Th e outlook
f or g lobal tax
p olicy in 2 0 1 6
This report provides a non-exhaustive update on potential tax policy
developments in 2016. The volume, speed and complexity of new developments
continues to be high, and this document has been prepared for general
informational purposes only. It is not intended to be relied upon as accounting,
tax or other professional advice. Please refer to your advisors for specific advice.
Contents
1
20
31
39
The outlook for
global and national
tax policies
in 2016
The outlook for
European tax
developments
in 2016
Where next for
the global debate
on tax?
Country outlooks
The outlook for global tax policy in 2016 |
iii
Th e outlook f or
g lobal and national
tax p olicies in 2 0 1 6
1
Global trends and j urisdiction
changes
In our 2015 Outlook, we compared the tax landscape to a
hall of mirrors within a fairground, with the forces bending
those mirrors, strengthening and growing in number. Did
policymakers deliver during the course of the year and will
they deliver again in 2016? Yes, they will, and with great
vigor and energy!
C h ri s S an g er
Global Tax Policy Leader, EY
+44 20 7951 0150
csanger@uk.ey.com
As in past years, our Outlook is made up of known legislative changes —
of which there were a great many in November and December 2015 —
and the predictions of our tax policy leaders in 38 j urisdictions.1
These predictions are developed based upon their deep experience in
understanding the tax policies of the j urisdictions in which they work, the
likelihood of the j urisdiction implementing changes, such as one or more
base erosion and profit shifting (BEPS) recommendations, and the overall
backdrop (economic, political and social) against which the jurisdiction is
working. So, what do our leaders see?
There seems little to temper j urisdictions’ desires to possess a competitive,
“ low-rate, broad-base” business tax environment, continuing a trend
that we have seen for some years now. Seven jurisdictions (Denmark,
Israel, Japan, Malaysia, Norway, Spain and Vietnam) have either enacted
or plan to enact reductions to their headline corporate income tax (CIT)
rates in 2016. At 18% of all j urisdictions surveyed, this is slightly lower
than the 22% who reduced their rates in 2015. Spain’s three percentage
point reduction from 28% to 25% represents the reduction of the largest
magnitude. Interestingly, three of the five jurisdictions — Denmark, Japan
and Spain — also reduced their CIT rates in 2015. Twenty-nine jurisdictions
anticipate no change in CIT rates, while only India has increased its CIT
rate, and only for domestic companies.
R ob T h om as
EMEIA Tax Innovation Leader, EY
+1 202 327 6053
rob.thomas@ey.com
1
Australia, Belgium, Brazil, Canada, China, Cyprus, Czech Republic, Denmark, Finland,
France, Germany, Hong Kong SAR, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan,
Luxembourg, Malaysia, Mexico, Netherlands, New Z ealand, Norway, Philippines, Poland,
Russia, Singapore, Slovakia, South Africa, Spain, Switzerland, Taiwan, Thailand, United
Kingdom, United States, Vietnam.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 65
|
1
K ey
t ren ds
K ey c orp orat e i n c om e t ax rat e c h an g es i n 2 0 1 6
• CIT rates continue to fall — though
at a slightly lesser rate than in the
last two years
1
3 4 .6 0 8 %
3 3 .9 9 %
I n c reases
• The proj ected CIT burden is
proj ected to fall in a slightly higher
number of j urisdictions in 2016
than in the previous two years
I ndia ( D omestic
comp anies only)
2
Tw enty- nine j urisdictions anticip ate n o c h an g e in CI T rates
• The overall CIT burden is
proj ected to fall in almost twice as
many j urisdictions as it is to rise
(34% of jurisdictions versus 18%
of jurisdictions)
D ec reases3 , 4
Sp ain
• Transfer pricing changes are
forecast to be the leading issue
driving a higher tax burden
for taxpayers, followed by
enforcement changes and
legislation to tackle hybrid
mismatches
J ap an
D enmark
I srael
M alaysia
N orw ay
V ietnam
3 2 .1 %
2 9 .9 7 %
2 8 %
• In terms of BEPS implementation
priorities, Actions 13, 8-10, 2,
5 and 7 (in that order) seem to
be j urisdiction implementation
priorities in 2016, though there
is some gap in implementation
importance between Actions
13 and 8-10 compared to other
Actions
2 7 %
2 6 .5 %
2 5 %
2 5 %
2 3 .5 %
2 2 %
2 5 %
2 5 %
2 4 %
2 2 %
2 0 %
• Indications are that — outside of
Actions 2 and 13 — a maj ority of
j urisdictions have not yet started
their BEPS implementation efforts
1
These data are not global in nature and reflect only the 38 jurisdictions covered in this report.
These figures should not be relied upon for tax accounting purposes. Please refer to your advisors
for specific advice.
2
For tax year 2015-16, surcharge was increased by 2% for companies whose income is more
than INR 10 million but less than INR 100 million and for companies whose income is more than
INR 100 million.
3
These figures refer to national/federal headline rates and do not take into account subnational
or local rates or additional surcharges.
2
4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
These figures are listed according to magnitude.
Unsurprisingly (given the looming deadlines in relation
to BEPS Action 13), transfer pricing sees the largest
incidence of change for 2016.
Although one might expect that static or falling CIT rates would
be commensurate with a static or falling total corporate tax
burden, it would be wrong to do so.
While 17 of the 38 jurisdictions (45%) do indeed project a
static burden, seven (Brazil, China, Czech Republic, Finland,
Germany, South Africa and the United Kingdom (representing
18% of the jurisdictions surveyed)) project a rising burden.
This is lower than both the 2014 Outlook (31%) and the 2015
Outlook (also 31%).
Thirteen j urisdictions — or 34% — proj ect a falling corporate
tax burden. This figure was 26% in 2014 and 16% in 2015; in
essence, j urisdictions are more likely than in the previous two
years to reduce their overall burden on CIT taxpayers in 2016.
That is an unexpected outcome, given the very existence of
the BEPS project, perhaps indicating that some change has
preempted the finalization of the BEPS outcomes and that
other changes will take time to bed in.
Our respondents’ views cover cash taxes, not total compliance
burden, though. Here, global companies face significant new
challenges. This includes most directly the transparencyfocused BEPS recommendations — the new requirement
for country-by-country reporting, the two-tier approach to
transfer pricing documentation and the recommendations that
jurisdictions should adopt (or refresh) mandatory disclosure
regimes. New compliance obligations, however, do not end
with the filing requirements, but will also include the follow-up
that will be required in many jurisdictions to explain the new
reporting and to put information in the proper context.
Areas of greatest change
So from where do the changes in corporate tax burden — both
positive and negative — hail?
Unsurprisingly (given the looming deadlines in relation to
BEPS Action 13), t ran sf er p ri c i n g sees the largest incidence
of change for 2016. Here, 18 jurisdictions have either seen
burden-increasing changes so far in 2016 or expect such
changes to be made during the course of the year. J ust one
jurisdiction — Russia — expects a burden-reduction in this area.
While transfer pricing has always been an area within which we
see some of the most regular change, the volume of change in
2016 significantly outstrips that of prior years.5
Changes to en f orc em en t secure the second highest incidence
in 2016, reflecting their ever-growing influence over the
last five to six years. Fourteen jurisdictions (37%) forecast
changes resulting in a higher tax burden here, six percentage
points higher than in our 2015 report. Only India forecasts an
improving dispute/controversy environment.
New legislation to tackle h y bri d m i sm at c h arran g em en t s is
the second-equal area of most highly anticipated change, with
14 (or 37%) jurisdictions foretelling change in this area, just two
percentage points ahead of our 2015 report. While hybrids are
indeed addressed under the BEPS project (Action 2), 12 of the
14 j urisdictions implementing changes in this area in 2016 are
EU Member States,6,7 signaling the importance of the European
Commission tax agenda on legislative flows, both today and in
the future.8
5
Readers wishing to access greater analysis of the ongoing transfer
pricing transparency changes in particular should see the reference to the
EY publication A re you ready f or you r close- u p ? on page 8.
6
Singapore and New Zealand are the remaining two jurisdictions.
7
Norway, while not an EU Member State, is an EEA member.
8
On 20 June 2014, the European Union’s Economic and Financial Affairs
Council (ECOFIN) reached political agreement on a proposed amendment to
the Parent-Subsidiary Directive (PSD). This amendment targeted cross-border
hybrid loans and was designed to neutralize international mismatches that
may arise due to international qualification differences of such loans. Member
States were required to implement the amendments in their domestic tax laws
by 31 December 2015 at the latest.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
3
Other areas of change
Several other areas continue to see change — both positive and
negative, in terms of tax burden — in 2016. These areas are
listed here in order of prevalence of change:
• O th er business incentives: Fourteen jurisdictions have
either announced or are forecasted to announce changes to
non-R&D incentives such as tax relief on capital expenditure,
depreciation or amortization. Ten of the 14 changes result
in a lower tax burden, while four (Brazil, India, Japan and
Norway) result in a higher anticipated burden in 2016.
• R esearch and D evelop ment ( R & D ) incentives: Ten
j urisdictions have either announced or are forecasted to
announce changes to R&D incentives. Seven of the ten
changes result in a lower tax burden, while three (Brazil,
India and Singapore) result in a higher anticipated burden
in 2016.
• Cap ital g ains tax: Eight j urisdictions have either announced
or are forecasted to announce changes to capital gains
taxes. Five of the eight (Belgium, Brazil, Germany, Poland
and Vietnam) will result in a higher anticipated burden, while
three (Israel, Norway and Slovakia) are forecasted to result in
a lower anticipated burden in 2016.
• I nterest deductibility: Seven jurisdictions have either
announced or are forecasted to announce changes to the
deductibility of interest expense. Six of the seven (Brazil,
China, Germany, Italy, Norway and Singapore) will result in a
higher anticipated burden, while only Hong Kong forecasts a
lower anticipated burden in 2016. Given the BEPS activity —
and notwithstanding the fact that the EU Member States may
wait until an EU-wide anti-BEPS directive is agreed — this is
an area where we should expect to see growth in 2017.
• Treatment of losses: Six jurisdictions have either announced
or are forecast to announce changes to the tax treatment
of losses. Three of the four (Hong Kong, Japan and Norway)
will result in a higher corporate tax burden, while two of the
four (Australia and Spain) will result in a reduced tax burden.
Italy’s changes could result in either higher or lower burden,
depending on company fact patterns.
• Th in cap italiz ation: Four jurisdictions have either announced
or are forecasted to announce changes to thin capitalization.
Three of the four (China, India and New Zealand) will result
in a higher anticipated burden, while only Mexico forecasts
lower anticipated burden in 2016.
• Controlled F oreig n Comp anies: Six jurisdictions have
either announced or are forecasted to announce changes to
Controlled Foreign Companies legislation in 2016. Four of
the six (China, India, South Africa and Taiwan) will result in a
higher anticipated burden, while Italy and Russia forecast a
lower anticipated burden in 2016.
Overall, Brazil and Singapore are the two jurisdictions
proj ecting the largest number of tax changes that will result
in an increased tax burden, with Brazil foretelling burdenincreasing changes in nine areas of tax, and Singapore in
seven.9 China and Malaysia are the two leading j urisdictions at
the other end of the spectrum, with both projecting beneficial
changes for taxpayers in five areas.10 The Philippines and
Switzerland will see the greatest stability in 2016, according
to our responders. Readers should, however, not ignore the
fact the Switzerland’s seeming quiet masks the third series of
corporate tax reforms, which will be designed to effectively
put an end to the different taxation of domestic and foreign
company profits by the cantons. The new federal law is likely to
enter into force as of 1 J anuary 2018.
9
10
Across CIT, VAT/GST and PIT.
4
In both these cases, this does not mean that the total tax burden may be
increasing or decreasing more than in other jurisdictions with fewer changes;
it simply means that the j urisdiction is experiencing a greater incidence
of change.
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
None of the 38 j urisdictions have either experienced or
predict a standard VAT or GST rate reduction in 2016.
Interestingly, though, eight of the 38 j urisdictions forecast
an overall VAT or GST burden increase.
Indirect taxes
Personal income taxes
Regarding indirect taxes (which for the purposes of this report
include both VAT and GST), none of the 38 jurisdictions have
either experienced or predict a standard rate reduction in
2016. Interestingly, though, eight of the 38 j urisdictions
forecast an overall Value Added Tax/Goods and Services Tax
(VAT/GST) burden increase, double the number that forecast
a decreasing burden. As always, the burden increases reflect
changes to the VAT/GST base in a number of different areas
demonstrating that, as ever, the devil is in the detail.11 Many
changes may also be the result of new indirect taxes on
digital activity; here, the final quarter of 2015 saw many
jurisdictions — including Australia, Japan, Korea, New Zealand
and Russia — enact new legislation, in turn reflecting the
overall lack of action resulting from BEPS Action 1 on the
digital economy.
Personal income taxes (PIT) have either experienced or are
forecast to experience around the same overall incidence of
change as both business taxes and VAT/GST in 2016. Five
jurisdictions (Canada,12 Malaysia, Mexico, Singapore and South
Africa) have either experienced or are forecast to experience
PIT rate increases in 2016, reflecting the ongoing exit from
the financial crisis, with many more governments now having
the confidence to increase higher marginal rates of tax on
top earners. Hungary and Norway are the only jurisdictions
reducing headline rates, under their flat tax regime.
11
12
For more information, please see EY’s Indirect Taxes in 2016 publication
at www.ey.com/tax.
But like business taxes, PIT sees a rising burden (for 8 of 32
jurisdictions), with the burden increase being delivered via
multiple different changes to the PIT base.
Where there are differences between the rate increases among different
provinces.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
5
Leading incidence of business tax base changes 2015-2016
2015
Hybrid mismatches
1
1
Enforcement changes
2
2=
Enforcement changes
Thin capitalization
3
2=
Hybrid mismatches
Transfer pricing
4
4
Other business incentives
R&D incentives
5
5
R&D incentives
Other business incentives
6
6
Capital gains tax
Interest deductibility
7
7
Interest deductibility
Controlled Foreign Companies
8
8
Treatment of losses
Treatment of losses
9
9
Thin capitalization
10
10
Capital gains tax
6
2016
| The outlook for global tax policy in 2016
Transfer pricing
Controlled Foreign Companies
BEPS implementation
BEPS implementation priorities
Few ever thought that the 5 October 2015 publication of the
final BEPS recommendations would instantly bring us a new
era of clarity, certainty and consistency. This cautiousness has
proven warranted.
26 jurisdictions responded to a separate EY survey on BEPS
implementation priorities for 2016. EY j urisdiction tax policy
leaders were asked to rank their j urisdictions’ perceived
implementation priorities from first to fifth most important.
An inverse points system was assigned to each submission,
with the first most important Action receiving five points and
the fifth, one point.
The BEPS recommendations reflect a varying degree of
consensus and impose different levels of commitment
from the participating j urisdictions. Given the wide range
of views, reaching agreement on the Action items required
the inclusion of many options and alternative approaches in
some of the reports. In other cases, the use of fairly general
concepts coupled with broad language to leave room for varied
interpretations likely facilitated acceptance of the final reports.
Given the sheer number of variables reflected in the final
recommendations, and the complexity inherent in meshing
any of these concepts with j urisdictions’ existing domestic
tax systems, there may be significant distance between
agreement in the Organisation for Economic Co-operation
and Development (OECD) process and ultimate adoption of
new domestic tax rules in 2016 and ahead. In addition, most
of the recommendations likely will require legislative changes
or treaty revisions, thus necessitating the legislative or treaty
ratification processes, which in many jurisdictions are separate
from the process for participation in the OECD. In addition,
some j urisdictions may already have measures in place that
they believe are consistent with one or more of the BEPS
recommendations such that they would take the view that no
further action would be needed in those areas.
Action 13 (CbCR and Transfer Pricing documentation) was
a clear winner, ahead of Actions 8-10 on transfer pricing.
Action 5 (Harmful Tax Practices) was a somewhat distant third,
ahead of Action 2 (hybrid mismatches). Action 7 (Permanent
Establishment), perhaps surprisingly, scored less points than all
of these Actions.
There was a level of consistency with Action 13 ranked the
number 1 or 2 implementation priority for 18 of the 26
j urisdictions. Action 14 on dispute resolution was in the top
5 priorities for only three jurisdictions (India, Singapore and
South Africa).
It is possible that some of the OECD and G-20 member
jurisdictions will consider the BEPS Action plan to have been a
success in terms of providing governments with the policy and
legislative tools to tackle the maj or sources of base erosion and
profit shifting. It is equally conceivable that other stakeholders,
particularly tax activists and non-governmental organizations,
will view the BEPS project as merely the first phase in
overhauling the international tax framework, and will call for
further work to reform tax rules that they perceive to favor the
wealthy and large multinational companies.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7
Are you ready for your close up?
How a new era of tax transparency
is being woven together
Multinational businesses face a multitude of
different transparency and data disclosure
requirements in the wake of the broad debate
about how the international tax environment
should reflect 21st-century ways of global
business. Among other things, they face new
transfer pricing documentation requirements;
demands to publicly account for their tax and
business activities on a country-by-country
basis; and pressure in jurisdictions like the
UK to disclose more information about their
overall tax strategy. In this report from EY,
we provide a snapshot of some of these new
demands and offer those with responsibility
for keeping business compliant some
insights on the current and potential future
trajectories of the debate.
Download the report at www.ey.com/tax
8
| The outlook for global tax policy in 2016
European dimensions
As Klaus von Brocke discusses
on page 18, 2016 will be a year
of high-paced activity for the
European Commission. Under
pressure from the European
Parliament to drive results, the
Commission on 28 January
2016 released an anti-tax
avoidance package comprising
four separate documents:
i) a proposed European Union
Anti‑Tax Avoidance Directive
(the ATA Directive)
ii) a proposed Directive
implementing the automatic
exchange of country-bycountry (CbC) reports (the
CbCR Directive)
iii) a communication proposing
a framework for a new
EU external strategy
for effective taxation
(the external strategy
communication)
iv) a recommendation on the
implementation of measures
against tax treaty abuse
At this stage, the proposed
ATA and CbCR directives both
remain in draft form, and
unanimous agreement of all
Member States will be required
before they can be implemented.
Although there appears to be
strong political support for an
ATA Directive among Member
States, it is likely that the form
of the final directive will differ
significantly from the current
draft and that the timetable set
for agreement by July 2016
may not be met. The ATA
Directive is more controversial
than the other proposals, as
it includes elements that are
arguably wider than anti-BEPS
measures, but in fact represent
a compromise between the
EU Common Consolidated
Corporate Tax Base proposal
and a common EU response to
BEPS. As such, it goes much
further than the OECD BEPS
recommendations, including
making recommendations
which are really not related to
BEPS, but are instead related
to the desire for increased EU
harmonization — such as the
switch‑over clause, consistent
GAARs and consistent exit
tax regimes.
So, as far as the impact on
national legislation goes, the
message is simple — watch
this space for changes.
The outlook for global tax policy in 2016 |
9
Monitoring BEPS Action 13 developments on Country-byCountry (CbC) Reporting and Transfer Pricing Master/Local File
requirements
As noted, a maj ority of the changes to national transfer pricing
regimes are a result of the rapid implementation of BEPS
Action 13. But, as with many other BEPS recommendations,
implementation will not be consistent. While the j urisdictions
participating in the BEPS project committed to the consistent
implementation of Action 13, we have already seen many
variations in the way that j urisdictions are setting out the
requirements on issues such as timing, materiality thresholds
and definition of terms. These issues have the possibility of
creating uncertainty for reporting businesses.
In addition, the secondary reporting mechanism is an issue that
could create confusion. Some MNCs may believe that if their
ultimate parent j urisdiction does not introduce CbC reporting,
the company does not need to worry about CbC reporting in
that jurisdiction. However, even if that jurisdiction does not
introduce it, the company may still be subj ect to CbC reporting
because other j urisdictions will likely have a secondary
reporting mechanism in place, requiring CbC reporting for the
full group, including the ultimate parent.
The detailed table below provides a snapshot of the
implementation approaches announced at the time this report
went to press.
Action 1 3 : CbC rep orting
O E C D
S t at u s
A u st rali a
C h in a
D en m ark
F i n lan d
F ran c e
I relan d
Adopted
legislation on
3 December
2015, to take
effect as of
1 J anuary 2016
Draft legislation
published
Bill approved by
parliament on
18 December
2015, to take
effect as of
1 J anuary 2016
Draft bill
published on
21 December
2015
Bill approved by
parliament on
18 December
2015, to take
effect as of
1 J anuary 2016
Adopted
legislation
applicable as of
1 J anuary 2016
Threshold of
AUD1 billion
(approximately
EUR670 million)
Threshold of
RMB 5 billion
(approximately
EUR705 million)
Threshold of
DKK 5.6 billion
(approximately
EUR750 million)
To be filed
together with
the annual
tax return
(due 31 May).
Possible to apply
for an extension.
Local filing
W h o
Ultimate parents
of group with
revenue of
EUR750 million
or greater
W h en
For fiscal years
starting in 2016,
with filing within
12 months from
fiscal year-end
S ec on dary
Local filing
filing rule
1. Local filing or
2. Filing
by named
“ surrogate
parent” entity
P en alt i es
Left to
j urisdiction
General
penalty for
non-compliance
ü
Filing by “next
tier parent
entity”
ü
Consistent w ith O E CD recom m endations.
1 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
General penalty
regime
ü ü ü
ü
The government
intends for
the provisions
to be enacted
and effective
beginning of
2017
ü ü
ü
Local filing
ü ü
General penalty
regime
Penalties in
the maximum
amount of
EUR25,000
Specific penalty
regime. Should
not exceed
EUR100,000
Penalty
applicable for
not complying
with tax return
obligation
I t aly
J ap an
M ex i c o
N et h erlan ds N orw ay
P olan d
S p ai n
U K
U S
Published
legislation in
the Official
Gazette on
30 December
2015, to
apply as of
1 J anuary
2016
Draft
legislation
published on
16 December
2015
Published
legislation on
18 November
2015, to
apply as of
1 J anuary
2016
Published
legislation in
the Official
Gazette on
30 December
2015, to
apply as of
1 J anuary
2016
Adopted
regulations
applicable as
of 1 J anuary
2016
Adopted
implementing
regulations
applicable as
of 1 J anuary
2016
Enabling
legislation
adopted. Draft
regulations
published
Proposed
regulations
published on
21 December
2015
ü
Revenues
in excess of
J PY100 billion
(approximately
USD820
million)
Revenues
in excess of
12 billion
pesos
(approximately
EUR650
million)
Threshold of
£ 586 million
(approximately
EUR790
million)
Revenue
of USD850
million or
greater
ü
Proposed
to apply to
taxable years
beginning on
or after 1 April
2016
Local filing
Specific
penalty
between
€ 10,000 and
€ 50,000 may
apply.
Published draft
legislation for
consultation
on 2 December
2015
ü
Revenues
in excess of
NOK6.5 billion
(approximately
USD730
million)
ü ü
ü ü
First reporting
should be done
in 2018 based
on figures from
2016
ü ü ü
ü ü ü ü
General
penalties and
presumptive
taxation
may apply in
case of noncompliance
In addition
to penalties,
non-compliant
taxpayers may
be disqualified
from entering
into contracts
with the
Mexican public
sector
Criminal
penalty
for noncompliance
General
penalty
for noncompliance
For taxable
years
beginning
on or after
the date final
regulations are
published
None
Local filing
Voluntary local
filing
None
General
penalty
for noncompliance
with reporting
obligations
General
penalty
for noncompliance
with reporting
obligations
Specific
penalty
for noncompliance
General
reportingrelated
penalties may
apply
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
1 1
a s
ici
as
fi
a
ca fi
A u st rali a
C h in a
F i n lan d
J ap an
N et h erlan ds
S t at u s
Adopted legislation
on 3 December 2015
to take effect as of
1 J anuary 2016
Draft legislation
published
Draft bill published
for consultation on
21 December 2015
Draft legislation
published on
16 December 2015
Published legislation in
the Official Gazette on
30 December 2015, to
apply as of 1 J anuary
2016
W h o
Entities that are part of
a group whose annual
global revenue exceeds
AUD1 billion
Entities that
currently have a
TP documentation
obligation in China
Entities that
currently have a
TP documentation
obligation in Finland
Master file requirement
for J apanese entities
and PEs part of a
group with revenues
in excess of J PY100
billion (approximately
USD820 million)
Entities that are part of
a group whose annual
global revenue exceeds
EUR50 million
Local file requirement
for J apanese
taxpayers conducting
transactions with
foreign related parties
at amounts higher
than a specified
threshold
W h en
To be filed
electronically by the
end of 2017
Upon request, but
must be ready by the
time the tax return is
submitted
Within 60 days of a
request by the tax
authorities, but not
earlier than 6 months
after the end of the
financial period
Master file requirement
to apply for taxable
years beginning on
or after 1 April 2016.
Master file to be filed
online
Upon request
Local file requirement
to apply to taxable
years beginning on or
after 1 April 2017
Local file to be filed
upon request
P en alt y
1 2
Late filing, or filing
of these statements
not in the approved
form, may trigger
administrative
penalties
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
The general penalty
regime would apply
A tax penalty of
up to EUR25,000
can be imposed for
failure to comply with
the transfer pricing
documentation
requirement
General penalties
(for master file and
CbC reporting) and
presumptive taxation
(for local file) may
apply in case of noncompliance
The general penalty
regime would apply
S i n g ap ore
S ou t h K orea
S p ai n
M ex i c o
P olan d
Transfer Pricing
guidelines adopted on
6 J anuary 2015
Adopted rules on
15 December 2015, to
apply as of 1 J anuary
2016
Adopted implementing
regulations to apply as
of 1 J anuary 2016
Published legislation on
18 November 2015, to
apply as of 1 J anuary
2016
Adopted regulations to
apply as of 1 J anuary
2017
Based on the type of
the transaction and its
value (several dollar
value thresholds)
Domestic corporations
that have transactions
and assets exceeding
specific thresholds
to be defined and
foreign corporations
having a permanent
establishment in Korea
Groups with an
aggregate net turnover
lower than EUR45
million in the preceding
year would be exempt
from the preparation of
the master file.
Entities that
currently have a
TP documentation
obligation in Mexico
Polish tax residence
entities with revenue or
cost over EUR20 million
Upon request, but
must be ready by the
time the tax return is
submitted
By the corporate tax
return filing due date
Upon request
Upon request, but
must be ready by the
time the tax return is
submitted
No filing obligation;
however, Management
Board would need to
attach to CIT return
their confirmation
that documentation is
complete
The general penalty
regime will apply
Failure to comply
with the reporting
requirement will result
in a penalty not higher
than KRW10 million
(USD8,500)
The new enforced
penalties amount
EUR1,000 per omitted
or false fact, or
EUR10,000 per group
of omitted or false
facts, as well as 15% of
the gross adj ustment, if
applicable
Not clear yet
The general penalty
regime would apply
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
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1 3
Global Tax Policy and Controversy
Briefing Special Edition — the
BEPS recommendations
Issue 17 of our Global Tax Policy and
Controversy Briefing is a special edition,
providing deeper analysis of each of the
15 G-20/OECD Base Erosion and Profit
Shifting (BEPS) recommendations.
For each recommendation, we provide
a factual overview of what has been
recommended by the OECD, along with a
more forthright analysis by EY professionals
of what each recommendation is really trying
to address, how implementation may play
out at the national level and what responses
business may consider making.
Download the briefing at www.ey.com/tax
14
| The outlook for global tax policy in 2016
Impacts on business
In other chapters, we provide an
outlook for the fast-moving and
complex European landscape, where,
according to many commentators, the
very epicenter of BEPS developments
is heading. But as outlined at the
outset of this introduction, the BEPS
recommendations are certainly not the
beginning of the end; as Jeffrey Owens
sets out on page 25, the debate on
business tax continues, and in 2016 the
G20 will, under the Chinese Presidency,
provide a forum for developing markets
to continue voicing their concerns.
With the OECD’s issuance of the
final reports, jurisdictions must now
consider whether, how and when to
act with respect to the various BEPS
recommendations. J urisdictions will
act in their own interests and according
to their own timetables. Without
renewed global efforts, coordination
and consistency of actions are likely to
be limited as each j urisdiction interprets
the BEPS recommendations through its
own lens and in the context of its own
ongoing tax policies and practices.
i ifica
is a i
action exp ected
Notwithstanding the likely absence of a
coordinated approach, significant action
with respect to BEPS nevertheless is
expected across j urisdictions around
the world. The OECD proj ect arose out
of a growing political and public focus
in many j urisdictions on the taxation
of foreign companies. More than 60
j urisdictions actively participated
in the BEPS project, including all
members of the OECD and G20 and
a substantial number of developing
j urisdictions. More than 90 j urisdictions
are participating in the negotiation of
the multilateral instrument to be used
to amend existing bilateral treaties to
incorporate the treaty-based BEPS
recommendations. Thus, there is
substantial interest by j urisdictions in the
BEPS recommendations.
Business should be retaining their closest
focus on the BEPS recommendations
with respect to transfer pricing, which
represent some of the most significant
changes coming out of the BEPS project.
The new rules will have effect in some
j urisdictions without further action by
said j urisdiction. The recommendations
are reflected in revisions to the OECD
transfer pricing guidelines, which in
many j urisdictions, other than the
United States, have been made a part
of the j urisdictions’ rules on transfer
pricing through legislation or guidance.
Thus, in these j urisdictions, the transfer
pricing changes will become applicable
as soon as the revised guidelines are
finalized by the OECD. Likewise, there
is much uncertainty inherent in the
new rules recommended with respect
to permanent establishment. Here, the
BEPS recommendation on permanent
establishment replaces what are
relatively bright-line standards with
vaguer, more subj ective tests that clearly
lower the threshold, but are also much
less clear as to exactly where that new
threshold may lie. A global company
would have to operate without clarity
as to when its activities in a foreign
j urisdiction would be considered to give
rise to a permanent establishment such
that its operations in the j urisdiction
would be treated like a local taxable
entity subj ect to all of the j urisdiction’s
domestic tax obligations.
U nilateral actions
J urisdictions had already begun taking
what could be described as “ unilateral
actions” to address BEPS even while
the OECD process was continuing and
before final recommendations had
been agreed upon. In some cases,
the action taken anticipated the final
BEPS recommendation and is generally
consistent with it. In other cases,
unilateral action that is inconsistent
with the BEPS recommendations
has been taken. In addition, in many
j urisdictions, tax authorities have been
citing BEPS concerns as justification
for new administrative practices even
without any change in the applicable
law. In addition to individual j urisdiction
action, the European Union already has
agreed on measures to address BEPS
that all EU member jurisdictions will
be required to implement, and several
additional BEPS-related measures
are under ongoing discussion in
the European Union. With the final
recommendations in place, it is hard to
now criticize jurisdictions for acting on
them within the confines of their own
national legislation.
U ncertainty p revails
Barbara Angus — at the time part of our
tax policy team at EY, and now Chief
Tax Counsel for the US House Ways and
Means Committee — shared insights into
the potential outcomes for business
in her December 2015 statement to
the US House Committee on Ways and
Means Subcommittee on Tax Policy’s
Hearing on the OECD BEPS project:
“Global companies face significant
uncertainty in light of the BEPS
recommendations, uncertainty that can
be a substantial barrier to cross-border
operation and investment. Change of
the magnitude contemplated in the
BEPS recommendations necessarily
creates uncertainty,” said Barbara.
“Global companies also face significant
risk of controversy. The fundamental
changes and new rules subj ect to varied
interpretation that create uncertainty
for global companies also create
controversy with tax authorities. The
BEPS recommendations largely are
high-level policy statements. Proper
implementation will require detailed and
specific guidance. In many cases, an
appropriate transition to the new rules
will be needed. In all cases, training of
tax authority personnel responsible
for administering the new rules will be
essential. Controversy will arise when
there are gaps in any of these areas.”
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1 5
Actions for business to consider
All this change makes for weary reading. It is therefore small consolation that our recommendations to business from 2015
(indeed, from 2014!) remain consistent. With BEPS implementation proceeding at full pace, our only suggested change for
companies is to increase their focus on our action 1.
1 6
S u g g est ed ac t i on 1
S u g g est ed ac t i on 2
S u g g est ed ac t i on 3
S u g g est ed ac t i on 4
M onitor and assess
ong oing ( and
p ossible f uture)
tax p olicy sh if ts:
Companies should
develop processes
and channels to stay
up to date with tax
legislation and the tax
policy environment
in key j urisdictions,
and they should
communicate this
process to their
organization’s key
stakeholders. These
steps will help
companies anticipate
potential adverse
policy changes and
identify potential
opportunities to
work closely with
government to design
policy that meets all
stakeholders’ needs.
B e an active
p articip ant in tax
p olicy develop ment:
In such a rapidly
shifting economic,
legislative and
regulatory
environment,
new tax laws may
sometimes impede
commercial decisions
in ways unintended
by policymakers.
Companies faced with
this issue can either
adapt their business
plans accordingly or
work collaboratively
with the government
to explain the
impediment, model
the potential
outcomes and develop
alternative policy
choices.
J oin f orces: Consider
whether forming
an industry or
trade group is an
appropriate way to
develop a collective
voice, particularly
when your companies
reside in a relatively
specialist sector.
Alternatively, assess
opportunities to j oin
an existing group such
as BIAC or another
advocacy group in
your j urisdiction.
Assess th e imp act
of ch ang e: If
change is clear
and documented,
create an impact
assessment(s) that
contains economic
modeling of the policy
impacts. This is useful
not only for internal
budgeting and
forecasting purposes,
but also to use when
discussing change
with policymakers.
Policymakers need
information to
develop good tax
and economic policy,
and comparative tax
studies and insightful
analysis of tax policy
proposals’ effects on
competitiveness can
help in this effort.
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
O ne w ay f or business to connect w ith
p olicymak ers: Th e B usiness and I ndustry
Advisory Committee ( B I AC) to th e O ECD
Founded in 1962 as an independent organization, BIAC is an
international business network and is officially recognized
by the OECD as the voice of business. Through its members
(individuals, businesses and national business groups) and
associate member organizations, BIAC includes a broad
network of over 2,800 business experts. BIAC’s membership
is a cross-industry, diverse group with a common mission to
advocate for open markets and private sector-led growth.
Through over fifty years of experience, BIAC has conveyed
business perspectives and expertise to policymakers on
a broad range of global economic governance and policy
issues and become a trusted partner of the OECD and other
international institutions.
BIAC provides international advocacy through the
formulation of policy positions and engaging with
Chair of BIAC’s Tax Policy Group,
government officials in OECD member and non-member
and Director, Global Tax Policy
economies; bringing targeted expertise through more than
at GE
30 policy groups to communicate business perspectives to
OECD committees, Working Parties and governments. The
BIAC Tax Committee has recognized the need for changes in the international tax framework
and has worked (and will continue to work) constructively with the OECD throughout the OECD
BEPS Project to ensure that the OECD’s recommendations achieve their objectives and support
international trade and economic growth.
W i ll M orri s
“Though the BEPS recommendations may now have been released by the OECD, that certainly
does not mean that opportunities to engage with policymakers are over,” explains Will Morris,
Chair of BIACs Tax Policy Group, and Senior International Tax Counsel & Director of Global Tax
Policy at GE International Inc. “Successful implementation of the BEPS recommendations will be
a real challenge, as many of the recommendations reflect a move away from relatively clear rules
and well-understood standards to less-specific rules, more subjective tests and vaguer concepts,”
says Morris. “ More than ever, business needs to continue to engage with policymakers to ensure
that clear and consistent implementation occurs wherever possible. I therefore very much
encourage readers of this publication to consider whether BIAC may be a useful channel via which
they carry out such engagement and ensure their voices are heard.”
Companies who are interested in exploring this option are invited to indicate their interest
by emailing bi ac . t ax p oli c y @ g e. c om .
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1 7
Concluding thoughts
In some respects, it is data from not only our 2016 report,
but also the 2015 edition that indicate what activity taxpayers
may expect to see from government, going forward.
Our 2016 data indicates that efforts to tackle hybrid
mismatches, higher enforcement efforts by government
and voluminous transfer pricing changes represent the
most prevalent changes. These actions stem from European
Commission developments (the EU hybrid loans linking rule
and new GAAR, both in the Parent-Subsidiary Directive) and
the G-20/OECD BEPS project Action 13, respectively.
All in all, a return to our fairground metaphor may best
describe where we are at the start of 2016. We have entered
the fairground. We’ve done a few rides to get warmed up.
We’re now in the queue for the big roller coaster.
Let’s hope that, despite the prospect of some challenging
twists and turns, we end up with our sense of balance still
in place.
While nascent (but far more limited) action is indeed
occurring in other areas of BEPS (such as limitations
on interest deductibility and CFCs), the overall picture
would seem to indicate that BEPS implementation at the
national level has not yet really started in earnest. With
only five months having passed since the publication of
the final BEPS recommendations, that is to be expected. It
is further driven by three additional issues, all of which are
supporting a “ wait-and-see” mode for j urisdictions, but
which in turn will all play out in the coming 12-24 months:
• EU Member States in particular will be assessing
the content of the Commission’s so-called “ Anti-Tax
Avoidance” Directive before making any decision.
Here, 28 January 2016 saw the Commission present a
legislative proposal as regards EU-wide implementation
of OECD BEPS Action 2 (hybrid mismatches), 3
(Controlled Foreign Company rules), 4 (interest
limitation rules) and 6 (general anti-abuse rule).
• Many j urisdictions may be waiting to see what direction
US international tax reform takes before deciding which
BEPS recommendations to implement. They will do
this to make sure that an early decision does not put
them at a competitive disadvantage in regard to the
interaction of their national tax system with that of the
US.
• All j urisdictions will essentially be waiting for others to
make the first implementation moves, allowing early
adopters to set the pace and provide a platform where
others may learn from their mistakes. In that regard, it
will take a brave jurisdiction (or jurisdictions) to make
the first bold moves.
1 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
All in all, a return to our
fairground metaphor may
best describe where we
are at the start of 2016.
We have entered the
fairground. We’ve done a
few rides to get warmed
up. We’re now in the
queue for the big roller
coaster.
The outlook for global tax policy in 2016 |
19
Th e outlook f or
Europ ean tax
develop ments in 2 0 1 6
2
The focus in 2016 will likely fall heavily on BEPS, where
various EU institutions have deployed a significant
amount of resources to determine how to implement the
BEPS recommendations within the EU in what they hope
will be a swift, coordinated and consistent manner.
