to get a refund of the contribution paid in any non-statute barred years.

Poland - Draft Budget Law for 2018
Draft Budget Law, aiming to address and prevent tax avoidance and aggressive tax planning, was submitted to the parliament. The Bill introduces measures to minimize tax avoidance and aggressive tax planning.

Significant changes will apply to the taxation of Research and development (R&D) activities. It will be possible for taxpayers to deduct up to 100% of the qualifying expenses incurred in connection with R&D, and to 150% for R&D centers. The definition of qualifying expenses will be broadened. Companies located in special economic zones will be entitled to qualify for special benefits.

Furthermore, with respect to anti-avoidance measures, interest deduction limitations of 30% EBITDA will be introduced. The limitation applies to all interest – to both related and non-related parties. Criteria for application of CFC rules will be revised where among other changes, the definition of CFC will be changed. Both CFC and interest deduction rules will be reformed in order to comply with Anti-Tax Avoidance Directive.
If approved by the parliament, the new legislation will be effective from 1 January 2018.

Malaysia - Exemption Order for Offshore Services Issued
The Income Tax (Exemption) was gazetted on 24 October 2017. Order provides that fees to non-residents for the services provided outside Malaysia shall be exempt from withholding tax in Malaysia. Such fees will be considered Malaysian source income but exempt from withholding tax in Malaysia.

However, payment for services that were performed outside Malaysia between 17 January 2017 and 5 September 2017 remain subject to tax and any relief under existing double tax treaties will be applicable.

The full details of the Order are available on the Federal Gazette's website at:


Bulgaria - Amendments to CbC Reporting Requirements Proposed
A proposal for amendments to the Tax and Social Security Procedure Code was submitted by the Council of Ministers to the National Assembly on 2 October 2017. According to the proposal, the relevant threshold for a constituent company as regards the obligation to submit a country-by-country (CbC) report, is the group’s revenue calculated in the local currency of the jurisdiction of the ultimate parent company. If the threshold for CbC reporting requirement in that country corresponds to the equivalent of EUR 750 million calculated in the local currency of that jurisdiction as of 1 January 2015, and the group’s revenue is below that threshold, the constituent company will not be obliged to submit a CbC report, irrespective of whether the revenue exceeds the threshold in Bulgarian leva. Once adopted, the rule enters into force three days after promulgation in the State Gazette.


Denmark - Japan
On 11 October 2017, the Denmark - Japan Income Tax Treaty (2017) was signed in Tokyo. Once in force and effective, the new treaty will replace the Denmark - Japan Income Tax Treaty (1968).

Romania - Spain
On 18 October 2017, Romania and Spain signed an income tax treaty in Bucharest. Once in force and effective, the new treaty will replace the Romania - Spain Income and Capital Tax Treaty (1979).

Turkey - Ukraine
On 9 October 2017, Turkey and Ukraine signed an amending protocol to update the Turkey - Ukraine Income and Capital Tax Treaty (1996).



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