iSP Global Tax Newsletter September 2017

iSP Global Tax Newsletter September 2017


Latvia - CIT reform in Latvia
On 28 July 2017, a new Corporate Income Tax Law was adopted. Effective from 1 January, 2018, the income tax will be paid at the time of profit-distribution rather than at the time profit is gained. The new CIT rate will be 20% instead of the current rate of 15%. Retained profits will not be subject to CIT. CIT credits for business activities in Free Ports and Special Economic Zones will remain unchanged. Additionally a new method of calculation of the tax base will be introduced. The tax base will be adjusted by a coefficient as provided by the Law. Transition rules will apply.

Poland - New Anti-tax Avoidance Measures to be introduced
The Polish Ministry of Finance has proposed changes in Corporate Income Tax Law partially implementing provisions of the Anti-Tax Avoidance Directive (ATAD).
The main measures will include:

  • Changes in thin capitalization rules that will introduce interest deduction limitation up to 30% of taxpayers EBITDA. The new rules will not apply to financial institutions as well as to debt amounts that do not exceeds PLN 120,000.

With relation to group taxation, the new legislation will:

  • decrease thresholds for share capital to 75% instead of current 90%;
  • decrease net profit ratio to 2% currently 3%; and
  • introduce limitations of profitability – members of the group may not be subject to exemption from corporate income tax.

In respect to CFC rules, the new legislation will increase the level of holding stake from 25% to 50%. Additionally, in order to qualify for CFC the threshold for effective tax rate in CFC jurisdiction will be increased to 50% (currently 25%). Furthermore, the passive profits threshold will be decreased to 33% (currently 50%).

Proposed provisions are expected to enter into force 1 January, 2018.


Luxembourg - Bill on new IP Regime Submitted to Parliament
Luxembourg has announced a new IP regime that contains a special tax incentive for certain income from intellectual property rights. The Bill aims to introduce the "modified nexus approach" that will be in line with OECD BEPS action plan. Under the new regime taxpayers will still be able to enjoy 80% exemption from CIT on income from patents and copyright software, resulting into effective tax rate of 5, 2%. However, the new rules will considerably change the conditions for qualifying assets and expenditures.

Bulgaria - Legislation Implementing BEPS Measures Gazetted
In order to continue implementation of BEPS measures, Bulgaria has adopted amendments to existing rules concerning mandatory automatic exchange of advance cross-border tax rulings as well as country-by-country (CbC) reporting requirements. The new rules define that taxpayers, subject to CbC reporting in Bulgaria, must submit CbC reports within 12 months from the last day of a reporting fiscal year. Non-compliance may be subject to penalties in Bulgaria. The deadline for filing the first CbC report is 31 December 2017.


Argentina - Mexico
The Argentina - Mexico Income and Capital Tax Treaty (2015) will enter into force. The treaty generally applies from 1 January 2018 and replaces the Argentina - Mexico Transport Tax Treaty (1997).

Belarus - Pakistan
The amending protocol, signed on 5 October 2016, to the Belarus - Pakistan Income Tax Treaty (2004) entered into force. The protocol states that reduced withholding tax rate for qualified dividends is adjusted from 10% to 11%. The protocol generally applies from 1 July 2017 for Pakistan and from 1 January 2018 for Belarus.

Hong Kong - Saudi Arabia
The Hong Kong - Saudi Arabia Income Tax Agreement (2017) was signed in Hong Kong.



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