D r. K lau s v on B roc k e
EU Tax Services Leader, EY
+49 89 14331 12287
klaus.von.brocke@de.ey.com
In 2015 we saw the European Commission’s (the Commission)
efforts to tackle BEPS, as set out in its 2015 work program,1
supplemented by the European Parliament’s initiatives to increase
corporate transparency, and a greater focus on tax issues by the
Economic and Financial Affairs Council of the European Union
(ECOFIN). At the same time, the Commission continued its State
Aid investigations of a number of EU Member States’ tax rulings
practices. Of course, 2015 does not represent the first foray of
the Commission into this area; the genesis of much of their work
arguably goes back to the December 2012 Action Plan to strengthen
the fight against tax fraud and tax evasion.2
These various initiatives culminated in the Commission’s 28 J anuary
2016 release of an anti-tax avoidance package3 that comprised four
separate documents:
• A proposed EU Anti-Tax Avoidance Directive (the ATA Directive)
that would implement four of the OECD’s BEPS Action items as
well as two measures (a switch-over clause and consistent exit tax
regimes) that were earlier considered as part of the Commission’s
2011 Common Consolidated Corporate Tax Base (CCCTB) proposal
• A proposed directive that would implement the automatic
exchange of country-by-country (CbC) reports (the CbCR Directive)
• A recommendation on the implementation of measures against
tax treaty abuse
• A communication proposing a framework for a new EU external
strategy for effective taxation
1
See http://ec.europa.eu/atwork/pdf/cwp_2015_new_initiatives_en.pdf
2
See https://www.eycom.ch/en/Publications/20121210-Global-Tax-Alert-6December-2012/download
3
See EY Global Tax Alert, E u rop ean Com m ission releases anti- tax avoidance
p ack ag e desig ned to p rovide u nif orm im p lem entation of B E PS m easu res and
m inim u m standards across M em ber S tates, dated 28 J anuary 2016.
2 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
The proposed ATA Directive goes much further than the OECD’s BEPS
recommendations and in fact represents a compromise between the
EU CCCTB proposal and a common response to the OECD’s Action
Plan. The Commission underscored this point by naming the proposal
an “anti-tax avoidance” directive rather than an “anti-BEPS” directive.
The proposed ATA Directive goes much further than the
OECD’s BEPS recommendations and in fact represents a
compromise between the EU CCCTB proposal and a common
response to the OECD’s Action Plan. The Commission
underscored this point by naming the proposal an “ anti-tax
avoidance” directive rather than an “anti-BEPS” directive, as
many within the EU had been calling it before the proposal was
released. The naming of the ATA Directive was likely made to
differentiate the Commission’s work from the OECD’s proj ect
and to reflect the Commission’s position that it is the EU’s
legislative body, whereas the OECD is a body that can only
make non-binding recommendations. Some could even argue
that the proposed ATA Directive represents an overt attempt
by the Commission to further harmonize EU Member States’
corporate tax regimes.
2015: laying the groundwork
for a busy 2016
Before exploring the particular elements of the Commission’s
anti-tax avoidance package, a brief overview of the steps taken
in 2015 by the Commission, the European Parliament and
ECOFIN is in order:
In 2015, the EU bodies closely monitored the OECD’s progress
in finalizing the BEPS Action Plan in order to develop their
own agenda on EU implementation and be prepared to
quickly respond once the final recommendations were issued.
Numerous initiatives and proposals were announced through
2015, not all of them from the Commission itself, thereby
laying the groundwork for what will likely be an intense and
very busy 2016 for EU and national policymakers, legislatures,
taxpayers and advisers.
In March 2015, the Commission released a package of tax
transparency measures4 aimed at tackling perceived corporate
tax avoidance and harmful tax competition in the EU. The
package included a proposal to introduce the automatic
exchange of information between Member States in regard to
information relating to cross-border tax rulings, and announced
plans to consider new transparency requirements for
multinationals and to launch a review of the Code of Conduct
(Business Taxation).
In J une the Commission followed up with the release of a
comprehensive action plan to reform corporate taxation in
the EU. The plan included an initiative to revisit the 2011 EU
CCCTB proposal, but with some changes — the Commission
advocated making the CCCTB mandatory and implementing it
in phases (i.e., postpone the work on consolidation until after
a common corporate tax base is agreed). The Commission also
stated that it would explore a number of measures to ensure
the effective taxation of profits, improve the transfer pricing
framework in the EU, provide guidance on how to implement
patent box regimes in line with the OECD’s “modified nexus
approach,” 5 create a coordinated, EU-wide approach to
resolving double taxation disputes, ensure a more common
approach to third j urisdiction non-cooperative tax j urisdictions,
and reform the Code of Conduct (Business Taxation) and the
Platform on Tax Good Governance.
2015 further saw both ongoing and new scrutiny of multiple
Member States’ tax regimes under the banner of State Aid
investigations. In October 2015, the Commission determined
that Luxembourg and the Netherlands granted illegal State
Aid to a Luxembourg-resident and a Dutch-resident company,
respectively, which both form part of a multinational company
(MNC) group. The Commission found under the EU State Aid
rules that Luxembourg and the Netherlands granted a selective
4
See http://www.ey.com/GL/en/Services/Tax/International-Tax/Alert-European-Commission-presents-a-package-of-tax-transparency-measures
5
See http://www.ey.com/GL/en/Services/Tax/International-Tax/Alert-OECD-explains-agreed-approach-on-intangible-property-regimes-under-BEPSAction-5
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
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2 1
tax advantage. This news was followed in early December
2015 by the European Commission’s announcement that it is
investigating the Luxembourg rulings of an MNC that involves
a Luxembourg company with US and Swiss branches.6
The European Parliament
In the wake of the November 2014 illegal leaking of
Luxembourg tax rulings, and public interest in the Commission’s
ongoing State Aid investigations, the European Parliament
took steps to review and propose changes to EU corporate
tax policies through 2015. In December 2014 it decided to
launch the drafting of a legislative own-initiative report on
increasing transparency, coordination and convergence to
corporate tax policies in the EU. The drafting of the report was
assigned to the European Parliament’s permanent Economic
and Monetary Affairs (ECON) Committee. The European
Parliament made another move in February 2015 by forming
the Special Committee on Tax Rulings and Other Measures
Similar in Nature or Effect (TAXE committee), with a mandate
to review Member States’ ruling practices going as far back as
J anuary 1991.
The ECON committee in September released a draft version
of its report, “Bringing transparency, coordination and
convergence to Corporate Tax policies in the Union.” The final
version, which was adopted by the committee on 1 December
2015 and published on 2 December, recommended that the
Commission, inter alia:
• Table a proposal for CbC reporting on profit, tax and
subsidies by J une 2016
• Table a proposal for introducing a “Fair Tax Payer” program
• Introduce a Common Tax Base (CCTB) as a first step, and
then introduce consolidation as well (CCCTB)
6
It is important to note that the investigation is limited to the rulings
obtained by this MNC and we are not aware of any more general Commission
focus on exempt branch structures.
2 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Table a proposal for a common European Tax Identification
Number
• Table a proposal for legal protection of whistle-blowers
• Improve cross-border taxation dispute resolution
mechanisms
• Table a proposal for a new mechanism whereby Member
States should inform each other if they intend to introduce
a new allowance, relief, exception, incentive, etc. that may
affect the tax base of other Member States
• Estimate the corporate tax gap
• Strengthen the mandate and improve transparency of the
Code of Conduct Group
• Provide guidelines regarding “ patent boxes” so as to ensure
they are not harmful
• Develop common definitions for “permanent establishment”
and “economic substance” so as to ensure that profits are
taxed where value is generated
• Develop an EU definition of “tax haven” and countermeasures for those who use them, and
• Improve the transfer pricing framework in the EU
On 16 December 2015, the European Parliament in a plenary
session adopted the report by an overwhelming maj ority of
500 to 122 votes, with 81 abstentions. The report is de facto
non-binding from a legislative perspective, but puts forward
specific policy proposal recommendations, to which the
Commission has to respond within three months. After months
of public fact-finding hearings, the TAXE committee also
released a report; an interim report of its initial findings
ECOFIN said that EU directives should be, where
appropriate, the preferred vehicle for implementing the
BEPS recommendations in the EU in order to ensure
both legal certainty and proportionality in the level of
harmonization required by the Single Market.
and recommendations was issued in J uly 2015, with the
committee issuing a final report in October. The final report
recommended, inter alia,
• Introducing CbC reporting for multinational companies
on financial data including profits made, taxes paid and
subsidies received
• Introducing clear definitions of “economic substance” and
other determining factors of corporate tax bills
• Developing common EU guidelines regarding tax rulings
and advance transfer pricing agreements, specifically for
the application of the arm’s length principle
• Introducing a compulsory EU-wide CCCTB so that there is
a common agreement on what is allowed in terms of tax
rulings and advance transfer pricing agreements
• Implementing a framework under which Member States
systematically share their national rulings and other
tax information with each other as well as with the
Commission
• Appointing a permanent, politically accountable chair of
the Code of Conduct Group and having finance ministers
regularly participate in the Group
• Developing an EU legislative framework to better protect
whistleblowers whose revelations promote the public
interest
As with the ECON report, the European Parliament adopted
the TAXE committee report in a 25 November 2015 plenary
session by an overwhelming majority (508 votes to 108,
with 85 abstentions). The TAXE committee’s mandate ended
on 30 November. The European Parliament on 2 December
approved a measure to continue the committee’s work for
six months under a new mandate.
The scene is set for 2016
At an 8 December 2015 meeting, ECOFIN formally adopted
a legislative proposal to amend Directive 2011/16/EU (the
Directive on the Automatic Exchange of Information) that will
require Member States to automatically exchange information
related to cross-border tax rulings and advance pricing
arrangements.7 ECOFIN had reached political agreement on the
proposal in October. As part of the new exchange procedure,
the Commission will develop a secure central directory for
storing the exchanged information. The directory will be
accessible to all Member States and, to the extent that it is
required for monitoring the correct implementation of the
Directive, to the Commission. The formal adoption of the
Directive amendments fulfilled one of the elements of the
Commission’s March 2015 tax transparency package.
ECOFIN also adopted conclusions regarding the EU
implementation of the OECD’s BEPS recommendations. It said
that EU directives should be, where appropriate, the preferred
vehicle for implementing the BEPS recommendations in the
EU in order to ensure both legal certainty and proportionality
in the level of harmonization required by the Single Market.
ECOFIN tasked the Commission with developing a legislative
proposal on implementing Actions 2 (hybrid mismatches),
3 (Controlled Foreign Company rules), 4 (interest limitation
rules), 6 (treaty anti-abuse rule), 7 (permanent establishment
status) and 13 (CbC reporting).
ECOFIN asked that the Commission take into account the
consideration already given to those Action items within
the Commission’s ongoing work, notably with respect to
the CCCTB. Regarding Action 6, the insertion of a common
anti-abuse clause is envisaged in the context of the recast of
the Interest and Royalties Directive. ECOFIN noted that the
implementation of BEPS measures via EU legislation shall not
preclude the application of Member States’ domestic legislation
or agreement-based provisions aimed at preventing BEPS.
7
See EY Global Tax Alert, E U Cou ncil adop ts directive on exch ang e of
inf orm ation on tax ru ling s, ag rees on oth er corp orate tax issu es, dated
10 December 2015.
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2 3
I nto 2 0 1 6
28 J anuary anti-tax avoidance
package
Th e ATA D irective
The proposed ATA Directive significantly expands the scope
of what was envisioned in ECOFIN’s 8 December 2015
conclusions, with provisions addressing the OECD BEPS
measures requested by ECOFIN (interest deductibility, a GAAR,
Controlled Foreign Company (CFC) rules, and a framework to
tackle hybrid mismatches), as well as provisions on uniform
exit taxation and a switch-over clause as regards a minimum
effective corporate taxation rate that have been split from the
CCCTB proposal.
For a comprehensive overview of how the six provisions
would operate, please see EY Global Tax Alert, E u rop ean
Com m ission releases anti- tax avoidance p ack ag e desig ned
to p rovide u nif orm im p lem entation of B E PS m easu res
and m inim u m standards across M em ber S tates, dated
28 J anuary 2016 at ey . c om / t ax alert s.
It should be noted that the proposed Directive sets out
principle-based rules and leaves the details of their
implementation to the Member States. In that regard, Member
States may choose to implement measures that go above and
beyond those set out in the Directive; in effect, it represents a
set of minimum standards.
The provisions that will likely cause the biggest points of
contention during Member States’ debate of the proposed ATA
Directive are the switch-over clause and hybrid mismatch rules.
The switch-over clause would require Member States to deny
an exemption from corporate tax with respect to distributions
of profits and proceeds from the sale of shares in low-taxed
entities that are resident in, and PEs that are located in, third
countries. An entity or PE would be regarded as low-taxed
when that entity or PE is subj ect to a statutory corporate tax
rate lower than 40% of the statutory corporate tax rate that
would have been charged by the Member State of the taxpayer
receiving the income. A credit would be available for tax that
was paid by the low-taxed subsidiary or PE.
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At this stage, the proposed CbCR Directive would not require the
public disclosure of CbC reports, as the European Parliament and
many tax justice activists have been demanding. However, the
Commission noted in its initial 28 J anuary draft that the decision not
to require public disclosure does not preclude it from deciding in the
future to propose public disclosure obligations on companies.
This provision is a highly controversial one; the UK is believed
to have strongly obj ected to inserting this clause into the
proposed ATA Directive, for example. If the Council is unable
to obtain unanimous support for this particular provision, it is
possible that it will be split up and postponed for adoption at a
later stage.
The hybrid mismatch provision is intended to address situations
where there are differences in the legal characterization of
payments or entities between two Member States which give
rise to a double deduction or a deduction/no inclusion. The
proposed Directive would require that the treatment in the
Member State where the first deduction is claimed be followed
by the other Member State where the income is received or a
second deduction is claimed.
This approach differs significantly from the BEPS Action 2
recommendations, where there is a primary rule that the
deduction be disallowed, with a secondary rule requiring that
income be taxed, or a second deduction disallowed, if the
primary rule is not adopted. However, it seems unlikely that
the Commission would go so far to propose such a provision
if it were not confident it could get agreement by all Member
States. Again, this particular piece of the puzzle is likely to
attract controversy as the negotiations move forward.
Th e CbCR D irective
The Commission’s 28 J anuary package also included a
proposed Council Directive that would amend Directive
2011/16/EU to provide for the mandatory automatic exchange
of CbC reports. The proposed amendments would largely
implement the OECD’s CbC reporting recommendations within
an EU context, and would require Member States to implement
the exchange of CbC reports between competent authorities in
relation to multinational enterprises for fiscal years beginning
on or after 1 J anuary 2016. The proposal does not contain
rules on the Action 13 requirements for a master file and local
file, as these are already addressed by the EU’s voluntary Code
of Conduct on Transfer Pricing Documentation for Associated
Enterprises in the European Union. The proposal has been
specifically designed to enable the automatic exchange of CbC
reports to build on the existing rules in Directive 2011/16/
EU relating to the practical arrangements for exchanging
information, including the use of standard forms.
During an 8 March 2016 meeting, ECOFIN reached political
agreement on moving forward with the proposed CbCR
Directive, subj ect to the European Parliament’s opinion of
the proposal as well as the UK’s pending CbCR consultation
with its Parliament. Following the 28 January release of the
proposed CbCR Directive, there had been some concerns
among the Member States regarding the mandatory nature
of the “secondary reporting” provision for EU subsidiaries
in cases where (i) the ultimate parent is not required to
file a CbC report in its jurisdiction of tax residence, (ii) the
ultimate parent’s j urisdiction does not have a competent
authority agreement in place to effect CbC report exchange
with a constituent entity’s j urisdiction of tax residence, or
(iii) there has been a “systemic failure” by the ultimate parent’s
jurisdiction to carry out CbC report exchange. Under the
OECD’s final Action 13 recommendations regarding CbCR, the
secondary reporting mechanism is optional.
At the 8 March 2016 ECOFIN meeting, the Member States
agreed that secondary reporting will be mandatory, but
not until the 2017 fiscal year; it will be optional in 2016.
The Council will formally adopt the CbCR Directive after
the European Parliament has given its opinion and national
parliamentary reservations have been lifted, and after the text
is finalized in all languages.
At this stage, the proposed CbCR Directive would not require
the public disclosure of CbC reports, as the European
Parliament and many tax j ustice activists have been
demanding. However, the Commission noted in its initial 28
January draft that the decision not to require public disclosure
does not preclude it from deciding in the future to propose
public disclosure obligations on companies. The Commission
is currently carrying out an impact assessment to determine
whether multinationals should be required to publicly disclose
certain information on a CbC basis. The Commission expects to
finalize the impact assessment and announce a decision on the
matter in spring 2016.
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The Commission’s decision to address Actions 6 and 7 in a
recommendation, rather than including them in a binding
EU Directive, seems appropriate, given that the decisions on
whether to include a PPT and how to define a PE in a bilateral
tax treaty will be negotiated by the relevant treaty partners.
R ecommendation on tax treaty issues
As part of the 28 J anuary anti-tax avoidance package,
the Commission issued a recommendation regarding the
EU implementation of the OECD’s proposed measures
addressing tax treaty-related BEPS concerns, i.e., the Action 6
recommendation that j urisdictions include in their tax treaties a
general anti-abuse rule based on a principal purpose test (PPT),
and the Action 7 recommendation that j urisdictions adopt the
new proposed changes to the definition of PE in Article 5 of
the OECD Model Tax Convention to make the definition more
resilient against artificial structures designed to circumvent
its application.
Regarding Action 6, the Commission recommended that when
Member States include a PPT as suggested by the Action 6
Final Report in tax treaties which they conclude among
themselves or with third j urisdictions, they should insert in the
PPT the following modification to ensure compliance with EU
law (modification in bold):
“ Notwithstanding the other provisions of this Convention, a
benefit under this Convention shall not be granted in respect
of an item of income or capital if it is reasonable to conclude,
having regard to all relevant facts and circumstances, that
obtaining that benefit was one of the principal purposes of any
arrangement or transaction that resulted directly or indirectly
in that benefit, unless it is established that it re ects a
g en u i n e ec on om i c ac t i v i t y or t h at granting that benefit in
these circumstances would be in accordance with the obj ect
and purpose of the relevant provisions of this Convention.”
Regarding the implementation of Action 7, the Commission
asked Member States to adhere to the proposed changes to
Article 5 of the OECD Model when concluding tax treaties
among themselves or with third j urisdictions.
The Commission’s decision to address Actions 6 and 7 in a
recommendation, rather than including them in a binding
EU Directive, seems appropriate, given that the decisions on
whether to include a PPT and how to define a PE in a bilateral
tax treaty will be negotiated by the relevant treaty partners.
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For example, it is possible that when one treaty partner is more
industrialized than the other partner, the former will agree
to give more concessions to the latter by deviating from the
generally applicable OECD guidelines on what constitutes a PE.
Thus, it makes sense to leave it up to the Member States to
decide those questions during their treaty negotiations.
External strateg y f or ef f ective taxation
The Commission’s 28 J anuary external strategy
communication summarizes a number of issues around BEPS,
the principles underlining the various anti-BEPS measures
and the various measures and initiatives being taken within
the EU. The communication sets out the Commission’s view
that a coordinated EU external strategy (i.e., covering third
jurisdictions and not just EU Member States) is essential to
boosting Member States’ collective success in tackling tax
avoidance, ensuring effective taxation and creating a clear and
stable environment for businesses in the Single Market.
Alongside mention of the proposed ATA and CbCR Directives,
the communication makes reference to a number of
additional measures which the Commission believes could
further strengthen the promotion of tax good governance
internationally. At the core of these measures lies the
creation and maintenance of an EU-wide list of problematic
tax j urisdictions. The Commission explained that the current
medley of individual Member State listing processes should
ultimately be replaced with a clear and coherent EU approach
to identifying third j urisdictions that fail to comply with good
governance standards, along with a unified EU response to
these j urisdictions. The Commission stated that once this
common EU list is fully established, Member States in Council
should formally agree to use it instead of national lists to
address external base erosion threats.
While the Commission’s communication may fly under the radar
since it does not have any binding legal effect, tax advisers and
their clients should take note that the Commission’s goal of
developing a common EU list of problematic tax jurisdictions
could have a significant impact on third jurisdictions’ tax
sovereignty. As we saw when the Commission in J une 2015
It is highly likely that we could see an ATA Directive
agreed upon by mid-2016, but not necessarily
encompassing all provisions in their current form and
with the technical details set out in the 28 J anuary
proposal, and with a requirement that the Member States
implement the Directive in a very short time frame.
published for the first time a consolidated overview of all third
jurisdictions listed by Member States for tax purposes, such
j urisdictions take these “ black” and “ gray” lists very seriously.
An EU-wide list monitored and maintained by the Commission
could have a greater effect on the international investment
climate than many people may realize.
Very often multinationals may decide to invest in a particular
j urisdiction not necessarily because of tax reasons but because
of other factors, such as a favorable regulatory environment,
meaning those companies have genuine business reasons for
locating in those j urisdictions. Tax advisers should therefore
closely follow the development of the EU’s list of problematic
tax j urisdictions and the criteria for listing such j urisdictions,
particularly as the Commission will be coordinating its efforts
with regional bodies like the African Tax Administration Forum
(ATAF), the Centre de Rencontres et d’Etudes des Dirigeants
des Administrations Fiscales (CREDAF) and the Inter-American
Center of Tax Administrations (CIAT). In some ways the
Commission’s efforts could be described as a back-door route
to globally aligning j urisdictions’ corporate tax systems.
Timing and prospects for
unanimity
The Netherlands, which holds the EU presidency for the first
half of 2016, has set an extremely ambitious timetable for
implementing the proposed ATA and CbCR Directives. It aims
to get a political agreement on the directives by the end of
its presidency (i.e., June 2016) and to have Member States
implement the directives into their national laws by the end of
December 2016.
So it is highly likely that we could see an ATA Directive agreed
upon by mid-2016, but not necessarily encompassing all
provisions in their current form and with the technical details
set out in the 28 January proposal, and with a requirement
that the Member States implement the Directive in a very
short time frame (i.e., a minimum of six months). MNEs
should therefore expect to see almost all of the proposed ATA
Directive provisions, as well as the proposed CbCR Directive, in
place by 2017, and should already start planning their current
structures around this expectation.
Aside from the big question of whether the Commission can
achieve unanimous support for the proposed ATA Directive,
there is a potentially troublesome issue for Member States
whose national laws do not currently have some of the
provisions called for under the Directive and would now
be required to implement them. Such a scenario raises a
fundamental question as to whether the Commission has
competence to require those Member States to adhere to the
Directive and further harmonize their tax regimes to other
Member States’ regimes.
Assuming the Commission did its homework and received a
legal opinion that it does have such competence, the next
question is what happens if the ATA Directive is implemented
but a provision runs counter to the general obj ective of a
Member State’s corporate tax system. Will that Member State
have the option to not implement that provision? If the answer
is no, then the Commission – as the watchdog of the EU treaties
and secondary law – would be required to open infringement
proceedings against a Member State that fails to implement the
Directive. If the proceedings are brought to the CJEU, and the
Court upholds the Commission’s position but the Member State
still refuses to implement the Directive, then that Member State
could be subj ect to penalty payment for each day it does not
comply with the Court’s j udgment.
Other BEPS measures
The amendments to Directive 2011/16/EU to require
automatic exchange of information regarding cross-border
tax rulings and advance pricing arrangements may raise some
logistical issues that have to be resolved as the Commission
develops the secure central directory for storing the
information that will be exchanged. It is not yet clear who will
actually be responsible for setting up the technical devices
that will enable Member States to upload the content of tax
rulings to the central depository. According to the directive,
the Commission will be tasked with monitoring Member States’
adherence to the new information exchange rules, but it will
not have a right to access the content of the rulings. That
means that if the Commission is involved in setting up the
directory, someone will have to ensure that the Commission
does not have full access to the entire content of the rulings.
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On the non-legislative side, it appears that much work will
be carried out by the Commission in terms of developing
recommendations or guidelines on what a ruling procedure
should look like and how transparency around a ruling system
should operate. It is possible that we could see the Commission
develop a system similar to Belgium’s, where rulings are
disclosed on an anonymous basis.
Regarding the reform of the Code of Conduct on business
taxation, ECOFIN on 8 March 2016 adopted conclusions on
enhancing the governance, transparency and working methods
of the working group (the Group) responsible for overseeing
whether the Member States are in compliance with the Code
of Conduct.8 In its 8 March conclusions, ECOFIN directed the
Group to, inter alia, develop guidance on the interpretation
of the gateway criterion and its application, and to actively
use existing sub-groups and establish new sub-groups where
appropriate. ECOFIN further concluded that efficiency will be
improved by speeding up the assessment of potentially harmful
tax regimes, with an earlier and more frequent involvement of
the Council.
ECOFIN also emphasized the need to increase the transparency
of the Group’s work, including by having more substantial
six-monthly Group reports to ECOFIN and regular oral
reports to ECOFIN from the Group’s chair, and by exploring
initiatives to further inform the public on the results of the
Group’s meetings. The Dutch EU Presidency intends to have a
decision made by the end of J une 2016 on the revision of the
Group’s mandate.
8
See EY Global Tax Alert, E U F inance M inisters reach conclu sions on new
ru les f or Code of Condu ct, dated 14 March 2016.
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State Aid investigations will
continue
As for the Commission’s decisions that Luxembourg and
the Netherlands violated EU State Aid rules, both Member
States have announced plans to appeal to the EU General
Court (the appeals had to be filed by 31 December 2015).
After the redacted versions of the decisions are published,
the companies involved will have two months to file their
respective appeals. It generally takes one to two years for the
General Court to reach a decision. If the court upholds the
Commission’s decisions, the Member States and companies
could file actions for judicial review with the CJEU. All in all,
we likely will not see a legal conclusion to these cases for
another three to five years.
Outlook for the CCCTB
Given that the Luxembourg EU Presidency successfully
convinced the Commission to split up the CCCTB proposal by
carving out measures against aggressive tax planning from a
future CCCTB directive proposal and integrating them into the
proposed ATA Directive, the prospects for introducing a CCCTB
now seem far more remote than they did in 2015. Because
there will be many discussions around the ATA Directive, there
will likely be little appetite to carry out the remaining work on
CCCTB in 2016.
The Commission’s decision to split the CCCTB proposal was
a very tactical move. Assuming it is able to get some kind of
agreement this year on implementing the ATA Directive, the
Commission will be in a strong position when addressing the
ECON Report’s recommendation to introduce a CCCTB. The
Commission could, for example, tell the European Parliament
that it successfully addressed the report’s recommendation
and that while there are remaining CCCTB issues on the
Commission’s agenda, it needs to digest what has been
achieved so far, and therefore the CCCTB discussions should be
postponed until 2017.
Recipe for confusion and
uncertainty?
Given the multiple BEPS initiatives being led by different EU
bodies, there are legitimate concerns that all of this work will
ultimately create a very unsystematic approach to tackling
BEPS, with all parties — the Member States, the Commission,
ECOFIN, the European Parliament and other stakeholders
such as tax campaign groups — having varying interpretations
of how the BEPS Action Plan recommendations should be
implemented in the EU. It will therefore be more critical than
ever that business closely monitors what has been decided,
recommended and implemented (and by whom) in order to
manage what will surely be a highly uncertain and complex
year for EU developments.
K eep i n g u p t o dat e on E u rop ean
dev elop m en t s i n 2 0 1 6
By all accounts, 2016 has the potential
to deliver significant developments at the
European level. But staying up to date with
change is a challenge for the busy tax leader.
Our Global Tax Alerts are designed to provide
timely, accurate, plain-English analysis of
developments and their impacts. Available by
either web access or within EY’s Global Tax
Guides app, they are a key source of relevant
information for your tax team.
L earn more about EY’s G lobal Tax G uides ap p
at ey . c om / t ax g u i desap p .
Access EY’s G lobal Tax Alerts library at
ey . c om / t ax alert s.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
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30
| The outlook for global tax policy in 2016
W h ere next f or th e
g lobal debate on tax?
3
While multinational enterprises (MNEs) are
understandably spending significant amounts of time,
human resources and money this year on preparing for
the implementation of the final BEPS recommendations
issued by the OECD in October 2015, the most
experienced minds will be focusing on the bigger picture,
keeping in mind that there will likely be other moving
parts to the debate throughout 2016 and beyond.
J ef f rey O w en s
Senior Policy Advisor, EY
+44 20 795 11401
j owens@uk.ey.com
Keeping track of both the OECD’s BEPS monitoring work and the
local implementation of BEPS recommendations into national law is a
critical task for MNEs in 2016. But following other intergovernmental
and international organizations — such as the G-20, European
Commission, World Bank, United Nations (UN) and International
Monetary Fund (IMF) (to name but a few) — for tax developments
will also be important, as those groups may build on the BEPS
momentum and seek to modify other aspects of the international
tax framework.
Addressing the concerns of developing j urisdictions, many of
which believed their voices were not sufficiently heard during the
OECD’s BEPS process, may well become a prominent issue in 2016,
especially as the UN has several projects underway focusing on tax
treaty issues relating to developing j urisdictions, and as China has
made capacity-building for emerging and developing j urisdictions a
key agenda item of its 2016 G-20 presidency. Exploring the crossborder tax challenges in specific sectors (such as natural resources
and information technology) could also potentially become areas of
greater focus.
The following sets out what could be on the BEPS agenda for 2016 —
both those pertaining directly to the implementation of the 15 BEPS
Action items, and those that could build on the OECD’s Action Plan.
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In many ways the multilateral instrument is perhaps the key
follow-up activity, since if we were to follow the traditional route
for modifying tax treaties it would take 10 to 15 years to get the
agreed changes into the 3,000-plus network of bilateral treaties.
BEPS Action Plan:
the next steps
Multilateral instrument and
arbitration provision
Now that j urisdictions have begun the monumental task of
considering the various BEPS recommendations and drafting
legislative proposals and/or guidance to implement those
measures (a process that started in some jurisdictions even
before the final reports were released), MNEs need to carefully
assess the details of any actions taken, as it is inevitable
that some differences will arise as j urisdictions adapt the
recommendations to their own existing law and policies. As
Klaus von Brocke notes in his EU Outlook (see page 18), the
challenges of monitoring individual j urisdiction developments
will be even more complicated for MNEs with operations in
the European Union, where multiple EU bodies have launched
(sometimes conflicting) initiatives on implementing the BEPS
recommendations in the EU. Whether or not the European
Commission’s 28 J anuary Anti-Tax Avoidance Directive can
survive through to final approval because of its more ambitious
approach, which some will see as an overt move toward tax
harmonization, and provide some form of glue that binds the
different constituents together remains to be seen.
The ad hoc group (the Group) tasked with developing the
multilateral instrument began its work in May 2015 and has
set itself a very ambitious timetable to finalize the instrument
and open it for signature no later than 31 December 2016.
So far, approximately 90 jurisdictions are participating in the
discussion. Given the ambitious timetable, the Group will be
meeting roughly every 6 weeks during 2016 to carry out the
necessary work. In many ways this is perhaps the key followup activity, since if we were to follow the traditional route
for modifying tax treaties it would take 10 to 15 years to get
the agreed changes into the 3,000-plus network of bilateral
treaties. It is in the interest of both business and government
that this scenario be avoided.
At the OECD level, follow-up work is being carried out in
relation to several Action items, including work on the transfer
pricing aspects of financial transactions, finalizing the guidance
on the practical application of transactional profit split methods
and the approach on hard-to-value intangibles, clarifying the
rules for the attribution of profits to permanent establishments
(in light of the changes to the PE definition), exploring solutions
to the broader question of treaty entitlement of non-collective
investment funds, and finalizing the details of a group ratio
carve-out and special rules for insurance and banking sectors
in the recommended approach for interest deductibility. Other
key OECD proj ects for 2016 include the development of the
multilateral instrument and an arbitration provision under
Action 15 and the creation of a framework for monitoring the
implementation of BEPS measures.
The final report on Action 14 (Making Dispute Resolution
Mechanisms More Effective) stated that a provision on
mandatory binding arbitration will be developed in the
negotiations of the multilateral instrument. This was one of the
more contentious recommendations, and in the end the OECD
had to limit its ambition in Action 14 to improving the mutual
agreement procedure (MAP), since not only did the BRICS
(Brazil, Russia, India, China and South Africa) fail to endorse
the idea of mandatory arbitration – largely because they did
not like the institutional framework within which the arbitration
would take place – but also because more than half of the EU
j urisdictions did not, which is even more surprising given that
they have signed onto the EU Arbitration Convention. It will
be fascinating to see how the arbitration issue pans out. The
Action 14 final report explained that while not all OECD and
G-20 j urisdictions agreed on arbitration as a mechanism for
improving the resolution of the mutual agreement procedure,
a group of 20 or so j urisdictions1 (all OECD members) have
committed to providing for mandatory binding MAP arbitration
in their bilateral tax treaties.
1
According to the Action 14 final BEPS report, the jurisdictions that have
committed to mandatory binding arbitration include Australia, Austria,
Belgium, Canada, France, Germany, Ireland, Italy, Japan, Luxembourg,
the Netherlands, New Zealand, Norway, Poland, Slovenia, Spain, Sweden,
Switzerland, the UK and the US.
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While we likely will not see any significant advances on arbitration
at the OECD level in 2016, MNEs should nevertheless be engaged in
UN developments, particularly as the UN has provided an outlet for
developing j urisdictions to voice their frustrations about not having
formal voting rights during the OECD BEPS process.
How this provision will fit into the multilateral instrument is
not entirely clear. Given that the instrument is intended to
apply to the tax treaty-based BEPS measures for which there
was consensus, and considering that a limited group of 20 or
so j urisdictions have so far committed to mandatory binding
arbitration, it is difficult to see how an arbitration provision will
be included in the multilateral instrument, unless j urisdictions
are permitted to selectively “ cherry-pick” implementation of
only certain provisions.
It is possible that the decision to include arbitration in the
negotiations of the multilateral instrument was a political
move to get the US involved in the negotiations2 and promote
a broader discussion on arbitration that goes beyond the
“ coalition of the willing.” The Group created a subgroup on
arbitration that is expected to meet about three times in 2016,
principally to examine how the multilateral instrument could be
used to implement mandatory binding arbitration provisions.
While the subgroup will undoubtedly hold important discussions
on the arbitration issue, it is unlikely that the OECD will be able
to convince more than a handful of additional j urisdictions —
especially non-OECD j urisdictions — to j oin the coalition of the
willing during 2016.
However, it is worth noting that the subgroup is chaired by
Kim Jacinto-Henares, Commissioner of the Bureau of Internal
Revenue in the Philippines. Jacinto-Henares is also chair of a
UN subcommittee that is currently reviewing dispute avoidance
and resolution aspects relating to MAP. The subcommittee
is considering several issues, such as ensuring that the MAP
procedure under Article 25 of the UN Model Double Taxation
Convention between Developed and Developing J urisdictions
(UN Model) functions as effectively and efficiently as
possible; considering other possible options for improving or
supplementing the MAP procedure, including through the use
of non-binding forms of dispute resolution (such as mediation);
and exploring issues associated with agreeing to arbitration
clauses between developed and developing j urisdictions.3 The
subcommittee, which was created in October 2015 by the
UN Committee of Experts on International Cooperation in Tax
Matters (the UN Tax Committee), will provide an initial report in
October 2016.
Thus, while we likely will not see any significant advances
on arbitration at the OECD level in 2016, MNEs should
nevertheless be engaged in UN developments, particularly as
the UN has provided an outlet for developing jurisdictions to
voice their frustrations about not having formal voting rights
during the OECD BEPS process.4 Moreover, with the UN Tax
Committee being given new political momentum as a result of
the J uly 2015 Addis Ababa Action Agenda, under which the
193 jurisdictions that attended the UN’s Third International
Conference on Financing for Development pledged, inter alia,
to further enhance resources for the UN Tax Committee to
improve its effectiveness and operational capacity, we could
see the UN pick up the pace on some of its tax initiatives.
In addition to MAP and other tax treaty issues that are now
being considered, the UN Tax Committee hopes to complete a
further update of the UN Practical Manual on Transfer Pricing
for Developing Jurisdictions by September 2016. Given this
increased activity and the developing j urisdictions’ desires to
have their specific BEPS challenges addressed, perhaps the
UN Tax Committee might consider the feasibility of reviewing
the OECD’s treaty-related BEPS recommendations and
implementing agreed changes to the UN Model?
3
2
On 2 October 2015, Robert Stack, US Deputy Assistant Treasury Secretary
for International Tax Affairs, confirmed that the US will participate in the
multilateral instrument discussions, although he emphasized that this decision
does not imply that the US ultimately will join in signing the instrument.
The mandate of the Subcommittee on the Mutual Agreement Procedure –
Dispute Avoidance and Resolution is available at http://www.un.org/esa/ffd/
tax-committee/tc-subcommittee-map-dar.html.
4
A distinction should be made between the BRICS jurisdictions, which
had formal voting rights, and the other (non-BRICS) developing and least
developed j urisdictions, which did not.
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Designing an effective monitoring mechanism will not be an easy
task, namely because of the likely challenges of determining what
will be monitored and who will do the monitoring.
BEPS monitoring
In the Explanatory Statement accompanying the final
BEPS deliverables, the OECD stated that OECD and G-20
jurisdictions have agreed to keep working on an equal
footing to monitor the implementation of the BEPS
measures. It indicated that the monitoring will consist
of an assessment of compliance, in particular with those
deliverables described as minimum standards, in the form
of reports on what j urisdictions have done to implement the
BEPS recommendations. The OECD added that monitoring
will involve some form of peer review, which will have to
be defined and adapted to the different Actions with a
view to establishing an inclusive framework within which
all j urisdictions implement their commitments, so that no
j urisdiction may gain unfair competitive advantages.
Designing an effective monitoring mechanism will not be
an easy task, namely because of the likely challenges of
determining what will be monitored and who will do the
monitoring. In terms of what will be monitored, the fact that
the BEPS recommendations come in different forms (minimum
standards, reinforced standards and best practices) and in
some cases provide j urisdictions with various options and
alternative approaches, means that there will not be one clear
and concise standard to be monitored.
That is quite different from the type of monitoring being
performed by the OECD’s Global Forum on Transparency
and Exchange of Information for Tax Purposes (Global
Forum), which is responsible for monitoring its members’
implementation of one (relatively) clear standard, i.e., the
global standard on transparency and information exchange.
Creating a group to monitor BEPS implementation will also
raise a host of questions. First, which jurisdictions will be
monitored – all that participated in the BEPS project, or
that formally committed to the BEPS recommendations? Or
j ust the OECD member j urisdictions, or even j ust the OECD
j urisdictions plus the non-OECD G-20 j urisdictions? And who
will be responsible for carrying out the monitoring and peer
reviews? A couple of ideas have already been floated in this
regard. One is to create an OECD BEPS Monitoring Forum,
similar to the Global Forum. This is an attractive option because
it could give the OECD Committee on Fiscal Affairs the leverage
to seek additional funding and continue to lead the BEPS
process.
