iSP Global Tax Newsletter January 2018
LOCAL TAX NEWS
France - Amending Finance Bill for 2017 Adopted
On 21 December 2017, the parliament adopted the second Amending Finance Act for 2017 stipulating deductibility of foreign taxes. According to the Act, companies that are in a loss position may deduct foreign taxes from their tax base if the applicable tax treaty does not explicitly prevent such deduction. If there is no tax treaty between respective countries, then foreign taxes also may be deducted from the tax base. The provisions are applicable to fiscal years ending on or after 31 December 2017.
Furthermore, on 21 December 2017, the parliament adopted the Finance Act for 2018. The key provisions of the Act are summarized below.
The standard corporate income tax (CIT) rate, currently set at 33.33%, will be reduced progressively to 25% by 2022.
For financial years commencing on:
- 1 January 2018, profits of up to EUR 500,000 will be subject to a 28% rate; profits exceeding that amount will be subject to the current 33.33% rate;
- 1 January 2019, profits of up to EUR 500,000 will be subject to a 28% rate; profits exceeding that amount will be subject to a 31% rate;
- 1 January 2020, the standard CIT rate will be 28% for all profits;
- 1 January 2021, the standard CIT rate will be 26.5% for all profits; and
- 1 January 2022, the standard CIT rate will be 25% for all profits.
Germany - Ministry of Finance Issues Revised Guidance on Change-in-Ownership Rules
On 30 November 2017, the Ministry of Finance published guidance on the application of the change-in-ownership rules contained in section 8c of the Corporate Income Tax Act (CITA). Guidance clarifies the rules for carrying losses forward and back.
Panama - Bill Criminalizing Tax Evasion Announced
Panama has approved a bill criminalizing tax evasion. The bill would be presented during the next period to the National Assembly. The bill establishes the threshold for the defrauding transactions, imprisonment time and fines. Furthermore, it establishes conditions for the relief if a company paid taxes voluntarily. However, the relief might be granted only once for each individual or legal person.
China - Application Scope of Super-Deduction for R&D Clarified
The China’s State Administration of Taxation issued clarification for application of super-deduction rights of R&D expenses. The super-deduction might be enjoyed for the following R&D expenses:
- payments made to internal and external R&D personnel;
- expenses on equity incentives granted to R&D personnel;
- personnel welfare expenses, supplementary pension funds and supplementary medical insurance premiums; and
- R&D expenses incurred for “failed” projects.
With respect to costs of materials included in the R&D expenses in prior tax years, the corresponding material costs incurred in the current sales year must be set off against the R&D expenses in the same year. Excessive costs may be carried forward.
If tangible or intangible fixed assets used for the R&D activities are depreciated on an accelerated basis, such expenses may be deemed eligible for the super-deduction.
The R&D expenses incurred by external contractors (the commissioned party) will not be eligible for super-deduction. It is the principal (the commissioning party) who can enjoy super-deduction rights.
Cyprus - CbC Reporting Deadline Extended
The deadline for the filing of the CbC reports for 2016, initially due by the last day of the reporting fiscal year (usually 31 December), has been extended to 28 February 2018. The deadline for CbC reporting notifications for 2017 has been extended to 15 January 2018.
Chile – Ireland
The most favoured nation (MFN) clause contained in the protocol to Income Tax Treaty (2005) between Chile and Ireland was activated by way of the Chile - Japan Income Tax Treaty (2016). According to the MFN clause for articles 11 and 12 the adjusted interest rate will be applicable between Chile and Ireland if Chile enters into a treaty with any OECD country and if that treaty contains lower tax rates. Lower withholding tax rate on interests and royalties stipulated in the treaty between Chile and Japan has entailed tax rates adjustment between Chile and Ireland starting from 1 January 2017. Further adjustments for interest rates will be in effect from 1 January 2019.
Spain - Qatar
Income Tax Treaty (2015) between Spain and Qatar will enter into force on 6 February 2018.
The treaty generally applies from 1 January 2019 for income taxes and from 6 February 2018 for other tax matters. Once the treaty applies, the maximum rates of withholding tax will be:
- 5% on dividends if shareholding is 0-10% and 0% on dividends if shareholding is more than 10%;
- 0% on interest, royalties and fees.
Resident taxation of capital gains will be applied. Both parties provide for the ordinary credit method to avoid double taxation.
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