Another idea could be to have the International Tax Dialogue5
(ITD) carry out the monitoring and have it report regularly
to the OECD and G-20. The ITD is a j oint initiative of the
European Commission, Inter-American Development Bank,
IMF, OECD, World Bank Group and Inter-American Center
of Tax Administrations that was created in 2002 to enable
international organizations, governments and officials to
network, identify and share good tax practices, and work
together to avoid duplication of efforts with regard to tax
initiatives. One of the advantages of that idea is that it would
save resources by using an existing intergovernmental body.
As the OECD ponders how to develop the monitoring
mechanism, it may want draw on past experiences to see
what pitfalls could lay ahead. While the Global Forum’s peer
review mechanism has run smoothly, other efforts have not
been as successful. As an example, the Annex to the OECD’s
1995 Transfer Pricing Guidelines set out a peer review process
that was intended to provide OECD Working Party No. 6
with detailed information on the legislation, practices and
experiences of transfer pricing in OECD member j urisdictions.
Mexico volunteered for a full review, which was carried out in
2002-03 and was considered by many to be a great success.
However, since then no other jurisdictions have volunteered for
a full j urisdiction review, which shows the political sensitivities
involved in this area. Will monitoring and/or peer reviews of the
implementation of the BEPS transfer pricing recommendations
suffer a similar fate?
5
3 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
http://www.oecd.org/tax/tax-global/international-tax-dialogue.htm
China’s G-20 Presidency
I mp roving th e international tax
reg ime: an excerp t f rom th e
messag e dated 1 D ecember 2 0 1 5
f rom Ch inese President X i J inp ing
As Australia and Turkey did in their respective 2014 and 2015
G-20 presidencies, China has made improving the international
tax regime a priority of its 2016 presidency. However, whereas
Australia and Turkey focused on the development of the BEPS
Action Plan through a high-level policy lens, China appears to
be adopting a more ambitious approach that would broaden
the G-20 tax agenda beyond the narrow focus on BEPS.
“ International tax is at the j uncture of a
historical change where globalization and
emerging industries pose challenges to tax
rules, policies and administration systems.
The G20 should deepen international
tax cooperation to establish on a global
scale mechanism which is inclusive,
fair and transparent, with the broad
participation of developing j urisdictions.
While implementing the outcomes of
the international tax agenda (e.g., BEPS
project) and the consensus reached in other
tax-related arenas, the G20 should continue
to move forward global tax cooperation,
combat tax evasion and avoidance, and give
practical help to developing j urisdictions
in capacity-building on tax administration.
In addition, efforts should be made to
explore future development of taxation,
and give full scope to the role of taxation
in promoting investment, growth and
structural reforms.”
In a message dated 1 December 2015 from Chinese President
Xi Jinping6 setting out China’s key agenda items, he stated
that while implementing the outcomes of the BEPS project
and the consensus reached in other tax-related arenas, the
G-20 should continue to move forward on furthering global tax
cooperation, combating tax evasion and avoidance, and giving
practical help to developing j urisdictions in capacity-building on
tax administration. The emphasis on developing j urisdictions
is consistent with China’s position that the G-20 should seek
the broad participation of the developing j urisdictions when
furthering international tax cooperation, and that efforts
must be made to address the special challenges that G-20 tax
regimes impose on emerging economies.
Xi’s message also stated that “efforts should be made to
explore future development of taxation, and give full scope
to the role of taxation in promoting investment, growth and
structural reforms.” This suggests that China may want
to move the BEPS debate past the technical detail and
administrative phase, past the discussion on how j urisdictions
could leverage the changes made under the BEPS project,
and into new waters about how to increase j urisdictions’
competitiveness and economic growth. This is an agenda
that should resonate with G-20 finance ministers, who are
confronted with sluggish growth and growing unemployment.
Looking beyond 2016, it is interesting to note that another
BRICS jurisdiction, India, will take over the G-20 Presidency
in 2018 (Germany will have the presidency in 2017). This
presents a real mix of the developed and the developing over
the next few years, which is bound to have implications for the
direction of the debate.
6
http://www.g20.org/English/China2016/G202016/201512/
P020151210392071823168.pdf
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
3 5
How the common reporting standard process unfolds in 2016
could provide a dry-run for country-by-country reporting.
Sleeper issues?
Other possible developments to watch for in 2016 are whether
tax issues that have been addressed at a high-policy level in
the last few years will now crystallize into broader discussions
as a result of the BEPS project. For example, in October 2015,
the IMF, OECD, UN and World Bank released a report, “Options
for Low Income Jurisdictions’ Effective and Efficient Use of Tax
Incentives for Investment,” 7 in response to a request from the
G-20 Development Working Group to explore whether there
is room for more effective and efficient use of investment
tax incentives in low-income j urisdictions by improving
transparency and accountability, a debate that leads naturally
into the question of what is fair and unfair tax competition.
The report sets out principles for the design and governance of
tax incentives and provides guidance on good practices in these
areas. It also discusses options for international coordination
to address the adverse cross-border spillover effects that tax
incentives can have on the welfare of other j urisdictions. The
report’s findings could factor into a wider debate on how to
reconcile the need for a business-friendly tax environment with
the need to protect the revenue base, a debate that the World
Bank is well-placed to lead.
Other questions that could be teed up for further exploration
include what the BEPS project means for particular industries
such as financial services, digital services and natural
resources.
7
http://www-wds.worldbank.org/external/default/WDSContentServer/
WDSP/IB/2015/11/05/090224b083198498/1_0/Rendered/PDF/
Options0for0lo0D00UN0and0World0Bank.pdf
3 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
CRS as a dry run for countryby-country reporting?
While the 2014 development of the OECD’s common reporting
standard (CRS) for the automatic exchange of financial account
information predominantly affects the financial services
industry, this year’s rollout of the CRS could serve as a litmus
test on whether the country-by-country reporting (CBCR)
mechanism developed under Action 13 can be made to work
efficiently and effectively from a practical standpoint.
For the more than 50 “early adopter” jurisdictions that
committed to a first exchange of financial account information
in 2017, financial institutions in those jurisdictions needed to
have new account opening procedures in place from 1 J anuary
2016. How the CRS process unfolds could provide a dry-run
for CBCR. If the tax authorities have significant problems with
administering the CRS, what does that mean for CBCR, which
will require a more complicated exchange process and where
there is still not a common standard between the EU, OECD
and certain jurisdictions (although it is to be welcomed that the
vast majority of jurisdictions that have legislated for CBCR have
closely followed the OECD template)?
Parting thoughts —
the bigger picture
As governments and business look back on the two years of
the BEPS project, it is important not to get too engrossed
in the technical details. Yes, these are important, but the
big achievement of BEPS is having changed the attitudes
on the part of government and business. BEPS showed that
governments are prepared to accept certain constraints
on their fiscal sovereignty – a recognition that without
enhanced international coordination, our current corporate
tax systems were unlikely to survive in the current global
environment, and that there was a need for a set of rules
to determine what are acceptable and unacceptable
tax practices.
BEPS was also a wake-up call for business, forcing them to
accept that in today’s more transparent environment they
need to be able to not j ust explain their tax strategies to the
tax authorities, but also defend them in the court of public
opinion. Both of these developments should be welcomed
as a move in the direction of more accountability toward
citizens and a more open debate on how we design our
tax systems.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
3 7
38
| The outlook for global tax policy in 2016
Australia
4
Luxembourg
88
Belgium
10
Malaysia
92
Brazil
14
Mexico
96
Canada
18
Netherlands
102
China
24
New Zealand
106
Cyprus
32
Norway
112
Czech Republic
36
Philippines
116
Denmark
40
Poland
120
Finland
44
Russia
124
France
48
Singapore
130
Germany
52
Slovakia
134
Hong Kong SAR
58
South Africa
138
Hungary
62
Spain
142
India
66
Switzerland
146
Indonesia
68
Taiwan
150
Ireland
72
Thailand
154
Israel
76
United Kingdom
158
Italy
80
United States
164
Japan
84
Vietnam
170
The outlook for global tax policy in 2016 |
39
Australia
1
| Tax rates (2015–16)
Tax p olicy
A lf C ap i t o
alf.capito@au.ey.com
+61 2 8295 6473
1 .1 K ey tax rates123
T on y S t olarek
tony.stolarek@au.ey.com
+61 3 8650 7654
Tax controversy
M art i n C ap li c e
martin.caplice@au.ey.com
+61 8 9429 2246
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income tax
rate (national and local
average if applicable)
30%
30%
1
—
Top individual income tax
rate (national and local
average if applicable)
49%
49%
2
—
Standard Value Added
Tax rate
10%
10%
3
—
H ow ard A dam s
howard.adams@au.ey.com
+61 2 9248 5601
2
S tay u p to date w ith
develop m ents in A u stralia
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
C on t en t p rov i si on dat e
J anuary 2016
4 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .1 K ey drivers of tax p olicy ch ang e
In September 2015, Malcolm Turnbull replaced Tony Abbott as Australia’s Prime
Minister during the Government’s first term in office, and appointed a new Treasurer,
Scott Morrison. This is expected to influence Australia’s tax policy direction and the
plans and process for a 2016 tax reform White Paper. Early attention to an innovation
agenda may influence previous tax and future tax policies.
1
The rate of tax in respect of the taxable income of a company is 30% , but if the company is a small
business entity with aggregated turnover of less than A$ 2 million for a year of income the rate is 28.5%
(refer to Subsection 23(2) Income Tax Rates Act 1986.
2
The top marginal tax rate is 45% (refer to Section 12 and Schedule 7 of Income Tax Rates Act 1986).
A Temporary Budget Repair Levy which increases the highest personal marginal income tax rate
applicable for individuals by 2 percentage points, is effective until 30 June 2017 (refer to Section 35
Income Tax Rates Act 1986). Furthermore a Medicare levy of 2% is imposed on taxable income under
Section 6 of the Medicare Levy Act 1987.
3
Refer to Section 9-70 of A New Tax System (Goods and Services Tax) Act 1999.
A u st rali a
Conditions anticipated in the 2015-16 Federal Budget include:
• A refocus on growth of the economy away from capital
spending on mining/resources to non-mining investments.
• Promoting consumer spending through small business tax
concessions, and increasing exports.
• Transparency and integrity measures to ensure taxpayers
(particularly multinationals) pay their fair share of tax.
Tax measures focusing on tax integrity were initiated in the
2015 Budget:
• Multinational Anti-Avoidance Law (MAAL) to target
multinationals artificially avoiding a taxable presence in
Australia has been enacted.
• Country-by-country (CbC) reporting (BEPS Action 13) has
also been enacted.
• Extension of GST to digital imports and certain other
imported goods and services was released as exposure
draft law.
In addition, the Government is exploring:
• Implementation of anti-hybrid rules (BEPS Action 2).
• Development of a voluntary tax disclosure code.
• Non-final withholding tax on sales by non-residents of certain
Australian direct or indirect real property interests.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• No changes to CIT proposed for 2016.
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• The Government plans no changes to Australia’s thin
capitalization rules, following the release of the OECD’s final
BEPS report for Action 4.
• The review of options to broaden the corporate income tax
base will include interest deductibility, but this review can be
seen as related to the White Paper process rather than shortterm ad hoc reform.
• Hybrid mismatches
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016☐
: Increased burden in 2016 ☐
• The Board of Taxation is currently consulting on the
implementation of anti-hybrid rules (BEPS Action 2) and is
expected to report by March 2016, to allow the Government
to consider actions in the 2016-17 Federal Budget.
• Treatment of losses
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• The Government has legislated to improve company loss
recoupment rules for companies with preference and other
classes of shares with “unequal rights.”
• Loss integrity measures might be loosened under the
innovation agenda released in December 2015.
• Capital gains tax
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• The Government is introducing a non-final withholding
tax regime from 1 J uly 2016 in relation to sales by nonresidents of certain Australian direct or indirect real property
interests. ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• There is a tax reform debate regarding the GST rate and
base, but any changes if agreed from the reform process
would not be operative for some time. ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Changes have been proposed for income years commencing
on or after 1 July 2017 to extend the GST to inbound digital
product and services to Australian consumers, as well as
removing the GST for imported goods with value less
than A$1,000. ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
4 1
A u st rali a
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• The Government has not announced any further changes to
Australia’s thin capitalization regime after the release of the
OECD’s final BEPS report for Action 4.
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• CbC reporting, which has been enacted in domestic law, will
impose greater compliance obligations for significant global
entities from 1 J anuary 2016.
• Increased penalties apply from 1 J uly 2015 to tax avoidance
and profit shifting schemes (including transfer pricing) where
there is no reasonably arguable position.
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• No changes to R&D proposed under the Industry Innovation
and Competitiveness Agenda.
• Other business incentives — including
depreciation/amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• Incentives for eligible small business entities, including
a company tax rate cut to 28.5% , a 5% tax discount
(for unincorporated entities), immediate deductions
for depreciating assets acquired under A$20,000, and
immediate deductions for certain start-up costs.
4 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• The Australian Taxation Office (ATO) has significantly
increased its focus on enforcement, including on MNEs
• The ATO distinguishes between compliant taxpayers
and those that do not seek to engage, and is basing its
enforcement approach on risk classifications (see the ATO’s
“Reinventing the ATO Blueprint” released in March 2015).
• There is a strong focus on advance compliance
arrangements, or else pre-lodgment compliance reviews, to
streamline compliance activities.
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Medicare Levy rate of 2% for the 2015-16 income year.
• Temporary Budget Repair Levy of 2% is effective until
30 J une 2017, so top marginal rate is 49% .
• FBT rate is temporarily increased from 47% to 49% from
1 April 2015 to 31 March 2017.
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Review of options for broadening the personal income tax
base is unlikely to trigger changes prior to the 2016
Federal election.
A u st rali a
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
X
Corp orate income tax burden
L ow er
N o ch ang e
H ig h er
Corp orate income tax burden
ow do
ernot expect maj or new tax reformsN other
o ch than
ang the
e integrity measures noted above.H ig h er
• L We
Personal
income tax burden
L ow er income tax burden N o ch ang e
H ig h er
Personal
X
X
X
X
L ow er
N o ch ang e
H ig h er
Personal income tax burden
L ow er
N o ch ang e
H ig h er
V AT/ G ST/ sales tax burden
• V L AT/
We
or burden
new tax reformsN until
reform
ow do
er
o chtaxang
e cycle is concluded in 2016 intoH the
ig h next
er election.
G not
ST/ expect
salesmaj
tax
X
N
L ow er
N
X
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
o ch ang e
X
o ch ang e
N o ch ang e
H ig h er
H ig h er
H ig h er
• We do not expect maj or new tax reforms until tax reform cycle is concluded in 2016 into the next election.
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
Taxes on w ag es and emp loyment
• The tax reform cycle will likely include a public debate on
corporate taxation leading up to the 2016 election, with
policies not likely to be implemented until after the election.
• Reporting requirements may be relaxed for start-ups under
the innovation agenda.
• Measures already underway from the 2015 Budget will be
developed, including
V AT, G ST and sales taxes
• Implementation of anti-hybrid rules
• Voluntary code of conduct for corporates
• Guidance related to the MAAL and CbC reporting, both of
which were enacted in December 2015. On 12 J anuary
2016, the ATO issued the “ MAAL client experience
roadmap” which is intended to assist taxpayers transition to
compliance with the new MAAL provisions.
• Tax reform discussions will continue in regards to increasing
the GST rate and/or broadening the base. No change is
expected prior to the 2016 election.
• The tax base will be broadened from 1 J uly 2017 in regards
to certain goods and services imported into Australia,
in addition to the abolition of the GST-free threshold for
imported goods of less than A$ 1,000.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
4 3
A u st rali a
2 .5 Political landscap e
• The Coalition Government elected in September 2013 had
a change of Prime Minister and Treasurer and ministers
in 2015, and an election is due by the end of 2016. The
Government does not hold a majority in the Senate and
needs the support of minor parties and independent
Senators to pass legislation.
• The new Prime Minister and Treasurer have mentioned
growth as a focus.
• Innovation agenda addresses venture capital investments,
employee share schemes, company losses and acquired
intangible assets.
• A comprehensive tax reform White Paper is expected in
2016; originally this was to set out tax directions for the
Government to take to the election. But the Government has
the option of an early election.
• Federal Budget is not expected to return to surplus soon,
which sets up Government focus on spending cuts as well as
tax revenues.
• Senate committee is looking at options to further broaden
the income and corporate tax base.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Malcolm Turnbull MP, Prime Minister
• Warren Truss MP, Deputy Prime Minister and Minister for
Territories, Local Government and Maj or Proj ects
• Scott Morrison MP, Treasurer
• Kelly O’Dwyer MP, Assistant Treasurer and Minister for Small
Business
• Senator Mathias Cormann, Deputy Leader of Government in
the Senate and Minister for Finance
• Alex Hawke MP, Parliamentary Secretary to the Treasurer
• Alan Tudge MP and J ames McGrath MP, Parliamentary
Secretary to the Prime Minister
T ax adm i n i st rat i on leaders
• Chris J ordan AO, Tax Commissioner of the Australian
Taxation Office (ATO)
• Neil Olesen, Second Commissioner (Compliance)
• Andrew Mills, Second Commissioner (Law Design and
Practice)
• Jeremy Hirschhorn, Deputy Commissioner, Public Groups
and International
• Mark Konza, Deputy Commissioner, Public Groups and
International
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Enactment of the MAAL.
• Enactment of CbC reporting.
• Exemption of Australian maj ority-owned private companies
with turnover < A$ 200 million from ATO public reporting of
tax data for companies with >A$100M turnover (initial ATO
public reporting was released 17 December 2015).
• R&D tax incentive expenditure cap of A$100 million,
which replaced a proposed denial of R&D tax incentive for
companies with > A$ 20 billion turnover.
• Investment Manager Regime #3 exemption for direct
investment by an Investment Manager Regime (IMR)
widely held entity, or for indirect investment through an
independent Australian fund manager for an IMR entity.
• Reduced corporate tax rate for eligible small business entities
(broadly, turnover <A$2 million) from 30% to 28.5%.
• Minerals resource rent tax repealed effective from
1 October 2014.
• Carbon Pricing Mechanism (carbon tax) was repealed
from 30 J une 2014 and replaced with Direct Action Plan
(incentives-based).
• Proposed federal bank deposit (0.05 per cent) levy
on deposits up to A$ 250,000 abandoned on
1 September 2015.
• Improvements to loss recoupment rules relating to tracing
ownership.
• Changes made to employee share scheme rules regarding
the taxing time and concessional treatment for start-ups.
4 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
A u st rali a
2 .8 Pending tax p rop osals
2 .9 Consultations op ened/ closed
• Measures to protect the tax base include:
• Consultations closed in 2015, reports released J une 4 by
Board of Taxation
• Closing loopholes in the tax consolidation regime.
• For foreign residents’ capital gains, a non-final withholding
tax regime from 1 J uly 2016.
• Reduction of the R&D tax incentive tax offset rates by
1.5% .
• Extension of GST to digital imports, amendments to
cross-border transactions, and removal of GST low value
threshold for imported goods.
• Implementation of the OECD’s common reporting
standard on the automatic exchange of financial account
information, offshore voluntary disclosure and information
exchange agreements.
• Positive changes include:
• Debt and equity rules — post-implementation review
• Private company loans and Division 7A —
post-implementation review
• Thin capitalization arm’s length debt test
• Permanent establishments and financial entities
• Collective investment vehicles
• Consultations closed in 2015 — Other
• Tax secrecy and transparency legislation
• Implementation of the OECD’s common reporting
standard for the automatic exchange of financial account
information
• New tax regime for managed investment trusts.
• Regulations to implement foreign investment reforms
• Tax exemption for direct investment by an IMR widely held
entity or for indirect investment through an independent
Australian fund manager for an IMR entity.
• Multinational anti-avoidance law
• Look-through treatment for earnout arrangements.
• Consultations currently open:
• Tax Reform White Paper
• Federation Reform White Paper
• Implementation of anti-hybrid rules — Board of Taxation
review will report by March 2016
• Voluntary tax transparency code — Board of Taxation
review to release a discussion paper by the end of 2015
• Voluntary code of conduct for large businesses
• Small business restructure rollover
• Innovation agenda tax changes
• Options for broadening the personal and corporate
tax base
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
4 5
B elg ium
1
| Tax rates (2015–16)
Tax p olicy
H erw i g J oost en
herwig.j oosten@be.ey.com
+32 0 2774 9349
1 .1 K ey tax rates123
Tax controversy
P h i li p p e R en i er
philippe.renier@hvglaw.com
+32 0 2774 9584
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income tax
(CIT) rate (national and local
average, if applicable)
33%
33%
1
—
Top individual income tax
rate (national and local
average, if applicable)
50%
50%
2
—
Standard value-added tax
(VAT) rate
21%
21%
3
—
2
S tay u p to date w ith
develop m ents in B elg iu m
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
C on t en t p rov i si on dat e
December 2015
4 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .1 K ey drivers of tax p olicy ch ang e
• Shifting from tax on labor to other taxes.
• Reviving the economy by creating more jobs and reinforcing competitiveness.
• Giving support to small and medium-sized enterprises and entrepreneurs.
• Implementing EU legislation (such as the general anti-abuse provision under the
Parent-Subsidiary Directive and various transparency measures) and BEPS (in
particular Action items 5 and 13; Actions 8–10 already being used by the tax
authorities in audits).
1
2
3
Article 215 Income Tax Code 92.
Article 130 Income Tax Code 92.
Article 37 – 38bis VAT Code and Royal Decree n° 20.
B elg i u m
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016☐
: Increased burden in 2016
• R&D incentives
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016☐
Increased burden in 2016
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016☐
Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
4 7
B elg i u m
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
X
L ow er
N o ch ang e
H ig h er
N o ch ang e
H ig h er
Personal income tax burden
L ow er
X
V AT/ G ST/ sales tax burden
L ow er
N o ch ang e
X
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
Taxes on w ag es and emp loyment
• Corporate Income Tax will probably not change except on the
following points:
• The focus of the Belgian government in the upcoming
years is on the so-called tax shift. The goal is to reduce
taxes on wages by reducing the tax base and by providing a
more important tax exempted bracket. Employment will be
increased by, inter alia, reducing employers’ social security
contributions on first hires.
• Increased focus on tax avoidance in the framework of the
BEPS initiatives and European measures. In particular,
the introduction of formal transfer pricing documentation
requirements and country-by-country reporting
requirements under BEPS Action 13 — these will likely
apply as of 1 J anuary 2016.
• More tax incentives for R&D, but also the introduction
of limitations on the patent IP box as a result of the
requirements under BEPS Action 5.
• More tax incentives for start-ups.
• Moreover, incentives will be provided for start-ups
(specifically in the field of financing).
V AT, G ST and sales taxes
• In the area of VAT no specific changes are expected, except
maybe the abolition of some special regimes where a lower
VAT rate is foreseen.
• Excise taxes on alcohol and gas/oil were already increased
in late 2015. Other excise taxes (such as on beer, alcohol,
cigarettes, lemonades) will also be increased.
4 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
B elg i u m
2 .5 Political landscap e
2 .8 Pending tax p rop osals
• There are no elections expected in 2016 and all in all, the
current political situation seems rather stable.
• Bill of law for the implementation of FATCA into Belgian
legislation
• However, one could question whether Belgium can meet
the budgetary requirements imposed by the European
Commission with the planned tax reductions in the area of
wage taxes.
• Bill of law regarding provisions to strengthen job creation
and purchasing power, with measures such as:
2 .6 Current tax p olicy and tax administration
leaders
• Speculation Tax (tax on capital gains on stock quoted
shares if realized within 6 months after the acquisition —
for individual investors only)
• Increased investment deductions
T ax p oli c y leaders
• Increased CFC legislation for individuals and pension funds
holding assets through offshore jurisdictions/structures
(so-called Cayman Tax)
• Johan Van Overtveldt, Minister of Finance
• General withholding tax rate from 25% to 27%
T ax adm i n i st rat i on leaders
• Hans D’Hondt, President of the Management Committee of
the Ministry of Finance
2 .9 Consultations op ened/ closed
• Andrew Mills, Second Commissioner (Law Design and
Practice Group)
• None
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• In 2015 the Belgian government took the first steps towards
reducing taxes on wages and shifting towards higher excise
taxes.
• The so-called 6th State Reform (2013–2014) provides more
taxing powers to the three Regions (the Flemish Region,
Brussels-Capital Region, and Walloon Region) which leads, in
general, to higher local taxes such as vehicle taxation and to
lower tax incentives in personal taxes.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
4 9
B raz il
1
| Tax rates (2015–16)
Tax p olicy
W ash i n g t on C oelh o
washington.coelho@br.ey.com
+55 11 2573 3446
1 .1 K ey tax rates1
Tax controversy
R odri g o M u n h oz
rodrigo.munhoz@br.ey.com
+55 11 2573 3595
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income
tax rate (national
and local average
if applicable)
34%
34%
—
Top individual income
tax rate (national
and local average
if applicable)
27.5%
27.5%
18%
18%
Standard Value
Added Tax rate
1
—
—
2
S tay u p to date w ith
develop m ents in B raz il
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contact
| 2016 tax policy outlook
C on t en t p rov i si on dat e
21 December 2015
5 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .1 K ey drivers of tax p olicy ch ang e
• Generate more tax revenue.
• Reduce budget deficit.
• Increase the use of e-services and digitization of tax data.
1
N ote: ICMS rates vary among Brazil’s 27 states. The standard rate of ICMS is 17% (18% in São Paulo and
19% in Rio de Janeiro). In 2016, there will be increases in the ICMS base and rate, but just in some states
and for some goods.
B raz i l
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016☐
Same burden in 2016☐
: Increased burden in 2016
• Interest deductibility
: Change proposed or known for 2016☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016☐
Same burden in 2016☐
: Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016☐
: Same burden in 2016☐
Increased burden in 2016
• Treatment of losses
Change proposed or known for 2016☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016
• Capital gains tax
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• VAT, goods and services tax (GST) or sales tax rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• VAT, GST or sales tax base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• R&D incentives
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
5 1
B raz i l
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
H ig h er
N o ch ang e
H ig h er
N o ch ang e
H ig h er
Personal income tax burden
L ow er
X
V AT/ G ST/ sales tax burden
L ow er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
X
Corp orate income taxes
changes drastically several HR routines and requires relevant
changes/updates in companies’ payroll systems.
• In addition to eSocial, there will be another new tax
obligation named EFD-Reinf that will focus on withholding
taxes on invoices (withholding social security tax and
corporate income tax, CSLL and PIS/COFINS).
• In an effort to avoid a budget deficit, Brazil’s Executive
branch has proposed a number of tax and administrative
measures that would reduce the forecasted R$30 billion
deficit for 2016. The proposal has been met with opposition,
as it would significantly increase taxes by:
• Reducing tax incentives
• Increasing the withholding tax on capital gains
• Limiting the deduction for interest on net equity (INE)
• Reviving the CPMF, a social contribution used to fund the
public health and social security systems
Taxes on w ag es and emp loyment
• The Payroll Cost Reduction Program (Law 12.546/11) was a
new law that entered into force in August 2011 that changed
the methodology for calculating the social contribution tax
in Brazil. The tax, which was previously levied on the total
value of a company’s payroll, was then levied on the gross
revenue of companies with some economic activities. In
2016, the Program becomes optional and the aliquots of
the contribution on gross revenues increased substantially.
Companies should choose at the end of each year the
taxation model for calculating social security contributions.
The chosen model (20% of the payroll or 1% to 4.5% of
gross revenue, depending on the economic activity of the
company) should be applied for the next 12 months by
the company. As a result of these changes, the maj ority
of companies in Brazil have decided to leave the reduction
Program and again apply the social contribution tax
calculation on the total value of their payroll.
• From a tax reporting perspective, large companies (i.e.,
companies with revenues of at least R$78m in 2014) have
until September 2016 to move to eSocial, a single digital
reporting system for bookkeeping tax, social security and
labor obligations. For smaller companies, the implementation
date will occur in J anuary 2017. This new tax obligation
5 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
•
V AT, G ST and sales taxes
In line with the goal of reducing the fiscal deficit, and based
on the assumption it will simplify the rules for calculating
the PIS and COFINS social contribution levies, the Brazilian
government is discussing the possibility of changing the
legislation. Basically the changes would:
• Consolidate the laws of PIS and COFINS into a single social
contribution levy;
• Create a system of unlimited credits, i.e., all costs and
expenses incurred will generate credits; and
• Increase the combined rate from the current 9.25% to a
not-yet-determined percentage.
• With respect to the state VAT (ICMS), many states are
increasing their tax rates (around 1%) from the beginning of
2016.
• Additionally, the modifications introduced by Constitutional
Amendment No. 87/2015 in relation to ICMS payable in case
of interstate purchases made by end consumers that are not
ICMS taxpayers entered into force on January 1, 2016. The
new rules establish the following procedures:
a. Adoption of internal rate established by the destination
State to calculate the total ICMS due on the transaction;
b. Adoption of interstate rate for the calculation of the ICMS
due to the source State; and
c. Collection of th e tax to th e destination State related to
th e dif f erence betw een th e tax calculated under item
“ a” and item “ b” above.
• Please note that until December 31, 2015, the total ICMS
due in such transactions is paid to the state where the
supplier is located.
B raz i l
2 .5 Political landscap e
• Brazil is currently facing a political crisis. Corruption
investigations have been undertaken at Petrobras, Brazil’s
state-run oil firm, and at Brazil’s Administrative Council
of Tax Appeals (CARF), an agency within Brazil’s Finance
Ministry. In addition, impeachment proceedings have been
started against Brazil’s President, Dilma Rousseff, while many
other politicians are being investigated for corruption as
well. Finance Minister Joaquim Levy, who clashed frequently
with Rousseff, was replaced in mid-December. In light of this
uncertainty, Brazil has lost its investment-grade rating from
some agencies. This unsteady political landscape could affect
Brazil’s tax policy.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leader
• Nelson Barbosa, Finance Minister
T ax A dm i n i st rat i on L eader
• Jorge Rachid, Brazilian Federal Revenue Service Secretariat
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Increased social contribution tax on net profits for financial
institutions: Effective September 2015, the Social
Contribution on Net Profits (CSLL) rate was increased to 20%
for firms in the financial sector.
• Increased state value-added tax (ICMS) interstate rates:
Increased ICMS rates shall apply to interstate operations
whereby goods and/or services are delivered to the ultimate
consumer. Please note that when the ultimate consumer
is a non ICMS-taxpayer, the recipient state is responsible
for collecting the difference between internal and intestate
rates. Tax revenue split should observe the transaction share
between the states. Applicable until 2019.
• Change to the tax basis of the state value-added tax (ICMS)
for software sales: Starting 1 January 2016, the sale of
software in the State of São Paulo will be subject to ICMS
on the total sales price, which includes the software value,
plus the electronic media and any other amounts charged to
clients. Under prior rules in the State of São Paulo, the ICMS
on the sale of software was calculated on the amount equal
to twice the value of the carrier media only (e.g., CD, flash
drives, etc.).
2 .8 Pending tax p rop osals
• MP 692 — Capital gains tax rate for individuals
In September 2015 the Brazilian Government published
Provisional Measure No. 692, which increased the capital
gains tax rate for Brazilian individuals, going from a 15% rate
to a progressive rate system (from 15% to 30%). Because
capital gains earned by non-residents generally follow the
same tax implications applicable to Brazilian individuals, this
increase may also apply to non-residents in 2016, as long as
MP 692 is converted into Law.
on net equity would increase from 15% to 18%. Both changes
still need to be approved by Congress to become effective
in 2016.
• Bill 1485 — Taxation of dividends
The Brazilian Congress is currently focused on the taxation
of dividends as a possible source of new revenue. On 12
May 2015, the Congress undertook the consideration of Bill
1485, which would:
• Revoke the regulations around Interest on Net Equity
(INE), which would prevent taxpayers from deducting
INE payments
• Revoke all exemptions from taxation for dividend
payments, which would subj ect to taxation all dividends
paid to individuals and corporations
• Impose a 15% withholding tax (WHT) on dividends received
by nonresidents from Brazilian companies (a 25% WHT
applies to residents of “favorable tax jurisdictions”).
• Bill 130/2012 — Wealth tax
Following the adoption of the Brazilian Constitution in 1988,
there have been several attempts to impose a tax on high
net worth individuals. Bill 130/2012 proposes an annual
tax of 0.5% to 1% on estates that exceed the threshold of
approximately BRL14 million. The calculation would be based
on the individual’s net worth (i.e., assets less liabilities).
At the state level, there are discussions to increase the
transfer tax (ITCMD) imposed on asset transfers due to
death and donation. As this proposal calls for amendments
to state taxes, each state would need to implement new
laws. Currently federal law limits the rates to 4% . There are
discussions to increase the rate to 15% or possibly to 30% ,
allowing more flexibility for the states.
• PEC 140 — Tax on financial transactions (CPMF)
The CPMF was a social contribution used to fund the public
health and social security systems. It was in force until 2007,
when it was repealed.
On 22 September 2015, the Executive branch sent to the
Congress a Proposal for Constitutional Amendment (PEC
140) for the CPMF to be reinstated.
PEC 140 would establish a 0.20% rate for the CPMF, which
would fund the federal social security system only. PEC 140
also would re-enact Law 9.311/1996, which regulates the
CPMF.
In a nut shell, the 0.20% rate would be levied on every
banking transaction (deposits and withdrawals). Certain
transactions and entities would be exempt.
The next step should be a Presidential Decree to reduce the
tax on financial operations (IOF) rate, which was increased to
0.38% when the CPMF was repealed in 2007. This reduction
would not eliminate all of the effects of the new CPMF, as the
IOF does not apply as broadly as the CPMF.
2 .9 Consultations op ened/ closed
• Not applicable in Brazil
• MP 694 — Interest on Net Equity (INE)
In September 2015 the Brazilian government proposed
changes to INE by capping the deduction of the interest on
equity expenses to the lower of 5% or the long-term interest
rate (TJLP). In addition, the withholding tax rate on interest
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
5 3
Canada
1
| Tax rates (2015–16)
Tax p olicy
Gary Z ed
gary.zed@ca.ey.com
+1 613 598 4301
1 .1 K ey tax rates
F red O ’ R i ordan
fred.r.oriordan@ca.ey.com
+1 613 598 4808
R obert N eale
robert.neale@ca.ey.com
+1 416 943 2571
Tax controversy
Gary Z ed
gary.zed@ca.ey.com
+1 613 598 4301
S tay u p to date w ith
develop m ents in Canada
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
C on t en t p rov i si on dat e
19 November 2015
5 4
2 0 1 6
Percentag e
ch ang e
Top federal general
corporate income
tax rate
15%
15%
N/A
Combined average
federal and
provincial/territory
27.76%
27.84%
Top individual income
tax rate (national
and local average if
applicable)
46.07%
50.22%
Standard value-added
tax (VAT) rate
5% to 15%
5% to 15%
(Varies by
province)
(Varies by
province)
1
0.3%
9.0%
N/A
EY k ey contacts
D an i el S an dler
daniel.sandler@ca.ey.com
+1 416 943 4434
2 0 1 5
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
1
The federal general corporate income tax rate is 15%; the provincial and territorial general corporate
income tax rates range from 11% to 16% .
C an ada
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
2 .2 Tax burdens in 2 0 1 6
The 19 October 2015 federal election resulted in a Liberal
Party maj ority government, replacing the Conservative Party
after 10 years in office. The Liberal Party election platform
“ R eal ch ang e — a new p lan f or a strong m iddle class” promised
to restore economic security to the middle class.
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• The
☐
Liberals campaigned on a plan to stimulate the economy
that, among other things, includes personal tax cuts for
middle income Canadians and increased spending on
infrastructure, projecting short-term deficits of about C$10
billion in fiscal 2016/17 and 2017/18, C$5.7 billion in
2018/19 before returning to a balanced budget in 2019/20.
• They
☐
project the federal debt-to-GDP ratio to fall every year
of the plan and be reduced to 27% by 2019/20.
• It
☐ is expected that the 2016 budget, as did the 2014 and
2015 budgets, will contain a number of measures to reflect
an ongoing commitment to address international aggressive
tax avoidance by multinational enterprises. The Liberal
plan includes a commitment to “direct the Canada Revenue
Agency (CRA) to immediately begin an analysis and stronger
enforcement of tax evasion of what the OECD calls the
‘ tax gap.’”
• From
☐
the perspective of individual Canadians, effective 1
J anuary 2016, there will be a reduction in the middle income
tax bracket to 20.5% from 22.0% and the introduction
of a new 33.0% bracket on taxable income in excess of
C$ 200,000. There will also be an undertaking to review all
tax expenditures to target tax loopholes that particularly
benefit Canada’s top one percent.
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 5
|
5 5
C an ada
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2015 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
5 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
C an ada
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
X
Corp orate income tax burden
L ow er
N o ch ang e
H ig h er
L ow orate
er income
Corp
incometax
taxburden
burden N
Personal
H ig h er
X
o ch ang e
X
X
Personal income tax burden
L ow er
N o ch ang e
H ig h er
ow er
Personal
taxburden
burden
V L AT/
G ST/ income
sales tax
N o ch ang e
H ig h er
X
X
X
Increase in top federal marginal tax rate to 33% from 29% , plus increases in a number of provincial rates.
V AT/ G ST/ sales tax burden
L ow er
N o ch ang e
H ig h er
ow er
V L AT/
G ST/ sales tax burden
N o ch ang e
H ig h er
L ow er
N o ch ang e
X
X
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Taxes on w ag es and emp loyment
Corp orate income taxes
• There is a new top marginal income tax rate by the federal
government and significant increases in the top rates in a
number of the provincial governments.
• For business tax measures, the Liberals campaigned largely
on maintaining the status quo, retaining the current federal
15% general corporate tax rate and the reduction in the
small business tax rate from 11% to 9% that was previously
announced by the Conservative government in the April
2015 federal budget and enacted on 23 J une 2015.
• The Liberals also promised to conduct a detailed analysis
of Canada’s fossil fuel subsidies, stating that they would be
phased out starting with a targeted C$ 250 million reduction
and that a first step would be to allow the use of the
Canadian Exploration Expenses (CEE) tax deduction only in
cases of unsuccessful exploration.
• The new Government is expected to continue the
long-standing government commitment to addressing
international aggressive tax avoidance by multinational
enterprises by closing “ tax loopholes.” Areas of ongoing
review include transfer pricing practices, taxation of foreign
affiliates, interest expense deductibility and tax
deferral arrangements.
• The federal Liberal Party policy obj ectives include income tax
reductions for middle class taxpayers. The income tax burden
of the top 1% of taxpayers will be increased to offset this
revenue reduction.
• The Liberal Party intends to carry out a comprehensive
review of all tax expenditures, with particular emphasis on
those that benefit the top 1%.
V AT, G ST and sales taxes
• There are ongoing efforts to have remaining provinces
harmonize with the federal system, and to conduct a review
of the treatment of financial services.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
5 7
C an ada
2 .5 Political landscap e
• On 19 October 2015, the political landscape in Canada
significantly changed with the election of a Liberal Party
majority government (184 of 338 seats). After 10 years
in government, the Conservative Party became the official
opposition party (99 seats) and the New Democratic Party,
previously the official opposition, was reduced to third party
status (44 seats). The remaining eleven ridings elected
members of the Bloc Quebecois (10 seats) and the Green
Party (one seat).
• The Liberal Party government was elected on a platform of
“ a new p lan f or a strong m iddle class. ”
• F
☐ or corporate taxpayers and perhaps particularly
multinational enterprises, there will likely be a stronger
enforcement of current tax measures and a further
tightening of “ tax loopholes.”
• For
☐
individual Canadians, it is expected that this will result
in a reduction of the federal tax burden on middle income
taxpayers, to be funded in part by a higher tax burden on
the top 1% of Canadian taxpayers.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• J ustin Trudeau, Prime Minister
• Bill Morneau, Minister of Finance
• Wayne Easter, Chair of the House of Commons Standing
Committee on Finance
• Diane Lebouthillier, Minister of National Revenue
• Lisa Raitt, Finance Critic, Conservative Party of Canada
• Guy Caron, Finance Critic, New Democratic Party of Canada
T ax adm i n i st rat i on leaders
• Paul Rochon, Deputy Minister, Department of Finance
• Andrew Treusch, Commissioner and Chief Executive Officer,
Canada Revenue Agency
• John Ossowski, Deputy Commissioner of the CRA
• Anne-Marie Lévesque, Assistant Commissioner, Appeals
Branch, Canada Revenue Agency
5 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Richard Montroy, Assistant Commissioner, Compliance
Programs Branch, Canada Revenue Agency
• Geoff Trueman, Assistant Commissioner, Legislative Policy
and Regulatory Affairs Branch, Canada Revenue Agency
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
B i ll C - 5 9 , E c on om i c A c t i on P lan 2 0 1 5 A c t , N o. 1
• Small
☐
business tax rate — Gradual reduction in the small
business tax rate from 11% to 9% by 2019, and related
changes to the gross-up factor and dividend tax credit rate
for non-eligible dividends.
• Accelerated
☐
write-off for M&P machinery and equipment — A
50% declining-balance rate, subj ect to the half-year rule, for
eligible manufacturing and processing (M&P) assets acquired
after 2015 and before 2026.
• Agricultural
☐
cooperatives — Extension of the 2005 budget
measure that defers the taxation of a patronage dividend
paid in stock that is issued before 2021.
2 .8 Pending tax p rop osals
3 1 J u ly draf t leg i slat i on f or 2 0 1 5 bu dg et m easu res an d
resou rc e- relat ed c h an g es:
• Tax
☐
avoidance of capital gains (subsection 55(2)) —
Expansion of the application of the anti-avoidance rules
to circumstances in which one of the purposes for paying
a dividend is to significantly reduce the fair value of any
share or significantly increase the total cost of properties of
the dividend recipient, regardless of whether the dividend
reduces a capital gain. Changes are applicable to dividends
received by a corporation on or after 21 April 2015.
• Dividend
☐
rental arrangement rules and synthetic equity
arrangements — Amendments to deny a deduction for an
intercorporate dividend on a share in respect of which the
taxpayer has entered into a synthetic equity arrangement
with an investor that does not pay Canadian income tax
on the dividend equivalent payments received (such as a
tax-exempt Canadian entity or nonresident). This measure
applies to dividends that are paid or become payable after
October 2015.
C an ada
• Captive
☐
insurance — Proposal to include income from the
ceding of specified Canadian risks in computing a foreign
affiliate’s FAPI, applicable to taxation years of taxpayers that
begin after 20 April 2015.
• Withholding
☐
for nonresident employers — Exemption from the
withholding obligations for payments by certain qualifying
nonresident employers to certain qualifying nonresident
employees, applicable to payments made after 2015.
• Canadian
☐
exploration expenses (CEE) — Changes that
extend the tax treatment for CEE to certain costs related to
environmental studies and community consultations incurred
for the purpose of determining the existence, location,
extent, or quality of a mineral resource, or an accumulation
of petroleum or natural gas, in Canada. These costs will also
be eligible for flow-through share treatment. The changes
apply to expenses incurred after February 2015.
2 .9 Consultations op ened/ closed
O p en
• No
☐ open consultations as of 9 November 2015.
C losed
• 2015
☐
federal budget draft legislation released on 31 July —
consultations closed 30 September 2015.
• Synthetic
☐
equity arrangements — alternatives to the budget
proposals — consultations closed 31 August 2015.
• Captive
☐
insurance — extension of anti-avoidance measures to
a broader base of transactions — consultations closed
30 J une 2015.
2 1 A p ri l 2 0 1 5 f ederal bu dg et f or w h i c h draf t leg i slat i v e
m easu res h av e n ot been t abled:
• Automatic
☐
exchange of information for tax purposes —
Proposal to implement the G20/OECD common reporting
standard on the automatic exchange of financial account
information on 1 July 2017, allowing a first exchange of tax
information in 2018.
• Streamlined
☐
reporting requirements for foreign assets (Form
T1135) — Introduction of a revised form that simplifies the
reporting requirements for taxpayers that own specified
foreign property with a total cost of more than C$ 100,000
(but less than C$250,000) throughout the year. Applicable
to taxation years that begin after 2014.
• Foreign
☐
affiliates — On 12 July 2013, the Government
proposed draft legislation to ensure that stub period FAPI
is included in the taxpayer’s income for the taxation year in
which the taxpayer disposes of, or reduces, its interest in
a foreign affiliate. The 2015 federal budget confirmed the
Government’s intention to proceed with this proposal.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
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5 9
Ch ina
1
| Tax rates (2015–16)
Tax p olicy
B ec k y L ai
becky.lai@hk.ey.com
+852 2629 3188
1 .1 K ey tax rates123
2 0 1 5
Tax controversy
Top corporate
income tax (CIT) rate
(national and local
average if applicable)
H en ry C h an
henry.chan@cn.ey.com
+86 10 5815 3397
S tay u p to date w ith
develop m ents in Ch ina
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
Top individual income
tax (IIT) rate (national
and local average if
applicable)
Statute Value Added
Tax rate(VAT)
C on t en t p rov i si on dat e
1
4 J anuary 2016
2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2
Percentag e
ch ang e
25%
—
IIT rates are
based on
categories of
income.3 Top
rates for each
type of income:
IIT rates are
based on
categories of
income. Top
rates for each
types income:
45% —
employment
45% —
employment
40%
Independent
service
40%
independent
service
35% — selfemployment
35% — selfemployment
20% — interest,
dividend,
capital gain,
royalty and
other income
20% — interest,
dividend,
capital gain,
royalty and
other income
6% , 11% ,
13% and 17%
(depending on
the industries)
and 0% for
certain eligible
export goods
and services4
6% , 11% ,
13% and 17%
(depending on
the industries)
and 0% for
certain eligible
export goods
and services5
—
This submission does not cover related tax policy and controversy updates in Hong Kong Special
Administrative Region (SAR), Macau SAR and Chinese Taipei
3
6 0
25%
2 0 1 6
Order of the President [ 2007] No. 63 - Chapter 1, Article 4
Order of the President [ 2011] No. 48
C h in a
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e45
G eneral direction
B EPS678 91011
• In October 2015, the Communist Party of China’s Central
Committee held the Fifth Plenary to set the five-year
economic plan that will shape the economic policy of
China from 2016 through 2020. The plan is important
to transforming the country from an efficiency-driven to
innovation-driven economy through sustainable growth. It
focuses on key areas like: investing in green energy policies,
implementing the “ internet plus” action plan, narrowing
regional development disparities, continuing the opening-up
of the economy, modernizing education, and strengthening
international cooperation.
• China is not an OECD member but participated as a G20
member on equal footing with participating members in the
BEPS project.
• The SAT has:
• Posted the Chinese translation of the final BEPS package
on its website in October 2015.
• Released the Draft Consultation Circular “Implementation
Rules for Special Tax Adjustment” on 17 September 2015
for public consultation to replace the existing Circular 2,
the integrated Anti-Avoidance circular previously issued
on a trial basis in 2009. The Draft incorporated several
new BEPS recommendations on anti-avoidance, CFC
rules, thin capitalization, transfer pricing, advance pricing
agreements, cost-sharing agreements, related-party
services, and intangibles (including the SAT’s view on
specific location advantages), as well as procedures for tax
audits, investigations, adj ustments and assessments in a
Special Tax Adjustment audit.
• Key economic goal:
• YoY GDP growth
6.5% (from 7% in the previous
5-year plan)
• Urbanization
60%6
• Service content of GDP
55%7
O ne B elt and O ne R oad ( O B O R ) initiative
• China introduced the OBOR initiative in 2013 to connect
different economic regions by way of building routes to
Central Asia and Europe to facilitate trade, flow of people
and investments. The Government has already committed
US$29.7 billion8 to the Asian Infrastructure Investment Bank
(AIIB) and a further US$40 billion9 into the New Silk Road
Fund.
• The SAT released Circular Shuizongfa [2015] No. 60 to
outline plans to establish an OBOR tax service hotline in
2016 for outbound investments.
10
• Established a new CFC division within the International Tax
Department to strengthen the administration of CFC rules.
• Issued a pilot plan to require its subordinates to collect
detailed operational and financial data/information from
identified large business groups as a pilot to assess tax
risks of enterprises.
• The SAT held a BEPS briefing on 10 October 2015 to report
on China’s involvement and its expected implementation
of BEPS11. Certain broad principles in adopting BEPS were
indicated:
• Tax sovereignty should be ensured while facilitating real
cross-border economic activities to promote economic
development;
4
The Interim Regulations of the People’s Republic of China on Value-added
Tax (effective as of January 1, 1994) provides VAT rates of 17%, 13% and 0%
(for specific exported goods). The 17% rate applies to most VATable goods.
The VAT Reform was rolled out gradually to nationwide on 1 August 2013.
New rates of 11% and 6% were introduced for certain industries. (Source:
Circular MOF/SAT Caishui [2013] 37) Railway transport (applicable tax rate
of 11%) and postal industries (applicable tax rate of 11%) were included in
the VAT Reform from1 January 2014. (Source: Circular MOF/SAT Caishui
[2013] 106) Telecommunications industry was included from June 1, 2014
with applicable rates of 11% and 6% for basic telecommunication services and
value-added services respectively. (Source: Circular MOF/SAT Caishui [2014]
43. Caishui [2015] No 118 has set out the VAT zero rating treatment for
selected VATable services)
5
Other industries will also be included in the forthcoming VAT pilot
expansion.
6
7
8
9
http://www.gov.cn/gongbao/content/2014/content_2644805.html
http://kyhz.nsa.gov.cn/xzxy_kygl/pf/xzxywz/yksInfoDetail.htm?infoid=2456
http://english.caixin.com/2015-07-07/100826344.html
http://www.thedailystar.net/china-presses-on-with-new-silk-roadplan-49386
10
11
http://www.chinatax.gov.cn/n810341/n810755/c1575644/content.html
http://www.chinatax.gov.cn/n810219/n810724/c1836574/content.html
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
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6 1
C h in a
• Compliance should be improved through risk management,
strengthening the administration of cross-border taxation
for a fair allocation of taxing rights and increasing certainty
of international taxation;
• China’s views and practice should be adequately
considered.
Streng th ening I nternational Coop eration121314
• China signed the Convention on Mutual Administrative
Assistance in Tax Matters in August 2013, which was
approved by the National People’s Congress in J uly 201512.
China has now entered into 10 tax information exchange
agreements, and has been subj ect to relevant reviews by the
Global Forum on Transparency and Exchange of Information
for Tax Purposes.
• On December 16, 2015, China became the 77th j urisdiction
to sign the Multilateral Competent Authority Agreement
which allows it to activate the automatic exchange of
financial account information in tax matters and to
commence exchange in 2018. On the same date, the
SAT and OECD renewed for another three years a general
memorandum of understanding (MoU), first signed in 2013,
to enhance the co-operation between the SAT and OECD,
including the Associate status of China on the OECD/G20
BEPS project. Also on that day, the SAT and OECD signed an
MoU to implement a Multilateral Tax Program at the OECDSAT Multilateral Tax Centre in Yangzhou, Jiangsu, China.
F ree Trade Z ones
• In order to encourage business and trade in target service
sectors, China has created several free trading zones each
with different missions in strengthening a certain service
sector. In addition to the Shanghai FTZ, in 2015 China
established three additional Pilot FTZs in Guangdong, Tianjin
and Fujian.
R & D incentives
• To foster innovation, the State Council has expanded R&D
incentives to additional sectors by way of accelerated
depreciation and 150% super deduction for qualified
industries and investments (please see section 2.2 below).
12
13
14
http://www.chinatax.gov.cn/n810219/n810724/c1885780/content.html
http://www.chinatax.gov.cn/n810341/n810770/index.html
http://www.chinatax.gov.cn/n810219/n810724/c1943144/content.html
http://www.oecd.org/tax/transparency/chinatakesimportantsteptoboostintern
ationalco-operationagainsttaxevasion.htm
6 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• We note that China may amend its thin capitalization
rules (currently 2:1 debt to equity ratio for non-financial
institutions and 5:1 for financial institutions for relatedparty transactions) in the future. The scope of the law may
be expanded to non-related party transactions as well as
to allow for certain industries, such as the finance and
petroleum industries, to adopt lower ratios.
• Hybrid mismatches
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016
☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• China will likely continue to align the VAT zero rating
treatment with the internationally adopted VAT principle
by including more services (which would be provided from
China to overseas locations) to be subject to VAT zero
rating treatment. ☐
C h in a
• VAT, GST or sales tax base
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• China continues its nationwide VAT pilot program and
has expanded the scope of VAT taxable services to cover
services related to railway transportation, postal and
telecommunication services. Real estate, construction,
life-style services and financial services industries are
expected to be covered in 2016. It has been anticipated
that the VAT rules will be announced in the first half of
2016, with implementation dates set to be in the second
half of 2016. Controlled foreign companies
• It has been set out that real estate and construction
services would generally be subject to VAT at 11%, lifestyle services would generally be subject to VAT at 6%, and
financial services would be subject to 6% VAT, although
these are still subj ect to approval processes.
• Controlled Foreign Companies1516
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• China first introduced its CFC rules in the CIT reform in
2008, with increased disclosure requirements added in
2014. Further guidance is expected:
• China recently published its Consultation Draft on
“Implementation Rules for Special Tax Adjustment.”
Chapter 10 covers CFC administration including the
concept of “attribution of profit,” which would be
applicable to interest, dividend, royalties and income
from sales with little value added or income from
intangibles without corresponding substantive activities
undertaken by the CFC.
• The SAT newly established a CFC division within the
International Tax Department for CFC administration.
• A CFC case in Beijing was reported in the media in
May 2015. Tax authorities applied the CFC rules to
tax undistributed offshore profits absent a reasonable
business purpose for establishing a CFC in that
j urisdiction.
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
15
16
• Transfer pricing changes
Change proposed or known for 2016☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016☐
: Increased burden in 2016 ☐
• The final version of the Consultation Draft on
“Implementation Rules for Special Tax Adjustment”
(Consultation Draft) is expected to be issued by December
2015 or early 2016, and will likely incorporate a
number of new disclosure requirements and technical
positions that are largely consistent with the final BEPS
recommendations, as suggested by the Consultation Draft.
• The Chinese tax authorities tend to emphasize people
functions and argue this is a critical driver of value
creation. Accordingly, Chinese tax authorities are inclined
to take a conservative view on how much value can be
attributed to risk-bearing and
capital contributions.
• The Consultation Draft still adopts the arms-length
principle, however, the Chinese tax authorities require that
location specific advantage be taken into consideration
during TP analyses, including in a profit split analysis, cost
sharing, and comparable search, etc.
• Currently, no specific rules govern business restructurings
in the area of transfer pricing. However, the Consultation
expands the definition of intangible and includes a
provision requiring an arm’s length remuneration to be
paid in cases where valuable intangibles are shifted out of
China after
entity liquidation.
• In addition to the framework on intra-group services
provided by the OECD Guidelines, China raises a number of
“ China positions” :
• When applying the “benefit test,” the benefit should
be considered from both the service recipient and the
service provider’s perspectives.
• Considerations should be made with regard to whether
the provision of various services from a parent company
to subsidiaries has already been remunerated through
the transfer prices applied in other related-party
transactions.
• The definition of shareholder services should also
include management and stewardship activities. Those
activities that don’t bring specific benefits to China, or
mainly benefit HQ should not be charged into Chinese
entities.
http://www.chinatax.gov.cn/n810341/n810755/c1150569/content.html
http://www.bjsat.gov.cn/bjsat/qxfj/zsefj/zcq/jdal/201505/
t20150505_224848.html
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
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6 3
C h in a
• Note:
• Changing from pre-approval procedure to no preapproval, but with concentration on post-filing tax
audits.
• Increased tax investigations in relation to general
anti-avoidance rules (GAARs) and Base Erosion &
Profit Shifting (BEPS) cases, especially in the areas of
outbound payments for royalties and services.
• China is in the process of revising the Tax Collection and
Administration Law (TCAL)19 and IIT Law. The new law
is expected to set the framework for tax administration,
outline the rights of taxpayers and tax authorities,
set time limitations for tax confirmation and appeals,
introduce advance rulings, and set out information
collection for the exchange of information.
• From an international tax administration perspective,
there has been consideration to set up several regional
international tax bureaus in selected cities to enhance
the consistency and efficiency of China’s international
tax administration.
• In September 2015, the SAT issued a pilot plan
to collect detailed operational and financial data/
information from identified large business groups to
assess tax risks of enterprises
• In December, 2015, the SAT published the 2014 Advance
Pricing Arrangement Annual Report, wherein it reported
that 3 unilateral and 6 bilateral APAs were signed in
2014. Of the 6 bilateral APAs signed, 3 were with Asian
countries, 2 with European and 1 with North American
countries. TNMM is the most used method, followed by the
cost-plus method. The SAT indicated that a submission
that presents an innovative application of TP method,
or a high-quality quantitative analysis for intangibles,
cost savings or market premiums, will merit the SAT’s
prioritized attention. A full version of the report can be
found following this link:
http://www.chinatax.gov.cn/n810219/n810724/
c1951566/part/1951585.pdf
• R&D incentives17
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• In November 2015, China expanded the scope of the
150% R&D super deduction under the MOF/SAT Circular
Caishui [2015] No.119 (Circular 119), effective from
1 J anuary 2016, to cover all industries except those on
the restricted list, e.g., tobacco, hospitality, wholesale
and retail, real properties, leasing and business service,
entertainment, etc.
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• In September 2015, the MOF/SAT issued Circular Caishui
[2015] No.106 (Circular 106),18 effective from 1 J anuary
2015, to extend accelerated depreciation to four additional
eligible industries, i.e., textile, machinery, automobile and
light industries, under the broad direction from the
State Council.
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• On 3 November 2015, China announced the “ Proposals
on the 13th Five-Year Plan for the National Economic &
Social Development,”20 in which it noted it will reform the
IIT law to implement a more comprehensive IIT collection
mechanism (Please refer to section 2.4).
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
17
http://szs.mof.gov.cn/zhengwuxinxi/zhengcefabu/201511/
t20151103_1540087.html
18
http://szs.mof.gov.cn/zhengwuxinxi/zhengcefabu/201509/
t20150921_1469073.html
6 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
19
Public consultation was closed on 3 February 2015 - http://www.mofcom.
gov.cn/article/b/g/201503/20150300920505.shtml
20
http://news.xinhuanet.com/fortune/2015-11/03/c_1117027676.html
C h in a
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary212223
Corp orate income tax burden*
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
X
H ig h er
N o ch ang e
H ig h er
N o ch ang e
H ig h er
V AT/ G ST/ sales tax burden* *
L ow er
X
* The overall corporate income tax burden is expected to
be higher as the SAT is targeting cross-border base erosion
transactions and increasing its GAAR (including TP)☐audit
activities.
* * The overall indirect tax burden will likely be generally lower,
because China has been converging Business Tax (“BT”) to VAT,
which allows an input tax credit that was not available under the
BT system.
Since the first launch of the VAT pilot program in 2012, the
overall tax burden has been reduced by over RMB 484.8 billion
(approx. US$76.21 billion ) as of June 2015. The VAT reform
is expected to include more industries such as real estate,
construction, life-style services and financial services in near
future.
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Tax incentive exp ected to continue
• Tax incentives will continue to apply to innovations, new
regions, energy preservations, and new and
modern services.
21
22
23
Assuming foreign exchange rate USD1=RMB6.36
D raf t — N ew E n v i ron m en t al P rot ec t i on T ax
• In response to the Central Government’s decision to prevent,
reduce and control pollution, the Chinese State Council
announced its green tax plan in 2008. After six years of
various studies and discussions, on 10 June 2015 the State
Council released a discussion draft to replace the current
Pollutant Discharge Fee (PDF) with a new Environmental
Protection Tax (EPT) Law (Consultation closed on 9 July
2015). The pollutants subject to EPT are divided into four
categories: air pollutants, water pollutants, solid waste
and noises.
I I T ref orm
— u n der p lan n i n g an d i n i t i al c on su lt at i on
• China will reform the prevailing IIT system during the 13th
Five-Year-Plan. According to this reform target, it is likely
that active income (i.e., employment income, independent
service income, etc.) will be covered under a new composite
tax system which is assessed on an annual basis, while
passive income and other incomes not covered by the
composite tax system will continue to be reported and
assessed separately. The IIT reform will focus on improving
an individual taxpayer’s self-reporting mechanism and also
enhancing the payer’s withholding and reporting system
from the tax source management perspective. Currently,
China’s National People’s Congress, the Ministry of Finance,
SAT and other related government departments are still
working on the related reform plan, with detailed reform
steps or schedules yet to be announced.
http://www.zgswcn.com/2015/1028/666130.shtml
http://www.zgswcn.com/2015/1028/666130.shtml
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
6 5
C h in a
R ev i sed D raf t T ax C ollec t i on an d A dm i n i st rat i on L aw
( T C A L ) ( u n der ap p rov al p roc esses)
• The Discussion Draft of TCAL was released on 5 J anuary
2015 for public comment. Consultation closed on 3 February
2015. The new law is expected to set the framework for
tax administration, outline the rights of taxpayers and tax
authorities, set time limitations for tax confirmation and
appeals, introduce advance rulings, and address how China
will to collect and administer information for the exchange
of information.
P rop ert y T ax — p i lot
• The property tax (referred to as real estate tax in China) pilot
program has been introduced in selected cities including
Shanghai and Chongqing since 2011. It is expected that
China will continue to explore measures by rolling out to
other cities nationwide. .
2 .5 Political landscap e
• No changes to the political landscape in 2015.
• The Fifth Plenary24 of the 18th CPC Central Committee
was held in October 2015, with a framework released
that focuses on the goal of completing the building of a
moderately prosperous society, with a target of year-onyear GDP growth at 6.5% from 2016– 202025, along with
blueprints for urbanization and employment creation.☐
2 .6 Current tax p olicy and tax administration
leaders
• China does not have a unified tax code. There are specific tax
laws and regulations for income tax, turnover tax, customs
duty and resource tax, supported by the release of circulars
and detailed implementation rules, procedures, and other
measures. State organizations that have the authority to
formulate national level tax regulations include the National
People’s Congress and its Standing Committee, the State
Council, the Ministry of Finance, the SAT and the General
Administration of Customs, as well as other Commissions
where appropriate (e.g., circulars for incentives may be
issued together with the Ministry of Science and Technology).
24
25
http://cpc.people.com.cn/n/2015/1029/c399243-27755578.html
http://cpc.people.com.cn/n/2015/1029/c399243-27755578.html,
http://finance.people.com.cn/n/2015/0804/c1004-27404754.html
6 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• The SAT is a ministry-level department that reports directly
to the State Council. The SAT oversees 12 functional
departments and the Auditing Bureau.26
• Minister Wang J un has been the Commissioner General of
the SAT since March 2013.27
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
C ap i t al g ai n s t ax on i n di rec t t ran sf er — sc op e f u rt h er
defined, safe harbor rules introduced:
• The SAT released Notice [2015] No. 7 (Notice 7) in February
2015 as a supplement to SAT Letter Circular Guoshuihan
[ 2009] 698 issued in 2009, in relation to capital gains on
the indirect transfer of Chinese equity shares. Notice 7
introduced the definition of Taxable Chinese Properties,
which include: permanent establishments, immovable
properties, equity or similar investment interests in China.
Notice 7 is a specific Anti-Avoidance rule to re-characterize
an indirect transfer without reasonable business obj ective
as a direct transfer and therefore subj ect to the scope of
China’s Corporate Income Tax. Notice 7 also introduced
Safe Harbor provisions, which allow qualifying internal
group restructurings to be regarded as having a reasonable
commercial purpose subject to specific conditions, where the
transfer can be at cost, resulting in no capital gain.
T h e M ai n lan d an d T ai w an T ax T reat y
• After years of negotiations, the Cross-strait DTA28 was signed
on 25 August 2015. It is going through the legal
approval processes.
R ev i sed D raf t C i rc u lar on S p ec i al T ax A dj u st m en t t o rep lac e
t h e c u rren t S A T c i rc u lar Gu osh u i f a [ 2 0 0 9 ] 2 c i rc u lar on
S p ec i al T ax A dj u st m en t — T ri al I m p lem en t at i on M easu res
• In September 2015, the SAT invited public comments on
the Draft circular on the “Implementation Rules for Special
Tax Adj ustment,” a detailed general anti-avoidance rule
to replace the existing Circular 2 (issued on a trial basis in
2009) that will incorporate several BEPS recommendations
on anti-avoidance, transfer pricing (documentation
requirements, country-by-country reporting, intra-group
services, intangible transactions, TP methods, advance
pricing agreements, cost-sharing agreements) and CFC
rules. It also included a new chapter on entity profit level
monitoring, and Mutual Agreement Procedures where
26
The State Administration of Taxation, http://www.chinatax.gov.cn/
n810209/index.html
27
28
http://www.chinatax.gov.cn/n810209/n810575/n811941/index.html
the Agreement on Avoidance of Double Taxation and Improvement of Tax
Cooperation across the Taiwan Straits, http://www.arats.com.cn/yw/201508/
t20150826_10550622.html
C h in a
the special adj ustments result in double taxation. It also
reiterated China’s view on the taxation of intangibles
and services.
T h ree N ew F ree t rade z on es added
• In addition to the Shanghai Pilot Free Trade Zone (SHFTZ)
launched in 2013, in 2015 three Pilot Free Trade Zones
(FTZs) were added in Guangdong, Tianjin and Fujian to foster
developments in new services sectors in line with national
economic policies.
R & D 1 5 0 % S u p er dedu c t i on – ex p an ded sc op e
• In November China expanded the scope of the 150% R&D
super deduction under MOF/SAT circular Caishui [2015]
No.11929 (Circular 119) to most sectors, except those on the
restrictive list, e.g., tobacco, hospitality, wholesale and retail,
real estates, leasing and business services, entertainment,
etc., effective from 1 J anuary 2016.
A c c elerat ed D ep rec i at i on – ex t en ded t o 4 addi t i on al
i n du st ri es
• The MOF and SAT circular Caishui [2015]106 extended
accelerated depreciation to light industries, textile,
machinery and automotive effective 1 J anuary 2015.
R edu c ed A dm i n i st rat i v e A p p rov als
• In May 2015, the State Council released Guofa [2015] No.
27 (Circular 27) to cancel 49 non-administrative approval
items. 23 items were tax-related, including the approval for
non-residents’ eligibility for tax treaty benefits, approval for
enterprises’ eligibility for special tax treatments for nongain recognition under the special restructuring provisions,
and approval for certain preferential tax treatments. The
SAT subsequently issued the implementation measures for
Circular 2730 . China is switching from a pre-approval system
to a post-filing audit system.
I I T ref orm
• China will reform the prevailing IIT system and to implement
a comprehensive system for IIT during the 13th Five-YearPlan. No detailed plan has been announced.
T ax C ollec t i on an d A dm i n i st rat i on L aw ( T C A L ) ( u n der leg al
p roc ess)
• The Discussion Draft of TCAL was released on 5 J anuary
2015 for public comments. Consultation closed on
3 February 2015. The new law is expected to set the
framework for tax administration, outline the rights of
taxpayers and tax authorities, set time limitation for tax
confirmation and appeals, introduce advance rulings, and
facilitate the collection of information for the exchange of
information with other governments.
P rop ert y T ax
• The property tax (refereed as real estate tax in China) pilot
program has been introduced in selected cities including
Shanghai and Chongqing since 2011. It is expected that This
would be rolled out to other cities nationwide.
2 .9 Consultations op ened/ closed
D raf t T ran sf er P ri c i n g an d C F C ru les
• In September 2015, the SAT invited public comment on the
DRAFT circular for on the “Implementation Rules for Special
Tax Adj ustment” to replace the existing Circular 2, adopting
several BEPS suggestions on anti-avoidance, CFC, transfer
pricing together with China’s view, taking into account its
economic development needs and market uniqueness,
increased disclosures and compliance and scrutiny on
related-party transactions are expected. Public consultation
closed on 16 October 2015.31
D raf t T C A L
2 .8 Pending tax p rop osals
I m p lem en t at i on M easu res f or S p ec i al T ax A dj u st m en t s
• The “Implementation Measures for Special Tax Adjustments”
which would replace the existing Guoshuifa [ 2009] No. 2
(Circular 2) on GAAR is being drafted and is subject to the
SAT’s internal review procedures and is expected to be
released as a final Circular in 2016.
N ew E n v i ron m en t al P rot ec t i on T ax ( E P T ) L aw
• The EPT Law is being drafted (discussion draft paper issued)
and subj ect to the approval by the NPC.
29
http://szs.mof.gov.cn/zhengwuxinxi/zhengcefabu/201511/
t20151103_1540087.html
30
http://www.chinatax.gov.cn/n810341/n810755/c1685543/content.html
• The Discussion Draft of TCAL was released on 5 J anuary
2015 for public comments. Consultation closed on
3 February 2015. The new law is expected to set the
framework for tax administration, outline the rights of
taxpayers and tax authorities’, set time limitation for tax
confirmation and appeals, introduce advance rulings, and
address how China will to collect and administer information
it needs to fulfill its obligations under agreements signed
with contracting parties for the exchange of information.
D raf t N ew E n v i ron m en t al P rot ec t i on T ax ( E P T ) L aw
• The Draft EPT Law was issued and subj ect to legislative
processes and approval by the NPC.
31
http://www.chinatax.gov.cn/n810214/n810606/c1813151/content.html
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
6 7
Cyp rus
1
| Tax rates (2015–16)
Tax p olicy
P h i li p p os R ap t op ou los
philippos.raptopoulos@cy.ey.com
+357 22 209 999
1 .1 K ey tax rates
Tax controversy
P h i li p p os R ap t op ou los
philippos.raptopoulos@cy.ey.com
+35 7 2220 9999
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income tax
rate (national and local
average, if applicable)
12.5%
12.5%
Top individual income tax
rate (national and local
average, if applicable)
35%
35%
2
—
Standard value-added tax
(VAT) rate
19%
19%
3
—
—
1
2
S tay u p to date w ith
develop m ents in Cyp ru s
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Through its tax policy, the government aims to:
• Promote economic development.
• Encourage the creation of business substance.
• Improve the tax regime in a fiscally viable way, without resulting in a reduction of
tax revenues.
• Improve Cyprus’ international competitiveness as a location of choice
for multinational companies doing business in Central South Europe, the
Commonwealth of Independent States (CIS), the Middle East and North Africa.
C on t en t p rov i si on dat e
J anuary 2016
6 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
1
Section 25(2) of the Income Tax Law of 2002
2
Section 25(1) of the Income Tax Law of 2002.
3
Section 17 of the VAT Law of 2000.
C y p ru s
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016 ☐
• Hybrid mismatches
: Change proposed or known for 2016☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Treatment of losses
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016 ☐
• Capital gains tax
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• R&D incentives
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016☐
: Same burden in 2016☐
Increased burden in 2016
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016☐
Increased burden in 2016
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016☐
: Same burden in 2016☐
Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
6 9
C y p ru s
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
V AT, G ST and sales taxes
• Headline rates are not expected to change.
• Headline rates are not expected to change.
• Reducing government spending is prioritized over increasing
tax revenues.
• Tax revenue considerations and economic growth should
strike a fair balance.
• Tax revenue considerations and economic growth should
strike a fair balance.
• The Ministry of Finance announced on 30 December 2015
that it will amend the existing intellectual property regime by
1 J uly 2016 to incorporate the recommendations made in
the OECD’s final report under Action 5 (Harmful
Tax Practices).
Taxes on w ag es and emp loyment
• Headline rates are not expected to change.
• Tax revenue considerations and economic growth should
strike a fair balance.
7 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .5 Political landscap e
• Elections will be held in May 2016 to elect 56 of the 80
Members of the House of Representatives. Because Cyprus
has a full presidential system, under which tax policy is set
by the executive branch of government and passed into law
by the legislative branch, these elections are not expected to
bring significant changes to the country’s tax policy.☐
C y p ru s
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Haris Georgiades, Minister of FinanceTax administration
leaders
T ax adm i n i st rat i on leader
• Yiannakis Lazarou , Commissioner of Taxation
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• During
☐
2015, some of the most substantial changes to
Cyprus’ tax laws were made since the introduction of the
current tax regime in 2003:
• The Notional Interest Deduction (NID) regime on corporate
equity was introduced. The NID will remove any distortions
between equity and debt finance by bringing equity and
debt into a level playing field, since both will be entitled to
a tax deduction.
• The Special Contribution for the Defence of the Republic
Law (SDC) was amended to provide that non-Cyprus
domiciled individuals will be exempt from SDC on
payments of interest, dividends and rental payments.
• An exemption from Capital Gains Tax on property acquired
through 31 December 2016, and a 50% reduction of land
transfer fees on property acquired through 31 December
2016, were introduced to encourage activity in the
construction sector.
• Amendments were made to the Income Tax Law so that
all foreign exchange differences are treated as tax-neutral
(neither taxable nor deductible), unless they result from
trading in currencies or currency derivatives.
• Changes to the EU Parent Subsidiary Directive regarding
hybrid instruments were implemented into national law
to prevent situations of double non-taxation and to deny
underlying tax relief to artificial arrangements.
• Amendments were made to the Income Tax Law to
harmonize it with the jurisprudence of the Court of
Justice of the European Union regarding group loss relief
provisions.
• The provisions for accelerated depreciation were extended
to tax years 2015 and 2016 in respect of plant and
machinery (20% as opposed to 10%) and industrial and
hotel buildings (7% as opposed to 4%).
• The Capital Gains Tax Law was amended to bring within
its ambit the disposal of shares which directly or indirectly
participate in other companies which hold immovable
property in Cyprus.
• The Capital Gains Tax Law was amended to tax any trading
nature profits derived from the sale of shares of companies
which own immovable property in Cyprus, if such profit is
exempt under the Income Tax Law.
• In
☐ addition, on 30 December 2015 the Ministry of Finance
issued a Decree relating to the application of the OECD’s
Common Reporting Standard (CRS) and the Multilateral
Competent Authority Agreement on the Automatic Exchange
of Financial Account Information. The Decree was published
in the Official Gazette of the Republic on 31 December 2015
and came into effect as of 1 J anuary 2016. The Decree
sets forth the main rules regarding client on-boarding,
due diligence and reporting, and includes a number of
clarifications that relate to the entities and products falling
within the scope of CRS and sets the applicable deadlines
and penalties relating to CRS reporting.
2 .8 Pending tax p rop osals
• The Ministry of Finance announced on 30 December 2015
that it will amend the existing intellectual property regime
by 1 J uly 2016 to incorporate the recommendations made
in the OECD’s final report under Action 5 (Harmful Tax
Practices).
2 .9 Consultations op ened/ closed
• While no formal consultation was held, the Ministry of
Finance, the Tax Authorities and the Institute of Certified and
Public Accountants of Cyprus worked together in agreeing to
the tax law reforms outlined in section 2.7.
• The arm’s length principle provisions in the Income Tax
Law were amended to provide for downward transfer
pricing adj ustments.
• The 50% exemption period is extended from 5 to 10 years
for employment income exceeding € 100,000 per annum.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 1
Cz ech R ep ublic
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates
S tay u p to date w ith
develop m ents in th e Cz ech
R ep u blic by accessing E Y ' s
g lobal tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
L u c i e R i h ov a
lucie.rihova@cz.ey.com
+420 225 335 504
C on t en t p rov i si on dat e
22 December 2015
7 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 0 1 5
2 0 1 6
Top corporate
income tax
rate (national
and local
average if
applicable)
19%
19%
Top individual
income tax
rate (national
and local
average, if
applicable)
Basic tax rate of
15% applied on a
“ super-gross salary”
(i.e., including social
security and health
insurance paid by
the employer),
leading to an
effective tax rate of
approximately 20%
Basic tax rate of
15% applied on a
“ super-gross salary”
(i.e., including social
security and health
insurance paid by
the employer),
leading to an
effective tax rate of
approximately 20%
Solidarity 7% for
employment/
business income
exceeding
approximately
€ 44,000 per year
Solidarity 7% for
employment/
business income
exceeding
approximately
€ 44,000 per year2
Standard
value-added
tax (VAT) rate
1
2
3
21%
Czech Income Tax Act effective 1 January 2016.
Czech Income Tax Act effective 1 January 2016.
Czech VAT Act effective 1 January 2016.
21%
Percentag e
ch ang e
—
1
3
—
—
C z ec h R ep u bli c
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Generally, the prevailing driver is resourcing tax collection
and providing guidance and clarification in the areas where
the interpretation has not been clear until now.
• The anticipated changes should also support and be in line
with the BEPS initiative.
• Other drivers include:
•
•
•
•
More intensive measures against tax fraud and tax
evasion, with a key focus on VAT fraud.
Enhancements to mutual assistance and exchange of
tax information procedures by the tax authorities.
Efforts to increase the effectiveness of tax collection
and administration.
Efforts to improve attractiveness for foreign investment.
2 .2 Tax burdens in 2 0 1 6
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
: Increased burden in 2016
No change in rates, but increased compliance requirements.
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 3
C z ec h R ep u bli c
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
H ig h er
X
N o ch ang e
H ig h er
X
N o ch ang e
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
V AT, G ST and sales taxes
• The Government will be implementing the amendment to
the EU Parent-Subsidiary Directive restricting the tax
exemption of otherwise qualifying profit distributions when
the same distributions are tax deductible for the subsidiary
(although, using a strictly grammatical interpretation of
the amended provisions, it is not clear whether this new
limitation also applies to distributions from EU subsidiaries
to Czech parent companies).
V A T ledg er
Taxes on w ag es and emp loyment
• No significant changes are expected.
7 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Effective as of 1 J anuary 2016, taxable persons registered
for Czech VAT ("VAT payer") will be obliged to file electronic
VAT ledgers — a special tax return form with the details of the
summary data reported in the regular VAT return.
• The VAT ledgers replace the Local Purchase Lists and Local
Sales Lists (reports of received and supplied local/domestic
taxable supplies subject to reverse-charge).
• The main purpose of the VAT ledgers is to provide the tax
authorities with an effective tool for identifying potentially
risky transaction chains and carousel frauds by enabling
them to extract and collect information relating to
particular transactions.
C z ec h R ep u bli c
T ax at i on of real est at e
• Significant changes are expected in taxation of real estate.
Generally, the scope of taxable supplies of real estate will
be extended.
2 .5 Political landscap e
• In the Czech Republic, tax policy is governed centrally by the
Cabinet, with the Ministry of Finance having the key role and
responsibilities in this area. The Ministry drafts the maj ority
of tax law and initiates the legislative process.
• Since December 2013, a seemingly stable center-left
government has been in power. As such, the legislative
process has been rather smooth and quick.
2 .6 Current tax p olicy and tax
administration leaders
T ax p oli c y leaders
• Bohuslav Sobotka, Prime Minister
• Andrej Babis, Minister of Finance
• Simona Hornochova, Deputy Minister of Finance — Taxes and
Customs (she will be replaced by a new Deputy, currently the
recruitment process is proceeding)
T ax adm i n i st rat i on leader
• Martin Janecek, General Director — General Financial
Directorate
• In 2014, benefits derived by a borrower from an interestfree loan (i.e., the benefit of not paying any interest on the
loan) was exempt from taxation. As of 2015, such benefit is
exempt only up to CZK 100,000. If it exceeds that threshold,
the borrower generally has to increase its tax base.
• The favorable 5% corporate income tax rate is limited to
investment vehicles (publicly traded investment funds, openend mutual funds, other investment funds with a significantly
diversified portfolio).
V A T
• A reduced 10% VAT rate for selected items like medicines,
pharmaceuticals, baby foods and books took effect
J anuary 1, 2015.
• The new Mini One-Stop Shop regime for electronic and
telecommunication supplies also took effect J anuary 1,
2015, following the implementation of the amended
EU VAT Directive.
2 .8 Pending tax p rop osals
• A proposed new Act on Electronic Evidence of Revenues is
currently being discussed in the Parliament. The proposed
measure would create an online sales reporting system
covering payments made in cash, by cards or vouchers.
Payments via wire transfer or debiting would not be subj ect
to reporting.
• The wording as well as the efficacy of the draft act may
change since it is subj ect to intense political discussions.
2 .9 Consultations op ened/ closed
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
I n c om e t ax es
• The measures described in sections 2.4 and 2.8 are/were
subject to consultations; however, none should have any
material impact.
• Obligatory transfer pricing reporting (overview of relatedparty transactions) was introduced for taxpayers meeting
one of the following criteria: (i) assets exceeding CZK 40
million, (ii) turnover above CZK 80 million or (iii) more than
50 employees. The reporting is a part of the corporate
income tax return form.
• Some clarifications/confirmations were made regarding
the interpretation of provisions in the Income Tax Law. The
law previously contained some unclear areas; taxation was
applied based on the interpretations of both tax professionals
and the Ministry of Finance/Tax Authorities. There were
amendments removing some of these areas and confirming
the applied interpretation, although the amendments did not
represent any substantial changes.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 5
D enmark
1| Tax rates (2015–16)
Tax p olicy and
controversy
S tay u p to date w ith
develop m ents in D enm ark
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
J en s W i t t en dorf f
j ens.wittendorff@dk.ey.com
+45 5158 2820
C on t en t p rov i si on dat e
10 November 2015
7 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
1 .1 K ey tax rates123
1
2
3
2 0 1 5
2 0 1 6
Top corporate
income tax rate
(national and
local average if
applicable)
23.5%
22%
1
– 6.4%
Top individual
income tax rate
(national and
local average if
applicable)
52%
52%
2
—
Standard Value
Added Tax rate
25%
25%
3
Section 17(1) of the Danish Corporate Tax Act.
Section 19(1) of the Danish Personal Tax Act.
Section 33 of the Danish VAT Act.
Percentag e
ch ang e
—
D en m ark
2
| 2016 tax policy outlook
2 .1 K ey driver of tax p olicy ch ang e
• Denmark’s new Government, elected in J une, announced
that taxpayer rights will be one of its focus areas in 2016.
• The Government will also continue to implement measures
developed under the OECD BEPS Action Plan. For example,
the Government presented a bill in Parliament on November
10, 2015, that would implement country-by-country
reporting.
• The Government has also made reducing the tax burden on
individuals a priority. This is still subj ect to political debate,
and a concrete proposal has not yet been presented.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
The corporate tax rate is 22% for 2016,
compared to 23.5% for 2015.
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
Introduction of country-by-country reporting
from J anuary 1, 2016.
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 7
D en m ark
• Other business incentives — including depreciation/amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Higher burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Higher burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Higher burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
7 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
D en m ark
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• No maj or changes are expected regarding corporate
income taxes.
2 .8 Pending tax p rop osals
• Bill L 13: Package I on Taxpayer Rights
• Bill L 14: Duties on online casinos etc.
• Bill L 15: Duties on slot machines
• Bill L 16: Expansion of tonnage tax regime
Taxes on w ag es and emp loyment
• It is expected that political agreement will be reached to
reduce the tax burden on individuals.
• Changes have also been made to the expatriate tax regime
in order to make it more attractive.
V AT, G ST and sales taxes
• No maj or changes are expected.
2 .5 Political landscap e
• The new Government elected in J une 2015 intends to
promote taxpayer rights.
• Bill L 17: Exemption from land tax for property subject to
coastal erosion
• Bill L 18: Extension of statute of limitation due to nonfunctioning of tax collection system
• Bill 45: Tax treatment of negative interest
• Bill 46: Implementation of country-by-country reporting
2 .9 Consultations op ened/ closed
• The following draft proposals are in public hearing:
• Repeal of advertising duty
• Changes caused by a new EU Customs Codex
• Adjustments of business taxation and alignment with EU law
2 .6 Current tax p olicy and tax
administration leaders
• Karsten Lauritzen, Minister of Taxation
• Changes to the NOX duty
• Increase of tax deduction for passage of the Great Belt
Bridge
• Phasing in of car taxes on electric cars
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• MImplementation of the GAAR in amended
EU Parent-Subsidiary Directive.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 9
F inland
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates123
J u k k a L y i j y n en
jukka.lyijynen@fi.ey.com
+35 840 844 7522
Top corporate
income tax (CIT)
rate (national and
local average, if
applicable)
S tay u p to date w ith
develop m ents in F inland
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
Top individual
income tax rate
(national and
local average, if
applicable)
2 0 1 5
2 0 1 6
20%
20%
Individual income
tax consists
of national
tax, municipal
tax and other
employee taxes.
The highest
personal income
tax rate is 56.5% ,
which consists
mostly of the
following taxes:
• National
income tax,
which is
progressive
until € 90,000,
when the tax
on the lower
amount is
€ 15,491, and
the rate on
the excess is
31.75%
• National
income tax,
which is
progressive
until € 72,300,
when the tax
on the lower
amount is
€ 10,085, and
the rate on
the excess is
31.75%
• Municipal tax,
which is levied
at a flat rate
that ranges
from 16.5% 22.5%
• Municipal tax,
which is levied
at a flat rate
that ranges
from 16.5% 22.5% 2
24%
C on t en t p rov i si on dat e
25 J anuary 2016
2
3
8 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Income Tax Act, article 124.
Act for the Income Tax Scale, article 1.
Value Added Tax Act, article 84.
24%
—
1
Individual income
tax consists
of national
tax, municipal
tax and other
employee taxes.
The highest
personal income
tax rate is 56.5% ,
which consists
mostly of the
following taxes:
Standard valueadded tax (VAT)
rate
1
Percentag e
ch ang e
3
—
—
F i n lan d
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• BEBS proposals in 2016
• Country-by-country reporting (would be applicable as
of 2017)
• Transfer pricing documentation (would be applicable as
of 2017)
• Fiscal sustainability
• Effective reaction to the grey economy
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 1
F i n lan d
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
8 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
N o ch ang e
X
N o ch ang e
X
X
H ig h er
H ig h er
H ig h er
F i n lan d
2 .4 Tax p olicy outlook f or 2 0 1 6 — details
T ax adm i n i st rat i on leaders
Corp orate income taxes
• Pekka Ruuhonen, Director General of the Finnish Tax
Administration
• BEBS proposals in 2016
• Country-by-country reporting (would be applicable as
of 2017)
• Transfer pricing documentation (would be applicable as
of 2017)
Taxes on w ag es and emp loyment
• The
☐
rate table for national income tax levied on earned
income was adj usted for 2016: The second highest bracket
(in 2015 €71,400-€90,000, with a rate of 29.75%) was
removed, and the highest bracket now starts from € 72,300.
V AT, G ST and sales taxes
• No changes are expected.
2 .5 Political landscap e
• No parliamentary elections are scheduled in 2016.
• Fiscal sustainability efforts may affect Finnish tax policy
in direct and indirect ways. The increase in income taxes
collected by the State is one way to decrease the State’s
deficit. However, the ability to adjust different tax incentives
narrows because of the fiscal sustainability.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Juha Sipilä, Prime Minister
• Ari Mäkelä, Tax Director of the Tax Office of Major Corp.
2 .7
K ey tax p olicy ch ang es in 2 0 1 5
• Implementation of amendments to the EU Parent-Subsidiary
Directive into Finnish law. Under the new rules, which
entered into force 1 J anuary 2016, dividends received by a
Finnish-resident company from an EU/EEA-resident company
will no longer be tax exempt for the receiving company if
the dividends had been tax deductible for the distributing
company. In addition, a tax exemption will not be granted
to an arrangement or a series of arrangements whose main
purpose, or one of the main purposes, is to obtain a tax
advantage that contradicts the obj ect or purpose of the
exemption and which is not genuine, taking into account all
relevant facts and circumstances.
2 .8 Pending tax p rop osals
• The Ministry of Finance on 21 December 2015 released for
public consultation a draft bill to introduce CbC reporting.
The draft bill also proposes amendments regarding the
general transfer pricing documentation requirements (in
relation to both Masterfile and Local file), which would
increase the level of information required in transfer pricing
documentation. The Government intends for the provisions
to be enacted and effective by the beginning of 2017.
2 .9 Consultations op ened/ closed
• CbC reporting proposal — comments were requested by 25
J anuary 2016
• Alexander Stubb, Finance Minister
• Paula Lehtomäki, Secretary of State
• Terhi Järvikare, Director-General, Ministry of Finance (Tax
Department)
• Timo Kalli, Chairman, Parliament’s Finance Committee
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 3
F rance
1
| Tax rates (2015–16)
Tax p olicy and
controversy
C h arles M é n ard
charles.menard@ey-avocats.com
+33 1 55 61 15 57
1 .1 K ey tax rates1234
Top corporate income
tax rate (national
and local average if
applicable)
Top individual income
tax rate (national
and local average, if
applicable)
EY k ey contact
2 0 1 6
38%
38%
Including
10.7% surtax
for tax years
2014 and
2015
53% , including
social security
taxes
(CSG/CRDS)
Percentag e
ch ang e
1
—
Including
10.7% 2 surtax
for tax years
2014 and
2015
45%
Standard Value Added
Tax rate
S tay u p to date w ith
develop m ents in F rance
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
2 0 1 5
45%
—
3
53% , including
social security
taxes
(CSG/CRDS)
20%
20%
4
—
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Budget constraints and deficits.
• EU pressure to reduce public expenditures.
• Fight against tax fraud, tax optimization and BEPS (the French Tax Authority (FTA)
will develop a tougher approach regarding tax audits and administrative dispute
resolution proceedings).
• Responsibility and Solidarity Pact (aim is to reduce burdens and constraints on
companies in order to create more jobs and make companies more competitive).
• Security Pact (aim is to increase public expenditures).
C on t en t p rov i si on dat e
J anuary 2016
1
2
Section 219 of French Tax Code.
However, the 10.7% surtax should be repealed for fiscal year closed as from 31 December 2016
resulting in a top CIT rate of 34.43% .
3 Section 219 of French Tax Code.
4 Ibid.
8 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
F ran c e
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• PIT base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 5
F ran c e
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
X
L ow er
N o ch ang e
H ig h er
N o ch ang e
H ig h er
N o ch ang e
H ig h er
Personal income tax burden
X
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• Employer social contributions should be decreased; and
• The 2016 Finance Bill also amended the required contents
of the annual transfer pricing declaration. As from 1
J anuary 2016, the annual declaration has to be subscribed
electronically. In the case of a French tax consolidated group,
the declaration must now be filed by the parent company. In
addition, the declaration must now also include the State or
territory of the company owning the intangible assets, the
nature and amounts of intercompany transactions and the
State or territory of the related entities.
• Surtax on CIT of 10.7% should be repealed for companies
closing their fiscal year on 31 December 2016.
Taxes on w ag es and emp loyment
• Within the so-called Responsibility and Solidarity Pact, the
French Government is aiming to reduce corporate tax by
decreasing labor costs. As a result:
• An allowance on the computation basis of the French
“ company social solidarity contribution” should be
increased;
• The parent-subsidiary regime will be amended in order
to comply with EU law and recent decisions of the French
Constitutional Council, according to the Amending Finance
Bill for 2015.
• Automatic exchange of financial information will be
established in order to comply with EU law.
• The 2016 Finance Bill implemented country-by-country
reporting (CBCR) for companies meeting the specific criteria
for fiscal years beginning on or after 1 January 2016. Those
companies are required to declare countries’ allocation within
8 6
12 months from the closing of each fiscal year. The penalty
for failing to provide the CBCR cannot exceed €100,000.
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• In the context of the Responsibility and Solidarity Pact, the
Government committed itself to decreasing taxes on wages
and employment.
V AT, G ST and sales taxes
• The Government will align the French VAT thresholds
with the other European thresholds in order to reduce the
distortion of competition.
F ran c e
2 .5 Political landscap e
• There are no national elections or changes in leadership
expected in 2016.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leader
• Michel Sapin, Minister of Finance
T ax adm i n i st rat i on leader
• Bruno Parent, Director of the General Office of Public
Finances
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
H ori z on t al t ax c on soli dat i on
• Section 223 A of the French tax code allows a French
company or permanent establishment (PE) to form a French
tax consolidated group with other French companies or PEs
as long as all are owned at 95% or more by a company or PE
that is subject to a tax equivalent to French CIT in another EU
country or European Economic Area country.
• The horizontal tax consolidation regime is applicable to fiscal
years closed on or after 31 December 2014.
E x c ep t i on al dep rec i at i on i n f av or of i n v est m en t s
• Section 39 A of the French tax code allows companies to
deduct 40% percent of historical cost of some investment
goods depreciable according to the declining balance
method. The investment goods must be acquired or
produced from 15 April 2015 to 14 April 2016.
P aren t - su bsi di ary reg i m e
• For fiscal years beginning on or after 1 January 2015, the
parent-subsidiary regime does not apply to shares’ products,
in the proportion where the benefits distributed are
deductible from the taxable result of that company.
• Therefore, the parent company would not be able to benefit
from the parent-subsidiary regime if the income distributed
by the company is deductible from the tax result of the latter.
• Inclusion of safeguard clause for dividends paid by
companies established in non-cooperative States or
territories
• Extension of the parent-subsidiary regime to:
• Shares without voting rights
• Bare ownership’s rights
• Updating the minimum level of ownership in order to
benefit from the withholding tax exemption
• Benefit of the withholding tax exemption on dividends
paid to parent companies having their center of effective
management in a State party to the Agreement on
the European Economic Area which has concluded a
convention on administrative assistance to combat tax
evasion and avoidance.
2 .8 Pending tax p rop osals
T ax c on soli dat i on an d p aren t - su bsi di ary reg i m es
• On 2 September 2015, the Court of Justice of the European
Union (CJEU) rendered its decision in the Steria case relating
to the French taxation of dividends from EU subsidiaries.
The CJEU ruled that fully exempting dividends received
from French tax consolidated subsidiaries, but including a 5%
fraction of dividends received from EU subsidiaries in French
taxable income, amounted to a discrimination infringing the
freedom of establishment.
• This decision allows French parent companies to claim a
refund of corporate income tax (CIT) paid on such 5% fraction
of dividends received from qualifying EU subsidiaries held at
95% or more.
• It is expected that the French law regime will be amended in
order to comply with this decision.
2 .9 Consultations op ened/ closed
• There are currently no open public consultations.
• A public consultation on horizontal tax consolidation was
held from 6 May 2015 to 7 J une 2015.
• The Amending Finance Bill for 2015 introduced some
changes:
• Reintroduction of some exclusions to the regime which
were deleted by the Amending Finance Law for 2014
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 7
G ermany
1
| Tax rates (2015–16)
Tax p olicy
H erm an n Gau ss
hermann.gauss@de.ey.com
+49 30 25471 16242
1 .1 K ey tax rates12345678
2 0 1 5
Tax controversy
Top corporate
income tax rate
(national and
local average if
applicable)
J u erg en S c h i m m ele
j uergen.schimmele@de.ey.com
+49 211 9352 21937
Top federal
(national)
corporate tax
rate: 15% 1
(plus solidarity
surcharge of
5.5% 2)
A (local) trade
tax: between 7%
and 19.25% 3
S tay u p to date w ith
develop m ents in Germ any
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
Total average:
approx. 30%
C on t en t p rov i si on dat e
20 November 2015
8 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
1
2
3
4
5
6
7
8
2 0 1 6
Top federal
(national)
corporate tax
rate:
A (local) trade
tax: between 7%
and 19.25%
Total average:
approx. 30%
45% 4 (plus
solidarity
surcharge of
5.5% 5 for a total
47.48%)
45% (plus
solidarity
surcharge of
5.5% for a total
47.48%)
Standard Value
Added Tax rate
19% 6 (reduced
rate of 7% 7
applies in many
areas)
19% (reduced
rate of 7% 8
applies in many
areas)
Sec. 4 SolzG (Solidarity surcharge act).
Sec. 11 and sec. 16 GewStG (Trade tax act).
Sec. 32a para. 1 EStG (personal income tax act).
Sec. 4 SolzG (Solidarity surcharge act).
Sec. 12 para 1 UStG (VAT act).
Sec. 12 para 2 UStG (VAT act).
Sec. 12 para 2 UStG (VAT act).
—
15% (plus
solidarity
surcharge of
5.5%)
Top individual
income tax rate
(national and
local average if
applicable)
Sec. 23 para. 1 KStG (Corporation tax act).
Percentag e
ch ang e
—
—
Germ an y
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Germany’s positive economic trend continued in 2015.
Economic growth was 1.6% in 2014, and the proj ections for
2015 and 2016 foresee similar growth rates. Unemployment
is at an all-time low and, correspondingly, tax revenues have
reached record highs. Fiscal consolidation continues to be the
Government’s primary obj ective. The federal budget for 2015
did not contain any new debt, and the financial plan does not
foresee any new debts for the coming years. This is mostly
due to the strict debt limitation rule that will take effect in
2016 at the federal level, followed by even stricter rules at the
state level as from 2020 (new debt will be banned entirely at
state level).
• From a policy perspective, achieving a balanced budget
in 2016 and in 2017 (a federal election year) will be an
important aim for Chancellor Angela Merkel and the
Conservatives as they strive to highlight their successful
political commitment to stability. Given the increased pressure
on the budget caused by the (self-inflicted) refugee crisis,
any tax policy issue in 2016 will be discussed from a budget
perspective. Therefore, bigger tax cuts for businesses seem
unlikely even in the forefront of the election campaign
in 2017.
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• VAT, GST or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• 2 .2 Tax burdens in 2 0 1 6
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Controlled foreign companies (CFCs)
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016
Same burden in 2016
: Increased burden in 2016
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
: Change proposed or known for 2016☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016☐
Same burden in 2016
: Increased burden in 2016
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 9
Germ an y
• R&D incentives
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives – including depreciation/
amortization
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
9 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
N o ch ang e
X
N o ch ang e
X
H ig h er
H ig h er
H ig h er
Germ an y
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• An extension of capital gains taxation to capital gains realized
on the disposition of portfolio corporate shareholdings of
less than 10% is strongly supported by a maj ority of states
and the Social Democrats. The Federal Ministry of Finance
also showed support for that approach when it published
a discussion draft on related legislation in J uly 2015.
Currently, only dividends are fully taxable for a corporate
shareholder with such portfolio shareholdings, while capital
gains are effectively 95% tax exempt. On the other hand,
Conservative members of parliament started a promising
campaign in late 2015 to prevent the extension. Given
the support from the Chancellery and the Federal Ministry
of Economics (though led by a Social Democrat) for that
campaign, there is a realistic chance that the extension of
capital gains taxation will at least be postponed to 2017 or
2018.
• The Federal Ministry of Finance announced that a draft bill
for BEPS implementation will be presented by the end of the
first quarter of 2016. While the Ministry said the draft bill
will include stricter anti-hybrid rules (Action 2) as well as the
introduction of country-by-country reporting (Action 13), it
remains unclear which additional measures will be included.
It is possible the draft bill could include changes to the
controlled foreign company rules (Action 3), changes to the
interest barrier (“Zinsschranke”) (Action 4), the introduction of
unilateral countermeasures against patent boxes (Action 5), a
new definition of the term “permanent establishment” (Action
7) in German tax law and provisions regarding mandatory
disclosure of aggressive tax planning arrangements (Action
12). As Germany is highly committed to the multilateral
instrument (Action 15), the national implementation of
the finalized treaty is expected to follow in 2017. It is not
yet clear how Germany will coordinate its domestic BEPS
implementation in early 2016 with the expected EU BEPS
directives.
• Germany supports the introduction of a common corporate
tax base (CCTB) in the EU. In the long term, Germany would
also accept consolidation and formulary apportionment
of the tax base (CCCTB). However, representatives of the
Federal Ministry of Finance have indicated that they do not
expect a breakthrough in the European negotiations on a
CCTB in 2016. Our understanding is that this perception
remains true even if some minor parts of the former
CCCTB draft might be implemented as part of the EU BEPS
directives.
Taxes on w ag es and emp loyment
• In J uly 2015 the basic tax-free allowance and the child
allowance were increased; there will be additional increases
to both in 2016. The tax bracket parameters (within the
German progressive tax system) will increase by 1.48%
for 2016. There are no significant changes in this regard
expected in 2016, although it is possible the Government
could provide minor tax relief for individuals in the federal
election year of 2017.
• The opposition parties recently initiated a discussion on
abandoning the flat-rate withholding tax (25%) on capital
gains that applies to individual investors. Finance Minister
Wolfgang Schäuble (CDU) and the Social Democrats
also backed this plan. Supporters argue that the global
implementation of the OECD common reporting standard
(CRS) gives tax administrations access to all relevant
information on capital income, and therefore an incentive in
the form of a decreased tax rate to disclose this income is
no longer needed. In this context, the issue will probably be
decided in 2017/18 when the CRS takes effect.
V AT, G ST and sales taxes
• The Federal Constitutional Court decided in late December
2014 that specific business-friendly tax allowances in
the inheritance tax act are against German basic law. The
current provisions continue to apply, but the legislature
must amend the law by 30 J une 2016. A proposed bill that
foresees a significant increase of the tax burden for many
bigger family businesses has been the subj ect of an extensive
political debate among the governing coalition partners.
The inheritance tax reform will probably be decided in the
first half of 2016. An increase of the tax burden for family
businesses is expected.
• Concerning real estate tax, the current valuation system
is under pressure as it uses values from the 1930s and
1960s. It is possible that either an expected decision by the
Constitutional Court will result in reform, or the states and
the federal level proactively will agree on reform. Several
proposals have been in discussion over the last several years.
The outcomes will likely lead to higher real estate taxes. The
federal coalition has called on the states to agree on a reform
model. In August 2015 a “ preliminary agreement” was
communicated by the individual states (excluding Bavaria).
Since then, several state governments (particularly Hesse,
Mecklenburg-West Pomerania and North Rhine-Westphalia)
have pushed the issue and worked on detailed aspects of a
reform. All in all, a reform seems possible by mid-2017 (end
of federal legislative period).
• Germany supports a swift introduction of a Financial
Transaction Tax.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
9 1
Germ an y
2 .5 Political landscap e
• With the next federal elections set for 2017, and five
important state level elections scheduled in 2016 (and a
further three in 2017), tax policy will strongly be influenced
by the election campaigns. So far, the party strategies for
those campaigns are not clear. In 2013 (the last federal
election), the campaigns of the Social Democrats and the
Greens to increase the tax burdens for rich individuals and
businesses were defeated. However, in light of the political
momentum of the BEPS project and the general perception
that a redistribution policy is more feasible and desirable
now than it was in 2013 given today' s stable economic
development, we could see a broad tax policy discussion on
tax increases in 2016.
• Interestingly, the grand coalition on a federal level does not
have a majority in the Federal Council (Bundesrat, or Upper
House) because of the involvement of the Green Party in
many state governments. This situation will continue in
2016, regardless of the outcome of the five state elections.
While the state elections will not affect the maj ority in the
Federal Council, they will provide an important bellwether
of the leading parties’ (CDU and SPD) chances in the federal
elections, especially their performances in the two states of
Baden Württemberg and Rhineland-Palatinate.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Dr. Angela Merkel (CDU), Chancellor
• Peter Altmeier (CDU), Head of the Chancellery
• Dr. Wolfgang Schäuble (CDU), Federal Minister of Finance
• Sigmar Gabriel (SPD), Vice Chancellor, Federal Minister of
Economics and Energy and SPD party chairman
• Ralph Brinkhaus (CDU), Deputy Chairman of the CDU/CSU
parliamentary group
• Carsten Schneider (SPD), Deputy Chairman of the SPD
parliamentary group
• Ingrid Arndt-Brauer (SPD), Chairman of the Bundestag
Finance Committee
• Finance policy speakers of the Bundestag
parliamentary groups
• Markus Söder (CSU), Bavarian State Minister of Finance
• Dr. Norbert Walter-Borjans, State Minister of Finance of
North Rhine-Westphalia
• The fate of another formerly important tax policy player,
the Liberal Democratic Party, may also be decided in the
next year. Successful state elections may pave the way for
a comeback in the federal parliament elections in 2017.
The Liberals have always been the party with the clearest
tax policy focus on tax cuts and tax competitiveness. After
a record election success in 2009, the Liberal Democrats
consistently lost support during their time in coalition with
Angela Merkel, and ultimately failed to enter the federal
parliament in 2013, the first time this had occurred since
1949.
• The “ big 8” business associations and other
representative bodies
• It has to be noted that with the recent refugee crisis, the
outcome of the federal elections of 2017 is becoming more
difficult to predict. The recent actions of Chancellor Merkel
have caused significant unrest amongst her own party (CDU)
and boosted the popularity of the right-conservative party,
AfD ( Alternative für Deutschland). Politically, a success of
the AfD as well as of the Liberal Democrats in the federal
election would lead to a situation in which only a grand
coalition is feasible.
• 16 heads of tax departments at state level
9 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
T ax adm i n i st rat i on leaders
• Johannes Geismann, State Secretary, Federal Ministry of
Finance
• Dr. Michael Meister, Parliamentary State Secretary, Federal
Ministry of Finance
• Michael Sell, Head of the Tax Division of the Federal Ministry
of Finance
Germ an y
2 .7
K ey tax p olicy ch ang es in 2 0 1 5
• The Tax Amendment Act 2015 (Steueränderungsgesetz
2015) was published in November 2015. The bill was
the Federal Government’s answer to a list of federal state
demands from late 2014 containing several changes to
different tax laws such as corporate income tax, personal
income tax, reorganization tax, VAT and others, many of
them rather technical.
The most important points of the bill are:
• A taxpayer-friendly revision of the so-called “ group
exemption” from the German change-in-ownership rule,
• A
☐ limitation regarding non-share considerations that a
receiving entity (transferee) can provide to the transferor
in certain group reorganizations, and
2 .8 Pending tax p rop osals
• The Federal Ministry of Finance issued a
discussion draft bill for the Investment Tax Reform
(Investmentsteuerreformgesetz) on 22 July 2015. The
draft contains a revised version of Sec. 8b (4) Corporate
Income Tax Act in view of a planned taxation of capital gains
from portfolio shareholdings, i.e., shareholdings under 10%
(compare discussion in 2.4). In addition, the draft aims to
completely overhaul the German fund tax regime for mutual
funds and to amend the treatment of so-called special funds
(funds that can have up to 100 investors, none of whom can
be private individuals).
• The inheritance tax reform (see section 2.4).
• Draft bill for a Modernization of the Taxation Process.
• A
☐ change to the real estate transfer tax act.
• Act on the Implementation of the Convention on Mutual
Administrative Assistance in Tax Matters (AmtshÜbereinkG).
The corresponding implementation law transposing the
Multilateral Convention on Mutual Administrative Assistance
in Tax Matters into German national law was passed in
J uly 2015.
2 .9 Consultations op ened/ closed
• Increases in the personal allowance and child allowances.
The basic personal allowance was increased in the personal
income tax to 8,472 euros (2015) and 8,652 euros (2016).
In addition, child benefits and child allowances were raised.
Moreover the basic parameters of the income tax tariff were
raised by 1.48 percent (applicable as of 2016).
• Steueränderungsgesetz 2015
O p en
• Investment Tax Reform/extension of capital gains taxation
C losed
• Inheritance tax reform
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
9 3
H ong K ong SAR
1
| Tax rates (2015–16)
Tax p olicy
B ec k y L ai
becky.lai@hk.ey.com
+85 2 2629 3188
1 .1 K ey tax rates
Tax controversy
Top corporate income tax
rate (national and local
average if applicable)
S tay u p to date w ith
develop m ents in H ong
K ong S A R by accessing E Y ' s
g lobal tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
J oe C h an
j oe-ch.chan@hk.ey.com
+85 2 2629 3092
C on t en t p rov i si on dat e
23 December 2015
9 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 0 1 5
2 0 1 6
Percentag e
ch ang e
16.5%
16.5%
—
Top individual income tax
rate (national and local
average if applicable)
2% to
17% with
personal
allowance;
or 15%
without
personal
allowances,
whichever
is the
smaller
2% to
17% with
personal
allowances;
or 15%
without
personal
allowance,
whichever is
the smaller
—
Standard Value Added Tax
rate
N/A
N/A
N/A
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Hong Kong strives to maintain a simple and low tax regime to maintain its overall
competitiveness, and policymakers have been very cautious when considering
tax deductions or relief proposals of any kind. One-off measures, including tax
reductions, increases in allowance, waivers of government fees and subsidy grants,
have been introduced to try to ease the burden and pressure on both enterprises
and individuals.
H on g K on g S A R
• To strengthen Hong Kong’s position as an international
financial, investment and commercial hub and to further
promote Hong Kong’s competitiveness in attracting
corporate treasury business, the Inland Revenue Department
(IRD) has proposed amending the existing interest deduction
rules to allow a corporate borrower carrying on an intragroup financing business in Hong Kong to deduct from its
assessable profits interest payable in respect of the money
borrowed from a non-Hong Kong associated corporation
under
specified conditions.
• In addition, a concessionary Profits Tax rate for qualifying
corporate treasury centres (CTCs) has been proposed such
that the tax rate for qualifying CTCs will be 50% of the
prevailing Profits Tax rate for corporations.
2 .2 Tax burdens in 2 0 1 6
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 .☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
: Increased burden in 2016
• There are no changes in the overall treatment of tax losses,
but no group loss relief/loss carryback. ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
9 5
H on g K on g S A R
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
X
Corp orate income tax burden
L ow er
N o ch ang e
H ig h er
• In the
2015–16
Budget,tax
the burden
Financial Secretary proposed reducing Profits tax for 2014-15 by a
Corp
income
L maximum
ow orate
er income
H ig h er
Personal
burden N o ch ang e
amount of tax
HK$20,000.
X
XX
Personal
L ow er income tax burden
L ow er
Personal income tax burden
ow er
V L AT/
G ST/ sales tax burden
X
X
N o ch ang e
N o ch ang e
H ig h er
H ig h er
N o ch ang e
H ig h er
X
• In the 2015–16 Budget, the Financial Secretary proposed reducing the salaries tax and tax under
V L AT/
G ST/assessment
sales tax
personal
forburden
2014-15 by a maximum
of HK$20,000,
and increasing child allowances
ow er
N o ch ang
e
H ig h er from
to HK$100,000 from 2015-16
L HK$70,000
ow er
N oonwards.
ch ang e
H ig h er
X
V L AT/
G ST/ sales tax burden
ow er
N o ch ang e
H ig h er
L ow er
N o ch ang e
H ig h er
X
• No change perceived in the near future, although the government has made soft remarks in the past
that it will consider this.
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
2 .5 Political landscap e
C orp orat e i n c om e t ax es
• Leung Chun-ying, the Chief Executive of Hong Kong,
assumed office on 1 July 2012. In his manifesto, he said that
Hong Kong’s key advantage — its simple and low tax system —
is being eroded due to intense competition from surrounding
areas in terms of talent, taxation, efficiency, and software
and hardware facilities.1
• To maintain Hong Kong’s competitiveness, a simple and
low-tax regime remains unchanged. The corporate income
tax rate will likely remain at 16.5% for corporations and 15%
for unincorporated business (e.g., sole proprietorship and
partnership) for 2014–15.
T ax es on w ag es an d em p loy m en t
• The 2015–16 Budget introduced a one-off reduction of the
salaries tax, as well as an increase in child allowances for the
2014– 15 year of assessment.
• He reinforced the importance of “maintaining a low-tax
approach to Hong Kong’s fiscal policy, following the principle
of keeping expenditure within the limits of revenue and
striving to achieve a fiscal balance in accordance with the
provision of the Basic Law.”2
V A T , GS T an d sales t ax es
• Not applicable.
1
Page 25 of Leung’s manifesto for the Chief Executive Election 2012, www.
ceo.gov.hk/eng/pdf/manifesto.pdf.
2
Page 77 of Leung’s manifesto for the Chief Executive Election 2012, www.
ceo.gov.hk/eng/pdf/manifesto.pdf.
9 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
H on g K on g S A R
• In the 2015 Policy Address, the Chief Executive stressed that
there is room to further diversify financial services in Hong
Kong. The Financial Services Development Council (FSDC)
has recommended specific proposals raised by the financial
sector to leverage Hong Kong’s advantages and promote
diversification.
• The Hong Kong District Council election was held in
November 2015, whereas the Legislative Council and
Chief Executive elections will be held in 2016 and 2017,
respectively. Notwithstanding the elections, it is expected
that Hong Kong will continue to maintain the existing simple
and low-tax regime through 2016.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• John Tsang Chun-wah, Financial Secretary, GBM, JP
• K.C. Chan, Secretary for Financial Services and the Treasury,
SBS, JP
A dm i n i st rat i on of t ax law :
• Hong Kong tax law is administrated by the Hong Kong Inland
Revenue Department (IRD) under the leadership of the
Commissioner of Inland Revenue (CIR).
• From time to time, the IRD issues Department Interpretation
and Practice Notes (DIPN) to explain how the IRD would
interpret the legislation and enforce the law in practice.
Moreover, the CIR also published advance ruling cases to
share the IRD’s view of common issues.
T ax adm i n i st rat i on leaders
• Wong Kuen-fai, Commissioner of Inland Revenue, JP
• Tam Tai-pang, Deputy Commissioner of Inland Revenue
(Operations), JP
• Chiu Kwok-kit, Deputy Commissioner of Inland Revenue
(Technical), JP
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
C D T A s an d T I E A s
A E O I
• The bill on automatic exchange of information (“AEOI”) for
the purposes of enhancing tax transparency and combating
cross-border tax evasion will be introduced in 2016 so that
tax information can be exchanged with appropriate partners
by the end of 2018.
• The government has sought views from stakeholders on
the proposed legislation and is now refining the legislative
proposals.
Tax Resident Certificates
• The IRD has tightened the application forms for the issuance
of Tax Resident Certificates. Extensive enquiries have been
raised by the IRD to assess the commercial substance of
Hong Kong companies applying for the certificate.
Profits Tax exemption for offshore private equity funds
• The relevant legislation, passed in J uly 2015 and applicable
to relevant transactions occurring on or after 1 April 2015,
aims to extend the current Profits Tax exemption for offshore
funds to private equity funds (“PE Funds). By allowing the
use of a Hong Kong incorporated special purpose company
as a vehicle for investment in an overseas private company,
the new law may make it easier for PE Funds to take
advantage of Hong Kong’s tax treaty network.
2 .8 Pending tax p rop osals
Concessionary profits tax rate for qualifying corporate
t reasu ry c en t res ( C T C s)
• Legislative proposals, as set out under the Inland Revenue
(Amendment) (No. 4) Bill 2015, were gazetted to amend
the Inland Revenue Ordinance to specify that interest
expenditure under Profits Tax for CTCs will be deducted
and Profits Tax for the specified treasury activities will be
reduced by half (two tax concessions). The measures will
be proposed to the Legislation Council for reading in the
upcoming legislative season in 2016.
2 .9 Consultations op ened/ closed
• Consultations on the AEOI legislation have been closed.
• In 2015, Hong Kong continued to expand its Comprehensive
Double Taxation Agreement (CDTA) network and to enter
into Tax Information Exchange Agreements (TIEAs) with
its counterparts. As of December 2015, Hong Kong has
signed 33 CDTAs and 7 TIEAs. There are 13 CDTAs under
negotiation.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
9 7
H ung ary
1
| Tax rates (2015–16)
Tax p olicy
B ot on d R en c z
botond.rencz@hu.ey.com
+36 1 451 8602
1 .1 K ey tax rates
2 0 1 5
Tax controversy
Top corporate income
tax (CIT) rate (national
and local average,
if applicable)
S tay u p to date w ith
develop m ents in H u ng ary
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contact
B ot on d R en c z
botond.rencz@hu.ey.com
+36 1 451 8602
10%/19%: 19%
is the standard
CIT rate. The
10% rate
applies to the
first HUF500
million
(approx.
USD 2 million
of taxable
income.
2 0 1 6
Percentag e
ch ang e
—
10%/19%:
19% is the
standard CIT
rate. The 10%
rate applies to
the first HUF
500 million
(approx. USD
2 million)
of taxable
income.1
Top individual income
tax rate (national
and local average,
if applicable)
16%
15%
2
-6.3%
Standard value-added
tax (VAT) rate
27%
27%
3
—
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• The government is determined to keep the fiscal deficit under 3% while maintaining
economic growth.
• The government is taking actions in order to decrease the administrative burdens
of taxpayers by providing allowances to reliable taxpayers (those that are lawabiding and comply with their tax liabilities).
• The government is specifically addressing VAT fraud, as those directly hinder the
goals listed above.
C on t en t p rov i si on dat e
15 J anuary 2016
1
2
3
9 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Section 19(1)-(2) of Act LXXXI of 1996 on Corporate Income Tax.
Section 8(1) of Act CXVII of 1995 on Personal Income Tax.
Section 82(1) of Act CXXVII of 2007 on the Value Added Tax.
H u n g ary
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
9 9
H u n g ary
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
H ig h er
N o ch ang e
H ig h er
N o ch ang e
H ig h er
Personal income tax burden
X
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
Taxes on w ag es and emp loyment
• As of 2016, companies which are listed on any EEA stock
markets or which are owned by foreign companies that keep
their books according to the International Financial Reporting
Standards (IFRS) may choose to keep their Hungarian books
also in IFRS. From 2017 on, credit institutions will have to
keep their books according to IFRS standards, and insurance
companies may also choose to do so.
• The general rate of personal income tax was decreased from
16% to 15% , effective from 1 J anuary 2016.
• Companies switching to IFRS will have to comply with
special regulations to CIT base. The establishment of tax
rules is based on tax neutrality, which means that the same
economic activities should imply the same CIT liability
regardless of whether the books are kept in line with the
Hungarian or IFRS standards.
• On 1 J anuary 2016, new rules entered into force regarding
transactions with periodic settlements. The new rules
changed the date of supply rules for such transactions.
• The “ exemption with progression method” was introduced
in Hungary as a mid-year tax law change in July 2015 in
relation to the application of double tax treaties. According
to the new rule, Hungarian tax resident companies’ exempted
foreign sourced income has to be taken into account when
determining the applicable tax rate on their income taxable in
Hungary, if the double tax treaty applied includes this option.
1 0 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• The family tax allowance for families with two children was
increased from 1 J anuary 2016.
V AT, G ST and sales taxes
• The tax rate of certain agricultural products (made of pork)
was decreased to 5% .
• Furthermore, the supply of new building or parts of a building
and the land on which it stands is subject to 5% VAT from
1 J anuary 2016 if the building’s ground-space does not
exceed 150 m2 in the case of flats and 300 m2 in the case
of houses.
H u n g ary
2 .5 Political landscap e
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• The coalition of Fidesz-KDNP that has been governing since
the 2010 elections won three elections during 2014 (the
general parliamentary elections in April, the European
elections in May and the local government elections in
November). Currently, Fidesz-KDNP still has an almost twothirds majority in the Hungarian Parliament.
• There were no maj or changes in tax policy during 2015.
• The last Hungarian parliamentary elections were held on
6 April 2014. The Fidesz-KDNP coalition won the elections
and currently holds 132 out of 199 seats in the Parliament.
The opposition is fragmented; the Hungarian Socialist Party
(MSZP) has the second largest fraction in the Parliament
with 29 seats. The next national election will be held in the
first half of 2018.
2 .8 Pending tax p rop osals
• No pending proposals.
2 .9 Consultations op ened/ closed
• No open consultations.
• The elections did not result in any changes in the leadership
which would affect the tax policy landscape.
2 .6 Current tax p olicy and tax
administration leaders
Tax p olicy leader
• Mihály Varga, Minister for National Economy
Tax administration leader
• András Tállai — State Secretary of the Ministry for National
Economy (Head of Tax Authority)4
4
The National Tax and Customs Authority’s status as a government office
changed as of 1 January 2016. It will operate as a centralized agency under
the leadership of the Minister responsible for tax policy. The law authorizes
the Secretary of State to manage the office. The legislation separates the
leadership competencies of the Minister and the management functions of the
State Secretary led by the Minister.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 1
I ndia
1
| Tax rates (2015–16)
Tax p olicy
Gan esh R aj
ganesh.raj @in.ey.com
+91 120 671 7110
1 .1 K ey tax rates
Tax controversy
2 0 1 6
Percentag e
ch ang e
A) Domestic company:
regular tax of 33.99% ,
including surcharge
and education cess
(32.445% where the
total income is more
than INR10 million and
up to INR100 million;
30.9% where the total
income is equal to or
less than INR10 million)
A) Domestic company: 1
regular tax 34.608% ,
including surcharge
and education cess
(33.063% where the
total income is more
than INR10 million and
up to INR100 million;
30.9% where the total
income is equal to or
less than INR10 million)
Domestic tax:
1.8%
B) Foreign company:
regular tax of 43.26% ,
including surcharge
and education cess
(42.024% where the
total income is more
than INR10million and
up to INR100 million;
41.2% where the total
income is equal to or
less than INR10 million)
B) Foreign company:
regular tax of 43.26% ,
including surcharge
and education cess
(42.024% where the
total income is more
than INR10 million and
up to INR100 million;
41.2% where the total
income is equal to or
less than INR10 million)
Top
individual
income
tax rate
(national
and local
average, if
applicable)
30%
30%
Standard
valueadded tax
(VAT) rate
Central VAT and
service tax levied on
manufactured goods
and services: 12.36%
(12% + 3% education
cess)
Central VAT levied on
manufactured goods
and services: 12.36%
(12% + 3% education
cess)
Top
corporate
income
tax rate
(national
and local
average, if
applicable)
EY k ey
EY contacts
k ey contacts
R aj an V ora
raj an.vora@in.ey.com
+91 226 192 0440
S tay u p to date w ith
develop m ents in I ndia
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
2 0 1 5
State VAT on sale
and purchase of
goods: 12.5% to 15%
(varies by state)
C on t en t p rov i si on dat e
23 J anuary 2016
1
2
1 0 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
EY India Budget Connect +, 2015.
EY India Budget Connect +, 2015
2
State VAT on sale and
purchase of goods:
12.5% to 15%. Varies
from one state to
another
Foreign
company:
no change
—
Central VAT
levied on
manufactured
goods: 1.1%
Service tax
levied on
supply of
services:
13.3%
State VAT
on sale and
purchase of
goods: no
changes
I n di a
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Aid economic growth revival
• Continue on path of fiscal consolidation
• Facilitate greater flow of resources for productive purposes
and investment
• Measures to curb black money
• J ob creation through revival of growth and investment
and promotion of domestic manufacturing (“Make in India”
mission)
• Make domestic companies more competitive by reducing
the corporate tax rate (to be accompanied by phase-out of
incentives)
• Minimum government and maximum governance to improve
the ease of doing business
• Benefits to middle class taxpayers
• Facilitate start-ups and entrepreneurship
• Rationalize and simplify the tax regime
• Adopt GST and address all concerns of State governments
• Establish non-adversarial and conducive tax environment
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2015 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• The Government is trying to implement GST in 2016. If
that happens, the GST rate is likely to undergo a change.
Discussions on a revenue-neutral rate have commenced
and are currently underway
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• The Government is trying to implement GST in 2016. If
that happens, the GST base is likely to undergo a change.
Discussions on these specifics are underway. ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• India is committed to implementing the BEPS Action Plans,
wherein some changes are expected in relation to CFCs.
At the same time, in considering the impact that the CFC
rules could have on outbound investments, India may not
wish to immediately carry out any policy changes in this
regard. There should be some clarity on this after the
budget is announced on 29 February.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 3
I n di a
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• N/A (Although India has some rules restricting debt in the
Foreign Exchange Management Act, thin capitalization
does not apply to India as we have no rules in this regard.)
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• India is committed to implementing the BEPS Action Plans.
Appropriate amendments in Indian TP rules to align with
Action 8-10 recommendations are being considered,
although the nature of amendments and the timing of
introduction of the amendments are uncertain at this
stage.
• R&D incentives
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• The Finance Minister in his 2015 Budget speech
announced that the corporate tax rate will be reduced from
30% to 25% over the next four years starting in 2016. This
will be accompanied by a gradual phasing out of current
incentives, including R&D incentives. It is proposed that the
deduction for R&D be restricted to 100% from fiscal year
2017-18.
1 0 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• The Finance Minister in his 2015 Budget speech
announced that the corporate tax rate will be reduced
from 30% to 25% over the next four years starting in 2016.
This will be accompanied by a gradual phasing out of
incentives. For example, it is proposed that the highest rate
of depreciation be reduced from 100% to 60% in respect
of certain assets. This new rate would be applicable to all
assets (whether old or new) falling in the relevant block of
assets.
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• India has already introduced several positive measures to
provide a non-adversarial regime. Positive steps have also
been taken in improving the tax administration and the
dispute resolution mechanisms.
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• The Government may introduce new tax exemptions/
deductions, or it may increase the existing limits of tax
exemptions/deductions that can be claimed.
I n di a
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
L ow er
X
N o ch ang e
H ig h er
X
L ow er
N o ch ang e
L ow er
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• Corporate tax rate will be reduced from 30% to 25% over the
next four years starting in 2016. This will be accompanied by
a gradual phasing out of incentives which will widen the base.
• The Government also taking measures to curb black money,
tighten tax administration, bring certainty in taxation and
reduce tax litigation to unlock the sums tied up in disputes.
Taxes on w ag es and emp loyment
• The Government may generate more revenue from greater
control and monitoring of cash transactions.
H ig h er
X
H ig h er
2 .5 Political landscap e
• The BJP has a majority in the lower house of the Parliament,
but it lacks a majority in the Upper House. It has been facing
stiff resistance from the Opposition on many important
reforms such as the GST and the Land Acquisition Bill.
• The BJP suffered a defeat in Delhi and Bihar in State
elections in 2015.
• In 2016, State Elections will be held in the States of West
Bengal, Kerala, TN and Assam
• By mid-2016 BJP expects to gain some more seats in the
Upper House. However, it will still not have a majority.
• It remains to be seen how the numbers and alliances
are managed by the BJP to push the reforms through,
particularly the GST.
V AT, G ST and sales taxes
• The Government is trying to bring political consensus for the
Constitutional amendment needed for the implementation of
GST, which is expected to increase revenues for both Centre
and State governments.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 5
I n di a
2 .6 Current tax p olicy and tax administration
leaders
• Finance Ministry decided not to file an appeal against the
Bombay High Court’s ruling in favour of Vodafone in the
transfer pricing dispute.
T ax p oli c y leaders
• Jayant Sinha, Minister of State for Finance
• Constitution of High Level Committee to scrutinise fresh
cases of indirect transfers arising from retrospective
amendments of 2012 - No retrospective changes that leads
to fresh tax liability.
• Mr. Hasmukh Adhia, Revenue Secretary
• GAAR deferred till 2017.
• Dr. Arvind Subramanian, Chief Economic Adviser
• Internal Circulars issued to follow non-adversarial tax regime.
T ax adm i n i st rat i on leaders
E n able i n v est m en t s
• Mr. Atulesh Jindal, Chairman, Central Board of Direct
Taxes (CBDT)
• More enabling tax provisions for REITs and Offshore funds
with fund managers based in India.
• Mr. Najib Shah, Chairman, Central Board of Excise and
Customs (CBEC)
I m p rov i n g di sp u t e resolu t i on m ec h an i sm s
• Mr. Arun Jaitley, Finance Minister
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
L ow er c orp orat e t ax bu rden
• Reduction announced in corporate tax rate from 30% to
25% over next four years, accompanied by phase-out of
incentives.
Simplification of law
• Committee constituted under the Chairmanship of J ustice
(Retd.) R V Easwar to simplify the provisions of the Income
Tax Act, 1961.
• New Bankruptcy Code Committee constituted to revamp
India’s bankruptcy law - draft legislation expected soon.
B ri n g i n g c lari t y i n law
• Setting up a High Level Committee (Ashok Lahiri Committee)
to interact with trade and industry and ascertain areas where
clarity on tax laws is required.
• More clarity brought on issues such as taxation of indirect
transfers and place of effective management.
E n su re n on - adv ersari al reg i m e
• The Government accepts the recommendations of the A P
Shah Committee re the non-applicability of the Minimum
Alternate Tax (MAT) provisions to Foreign Institutional
Investors/Foreign Portfolio Investors (FIIs/FPIs) and foreign
companies with a permanent establishment in India.
1 0 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Issuance of fresh guidelines for representation of Revenue
before Authority of Advance Rulings (AAR).
• J urisdictional authorities to submit their report before
AAR within prescribed time frame
• Only in unavoidable circumstances should adj ournment be
taken
• Notification of APA roll back rules (“roll back year” has been
defined to mean any previous year falling within the period
of four previous years, preceding the first previous year
covered in the APA).
• Scope of AAR expanded to resident taxpayers, additional
benches announced.
• Restructuring the composition, jurisdiction and control of
Dispute Resolution Panels across the country.
I n di a
2 .8 Pending tax p rop osals
• Announcement of reduction in corporate tax rate from 30%
to 25% over the next four years starting in 2016.
• Phasing out of incentives.
• Implementation of the GST.
• Changes in the Indian tax scenario in response to BEPS.
• Dispute minimization/resolution mechanisms may see
improvements.
2 .9 Consultations op ened/ closed
• The Government had constituted the A P Shah Committee
to examine past cases of payment of the MAT to FIIs. The
committee was given the task of examining MAT notices for
the period prior to 1 April 2015 and expeditiously suggesting
ways to resolve disputes. The committee held consultations
with stakeholders in this regard. The Government has
accepted the recommendations of the Committee re the
non-applicability of MAT provisions to FIIs/FPIs and foreign
companies with a PE in India.
• The Government had also set up a High-Level Committee
(Ashok Lahiri Committee) to interact with trade and industry
and ascertain areas where clarity on tax laws is required.
• The Easwar Committee was constituted to simplify the
provisions of the Income Tax Act, 1961. The committee has
made its first report public for stakeholders’ comments.
• Industry views were invited on:
• Pre-Budget issues
• Draft “ place of effective management” guidelines
• Income Computation and Disclosure Standards (ICDS)
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 7
I ndonesia
1
| Tax rates (2015–16)
Tax p olicy and
controversy
S tay u p to date w ith
develop m ents in I ndonesia
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
C on t en t p rov i si on dat e
J anuary 2016
6 8
1 .1 K ey tax rates123
2 0 1 5
EY k ey contacts
Y u di e P ai m an t a
yudie.paimanta@id.ey.com
+622 1 5289 5585
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Top corporate income
tax rate (national
and local average if
applicable)
25%
Top individual income
tax rate (national
and local average if
applicable)
30%
Standard Value Added
Tax rate
1
2
3
10% and
0% for
export of
goods and
for export
of certain
services
2 0 1 6
Percentag e
ch ang e
25% 1 (The
Government
has informally
mentioned
its intention
to reduce the
corporate
income tax rate
from 25% to
18% in 2016.
However, we
have not heard
any further
developments
on this subject.)
30%
2
10% and 0% for
export of goods
and for export
of certain
services3
Article 17 (2a) of Indonesian Income Tax Law Number 36 Year 2008.
Article 17 (1a) of Indonesian Income Tax Law Number 36 Year 2008.
Article 7 of Indonesian Value Added Taxes Law Number 42 Year 2009.
- (However, a
28% reduction
if the
proposed CIT
rate of 18% is
implemented.)
—
—
I n don esi a
2
| 2016 tax policy outlook
•
2 .1 K ey drivers of tax p olicy ch ang e
Tax policy in Indonesia is being driven by four obj ectives:
• Collecting revenue for the State Budget.
• Expanding the tax base so that the tax ratio improves.
• Becoming a more competitive location for foreign
investment.
• Developing a solid database of taxpayers in Indonesia.
2 .2 Tax burdens in 2 0 1 6
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Headline CIT rate
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 .☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
Increased burden in 2016
• C
☐ apital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
6 9
I n don esi a
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
7 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
I n don esi a
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
C orp orat e i n c om e t ax es
• Waiver of tax penalties (e.g., 2% per month interest late
payment) provided certain conditions are met.
• A new Ministry of Finance regulation, effective for fiscal
year 2016, made changes to the thin capitalization rule. The
regulation stipulates the allowable debt to equity ratio for
interest expense deduction is at a maximum of 4: 1.
• Another regulation allows individuals and companies residing
in Indonesia to apply for a fixed asset revaluation, with
payment at a lower tax rate. The incentive is available until
the end of December 2016.
• The Government plans to introduce a new tax amnesty to
enable taxpayers to report previously undeclared assets and
wealth (the applicable tax rates would increase the longer the
taxpayer waits to disclose).
T ax es on w ag es an d em p loy m en t
• So far no changes are expected in 2016.
V A T , GS T an d sales t ax es
• So far no changes are expected in 2016.
2 .5 Political landscap e
• On 1 December 2015, there was a change of Director
General of Taxes. The previous one resigned and has been
replaced by a temporary official. The new Director General of
Taxes has not been appointed yet.
• Based on December figures, the Government predicts that
tax collection reached only 78% -80% of the full-year target
in 2015. However, the Government is still setting a quite
aggressive target for 2016.
• The Bill on Tax Amnesty and the New General Rules and
Procedures of Taxation proposed by the Government are still
being discussed at the level of Parliament.
2 .6 Current tax p olicy and tax administration
leaders
• Fixed Assets Revaluation
• With this new regulation, the Government provides special
treatment in the form of a lower final tax rate from 10% to:
• 3% for applications submitted by 31 December 2015;
• 4% for applications submitted between 1 J anuary 2016
and 30 June 2016;
• 6% for applications submitted between 1 J uly 2016and
31 December 2016, which is imposed on the difference
on fixed assets value from revaluation above net fiscal
value.
• The introduction of a higher non-taxable income threshold
for individuals.
• The new protocol amending the Indonesia Netherlands Tax
Treaty (not yet effective).
• A change in VAT rules now provides that VAT is not collected
on the import and/or local delivery of certain transportation
vehicles and associated services (under the previous rules,
these were VAT-exempt) . This change means that input VAT
of the goods/services (where delivery of such good/service
is treated as “VAT not collected”) may be credited (whereas
under a “VAT exemption” the input VAT is not creditable).
This change, which took effect 17 October 2015, will be
evaluated within three years.
2 .8 Pending tax p rop osals
• Tax Amnesty
• New General Rules and Procedures of Taxation
2 .9 Consultations op ened/ closed
• None.
• Director
☐
General of Taxes (temporary): Mr. Ken Dwijugiastiadi
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 1
I reland
1
| Tax rates (2015–16)
Tax p olicy
K ev i n M c L ou g h li n
kevin.mcloughlin@ie.ey.com
+353 1 221 2478
1 .1 K ey tax rates
2 0 1 5
D av i d F en n ell
david.fennell@ie.ey.com
+353 1 221 2448
12.5%
(a 25% rate
applies
in some
instances)
12.5%
(a 25% rate
applies
in some
instances)1
—
Top individual income tax
rate (national and local
average, if applicable)
40% income
tax
40% income
tax2
—
Additional
Universal
Social
Charge:
Additional
Universal
Social
Charge:
8% (for
employees)
8% (for
employees)
11% (for selfemployed)
11% (for selfemployed)
EY k ey contacts
E n da J ou rdan
enda.j ordan@ie.ey.com
+353 1 221 2449
S tay u p to date w ith
develop m ents in I reland
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
Standard value-added tax
(VAT) rate
1
2
Percentag e
ch ang e
Top corporate income tax
(CIT) rate (national and local
average, if applicable)
Tax controversy
K ev i n M c L ou g h li n
kevin.mcloughlin@ie.ey.com
+353 1 221 2478
2 0 1 6
23%
Reduced
rates: 9% and
13.5%
23%
3
—
Reduced
rates: 9% and
13.5%
Section 21, Taxes Consolidation Act 1997.
Section 15, Taxes Consolidation Act 1997 (income tax rate) and Section 531AN, Taxes Consolidation
Act 1997 (Universal Social Charge).
C on t en t p rov i si on dat e
11 J anuary 2016
7 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
3
Section 46, Value-Added Consolidation Act 2010.
I relan d
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• In October 2015, the Irish Department of Finance issued an
update on Ireland’s International Tax Strategy, which sets
out a charter with the principles and obj ectives underlying
Ireland’s international tax policy:
• Ireland is committed to full exchange of tax information
with its tax treaty partners.
• Ireland is committed to global automatic exchange of tax
information, in line with existing and emerging EU and
OECD rules.
• Ireland is committed to actively contributing to the OECD
and EU efforts to tackle harmful tax competition.
• Ireland is committed to engaging constructively and
respectfully with developing countries in relation to tax
matters including by offering assistance wherever possible.
• With a general election in Spring 2016, personal income
tax reductions in the form of reductions to lower rates
of the Universal Social Charge (USC) came into effect
from 1 January 2016. These reversed some of the fiscal
consolidation measures required while the country was
running a significant exchequer deficit.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• N/A, as there are no CFC rules in Ireland
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• N/A, as there are no thin cap rules in Ireland
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• The Irish Knowledge Development Box (“KDB”) takes effect
from 1 January 2016. The KDB is aimed at incentivizing
innovative R&D activities by taxing profits from patented
inventions and copyrighted software at an effective
rate of 6.25%. The KDB is the first OECD-compliant tax
regime adopting the nexus approach. The relief operates
by providing a 50% deduction from “qualifying profits”
resulting in the effective 6.25% tax rate. It is available to
companies for accounting periods commencing on or after
1 J anuary 2016 and before 1 J anuary 2021.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 3
I relan d
• Other business incentives – including depreciation/
amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Higher burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Higher burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Higher burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Higher burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
X
L ow er
N o ch ang e
H ig h er
N o ch ang e
H ig h er
Personal income tax burden
L ow er
X
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• The Irish Government remains committed to the 12.5% rate
of corporation tax.
• The Irish exchequer returns for 2015 have reported a
close to balanced budget. On this basis, no major fiscal
developments are expected for the rest of 2016.
• While Finance Bill 2016 will likely be published in October
2016 (perhaps by a new Government), its fiscal measures
will not be expected to apply until 2017.
Taxes on w ag es and emp loyment
• The marginal rate of income tax remains at 40.
U niversal social ch arg e
• 0.5% decrease in rate (to 1%) for income up to €12,012.00.
• 0.5 % decrease in rate (to 3%) for income between
€ 12,012.01 and € 18,668.
• 1.5% decrease in rate (to 5.5%) for income from €18,668.01
to € 70,044.00.
• No change to higher USC rates.
7 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
I relan d
V AT, G ST and sales taxes
• Headline VAT remains at 23%.
• Retention of 9% targeted (broadly tourism sector) VAT rate.
• Excise increase on tobacco products.
2 .5 Political landscap e
• The current Irish Government, which enj oys a comfortable
majority, is a coalition of two political parties: Fine Gael
(centre-right) and Labour (centre-left). It has been in power
since March 2011. The next Irish general election must take
place no later than April 2016.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Michael Noonan, Minister for Finance
• Brendan Howlin, Minister for Public Expenditure and Reform
• Special Assignee Relief Programme (SARP): Relief extended
for a further 3 years until the end of 2017. Further
enhancements include the removal of the upper salary
threshold of € 500,000.
• Introduction of OECD-compatible Knowledge Development
Box (effective 6.25% rate) from 1 January 2016.
• Regulation of Lobbying Act entered into force.
• Finance (Tax Appeals) Act 2015 enacted in December 2015.
2 .8 Pending tax p rop osals
• There are currently no pending tax proposals as the Finance
Act 2015 was signed into law on 21 December 2015.
• Implications of BEPS reports likely to be considered in 2016.
2 .9 Consultations op ened/ closed
• J uly 2015 — Tax Treatment of Expenses of Travel and
Subsistence for Employees and Office Holders
• Derek Moran, Secretary General Department of Finance
• July 2015 — Consultation Paper on Funding the Cost of
Financial Regulation
T ax adm i n i st rat i on leaders
• J une 2015 — Tax and Entrepreneurship
• Niall Cody, Chairman, Revenue Commissioners
• May 2015 - Regulation (EU) 2015/751 on Interchange Fees
for card based payment transactions
• Liam Irwin, Revenue Commissioner
• Gerry Harrahill, Revenue Commissioner
• March 2015 — Review of the operation of Local Property Tax
Consultation
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• March 2015 — Deadline for submissions extended to 6 March
for Public Consultation on the Amalgamation of the Offices
of the Financial Services Ombudsman and the Pensions
Ombudsman
• Company residence: Finance Act 2014 provided that all Irish
incorporated companies will be regarded as Irish resident
(subject to a double taxation treaty). This rule applies from
1 J anuary 2015 for companies incorporated on or after
1 January 2015. For companies incorporated before 1
J anuary 2015 transitional rules apply.
• February 2015 — Potential of Taxation Measures to
Encourage Development of Zoned and Serviced Land
• January 2015 — Consultation Process on Knowledge
Development Box (since enacted)
• R&D: Abolition of the 2003 “base year” requirement.
• Intangible assets: Removal of the 80% cap on the annual
utilization of capital allowances for specified
• Accelerated capital allowances for energy efficient
equipment: Extended to 2017.
• Start-up operations: Extension of 3-year tax relief to
companies commencing operations in 2015.
• Foreign Earnings Deduction (FED): Relief extended to include
travel to more countries and conditions relaxed somewhat.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 5
I srael
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates1234
S tay u p to date w ith
develop m ents in I srael
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
Gi lad S h ov al
gilad.shoval@il.ey.com
+97 2 3623 2796
2 0 1 5
2 0 1 6
Top corporate income
tax rate (national
and local average if
applicable)
26.5%
25%
Top individual income
tax rate (national
and local average if
applicable)
48% + 2%
surtax
48% 2 + 2%
surtax
Standard Value Added
Tax rate
18% until
October
2015
and 17%
thereafter
—
-5.6%
2 .1 K ey drivers of tax p olicy ch ang e
• Tax policy in Israel is being driven by three obj ectives:
• Addressing state budget requirements.
• Mitigating tax avoidance, including aggressive tax strategies and the black
market economy.
• Incentivizing local production and export.
1
3
4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
4
3
2
2
7 6
-5.7%
1
| 2016 tax policy outlook
C on t en t p rov i si on dat e
J anuary 2016
17%
Percentag e
ch ang e
Section 126 of the Income Tax Ordinance (ITO).
Section 121 of the ITO.
Section 121B of the ITO.
Section 2 of the VAT Law.
I srael
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 .☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• C
☐ apital gains tax
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• R&D incentives
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 7
I srael
2 .3 Tax p olicy outlook f or 2 0 1 5 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
H ig h er
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
N o ch ang e
X
H ig h er
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
2 .5 Political landscap e
C orp orat e i n c om e t ax es
• The political landscape in Israel has generally experienced
little change in recent years.
• Following the general elections in 2015, the core
government coalition will continue for an additional 4-year
term.
• It is currently unclear what are the leading policy
implementation priorities for the government, if any.
• No elections are expected in 2016.
• CIT rate reduced from 26.5% to 25% .
• With respect to BEPS, over the past few years the Israeli
Tax Authorities (ITA) have increased their assertiveness in
enforcing existing transfer pricing rules and they have taken
aggressive approaches to permanent establishment and
treaty shopping schemes. However, it is currently unclear
what are the leading implementation priorities for the
government, if any.
• The ITA has put in place new disclosure requirements,
effective as of 1 J anuary 2016, for reporting on certain tax
advice and tax positions with an aim to identify and audit a
wide range of aggressive tax planning.
T ax es on w ag es an d em p loy m en t
• No maj or changes are expected in 2016.
V A T , GS T an d sales t ax es
• New disclosure requirements are in place, effective as of 1
J anuary 2016, for reporting on certain tax advice and tax
positions with an aim to identify and audit a wide range of
aggressive tax planning.
7 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .6 Current tax p olicy and tax administration
leaders
• The
☐
ITA, as part of the Ministry of Finance, is the
governmental body which normally assesses and forms new
tax policy recommendations.
I srael
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
2 .8 Pending tax p rop osals
• Under new legislation approved in December 2015,
taxpayers are required to disclose certain types of written
tax advice received after 1 J anuary 2016 and tax positions
taken in 2016 and thereafter.
• Amendment to tax benefits granted to investors in high tech
companies (amendment will enable investors in start-up hightech companies to deduct the investment as an expense for
tax purposes).
• The new reporting requirements will apply to “tax advice”
and “reportable tax positions” related to income tax, VAT,
excise tax, customs and purchase tax. “Tax advice” is defined
as either (i) written advice where fees are above a certain
threshold and depend on the amount of tax advantage
obtained, or (ii) advice that is considered as “off-the-shelf
planning.”
2 .9 Consultations op ened/ closed
• None.
• The taxpayer will be required to disclose the fact that tax
advice was obtained, the transaction or asset discussed in
the advice and the type of tax issue involved, but will not be
required to disclose the actual advice. Furthermore, a tax
position will be considered reportable if it is not in line with
an official position published by the Israeli tax authorities
by the end of the year for which the position is taken and
provided the position generates a significant tax advantage
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
7 9
I taly
1
| Tax rates (2015–16)
Tax p olicy
Gi ac om o A lban o
giacomo.albano@it.ey.com
+39 06 8556 7338
1 .1 K ey tax rates
Tax controversy
S tay u p to date w ith
develop m ents in I taly
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
M ari a A n t on i et t a B i sc oz z i
maria-antonietta.biscozzi@it.ey.com
+39 02 851 4312
C on t en t p rov i si on dat e
19 J anuary 2016
8 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income tax
(CIT) rate (national and local
average, if applicable)
31.4%
31.4%
Top individual income tax
rate (national and local
average, if applicable)
47.23%
47.23%
Standard value-added tax
(VAT) rate
22%
22%
—
1
3
—
2
—
1
The legislative disposal for corporate income tax is Article 77 of the Presidential Decree, 22 December
1986, n. 917 while the disposal for regional tax is Article 16 of the Legislative Decree, 15 December
1997, n. 446.
The corporate income tax (im p osta su l reddito delle società , or IRES) rate is 27.5%. The 6.5% surcharge
previously imposed on oil, gas and energy companies (with revenues exceeding €3 million and taxable
income exceeding €300,000) — better known as the Robin Hood Tax — was declared unconstitutional with
the decision n. 10/2015 of 9 February 2015 issued by the Italian Constitutional Court.
A regional tax on productive activities (im p osta reg ionale su lle attività p rodu ttive, or IRAP) is imposed on
the net value of production and the basic tax rate is 3.9% . Different rates apply to certain sectors. In any
case, each region may apply a higher or lower tax rate according to the types of taxpayer.
2
The legislative disposal for individual tax is Article 11 of the Presidential Decree, 22 December 1986,
n. 917. The rate includes an additional regional tax ranging from 0.7% to 3.33% (based on the region)
and an additional municipal tax ranging from 0% to 0.9% . The rate does not include a solidarity tax of 3%
(deductible from income subject to ordinary taxation) applicable on income in excess of €300,000, and
does not include the additional income tax of 10% imposed on employees working in the credit sector
on their variable remuneration (which may be represented by cash bonuses, stock options or shares)
exceeding the yearly fixed remuneration.
3
The legislative disposal for VAT is Article 16 of the Presidential Decree, 26 October 1972, n. 633.
I t aly
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• The Government is striving to stimulate economic growth
and keep the deficit under control by:
• Reducing taxation on labor costs.
• Increasing tax competitiveness by providing tax incentives
for income derived from certain value added activities
(R&D) and for business investment.
• Reducing some public costs (e.g., health, public
administration, education).
• Fighting against tax evasion and harmful tax planning.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016* ☐
Increased burden in 2016
* The corporate tax rate will decrease starting from 2017. ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016* ☐
Same burden in 2016 ☐
: Increased burden in 2016** ☐
* The Legislative Decree on growth and internationalization
has abolished the limitations of deductibility for bonds
not negotiated on official markets issued by entities
other than listed companies and banks. In addition, the
provision limiting at 96% the deductibility of interest
expenses for banks and financial institutions has been
abolished.
** Starting from fiscal year 2016 Italian tax groups cannot
consider gross operating profit of foreign subsidiaries for
computing the deductibility of interest expenses within
the limit of 30% of gross operating profit. On the other
hand, deductible interest expense will be increased up to
dividends effectively received. ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
* The Legislative Decree on growth and internationalization
has introduced the horizontal tax consolidation — with
the possibility to offset profit and losses — between Italian
sister companies with a common EU parent company.
** Restrictions on the use of losses in cases of bankruptcy or
debt restructuring procedures apply starting from 2016. ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 1
I t aly
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2015 ☐
Additional change possible or somewhat likely in 2015 ☐
Lower burden in 2015 ☐
: Same burden in 2015 ☐
Higher burden in 2015 ☐
• PIT base
Change proposed or known for 2015 ☐
Additional change possible or somewhat likely in 2015 ☐
Lower burden in 2015 ☐
: Same burden in 2015 ☐
Higher burden in 2015 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
X
N o ch ang e
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• The Italian budget law for 2016, Law n. 208 of 28 December
2015 (the Law), was published in the Official Gazette n. 302
of 30 December 2015. The most relevant tax measures
contained in the Law relate to:
• Reduction of the corporate tax rate by 3.5 percentage
points (i.e., from 27.5% to 24%) starting from fiscal year
2017.
• Introduction of country-by-country reporting for
multinational entities.
8 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
H ig h er
H ig h er
H ig h er
• Repeal of the limitations on the deductibility of costs
incurred for the purchase of goods and services from black
listed entities.
• Repeal of the existing black list relevant for the application
of the CFC regime.
• Change of statute of limitations rules.
• Extra-depreciation of 40% for certain tangible assets
purchased between 15 October 2015 and 31 December
2016.
• Acceleration of the amortization period of stepped-up
intangible assets including goodwill.
• Corporate tax incentive for the sale or assignment of real
estate and registered movable property to shareholders.
I t aly
• One-off opportunity for nonresident companies to step up
Italian participations.
• One-off asset step up.
Taxes on w ag es and emp loyment
• No changes are anticipated.
V AT, G ST and sales taxes
• The Budget Law for 2016 postponed to fiscal year 2017 the
VAT rate increase originally provided for by the Budget law
2015. In particular the Law provides that:
2 .7
K ey tax p olicy ch ang es in 2 0 1 5
• The main tax changes that occurred in 2015 can be
summarized as follows:
• Introduction of a favorable patent box regime for income
generated through the use of certain intangible assets;
such income shall benefit from a 50% exemption (30% in
2015 and 40% in 2016).
• Introduction of a new research and development (R&D)
tax credit, applicable from fiscal year 2015 up to fiscal
year 2019; the tax credit is 25% of the exceeding qualified
expenditures (or 50% for some specific expenditures) in
a given fiscal year in respect of the average of the three
previous fiscal years.
• The VAT rate of 10 percent will increase by three
percentage points as from 1 J anuary 2017.
• Full deduction for regional income tax (IRAP) of labor costs
related to employees hired on a permanent basis.
• The VAT rate of 22 percent will increase by two percentage
points as from J anuary 1st 2017, and by a further one
percentage point as from 1 J anuary 2018.
• Revision of the criteria to identify black listed countries.
• The above increase can be replaced (in whole or in part) by
regulatory measures to ensure the same positive effects
on the public finances through rationalization and revision
of public spending.
• In addition, the budget law provides for the application of a
reduced 4 percent VAT rate to e-publishing.
2 .5 Political landscap e
• The current political Government is led by Matteo Renzi and
is supported by a coalition of progressive parties. The next
Italian general election will be held before or during 2018.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Matteo Renzi, Prime Minister
• Pier Carlo Padoan, Minister of Economy
• Revision of the APA procedure.
• Introduction of a general principle of abuse of law.
• Review of the relationship between taxpayer and tax
authority (introduction of a cooperative compliance
system).
• Review of the administrative and criminal tax penalties
system.
• Review of the rules governing cross-border transactions:
tax residence, black list costs, taxation of permanent
establishment (introduction of a branch exemption
regime), exit and entry taxation.
• Extension of voluntary disclosure program.
• Introduction of a personal income tax (IRPEF) bonus of
€ 80.00 per month.
2 .8 Pending tax p rop osals
• As mentioned, the budget law for 2016 has introduced the
obligation of country-by-country reporting for multinational
entities and has revised the APA procedure. In order to enact
the new provisions, the Government is expected to issues
specific Decrees over the next weeks.
T ax adm i n i st rat i on leader
• Rossella Orlandi, Head of the Italian Revenue Agency
2 .9 Consultations op ened/ closed
• N/A
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 3
J ap an
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates12345
K oi c h i S ek i y a
koichi.sekiya@j p.ey.com
+81 3 3506 2447
EY k ey contacts
S tay u p to date w ith
develop m ents in J ap an
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income
tax rate (national
and local average if
applicable)
32.11% 1
(Regular
effective
corporate tax
rate including
local
corporate
taxes)
29.97% 2
(Regular
effective
corporate tax
rate including
local
corporate
taxes)
-6.7%
Top individual income
tax rate (national
and local average if
applicable)
45% 3 (In
addition, local
individual tax
is levied. The
tax rate is
10%.)
45% (In
addition, local
individual tax
is levied. The
tax rate is
10%.)
—
Standard Value Added
Tax rate
8% 4 (the
national rate
of 6.3% and
local rate of
1.7%)
8% 5 (the
national rate
of 6.3% and
local rate of
1.7%)
—
1
This rate is applicable for the fiscal years starting on or after 1 April 2015. Effective corporate tax rate
in Tokyo area is 33.10% .
C on t en t p rov i si on dat e
14 J anuary 2016
2
The top national marginal rate is 23.4% as a result of the 2016 tax reform package. This rate is
applicable for the fiscal years starting on or after 1 April 2016. It is expected that the regular effective
corporate tax rate is further reduced to 29.74% for the fiscal years starting on or after 1 April 2018.
3
The top marginal rate (income exceeding JPY 40 million) for national individual income tax increased
from 40% to 45% as of 1 J anuary 2015.
4
5
Consumption tax law, Art.29 and Local tax law, Art.72-83
It is expected that the tax rate will be increased from 8% to 10% (the 2015 tax reform package)
effective 1 April 2017.
8 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
J ap an
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Prime Minister Shinzo Abe has adopted monetary easing
measures, a progressive fiscal policy and an economic
growth strategy in order to reverse deflationary trends within
the Japanese economy and to achieve adequate economic
growth for the future.
• A key policy goal affecting J apanese tax policy is reducing
the national deficit in order to achieve fiscal health and cope
with an aging population and low future birthrate.
• In J une 2015, a Cabinet meeting resolution on the basic
policy for economic and fiscal management, including growth
strategy and regulatory reforms, was passed.
• On 16 December 2015, the two members of J apan’s ruling
coalition, the Liberal Democratic Party and the Komeito
Party, agreed to a budgetary tax package that provides tax
rate cuts for companies in the 2016 fiscal year and tax relief
for lower-income individuals in 2017.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 .☐
• Treatment of losses
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2015 ☐
: Increased burden in 2016
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 5
J ap an
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
8 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
J ap an
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
C orp orat e i n c om e t ax es
• The national corporate tax rate was lowered from 25.5% to
23.9% . The effective corporate tax rate including local taxes
was also lowered from 34.62% to 32.11% .
• The national corporate tax rate will be reduced to 23.4% from
23.9% for taxable years beginning on or after 1 April 2016.
The combined national and local effective corporate tax rate
will be reduced to 29.97% .
• Country-by-country (CbC) reporting will be introduced.
The CbC report and Master File requirements will apply for
taxable years beginning on or after 1 April 2016. The Local
File requirement will apply for taxable years beginning on or
after 1 April 2017.
• The 80% utilization limitation of the annual net operating loss
(NOL) deduction was lowered to 65%. The dividend exclusion
system was amended.
• An Exit Tax was introduced on 1 J uly 2015.
• The consumption tax treatment of inbound e-commerce
transactions was revised effective 1 October 2015.
T ax es on w ag es an d em p loy m en t
• No maj or changes are expected in 2016.
V A T , GS T an d sales t ax es
• No maj or changes are expected in 2016.
• The current 8% rate will be retained for fresh and processed
foods (other than alcoholic beverages and for dining out)
even after the 8% rate is increased to 10% on 1 April 2017.
2 .5 Political landscap e
• The national election in the lower house was held on
14 December 2014. The ruling party, LDP, won the vast
maj ority of the seats.
2 .8 Pending tax p rop osals
• The
☐
overhaul of the Japanese individual income tax regime
is pending. At the earliest, the recommendations will be
incorporated into the 2017 tax reform.
• It is expected that the consumption tax rate will be increased
from 8% to 10% effective 1 April 2017.
2 .9 Consultations op ened/ closed
• During
☐
2015, the Government’s tax advisory committee
discussed individual income taxation issues. Mid-term
recommendations are due to be submitted in 2016.
• The national election in the upper house will be held in
J uly 2016.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leader
• Shinzo Abe, Prime Minister
• Taro Aso, Minister of Finance
T ax adm i n i st rat i on leader
• Nobumitsu Hayashi, Commissioner of National Tax Agency
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 7
L uxembourg
1
| Tax rates (2014–15)
Tax p olicy
M arc S c h m i t z
marc.schmitz@lu.ey.com
+352 42 124 7352
1 .1 K ey tax rates12345
Tax controversy
op corporate income
tax rate (national
and local average if
applicable)
J oh n H am es
j ohn.hames@lu.ey.com
+352 42 124 7256
Top individual income
tax rate (national
and local average, if
applicable)
S tay u p to date w ith
develop m ents in
Lu xem bou rg by accessing
E Y ' s g lobal tax alert library
at www.ey.com/taxalerts.
EY k ey contacts
Standard value-added
tax (VAT) rate
2 0 1 5
2 0 1 6
29.22%
29.22%
The maximum
income tax rate
is 42.80% or
43.60% , including
the contribution
of 7% or 9% to the
employment fund.
17%
Percentag e
ch ang e
1
The maximum
income tax rate is
42.80% or
43.60% 2 including
the contribution
of 7% or 9% to
the employment
fund3,4
17%
—
—
—
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• “Solidarity Budget”: sustain growth, make investments in the interests of the
citizens, strengthen the welfare state, consider climate change and build solidarity
across borders.
• Accommodate to a changing tax environment in which transparency and automatic
exchange of information are key: adapt Luxembourg tax legislation to the new rules
whilst keeping a competitive economy.
1
C on t en t p rov i si on dat e
J anuary 2016
Article 174 of the law of 4 December 1967 on income tax, as amended. The rate consists of 21% of
CIT with additional 7% of employment fund surcharge and 6.75% of municipal business tax for companies
located in Luxembourg City and which taxable income exceeds EUR 15,000. A CIT rate of 20%
(plus surcharges) will be applicable on taxable income up to EUR 15,000. Since January 2013, all
Luxembourg resident entities in corporate form and liable to CIT are subj ect to a minimum corporate
income tax regime.
2
3
4
Article 118 of the law of 4 December 1967 on income tax.
Article 6 of the law of 30 J une 1976 on creation of an employment fund, as amended.
A further 0.5% temporary budget balancing tax levied on each category of income realized by
individuals has been introduced as from 1 J anuary 2015.
8 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
L u x em bou rg
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
8 9
L u x em bou rg
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• While corporate income tax rates should remain unchanged
in 2016, the current tax legislation will undergo numerous
substantial changes. The following measures were approved
by the Parliament in December 2015:
• Abolition as of 1 J uly 2016 of the existing preferential
tax regime for income derived from qualifying intellectual
property, with a grandfathering period of five years during
which it will still be possible to benefit from this regime,
under specific conditions;
• Abolition of the minimum corporate tax regime as
from 2016;
• Adaptation of the Luxembourg participation exemption
regime in line with the amended EU Parent-Subsidiary
Directive (introduction of anti-hybrid and anti-abuse
provisions);
• Introduction of the so-called “horizontal tax consolidation”
and possibility to include Luxembourg permanent
establishments of companies resident in a Member State
of the EEA that are fully liable to a tax corresponding to
Luxembourg corporate income tax into a tax consolidation;
9 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Extension of the benefit of tax deferral upon outward
migration (“exit taxation”) to migrations to any country
which is not within the EEA, provided that this third
country has concluded a double taxation treaty with
Luxembourg containing a clause allowing the exchange of
information in line with OECD principles;
• Introduction as of 1 J anuary 2016 of a differentiated rate
of net wealth tax depending on the amount of taxable net
wealth and of a new minimum net wealth tax regime.
• Furthermore, in 2015 the Luxembourg Parliament
voted and approved a draft law that implemented the
automatic exchange of information in the field of taxation
by transposing Council Directive 2014/107/EU of 9
December 2014 amending Directive 2011/16/EU as
regards mandatory automatic exchange of information in
the field of taxation; approved the Multilateral Competent
Authority Agreement on Automatic Exchange of Financial
Account Information signed in Berlin on 29 October 2014;
and modified the law of 29 March 2013 on administrative
cooperation in the field of taxation. The law therefore
introduces into Luxembourg law the new global standard
for automatic exchange of information set by the OECD and
approved by the G20.
L u x em bou rg
• Finally, the draft law aimed at approving the double tax
treaties concluded with Andorra, Croatia, Estonia and
Singapore, as well as the Protocols to the existing double
tax treaties with the United Arab Emirates, France, Ireland,
Lithuania, Mauritius and Tunisia, was voted and passed by
the Parliament in 2015.
Taxes on w ag es and emp loyment
• Temporary tax amnesty: any individual owning assets and
collecting undeclared income therefrom can regularize his/
her tax situation by automatically filing a corrective income
tax return between 1 J anuary 2016 and 31 December 2017
and paying the amount of tax due within one month following
the receipt of the revised tax assessment. The taxpayer will
not be prosecuted for tax fraud, but the amount of tax due
will be increased by 10% for any corrective tax return filed
between 1 January 2016 and 31 December 2016 (and will
increased by 20% for corrective tax returns filed in 2017);
• Step-up provision for substantial shareholdings: the
acquisition price of determined investments can be revalued
at their estimated market value as of the date of migration of
an individual to Luxembourg.
V AT, G ST and sales taxes
• No maj or changes are expected.
2 .5 Political landscap e
• As a result of elections that were held in October 2013, the
government is composed of three parties: the DP, LSAP and
Dé i Gré ng. No elections are scheduled for 2016.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders:
• Xavier Bettel, Prime Minister
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Formalization of the previous tax ruling practice into
Luxembourg domestic law.
• Formalization of the framework for Luxembourg transfer
pricing (TP) legislation and introduction of transfer pricing
documentation requirements.
• Implementation of the FATCA agreement signed with the US,
including the Memorandum of Understanding signed on 28
March 2014 and the exchange of notes, to the Parliament.
The Agreement defines the information intended to be
exchanged automatically and mutually, and provides a
timeline of the introduction of the automatic exchange of
information as well as the conditions for implementation.
• Law on VAT regime in Free Trade Zone: The Luxembourg
Parliament voted some amendments to the VAT law that
enhance the VAT regime applicable to transactions regarding
works of art, collectors’ items and antiques. It also extends
the benefit of the second-hand VAT regime to auction
houses.
2 .8 Pending tax p rop osals
• Draft law creating a new status of alternative investment
fund: the Reserved Alternative Investment Fund (RAIF). This
new type of alternative investment fund will not be subj ect
to the approval/supervision of the Luxembourg Supervisory
Authority (CSSF), but will have to be managed by an
authorized alternative investment fund manager (AIFM). The
tax regime will depend on how the RAIF is set up: a 0.01%
subscription tax applies (with exemptions available), unless
the RAIF exclusively invests in risk capital. In the latter case,
it is subj ect to corporate income and municipal business tax,
but income from transferable securities is exempt.
2 .9 Consultations op ened/ closed
• N/A
• Pierre Gramegna, Minister of Finance, Treasury and Budget
T ax adm i n i st rat i on leaders
• Guy Heintz, Director of the Direct Tax Administration
• Romain Heinen, Director of the Indirect Tax Administration
(VAT and Customs)
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
9 1
M alaysia
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates
EY k ey contacts
L i m K ah F an
kah-fan.lim@my.ey.com
+6 03 7495 8218
S tay u p to date w ith
develop m ents in M alaysia
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
C on t en t p rov i si on dat e
J anuary 2016
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 0 1 5
2 0 1 6
Top corporate
income tax (CIT)
rate (national and
local average, if
applicable)
25%
24%
Top individual
income tax rate
(national and local
average if applicable)
25%
In the 2016
National Budget,
effective for
the 2016
assessment
year, the tax rate
on chargeable
income between
RM600,001
and RM1 million
increased from
25% 26% , and
chargeable
income
exceeding RM1
million increased
from 25% to
28% 1
Standard Value
Added Tax rate
1
2
9 2
123
The goods
and services
(GST) tax was
implemented on
1 April 2015 at
the rate of 6% .
It replaced the
sales tax (5%,
10% and specific
rates) and
service
tax (6%).
Finance Act 2015 (gazetted on 30 December 2015).
Goods & Services Tax Act 2014.
6%
Percentag e
ch ang e
-4%
2
4% (for
chargeable
income
between
RM600,001
and RM1
million); 12%
(for chargeable
income
exceeding
RM1 million)
–
M alay si a
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Amidst a challenging economic environment, the path for
fiscal consolidation in 2016 will likely move at a slower
pace. Tax policy is driven by the moderate growth outlook
and a mildly expansionary budget. The Government’s 2016
National Budget contained strategies to balance economic
demands and people’s welfare in the drive to become a
high-income nation by 2020.
• Shrinking oil and gas revenue continues to exert pressure on
the fiscal balance sheet. It is expected that revenue from the
goods and services tax (GST), which was implemented on
1 April 2015, will help cover the shortfall of a maj or portion
of oil-related revenue.
• Key tax measures/incentives announced in the 2016
National Budget that are aimed at strengthening
economic resilience are targeted at selected sectors,
including aerospace, financial services, information and
communication technology, manufacturing, small and
medium-sized enterprises (SMEs), tourism and hospitality,
and training and education.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016☐
Same burden in 2016☐
Increased burden in 2016 ☐
• For the 2016 assessment year, the corporate income tax
rate is reduced from 25% to 24% .
• For SMEs, the tax rate on the first RM500,000 of
chargeable income is reduced from 20% to 19% , and on the
balance from 25% to 24% .
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016 ☐
• Not commonly used, hence no specific
legislation/guidelines.
• Treatment of losses
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016
• The only form of capital gains tax in Malaysia is the real
property gains tax (RPGT) on gains on disposal of real
properties situated in Malaysia or shares of real property
companies [ i.e., companies which substantially hold real
properties in Malaysia (more than 75% of the value of its
total tangible assets)]. No change is proposed or known
for 2016. ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• GST at the rate of 6% was implemented with effect from 1
April 2015. As the rate is lower than the previous sales tax
(5%, 10% and specific rates) and service tax (6%) and the
GST can be claimed as input tax by business organizations,
it should not burden taxpayers and should lower the cost
of doing business. No change in the GST rate is proposed
or known for 2016 and beyond.
• VAT, GST or sales tax base
: Change proposed or known for 2016
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016
Same burden in 2016 ☐
Increased burden in 2016
• Following the implementation of GST on 1 April 2015, it
was announced in the 2016 National Budget (and enacted
30 December 2015) that further improvements to GST will
be introduced with effect from 1 J anuary 2016. Among
others, these include additional zero rating of goods and
services in selected sectors and reducing the annual sales
turnover threshold for registration for small-scale farmers
from RM100,000 to RM50,000 under the agricultural flat
rate scheme.
• Controlled foreign companies
Change proposed or known for 2016☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016 ☐
Same burden in 2016☐
Increased burden in 2016 ☐
• N/A as there are no such rules in Malaysia.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
9 3
M alay si a
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2015 ☐
Lower burden in 2016
Same burden in 2016
Increased burden in 2016 ☐
• There are no specific thin capitalization rules but the tax
legislation has been amended to allow for such rules.
However, the implementation of the thin capitalization
rules has not yet been decided. It is understood that
the Ministry of Finance and the Central Bank are
in consultation with the professional bodies on the
appropriate timing for implementing the rules.
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016 ☐
• R&D incentives
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016☐
Same burden in 2016☐
Increased burden in 2016 ☐
• As announced in the 2016 National Budget (and enacted
30 December 2015), SMEs will be eligible for a double
deduction of R&D project expenditure upon approval of
the project by the Inland Revenue Board, which would
mean that taxpayers can make their claims much earlier as
compared to other companies.
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016☐
Same burden in 2016☐
Increased burden in 2016
• The reinvestment allowance (“RA”) incentive is available
for companies on capital expenditure incurred on
qualifying projects for a period of 15 years. It was
proposed in the 2016 National Budget (and enacted 30
December 2015) that a special incentive be given to
companies which have completed or about to complete the
existing RA incentive period, i.e. a special RA for qualifying
expenditure incurred from assessment year 2016 to 2018.
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016☐
: Increased burden in 2016 ☐
• It was proposed in the 2016 National Budget (and
enacted 30 December 2015) that, effective for the 2016
assessment year, the tax rate on chargeable income
between RM600,001 to RM1million will be increased from
25% to 26% and chargeable income exceeding RM1 million
will be increased from 25% to 28% .
• PIT base
: Change proposed or known for 2016
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016☐
Same burden in 2016☐
Increased burden in 2016 ☐
• A host of tax reliefs for individuals was announced in the
2016 National Budget (and enacted 30 December 2015).
These include a new tax relief of RM1,500 for parental
care, other existing tax reliefs were increased by amounts
ranging from RM1,000 to RM2,000.
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
9 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
M ixed
X
N o ch ang e
H ig h er
H ig h er
H ig h er
M alay si a
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
2 .6 Current tax p olicy and tax
administration leaders
T ax p oli c y leaders
• With the implementation of GST, it was envisaged that the
corporate tax rate would be reduced gradually. Though the
corporate tax will be reduced from 25% to 24% for the 2016
assessment year, no further rate reduction was announced
for future assessment years in the recent National Budget.
It is likely that the status quo may remain for a few years in
order to contain the expected reduction of tax revenues in
the current economic climate.
• Dato’Sri Mohd Najib bin Tun Abdul Razak, Prime Minister
and Minister of Finance
Taxes on w ag es and emp loyment
• Dato’ Seri Khazali bin Hj. Ahmad, Director General of the
Royal Malaysian Customs Department
• The tax structure remains the same, with the exception of
the increase in the upper marginal tax rates. For chargeable
income of RM600,001 to RM1million, the tax rate will
be increased from 25% to 26% , and the rate for income
exceeding RM1million will be increased from 25% to 28%.
This is likely to contribute some additional, though not very
significant, revenue, which may help to offset some of the
revenue loss resulting from the additional tax reliefs for
families announced in the National Budget.
V AT, G ST and sales taxes
• With the Government set to continue its rationalization
measures to address the concerns over the growing deficit,
GST revenue from the first 9 months since implementation
will likely help counter falling oil revenues in the fiscal
balance sheet. At the same time, there is a need to
alleviate the high cost of living and rising operation costs.
The expansion of the list of zero-rated goods and services
for targeted sectors in 2016 is expected to ease
taxpayers’ burdens.
2 .5 Political landscap e
• The general elections are not due until 2018. Hence, no
maj or tax policy change is expected in 2016.
• Ms Khodijah bt Abdullah, Under-Secretary, Tax Division,
Ministry of Finance
T ax adm i n i st rat i on leaders
• Tan Sri Dr Mohd Shukor bin Hj. Mahfar, Chief Executive
Officer, Inland Revenue Board
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• The key tax policy change in 2015 was the implementation
of the GST on 1 April 2015. With Government revenues
declining because of lower commodity and oil revenues, the
revenue from GST has helped to reduce the budget deficit.
2 .8 Pending tax p rop osals
• Revamp of the Stamp Act 1949
• Real Property Gains Tax (RPGT) on gains from the disposal of
real properties and shares of real property companies is to be
self-assessed in 2016 in tandem with the Government’s goal
to modernize the tax system. Changes to the Real Property
Gains Tax Act 1976 are expected to help pave the way for
the implementation of the self-assessment regime.
2 .9 Consultations op ened/ closed
• The 2016 National Budget consultative talks commenced in
J uly 2015 and closed around August 2015, i.e. prior to the
2016 National Budget announcement on 23 October 2015.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
|
9 5
M exico
1
| Tax rates (2015—16)
Tax p olicy
J org e L i breros
j orge.libreros@mx.ey.com
+52 555 283 1439
1 .1 K ey tax rates
Tax controversy
Enrique Ramirez
enrique.ramirez@mx.ey.com
+52 55 5283 1367
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income
tax (national and local
average, if applicable)
30%
30%
1
—
Top individual income
tax rate (national
and local average, if
applicable)
30%
35%
2
16.7%
Standard Value
Added Tax rate
16%
16%
3
—
2
S tay u p to date w ith
develop m ents in M exico
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
C on t en t p rov i si on dat e
J anuary 2016
9 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .1 K ey drivers of tax p olicy ch ang e
• B EPS Proj ect/ Tax transp arency Significant transfer pricing disclosure and
documentation requirements are included in the 2016 Tax Reform.
• Common R ep orting Standard Alig ning actual financial institution reporting
obligations with the principles and rules included in the OECD’s Common
Reporting Standard.
• Energ y industry As a consequence of the energy reform, some changes/
incentives were introduced in the Mexican Income Tax Law.2.2 Fiscal
consolidation vs. stimulus
1
2
3
Article 9, Mexican Income Tax Law (“MITL”).
Article 152, MITL.
Article 1, Value Added Tax (“VAT”).
M ex i c o
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016
Increased burden in 2016
• Thin capitalization
: Change proposed or known for 20164
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 20165
Same burden in 2016
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 20166☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 20167
Additional change possible or somewhat likely in 2016
: Lower burden in 20168
Same burden in 2016☐
Increased burden in 2016 ☐
4
Investment in electric power generation is excluded for purposes of
calculating the thin capitalization ratio (3:1 debt to equity). For other
industries, the tax burden is the same because the proposed change only hits
the electric power industry.
5
6
Idem.
Significant transfer pricing disclosure and documentation requirements
were included in the Reform.
7
Temporary regime for immediate deduction of (i) fixed assets acquired by
micro, small and medium-sized enterprises (i.e., companies with revenues
lower than 100 million pesos, approximately US$6 million), and (ii)
investments for the creation and expansion of transportation infrastructure
(highways, roads and bridges).
8
Idem.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
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9 7
M ex i c o
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016
: Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016☐
Additional change possible or somewhat likely in 2016☐
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016
Lower burden in 2016 ☐
: Same burden in 2016☐
Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
9 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
M ex i c o
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
I mmediate deduction
• On November 18, 2015, Mexico’s 2016 tax reform package
was published in the Official Gazette and became effective
J anuary 1, 2016. The key changes are:
• The reform allows the immediate deduction of:
N ew inf ormative tax returns related to B EPS:
• Fixed assets acquired by micro, small and medium
businesses (companies with revenues less than 100
million pesos);
•
• A new annual filing obligation that requires Mexican
corporate taxpayers and permanent establishments to
file three new information returns; namely, a master file
return, a local file return and a country-by-country
(CbC) information return.
Investments made for the creation and expansion of
transportation infrastructure such as highways, roads and
bridges; and
• The filing of the CbC information return is required only of
corporations that qualify as Mexican multinational holding
companies, or those that are designated by the parent
company of a foreign multinational group as responsible for
filing the CbC Report.
• Investments in the activities regulated by the
Hydrocarbons Law (except seismic activities and
exploration and extraction of hydrocarbons) and
in machinery and equipment for the production,
transportation, distribution and supply of energy,
according to the maximum rates provided by tax
authorities.
• These information returns will be required starting in
fiscal year 2016 and will be due for the first time by
31 December 2017.
• This benefit is granted under a temporary regime and only
applies to investments made by Mexican companies or
individuals during the last quarter of 2015, and during
2016 and 2017.
Automatic exch ang e of inf ormation reg ulations
R ep atriation of f unds
• Inclusion of the OECD’s Common Reporting Standard (the
CRS) with the objective of aligning actual financial institution
reporting obligations with the principles and rules included in
the Standard.
• The reform includes a tax program for the repatriation of
funds maintained offshore through December 2014 by
Mexican companies and individuals, and have not been
reported in Mexico, including those held in preferential
tax regimes. Unlike prior tax decrees for the repatriation
of capital, the proposed program will not grant reduced
income tax rates on repatriated funds; instead, it allows
taxpayers to claim foreign tax credits, consider their formal
tax obligations as duly met, and avoid incurring penalties and
surcharges.
• The CRS will be implemented with the following terms:
• Financial institutions will be required to file an annual
report for preexisting accounts open before the effective
date of the reform (accounts that remain open until
31 December 2015) and accounts that are opened after
that date.
• Information on high-value accounts and new reportable
accounts will be filed through an annual report on 30
J une, starting in 2017.
• Taxpayers are required to invest the repatriated funds
through the financial system for a minimum of three years.
• Information on low-value accounts and preexisting
accounts will be filed through an annual report on
30 J une 2018.
• The CRS will be applied and interpreted in terms of its
commentaries, unless the Mexican Tax Authorities expressly
state otherwise through general administrative rules.
• The Mexican Tax Authorities published Appendices 25 and
25-Bis of the 2016 Mexican Administrative Rules in the
Official Gazette on 12 January 2016. The Appendices set
forth general identification and reporting requirements
applicable to Mexican financial institutions, including their
foreign branches, pursuant to the exchange of information
requirements under the CRS and the Foreign Account Tax
Compliance Act (FATCA).
• This benefit will only be available during the first half
of 2016.
•
D ividends tax credit
The reform temporarily allows Mexican individuals to claim
a credit for dividends when those are reinvested. Dividends
are required to be derived from profits obtained during
2014, 2015 or 2016. This credit is allowed against the 10%
withholding dividend tax applicable to individuals, according
to a gradual percentage (ranging from 1%-5% on the amount
distributed) that increases depending on the time the
dividends are reinvested.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
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9 9
Th in cap italiz ation
• Financing obtained from nonresident related parties for
the construction, operation or maintenance of productive
infrastructure related to the generation of electric power, is
excluded for purposes of calculating the thin capitalization
ratio (3:1 debt to equity). The relief is extended to fiscal
years 2014 and 2015.
R enew able energ y
• The reform establishes a separate CUFIN (after tax earnings
account) calculation for income from renewable energy or
systems for the cogeneration of energy savings, taking into
account the deduction for investments in fixed assets related
to those industries on a straight-line basis (i.e., 5% yearly
rate), instead of the complete amount of the immediate
deduction allowing companies to generate CUFIN even if no
tax is paid at the corporate level.
• FIBRA E is a trust created in accordance with the laws of
Mexico, that issues publicly traded securities in the form of
trust bonds and listed in the Mexican Stock Exchange.
• To qualify for tax purposes as a FIBRA E, among other
requirements, the main purpose of the trust shall be to
invest in the capital stock of Mexican companies, with at
least 90% of its annual taxable income derived from specific
activities (energy sector, transportation infrastructure
proj ects, telecommunications, public safety and social
reintegration, drinking water, sewerage and wastewater
treatment).
Taxes on w ag es and emp loyment
• N/A
V AT/ G ST/ Sales Taxes
• N/A
F inancial services industry
• Transitional provisions extend the reduced 4.9% withholding
tax rate for interest paid to foreign banks and foreign
financial institutions as long as the beneficial owner resides
in a treaty jurisdiction and treaty requirements are met.
2 .5 Political landscap e
• The majority of both Chambers (Deputies and Senate) still
belongs to the same political party (PRI) as the Federal
Government and will be in power until 2018.
F ederal R evenue Act
• In general terms, the 2016 Federal Revenue Act keeps
the tax incentives for certain industries contained in the
2015 Federal Revenue (the credit for profit sharing paid to
employees in the same fiscal year applicable against the
taxable basis; the credit on a percentage of the donations
of basic goods for human consumption or health; and the
additional salary deduction for taxpayers hiring handicapped
people). The 2016 Act, however, specifies that these tax
incentives will not be treated as taxable income for income
tax purposes.
• The annual withholding income tax rate on real interest
(gross interest less inflation effect) paid by financial
institution is reduced in 2016 from 0.60% to 0.50% .
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Enrique Peña Nieto — President
• Luis Videgaray Caso — Secretary of Finance and
Public Credit
• Miguel Messmacher — Undersecretary of Revenue
• Damián Zeped Vidales — Chairman of the Finance and Public
Credit Commission, Chamber of Deputies
• José Francisco Yunes Zorilla — Chairman of the Finance and
Public Credit Commission, Senate
“ F I B R A E”
T ax adm i n i st rat i on leaders
• FIBRA E is a new investment vehicle, introduced in the
miscellaneous tax rules, that will allow private and public
participants to monetize assets characterized by having
stable and predictable cash flow, under a tax regime
that reduces levels of taxation and allows for greater
distributions. It is an investment alternative substantially
similar to MLPs (Master Limited Partnerships).
• Aristóteles Núñez Sánchez — Head of the Tax Administration
Service (SAT)
1 0 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Oscar Molina Chie — Head of the Large Taxpayers Division
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• On November 19, 2015, the Fifth Resolution of
Amendments to Miscellaneous Tax Rules in force for 2015
was published in the Official Gazette.
• On October 8, 2015, new “Regulations to the Income Tax
Law” were published in the Official Gazette, repealing the
previous one.
• The new Regulations to the MITL provide certain
adj ustments that may impact the indirect investments made
by foreign pension and retirement funds in Mexico through
non-Mexican resident entities or investment funds.
• New SAT Internal Organizational Regulations were
published in the Official Gazette on August 24, 2015. They
included a new SAT Division that is focused on the oil and
gas industry.
• Victory of an independent candidate in Nuevo Leon
(industrial center and home to some of Mexico’s biggest
corporations).
• Local elections to be carried out on J une 2016.
2 .8 Pending tax p rop osals
• N/A
2 .9 Consultations op ened/ closed
• N/A
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 1
N eth erlands
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates123
S tay u p to date w ith
develop m ents in th e
N eth erlands by accessing
E Y ' s g lobal tax alert library
at www.ey.com/taxalerts.
EY k ey contacts
A rj o v an E i j sden
arj o.van.eij sden@nl.ey.com
+31884078411
C on t en t p rov i si on dat e
18 J anuary 2016
1 0 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate
income tax (CIT)
rate (national and
local average, if
applicable)
25%
25%
1
Top individual
income tax rate
(national and
local average, if
applicable)
52%
52%
2
Standard valueadded tax (VAT)
rate
21%
21%
3
—
—
—
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• OECD and EU initiatives are the major drivers of policy change in the Netherlands.
• The Dutch government emphasized that it will stand by the fundamental principles
of the Dutch tax system in international discussions within the OECD and the EU
and will focus on maintaining a strong investment climate in the Netherlands.
1
2
3
Article 22 Dutch Corporate Income Tax Act.
Article 2.10 Dutch Personal Income Tax Act.
Article 9 Dutch VAT Act.
N et h erlan ds
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• N/A, as there is no capital gains tax in the Netherlands.
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• N/A, as there is no thin cap rules in the Netherlands.
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 3
N et h erlan ds
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — details
Corp orate income taxes
• The following measures were approved as part of the 2016
budget and took effect 1 J anuary 2016:
• The recent amendments to the EU Parent-Subsidiary
Directive regarding the anti-hybrid rule have been
implemented in Dutch law. The Dutch participation
exemption is no longer applicable for income derived
from an otherwise qualifying participation, to the extent
this income can, directly or indirectly, be deducted in the
source state.
• The recent amendments to the EU Parent-Subsidiary
Directive regarding the GAAR have been implemented
in Dutch law. The legislation incorporates the wording
of the GAAR as adopted in the PSD into (i) the current
Dutch substantial Interest Rules included in the Dutch
Corporate Income Tax Act, and (ii) the anti-abuse rules for
cooperatives in the Dutch Dividend Withholding Tax Act.
• The three-tiered approach of BEPS Action 13 (i.e.,
country-by-country reporting, master file and local file) has
been implemented. (In addition, a Ministerial Regulation
providing further rules regarding the form and content of
CbC report, master file and local file was published in the
Government Gazette on 30 December 2015.)
1 0 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• The Research and Development Allowance has been
integrated into the Wage Withholding Tax Grants available
under the so-called WBSO (see below).
• A step-up for Dutch dividend withholding tax purposes
has been included in the Dutch Dividend Withholding Tax
Act for cross-border spin-offs and legal mergers into the
Netherlands.
Taxes on w ag es and emp loyment
• The following measures were approved as part of the 2016
budget and took effect 1 J anuary 2016:
• The Dutch Cabinet is investing € 5 billion to reduce taxes
on people who work. This amount is being used to reduce
income tax rates (and wage tax rates) from 1 January
2016 onwards:
• The rate of the first tax bracket is slightly lowered to
36.55%. (Please note: for old-age citizens entitled to a
state pension, a lower rate applies.)
• The rate of the second and third tax bracket is reduced
from 42% to 40.15% .
N et h erlan ds
• The third tax bracket is extended from € 57,585 to
€ 66,421. This means that the highest income tax rate
of 52% does not apply until someone’s income is higher
than € 66,421. Another tool to improve purchasing
power is the system of tax credits. These are reductions
on the taxes due.
• Prior to 2016, there were two subsidy schemes available
for promoting innovative development. One — the
remittance reduction under the Promotion of Research
and Development Act (WBSO) — was implemented through
a reduction in the payroll tax to be remitted. The other
— the Research & Development Deduction (RDA) — was
a deduction from the taxable profit in the income tax
or corporation tax. The RDA has been merged into the
WBSO, meaning the tax deduction from income tax and
corporation tax will disappear. An important element in
the new scheme is that the entitlement to remittance
reduction applies not only to the wage costs but also to
other R&D expenditure and costs.
V AT, G ST and sales taxes
• No maj or changes are expected.
2 .5 Political landscap e
• The current Dutch Government is a coalition between the
Liberals (VVD) and the Social Democrats (Labor Party, or
PvdA). While this coalition holds a majority in the Dutch
Lower House, it does not in the Dutch Upper House. As a
result, the Government has to seek support for law proposals
“ outside the coalition” in order for such proposals to be
enacted. Thus, the Dutch Parliament seems to have more
influence on the Government’s tax policy. The current Dutch
Government should be considered neutral from a business
perspective, neither very business friendly nor unfriendly.
The next elections for the Dutch Lower House are in 2017,
while the next elections for the Upper House are in 2019.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• In the Netherlands, there is a lively discussion between the
Government (including members of Parliament and civil
servants) and business regarding tax policy – either via
organized engagement, individually or any form in between.
• In addition, numerous scholars and tax professionals (tax
advisors and, for example, tax inspectors) are involved in tax
policy via publications, interviews and other media. Finally,
the Dutch organization of tax advisors (NOB) is heavily
involved in tax policy.
T ax adm i n i st rat i on leaders
• Eric Wiebes, State Secretary of Finance
• Jos de Blieck, deputy Director-General Dutch Tax Authorities
• Pieter Haesekamp, Director-General Fiscal Affairs
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• On 5 October 2015, the Dutch State Secretary of Finance
sent a letter to Parliament outlining the Dutch Government’s
view on the final BEPS reports. In this letter, the Dutch
government reiterated its support for a coordinated
international/non-unilateral approach based on hard
law. It furthermore emphasized that it will stand by the
fundamental principles of the Dutch tax system and will
focus on maintaining a strong investment climate in the
Netherlands.
2 .8 Pending tax p rop osals
• Legislative proposal regarding revisions to the current Dutch
fiscal unity rules in order to comply with EU law.
2 .9 Consultations op ened/ closed
• There were no relevant public consultations opened or closed
in 2015 or currently open.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 5
N ew Z ealand
1
| Tax rates (2015–16)
Tax p olicy
A aron Q u i n t al
aaron.quintal@nz.ey.com
+64 274 899 029
1 .1 K ey tax rates
Tax controversy
K i rst y K eat i n g
kirsty.keating@nz.ey.com
+64 274 899 090
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income
tax rate (national
and local average if
applicable)
28%
28%
—
Top individual income
tax rate (national
and local average if
applicable)
33%
33%
—
Standard Value
Added Tax rate
15%
15%
—
2
S tay u p to date w ith
develop m ents in
N ew Z ealand by accessing
E Y ' s g lobal tax alert library
at www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
C on t en t p rov i si on dat e
26 November 2015
1 0 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .1 K ey drivers of tax p olicy ch ang e
• The government’s tax policy work programme covers three broad areas:
• Improving current tax settings within a broad-base, low-rate tax framework.
• Technology-led
☐
modernisation of tax administration over the next sevento-10 years, with major investment in upgraded systems (the “Business
Transformation” project).
• International
☐
tax reform and addressing base erosion and profit shifting.
N ew Z ealan d
2 .2 Tax burdens in 2 0 1 6
cific a as
fisca s i
s
• None,
☐
we expect the Government to run a broadly neutral
fiscal policy
cific a as
fisca c
s i ai
• New
☐
Zealand supports the base erosion and profit shifting
proj ect, and may introduce further measures regarding
hybrid entities and related party interest deductibility
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 7
N ew Z ealan d
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
:
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
1 0 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
N ew Z ealan d
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
V AT, G ST and sales taxes
• Government revenue and expenditure is broadly in balance,
with the result that we do not anticipate maj or changes
in tax bases or rates. The Government remains committed
to broad-based and low-rate taxes, that is, minimising rates
through avoiding concessions or preferences in the
tax system.
• Lower threshold for charging GST on imported goods (GST
currently is only collected where the combined GST and duty
exceeds NZ$60).
Corp orate income taxes
Tax Administration
• Reforms to tax administration will be a major part of
business transformation. These could include
• The Government supports the BEPS project, but has
committed to consulting with the private sector before
undertaking maj or reform.
• Changes
☐
to the way in which PAYE and GST information
is provided to Inland Revenue, with the general approach
being to integrate provision of information and payments
within business processes, using digital technology.
• Major BEPS-related issues for New Zealand include transfer
pricing, the taxation of hybrid instruments and entities, thin
capitalisation and related-party debt, and proposed changes
to tax treaties under the multilateral instrument.
• Reforms
☐
that give the Commissioner of Inland tRevenue
greater powers of “care and management” to fix minor
errors and uncertainties within legislation.
• Transfer
☐
pricing: New Zealand is likely to adopt the OECD’s
revised transfer pricing guidelines, will apply country-bycountry reporting for income years beginning on or after
1 J anuary 2016 and will scrutinise multinationals with
unexplained tax losses, large interest or royalty payments
and material dealings with related parties in low-tax
j urisdictions.
• Hybrid
☐
instruments and entities: consultation on
potential reforms.
• Thin
☐
capitalisation: consultation on whether to adopt
the earnings-based approach to limits recommended by
the OECD.
• Tax
☐
treaties: New Zealand will take part in negotiations
regarding the proposed multilateral instrument
and supports binding arbitration as part of mutual
agreement procedures.
• Automatic
☐
exchange of information: will be mandatory
from early 2019.
• Other areas where reform is expected include changes to the
system of provisional tax (which requires businesses to remit
tax on account in three installments during the income year)
and simplification for small and medium-sized enterprises.
• Changes
☐
to enable greater sharing of information held
by Inland Revenue across other government agencies.
• A
☐ review of the way in which late payment penalties
are applied to taxpayers, with a view of making earlier
interventions to prevent the build-up of large amounts
of debt.
2 .5 Political landscap e
• The current centre-right government is led by the National
Party, and is partway through its third term, with the next
election not due until 2017. The government regards the
tax system as very good and has no plans to move away
from the current broad-base low rate framework. It has
recently demonstrated greater willingness to embrace tax
reform, notably around moving to a digital-led approach
to tax administration and on taxing residential property
transactions. Having achieved a small budget surplus for
the year ended 30 J une 2015, the National Party has
indicated that modest personal tax cuts may be possible
by 2018. It has specifically ruled out the introduction of a
comprehensive capital gains tax.
Taxes on w ag es and emp loyment
• Consultation
☐
on greater use of withholding taxes on
labour income.
• Review
☐
of taxation of employee share ownership plans.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 0 9
N ew Z ealan d
2 .6 Current tax p olicy and tax
administration leaders
2 .8 Pending tax p rop osals
M easures announced but not yet ef f ective
Tax p olicy leaders
• John Key, Prime Minister
• Optional
☐
PAYE treatment for employee share ownership
plans, to apply from 1 April 2017
• Todd McClay, Minister of Revenue
• Residential
☐
land withholding tax on sales of residential
property made by offshore persons within two years of
acquisition, to apply from 1 July 2016
Tax administration leader
• GST
☐
on cross border supplies of remote services, to apply
from 1 October 2016
• Bill English, Minister of Finance
• Naomi Ferguson, Commissioner of Inland Revenue
• Struan Little, Deputy Commissioner, Policy and Strategy
• Martin Smith, Chief Tax Counsel
• Allowing
☐
start-up firms to "cash out" a maximum of NZ$2
million of their tax losses arising from qualifying research
and development expenditure, to be backdated to 2015/16
income year.
M easures anticip ated in leg islation in early 2 0 1 6
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Property tax measures to address rising house prices: a
“ bright line” test to tax any capital gains made from the
sale of investment property owned for less than two years,
transparency measures aimed at non-resident investors,
increased funding for Inland Revenue, and introduction of
withholding tax for non-resident vendors.
• Confirmation
☐
that forgiving debt owing to shareholders
in wholly owned groups (related-party debt remission) or
converting that debt to equity (debt capitalisation) does
not create taxable income, overturning a disputed Inland
Revenue interpretation of existing law.
• Cash out scheme for R&D tax losses: enables New Zealand
R&D companies in a tax loss position to claim a tax credit
in their return rather than having to carry losses forward.
Limits apply to the amount of losses which can be
cashed out.
• New
☐
Zealand and the United States have entered into
competent authority arrangements regarding the Foreign
Account Tax Compliance Act (FATCA). The arrangements
establish rules and procedures to implement the pre-existing
intergovernmental agreement with the United States.
• Inland
☐
Revenue now requires multinationals to complete an
annual international tax questionnaire by 30 June.
1 1 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Proposals
☐
to clarify that remitted debt is not taxable income
when both creditor and debtor are in the New Z ealand tax
base and are either part of the same wholly owned group
or, where the debtor is a company or partnership, there
would be no change in ownership if the debt was capitalised.
The reform is in response to Inland Revenue’s view that
debt capitalisation, where there is no effective change in
ownership, potentially constituted tax avoidance under
existing law.
• Changes
☐
to rules associated with closely held companies
(look-through companies), to improve the workability of
those rules
• GST
☐
changes to rules regarding input credits on capital
raising costs, clarification of zero-rating rules in connection
with land, changes to apportionment methodology for large
businesses making mixed supplies
• Enhanced
☐
ability to utilise imputation credits within partly
owed groups with loss-making companies
• Amendments
☐
to application of time-bar to ancillary taxes
• Changes
☐
to treatment of aircraft overhaul reserves
N ew Z ealan d
2 .9 Consultations op ened/ closed
Consultations op ened and closed in 2 0 1 5
• Related
☐
parties debt remission
• Simplifying
☐
the collection of tax on employee share schemes
• Inland
☐
Revenue’s business transformation
• Green Paper on long term direction of tax administration
• Digital services, with greater use of electronic and online
processes in tax administration
• Applying
☐
non-resident withholding tax and approved issuer
levy on related party and branch lending
• Taxation
☐
of property
• Bright-line test taxing gains on sale of residential property
sold within two years
• Residential land withholding tax
• GST
☐
and online purchases
• Closely
☐
held company rules
• Loss
☐
grouping and imputation credits
• GST
☐
reforms relating to the costs of raising capital;
apportionment; fine metals; and zero-rated services
Consultations currently op en
• Inland
☐
Revenue’s business transformation
• Reforms to powers regarding “care and management” of
tax acts and taxpayer secrecy
• Information requirements for PAYE and GST
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 1 1
N orw ay
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates12
A ri ld V est en g en
arild.vestengeno.ey.com
+47 982 06 292
Top corporate
income tax (CIT)
rate (national and
local average, if
applicable)
Top individual
income tax rate
(national and
local average, if
applicable)
EY k ey contacts
2 0 1 6
27%
25%
53.7%
including
employer’s
social security
contribution
(47.2% without)
Standard valueadded tax (VAT)
rate
S tay u p to date w ith
develop m ents in N orw ay
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
2 0 1 5
Percentag e
ch ang e
1
53.5%
including
employer’s
social security
contribution
(46.8%
without)2
25%
25%
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Fiscal consolidation (BEPS)
• Striving to be more competitive from a tax standpoint (lower CIT)
C on t en t p rov i si on dat e
6 J anuary 2016
1
2
1 1 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Reduced as a result of 2016 Fiscal Budget approved 14 December 2015.
Ibid.
– 7.4%
-0.4%
(including
employer’s
social
security
contribution),
– 0.8%
(without the
contribution)
—
N orw ay
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Hybrid mismatches
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Treatment of losses
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Capital gains tax
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• VAT, GST or sales tax base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• There is a proposal to remove VAT on electronic
newspapers. There is also a proposal to impose VAT on
financial services; however, it likely would not come into
effect until 2017.
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 1 3
N orw ay
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
H ig h er
X
N o ch ang e
H ig h er
X
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — details
Corp orate income taxes
H ig h er
2 .5 Political landscap e
• No changes are anticipated.
• The rate was reduced from 27% to 25% effective 1 J anuary
2016. There may be a proposal to further reduce the CIT
rate in 2018.
2 .6 Current tax p olicy and tax administration
leaders
Taxes on w ag es and emp loyment
T ax p oli c y leader
• No changes are expected.
V AT, G ST and sales taxes
• No changes are expected. (Note: There is a proposal to
impose VAT on financial services; however, it likely would not
come into effect until 2017.)
1 1 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Siv Jensen, Finance minister
T ax adm i n i st rat i on leader
• Hans Christian Holte, Head of Norwegian Tax Administration
N orw ay
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Loans from a company to a shareholder are regarded as
dividends from autumn 2015.
• CIT rate was reduced, but at the same time there is
continuity when it comes to total tax on CIT and dividends.
2 .8 Pending tax p rop osals
• New tax management legislation - will probably enter into
force in 2017.
• In the context of the BEPS projects, the Ministry of Finance
has already published a proposal for implementation of
country-by-country reporting rules (Action 13) in Norway,
which is currently subj ect to public consultation.
• The Ministry of Finance has also proposed to introduce a
statutory general anti-avoidance rule, which is currently
under review. A final proposal is expected to be published in
the spring of 2016.
• In addition, the Ministry of Finance is currently evaluating the
need for implementing new rules for dealing with anti-hybrid
mismatch arrangements (Action 2), CFC issues (Action 3)
and PE structures (Action 7).
2 .9 Consultations op ened/ closed
• Public hearing on the new tax management legislation closed
in 2015.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 1 5
Ph ilip p ines
1
| Tax rates (2015–16)
Tax p olicy and
controversy
S tay u p to date w ith
develop m ents in th e
Ph ilip p ines by accessing
E Y ' s g lobal tax alert library
at www.ey.com/taxalerts.
EY k ey contacts
W i lf redo U . V i llan u ev a
wilfredo.u.villanueva@ph.ey.com
+63 2894 8180
C on t en t p rov i si on dat e
15 J anuary 2016
1 1 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
1 .1 K ey tax rates
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income tax
rate (national and local
average if applicable)
30%
30%
—
Top individual income tax
rate (national and local
average if applicable)
32%
32%
—
Standard Value Added Tax
rate
12%
12%
—
* Minimum
corporate
income tax
(MCIT) of
2% of gross
income
beginning
on 4th
taxable year
following
start of
operations,
when MCIT
is greater
than the tax
computed at
the regular
rate of 30%
P h i li p p i n es
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Elections
☐
will be held in May 2016 both at the national and
local levels. Although the present government is expected to
continue a policy of fiscal consolidation, the newly elected
set of officials will drive tax policy in the second half of the
year. It is therefore likely that there will be changes in the
country’s tax policy and administration leaders.
• C
☐ apital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• The approved national budget for 2016 is Php3 trillion. The
government has tasked the Bureau of Internal Revenue (BIR)
with collecting Php2.026 trillion and the Bureau of Customs
(BOC) Php498.7 billion for 2016 to finance the Php3trillion
national budget. With increased collection targets (about 20%
higher than prior year) and no new tax legislations expected
in 2016, Philippine tax authorities are expected to continue
to rely on a strict interpretation and enforcement of tax laws
to plug tax loopholes.
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 .☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
Increased burden in 2016
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 1 7
P h i li p p i n es
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• There may be a change in tax policy and administration
leaders after the May 2016 elections. However, we do
not think this would result in increased tax rates in 2016,
as any change in tax rates would have to be legislated,
which could take some time as they must go through
rigorous deliberations in Congress.
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
1 1 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
P h i li p p i n es
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
C orp orat e i n c om e t ax es
• No new corporate taxes are expected to be imposed in
2016. In December 2015, a law was passed to ensure strict
monitoring of the tax incentives enj oyed by taxpayers and
the financial impact of these tax incentives in the
Philippine economy.
T ax es on w ag es an d em p loy m en t
• In 2015, there was a move to lower personal income tax
rates but it did not progress in Congress. This bill may be
revisited in 2016 but it remains to be seen if it will actually
be passed into law.
V A T , GS T an d sales t ax es
• We see no imminent changes.
2 .5 Political landscap e
• In May 2016, an election will be held to elect new national
and local officials including the President, Vice-President,
12 Senators (half of the Senate), nearly 300 members of
the House of Representatives, as well as officials of local
government units in provinces, cities and municipalities.
• Political and economic reforms are among the maj or election
talking points in the multi-party polls. The new President is
expected to lay down his/her agenda for the six-year tenure
beginning J uly 1, 2016.
• From past experience, the new President normally appoints
new members of the cabinet, including the Secretary
of Finance, Commissioner of Internal Revenue, and
Commissioner of Customs, each of whom influences and
drives tax policy and administration.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Benigno
☐
Aquino III, President of the Republic of the
Philippines
• Cesar
☐
Purisima, Secretary of Finance
• Feliciano
☐
Belmonte, Jr., Speaker of the House of
Representatives
• Franklin
☐
Drilon, Senate President
• Juan
☐
Edgardo Angara, Chairperson, Senate Ways and Means
Committee
• Romero
☐
Quimbo, Chairperson, House Ways and Means
Committee
T ax adm i n i st rat i on leaders
• Kim
☐
Jacinto-Henares, Commissioner of Internal Revenue
• Albert
☐
D. Lina, Commissioner of Customs
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
C D T A s an d T I E A s
• There
☐
was a move to amend the Tax Code and lower personal
income tax rates.
• The
☐
BIR continues to strictly interpret and apply Tax Code
provisions on tax exemptions, preferential tax treatment, and
allowable deductions from income, seeking to limit the grant
of exemptions previously enj oyed by taxpayers.
2 .8 Pending tax p rop osals
• The
☐
bill to lower personal income tax rates may be revisited
in 2016 when the new Congress (after the national elections)
convenes. This pending income tax bill seeks to, among
others, adj ust the levels of taxable income among individual
to inflation. The existing tax rates are based on the Tax Code
passed in 1997.
• The
☐
bill seeking to rationalize or consolidate fiscal incentives
granted to companies engaged in preferred areas of
investment remains pending in Congress.
2 .9 Consultations op ened/ closed
• The
☐
ASEAN Harmonized Tariff Nomenclature (AHTN) 2012
is currently being reviewed in order to (a) align it with the
2017 version of the Harmonized Commodity Description
and Coding System (HS) and (b) based on ASEAN technical
criteria. The Tariff Commission has been accepting
comments on amendments to AHTN 2012 that may be
considered for inclusion in AHTN 2017.
• Pending
☐
entry into force of the Inter-Governmental
Agreement (lGA) on the Foreign Account Tax Compliance Act
(FATCA) between the Philippines and US, Philippine financial
institutions (PFls) have been advised to take the necessary
steps to prepare for full implementation of the terms of
the IGA and the concomitant submission of information on
reportable accounts beginning the second quarter of 2016.
The BlR is expected to hold consultations in the course of the
preparation of the necessary rules and guidelines to facilitate
compliance of PFls with FATCA.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 1 9
Poland
1
| Tax rates (2015–16)
Tax p olicy
Z bi g n i ew L i p t ak
zbigniew.liptak@pl.ey.com
Phone: +48 22 55 77 025
Mobile: +48 502 444 107
1 .1 K ey tax rates123
Top corporate income
tax rate (national
and local average if
applicable)
Tax controversy
Agnieszka Tałasiewicz
agnieszka.talasiewicz@pl.ey.com
Phone: +48 22 557 72 80
Mobile: +48 505 10 80 10
Top individual income
tax rate (national
and local average if
applicable)
Standard Value Added
Tax rate
2 0 1 5
2 0 1 6
19%
19%
Progressive
two-tiered
scale: 18 and
32%
Percentag e
ch ang e
Progressive
two-tiered
scale: 18 and
32% 2
23%
23%
3
2
EY k ey contacts
| 2016 tax policy outlook
S tay u p to date w ith
develop m ents in Poland
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
2 .1 K ey drivers of tax p olicy ch ang e
• Increase VAT revenue by tightening the VAT rules.
• Increase corporate income tax revenue by closing CIT loopholes.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
C on t en t p rov i si on dat e
26 J anuary 2016
1
2
3
1 2 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Art. 19 par. 1 of CIT Act.
Art. 27 par. 1 of PIT Act.
Art. 41 par. 1 of VAT Act in relation with Art. 146a of VAT Act.
—
1
—
—
P olan d
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 .☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
Increased burden in 2016
• C
☐ apital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• PIT base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 2 1
P olan d
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
X
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
C orp orat e i n c om e t ax es
• “ Dividends clause” : Introduction of general anti-abuse
rule to Poland’s participation exemption regime based
on amendments to EU Parent-Subsidiary Directive. CIT
exemption for income/revenues from dividends will not be
applicable if specific requirements are not met (new rule in
force as of 31 December 2015).
• New transfer pricing rules: Legislation was enacted in
October 2015 to implement CbC reporting and new transfer
pricing documentation obligations. The new rules generally
follow the Action 13 recommendations, but certain specific
local requirements have been introduced. Key provisions
include 1) modification of the definition of related parties
increasing the capital relationship threshold to 25%, 2)
introduction of obligation to supplement the annual CIT
return with a simplified report on transactions with related
parties for taxpayers whose income or expenses exceed the
equivalent of €10 million, 3) introduction of obligation to
submit a declaration signed by member of the Management
Board confirming the preparation of complete transfer
pricing documentation by the date of filing the annual CIT
return, 4) introduction of obligation to prepare comparative
analyses for taxpayers whose income or expenses exceed
the equivalent of €10 million to support the arm’s length
character of the transactional prices applied, and 5)
introduction of obligation to prepare master file, local file and
CbC report. The new TP regulations enter into force from 1
January 2017, except for the CbC reporting requirement
which is binding from 1 J anuary 2016.
• Introduction of new banking/insurance levy:
• Taxpayers:
• Domestic banks.
• Consumer loan lending institutions and
1 2 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
H ig h er
H ig h er
H ig h er
• Insurance companies (incl. branches of foreign banks
and insurance companies).
• Taxable amount:
• PLN 4,000,000,000 for domestic banks, branches
of foreign banks, branches of credit institutions and
cooperative savings-and-credit funds.
• PLN 2,000,000,000 for domestic insurers, domestic
reinsurers, branches of foreign insurers and foreign
reinsurers and principal branches of foreign insurers and
foreign reinsurers; the tax base should be calculated
j ointly for all related taxpayers.
• PLN 200,000,000 for consumer loan lending
institutions; the tax base should be calculated jointly for
all related taxpayers.
• The tax will be 0.0366% of the taxable base monthly
(which is 0.44 % annually) for all taxpayers liable to this
tax. The new tax will be due monthly. The tax will not
qualify as a cost deductible for CIT purposes in Poland. The
bill, published in the J ournal of Laws on 18 J anuary 2016,
is scheduled to come into force on 1 February 2016.
• Possible introduction of new GAAR provision in Polish tax law
to prevent the creation and use of artificial legal constructs
to avoid payment of tax in Poland (see section 2.8).
• Repeal of provision obliging taxpayers to deduct taxdeductible expenses if the amount of a contract or another
instrument is not paid within a specified number of days from
the expiry of the due date.
• Clarification regarding when a taxpayer should adjust
revenue or costs in connection with received or issued
correction invoices. If an original invoice correctly evidenced
a given economic event and a correction invoice was
issued by the seller because of subsequently occurring
circumstances (such as reduction of price or return of
goods), entrepreneurs should settle the correction invoice in
a given settlement period (i.e., the date when the correction
invoice was issued or received). If the original invoice
P olan d
contained errors, the entrepreneur would have to assign
the correction to the date when the due revenue occurred
(the date when the cost was incurred), as follows from the
original document.
• Extension of tax-deductible costs concerning the following
activities: nursery school, children’s club or kindergarten.
T ax es on w ag es an d em p loy m en t
• Repeal of provision obliging taxpayers to deduct taxdeductible expenses if the amount of a contract or another
instrument is not paid within a specified number of days from
the expiry of the due date.
• Clarification regarding when a taxpayer should adjust
revenue or costs in connection with received or issued
correction invoices (see above).
• Extension of tax exemptions:
• Various benefits received by an employee related to
childcare
• All contracts to perform specific tasks (instead of one) will be
subj ect to social security contributions.
V A T , GS T an d sales t ax es
• Introduction of pre-pro rata provisions which will mostly
influence the public sector, e.g. municipal units (cities), nonprofit foundations and associations.
2 .5 Political landscap e
• In parliamentary elections held on 25 October 2015 the
right-wing Law and J ustice party won a maj ority of seats and
can govern alone. The party focuses on inter alia familyfocused welfare spending. To fund its election pledges, the
governing party plans to impose:
• Taxes
☐
on certain financial institutions (enacted in January
2016)
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Extended catalogue of products subj ect to reverse charge
mechanism:
• Electronic devices,
• Non-ferrous metals (Copper, Zinc, Aluminum, Tin, Lead).
• Full exemption from excise duty available to taxpayers
using electricity for the purposes of chemical reduction,
electrolytic processes, metalurgical processes and in
mineralogical processes (effective 1 January 2016).
• Partial reimbursement of excise duty on electricity consumed
by entities that have the status of an energy-intensive entity
(effective 1 January 2016).
2 .8 Pending tax p rop osals
• Retail
☐
tax:
• Taxpayers:
• Retailers, small shops, Internet shops.
• Taxable amount & tax rates:
• Progressive tax rate.
• Tax exempt amount: PLN 1.5 million.
• Monthly income up to PLN 300 million – taxed at 0.7%
rate.
• Monthly income over PLN 300 million – the excess over
PLN 300 million taxed at 1.3% rate.
• 1.9% rate on income earned on Saturdays, Sundays and
other public holidays.
• The abovementioned regulations may be amended. If
approved, the tax will enter into force14 days after its
publication in the J ournal of Laws.
• New Polish GAAR: Amend the Tax Code to introduce a GAAR
in order to prevent the creation and use of artificial legal
constructs to avoid payment of tax in Poland.
• Law and Justice will also focus on tightening VAT rules and
on closing CIT loopholes.
• The amendment would define tax avoidance as an act (or
series of acts) applied in order to receive a tax benefit,
which in certain circumstances defeats the obj ect and
purpose of the Tax Code, provided the way of conduct in
the particular case was artificial.
2 .6 Current tax p olicy and tax administration
leaders
• The GAAR would not be applicable to tax benefits/sum of
tax benefits less than PLN 100k.
• Paweł
☐
Szałamacha – Minister of Finance
• Tax settlements may be safeguarded by taxpayers by
obtaining a formal confirmation of non-applicability of
GAAR in their specific case.
• Levies
☐
on large retailers (proposal is pending).
• Marian Banaś – Undersecretary of State, Chief of the Custom
Service
• Leszek Skiba – Undersecretary of State
• Wiesław Jasiński – Undersecretary of State, General
Inspector of Treasury Control, General Inspector of Financial
Information
• Konrad Raczkowski – Undersecretary of State
• Hanna Majszczyk – Undersecretary of State
• Dorota Podedworna-Tarnowska – Undersecretary of State
• Monika Nowosielska – Acting Director General
• The abovementioned regulations may be amended. If
approved, the new law will enter into force 14 days after
its publication in the J ournal of Laws.
2 .9 Consultations op ened/ closed
• A proposal for the introduction of a GAAR to prevent the
creation and use of artificial legal constructs was released in
December 2015 for public consultation (comments were due
by 20 January 2016).
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 2 3
R ussia
1
| Tax rates (2015–16)
Tax p olicy
A lex an dra L obov a
alexandra.lobova@ru.ey.com
+7 495 755 9700
1
1 .1 K ey tax rates
2 0 1 5
Tax controversy CI S
A lex an dra L obov a
alexandra.lobova@ru.ey.com
+7 495 755 9700
Top corporate income
tax rate (national
and local average if
applicable
The state
percentage can
be reduced to
a minimum of
13.5% in certain
regions for certain
categories of
taxpayers.
Tax controversy R ussia
A lex ei . N est eren k o
alexei.nesterenko@ru.ey.com
+7 495 755 9700
1 2 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
The basic
corporate profits
tax rate consists of
a 2% rate payable
to the central
government, and
rates ranging
from 13.5 % to
18% payable
to the regional
governments. 1
—
As a result, the
basic corporate
profits tax rate
varies from 15.5%
to 20% .
Tax rates of 0% ,
13% and 15%
apply to dividends.
(No changes from
2015.)
C on t en t p rov i si on dat e
11 December 2015
Percentag e
ch ang e
A 0% tax rate
applies to profits
of Russian
companies
performing
educational
activities and
medical activities
if they satisfy
certain criteria.
EY k ey contacts
S tay u p to date w ith
develop m ents in R u ssia
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
The general rate of
income tax is set
at 20%, of which
2% goes to the
federal budget and
18% goes to the
regional budget.
2 0 1 6
1
Article 284 of the Tax Code of the Russian Federation.
R u ssi a
2 0 1 5
Top individual income
tax rate (national
and local average if
applicable)
General rate of
13% for Russian
residents, 35% on
gifts, 30% for nonRussian residents,
and 15% on
dividends received
by non-residents.
The 13% tax rate
applies from
1 J anuary 2015
to dividends
and participation
income received.
2 0 1 6
Standard rate is
13% for Russian
residents. 2
Percentag e
ch ang e
—
30% rate is set
for non-Russian
residents.
15% rate is set on
dividends received
by non-Russian
residents.
13% rate is set
for non-Russian
residents which
carry out labour
activities in
accordance with
the requirements
of the Russian
legislation.
35% rate is set for
gifts.
(No changes from
2015.)
Standard Value Added
Tax rate
The general rate
is 18%; 0% is set
for export sales
and international
transportation;
10% is set for food
products, products
for children,
medical products
and periodical
publications.
VAT exempt:
financial services,
warranty repairs,
medical services,
educational
services
Standard rate is
18% . 3
—
0% rate is set for
many exports
of goods,
international
exportation and
certain services.
10% rate is set for
food products,
children’s goods,
medical products
and periodical
publications.
(No changes from
2015.)
g23
2
3
Article 224 of the Tax Code of the Russian Federation.
Article 164 of the Tax Code of the Russian Federation.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 2 5
R u ssi a
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Fiscal consolidation.
• Fighting tax evasion and capital flight.
• Anti-crisis measures and investment incentives.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
1 2 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
R u ssi a
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
X
N o ch ang e
V AT/ G ST/ sales tax burden
L ow er
H ig h er
H ig h er
X
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — details
Corp orate income taxes
• Further improvements to CFC legislation aimed at:
• Elimination of double taxation of the CFC’s profits (first at
the undistributed stage, then at the stage of the dividends
distribution),
• Proper calculation of the share of indirect control in a
CFC through a chain of companies,
• Proper calculation of the CFC’s profits for the purposes
of taxation,
• Exclusion of foreign companies from CFC scope if they
are owned through participation in Russian public
companies etc.
• Extension of thin capitalization rules to loans from/to sister
companies; as stated in section 2.2 the tax burden will likely
stay the same because:
H ig h er
• Russian courts already rule in favor of tax authorities
which tend to consider afore-mentioned loans as
controlled – even in the absence of legislative rules,
• Interest on some controlled transactions (when all
associated persons in a group are Russian residents) is
taxed at 0% in 2015 and this measure may be prolonged
for 2016 or made permanent (see section 2.10).
• Consideration of possible amendments to interest
deduction rules according to the OECD’s BEPS Action 4
recommendations.
• Improvement of transfer pricing (TP) legislation (taking into
consideration BEPS Actions 8-10 and 13 recommendations)
with regard to:
• Requirements to report information on controlled
transactions,
• TP methods,
• Advance pricing arrangements
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 2 7
R u ssi a
Taxes on w ag es and emp loyment
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• No
☐ significant changes are expected.
• The
☐
following amendments to tax legislation aimed at
offshore evasion entered into force on 1 J anuary 2015:
V AT, G ST and sales taxes
• No significant changes are expected.
2 .5 Political landscap e
• No significant changes are expected.
2 .6 Current tax p olicy and tax
administration leaders
Tax p olicy leaders
• Anton Siluanov – Ministry of Finance
Tax administration leader
• Mikhail Mishustin – Commissioner of the Russian Federal
Tax Service
• CFC rules:
• A foreign company is considered a CFC if CIT rate in its
resident country is less than ¾ of the Russian general
CIT rate,
• If a Russian resident (controlling person) controls at least:
• 50%
☐
of its capital – in 2015,
• From
☐
2016 – 25% of the capital or 10% if a cumulative
share of all Russian controlling persons is at least 50%
of the CFC capital.
• Some exceptions apply – a foreign company is not
considered a CFC:
• If
☐ it receives 80% of its income from active
entrepreneurial operations,
• If
☐ it is an incorporated structure which does not
distributes its income,
• If
☐ it is a bank/insurance company which resident
country exchange information with the Russian tax
administration,
• If
☐ it is an issuer of some types of Eurobonds and not
less than 90% of its income comes from such
Eurobonds, etc.
• A
☐ foreign company which has a branch or PE in Russia
may apply for the Russian tax resident status to avoid
CFC rules,
• CFC
☐
profits for tax periods starting in 2015 shall be
included in tax returns due in 2017,
• CIT
☐
actually paid in a resident country may be credited
against due Russian CIT.
• Effective place of management as a criterion of tax residence
in Russia,
• Beneficial owner concept introduced.
• Law
☐
on amnesty for so-called repatriated capital came into
force on 1 July 2015. Between that date and 31 December
2015, individuals could declare previously undeclared
foreign property and bank accounts at no risk of criminal
liability, administrative liability or liability for tax violations.
Some restrictions applied, e.g., such property/accounts could
not be situated in countries included in the Financial Action
Task Force (FATF) list or in countries which do not exchange
tax information with Russia, etc.
1 2 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
R u ssi a
2 .8 Pending tax p rop osals
2 .9 Consultations op ened/ closed
• Pending legislation:
• All
☐ amendments by the Government bodies (ministries,
agencies and alike) to tax legislation are submitted for
public consultations and discussion (through the website
www.regulation.gov.ru).
• Improvements to the CFC rules and thin cap rules (see
section 2.4),
• Introduction of a principal purpose test (PPT) to the Tax
Code: transactions aimed at tax minimization shall not be
accepted for tax purposes (draft law passed first reading in
June 2015).
• Proposals from the Ministry of Finance’s “Main Goals of Tax
Policy for 2016” :
• Among the most important:
• Improving CFC legislation (draft law is still
being discussed),
• Law on amnesty for repatriated capitals (consultations are
over and the law is already in force).
• For “greenfield” and special investment contracts:
• 0% CIT rate for the federal share of the tax instead
of 2% ,
• 10% CIT rate for its regional share instead of 18% ,
• Continuation of 0% CIT rate for interest on controlled loans
within a group of Russian associated persons (see section
2.4), or making it permanent.
• New proposals by President Vladimir Putin to the
Federal Assembly:
• Tax exemption (both CIT & PIT) of the coupon income on
corporate bonds,
• Granting a right to regional authorities to introduce
0% CIT rate for special investment contracts (regional
investment projects).
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 2 9
Sing ap ore
1
| Tax rates (2015–16)
Tax p olicy
R u ssell A u brey
russell.aubrey@sg.ey.com
+65 6309 8690
1 .1 K ey tax rates 2
Tax controversy
C h u n g - S i m S i ew M oon
siew-moon.sim@sg.ey.com
+65 6309 8807
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income tax
(CIT) rate (national and local
average, if applicable)
17%
17%
1
—
Top individual income tax
rate (national and local
average, if applicable)
20%
22%
2
10%
Standard value-added tax
(VAT) rate
7%
7%
3
—
2
S tay u p to date w ith
develop m ents in S ing ap ore
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
C on t en t p rov i si on dat e
12 February 2016
2 .1 K ey drivers of tax p olicy ch ang e
• Support the transformation of the economy from one that is value-adding
into value-creating, by developing a conducive environment for businesses to
restructure, innovate and internationalize.
• Sustain a fair and progressive fiscal system.
• Continue the push to restructure Singapore’s economy in an attempt to increase
Singapore’s productivity by 2% to 3% per year over the next decade.
• Strengthen support for firms that innovate and expand through globalization,
as well as provide help for businesses so that they can restructure to upgrade
productivity and achieve quality growth.
• Promote an inclusive society that improves all lives, focusing especially on
investment in Singaporeans by equipping them with deep skills and knowledge,
keeping quality healthcare affordable, and supporting both middle and lowerincome Singaporeans.
1
Section 43(1)(a) of the Singapore Income Tax Act. Any changes in the top corporate tax rate for 2016 will be
known during the Budget 2016 which will be delivered on 24 March 2016.
2 Section 43(1)(b) of the Singapore Income Tax Act (not enacted yet).
3
Section 16(c) of the Singapore Goods and Services Tax Act. Any changes in the standard GST rate for 2016 will
be known during the Budget 2016 which will be delivered on 24 March 2016.
1 3 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
S i n g ap ore
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
N/A as there is no capital gains tax in Singapore
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
N/A as there are no CFCs in Singapore
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
N/A as there is no thin cap rule in Singapore
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
The Inland Revenue Authority released revised transfer
pricing guidelines on 4 J anuary 2016. The changes include
enhanced guidance on the cost plus method and significant
enhancements to the Mutual Agreement Procedure and
Advance Pricing Arrangement programs. However, the
new guidelines do not reflect the transfer pricing changes
included in the final BEPS report released in October 2015.
Nevertheless, the new guidelines remain directionally
aligned with the BEPS outcomes, particularly around the
importance of substance and alignment of transfer pricing
outcomes with value creation, and so any further updates
are likely to be reflected in future iterations of the guidelines.
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 3 1
S i n g ap ore
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
H ig h er
N o ch ang e
H ig h er
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
M ixed
X
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
2 .5 Political landscap e
Corp orate income taxes
• The ruling People’s Action Party (PAP) won in the Jubilee
year general election in September 2015. It was the first
election since Singapore independence where all seats
were contested. PAP secured a strong mandate with a
popular vote share of 69.9% . As PAP remains the single
dominant party in Parliament, tax policy is likely to remain
stable and consistent.
• Corporate tax rate of 17% is generally competitive.
Taxes on w ag es and emp loyment
• Top marginal rate of 22% is generally competitive.
V AT, G ST and sales taxes
• As of now, there is no indication of an increase in the GST
tax rate, although it will be no surprise if the GST tax rate
increases within the next few years.
1 3 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
S i n g ap ore
2 .6 Current tax p olicy and tax administration
leaders
E n h an c i n g t h e D ou ble T ax D edu c t i on ( D T D ) f or
I n t ern at i on ali z at i on sc h em e
T ax p oli c y leaders
• Businesses may claim a 200% tax deduction on qualifying
expenditure incurred on qualifying market expansion and
investment development activities, subj ect to conditions.
The scope of qualifying expenditure will be enhanced
to include qualifying salary expenses incurred from 1
July 2015 to 31 March 2020 for Singaporeans and
Singapore Permanent Residents posted to new overseas
establishments, capped at S$1m per approved entity per
year, subject to conditions. Businesses will have to apply to
International Enterprise (IE) Singapore to enjoy the DTD.
• Lee Hsien Loong, Prime Minister
• Heng Swee Keat, Minister for Finance
• Peter Ong, Permanent Secretary (Finance) and Chairman of
Inland Revenue Authority of Singapore Board
T ax adm i n i st rat i on leaders
• Tan Tee How, Commissioner of Inland Revenue
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
Singapore's Minister for Finance delivered the 2015 Budget in
Parliament on 23 February 2015. Some key measures include:
Gran t i n g a C orp orat e I n c om e T ax ( C I T ) rebat e f or y ear of
assessm en t ( Y A ) 2 0 1 6 an d Y A 2 0 1 7
• A 30% CIT rebate will be extended for another two YAs (YA
2016 and YA 2017), albeit with a reduced cap of S$20,000
per company per YA.
Extending and enhancing the Mergers & Acquisitions
( M & A ) sc h em e
• To further support companies, especially SMEs, to grow via
strategic acquisitions, the scheme will be extended through
31 March 2020. Some of the key changes which take effect
for qualifying acquisitions made from 1 April 2015:
• The M&A allowance rate will be increased to 25% of the
value of the qualifying acquisition, the value being capped
at S$20m;
• Stamp duty relief on the transfer of unlisted shares will
correspondingly be capped at S$20m on the value of
qualifying M&A deals.
• The shareholding eligibility tier has been revised:
• At least 20 % or more but 50% or less of the ordinary
shareholding in the target company (if the acquiring
company’s original shareholding in the target company
was less than 20%), subject to conditions, or
• More than 50% ordinary shareholding in the target
company (if the acquiring company’s original
shareholding in the target company was 50%
or less). The existing 75% shareholding eligibility tier
will be removed.
I n t rodu c i n g t h e I n t ern at i on al Grow t h S c h em e ( I GS )
• Under the IGS, to support high potential companies in their
growth overseas while anchoring their key business activities
and headquarters in Singapore, qualifying Singapore
companies will enj oy a concessionary tax rate of 10% for a
period not exceeding five years on their incremental income
from qualifying activities. The incremental income refers to
income in excess of the company’s average of the last three
years’ income from the relevant qualifying activities such as
headquarters functions and specific business lines. This new
scheme will be administered by IE Singapore. The approval
window period for the new scheme will be from 1 April 2015
to 31 March 2020.
2 .8 Pending tax p rop osals
• Tax changes proposed in Budget 2015 as highlighted in
section 2.7 have been incorporated into the Income Tax
(Amendment) Bill 2016, which was introduced in Parliament
on 25 J anuary 2016 and will likely be passed as law in the
first quarter of 2016.
2 .9 Consultations op ened/ closed
• Public consultations with the Ministry of Finance/Inland
Revenue Authority of Singapore that were closed in 2015:
• Income Tax (Amendment) Bill 2016
• Goods and Services Tax (Amendment) Bill 2015
• Income Tax Implications arising from adoption of
Financial Reporting Standard 115 — Revenue from
contracts with customers
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 3 3
Slovak ia
1
| Tax rates (2015–16)
Tax p olicy
R i c h ard P an ek
richard.panek@sk.ey.com
+421 2 3333 9109
1 .1 K ey tax rates1234
Top corporate income
tax (CIT) rate (national
and local average,
if applicable)
Tax controversy
P et er F ei ler
peter.feiler@sk.ey.com
+421 2 3333 9155
Top individual income
tax rate (national
and local average,
if applicable)
Standard value-added
tax (VAT) rate
2 0 1 5
2 0 1 6
22%
22%
19%/25% on
portion of gross
income exceeding
€ 3,370 per
month
Percentag e
ch ang e
—
1
—
19%/25% on
portion of gross
income exceeding
€ 3,370 per
month2
20%
20%
3
—
2
S tay u p to date w ith
develop m ents in S lovak ia
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
C on t en t p rov i si on dat e
14 J anuary 2016
1 3 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .1 K ey drivers of tax p olicy ch ang e
The Social Democratic Government (party in charge) develops tax policy according to
these key drivers:
• Fiscal consolidation — main driver.
• Increase of state income.
• Minimization of inequality in tax system.
• Fight against tax fraud and tax evasion.
• Goal to keep public finance deficit below 3% of gross domestic product.
1
2
3
Act No. 595/2003 Coll. on Income Tax, as later amended; Section 15 lit. b).
Act No. 595/2003 Coll. on Income Tax, as later amended; Section 15 lit. a) points 1 and 2,
respectively.
Act No. 222/2004 Coll. on Value Added Tax, as later amended; Section 27 (1) per the wording
effective as of 1 J anuary 2015.
S lov ak i a
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 3 5
S lov ak i a
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
H ig h er
N o ch ang e
H ig h er
N o ch ang e
H ig h er
Personal income tax burden
L ow er
X
V AT/ G ST/ sales tax burden
L ow er
X
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes —
ef f ective as of 1 J anuary 2 0 1 6
Cap ital I ncome of I ndividuals —
ef f ective as of 1 J anuary 2 0 1 6
• In connection with the implementation of the recent
• A new tax base with respect to capital gains is introduced,
amendment to the EU Parent-Subsidiary Directive (PSD),
with the aim of ensuring the same taxation treatment of
the linking rule dealing with hybrid loan arrangements as well
Slovak and overseas source income. The income from capital
as a general anti-avoidance rule should be introduced in Slovak
gains will not be included in the tax base under Article 4 of
tax law.
the ITA, but it will constitute a separate tax base, with a tax
rate of 19% , without application of progressive tax rates.
• A Slovak legal entity should not be allowed to exempt
dividends received if such distribution was tax deductible at
the level of subsidiary.
• Income from a sale of shares traded on regulated markets
shall be tax exempt if the period between acquisition and
sale of the shares is longer than one year and at the same
• Dividends received should also be subj ect to taxation in
time the shares are not included in the taxpayer’s business
Slovakia in the case of a transaction or series of transactions
assets. The exemption shall apply only to natural persons.
that are not business driven and their main purpose, or one
of the main purposes, is to gain a tax advantage.
1 3 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
S lov ak i a
V AT, G ST and sales taxes —
ef f ective as of 1 J anuary 2 0 1 6
• Extension of the scope of goods subject to reduced 10%
VAT rate. This applies for particular food products such as
meat, fish, milk and bread.
• Cash accounting scheme — taxpayers whose annual turnover
does not exceed € 100,000 may choose to use this scheme,
under which they declare output VAT only after the receipt
of customer payments.
• Extended reverse charge for supplies of goods by foreign
persons — The scope of the reverse-charge mechanism
for goods has been extended to all goods supplied by
non-established taxpayers in Slovakia
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• The measures described in section 2.4 were proposed and/or
legislated for in 2015.
2 .8 Pending tax p rop osals
• N/A
2 .9 Consultations op ened/ closed
• N/A
• Introduction of reverse-charge mechanism for construction
services — The reverse charge mechanism should also apply
to supplies of construction under a contract of work (or
similar type of contract).
2 .5 Political landscap e
• Parliament elections are expected in 2016.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leader
• Peter Kažimír, Minister of Finance
T ax adm i n i st rat i on leaders
• Frantisek Imrecze, President of Financial Directorate
• Dana Meager, Vice-President of Financial Directorate
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 3 7
South Af rica
1
| Tax rates (2015–16)
Tax p olicy
C h arles M ak ola
charles.makola@za.ey.com
+27 11 772 3146
1 .1 K ey tax rates123
Tax controversy
C h ri st el V an W y k
christel.vanwyk @za.ey.com
+27 11 502 0100
2 0 1 5
2 0 1 6
Top corporate
income tax (CIT) rate
(national and local
average, if applicable)
28%
28%
Top individual income
tax rate (national
and local average, if
applicable)
40%
Standard value-added
tax (VAT) rate
14%
Percentag e
ch ang e
41% 2
(for the
year ending
29 February
2016)
14%
3
2
EY k ey contacts
| 2016 tax policy outlook
S tay u p to date w ith
develop m ents in
S ou th A f rica by accessing
E Y ' s g lobal tax alert library
at www.ey.com/taxalerts.
2 .1 K ey drivers of tax p olicy ch ang e
• Raising revenue to fund government programs and deliver services
• Addressing fiscal consolidation
• Minimizing inequality using the tax system
• Changing taxpayer behaviors
• Addressing base erosion and profit shifting
C on t en t p rov i si on dat e
12 J anuary 2016
1
2
3
1 3 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Rates and Monetary Amounts and Amendment of Revenue Laws Act No. 13 of 2015.
Ibid.
Value-Added Tax Act 89 of 1991.
—
1
—
—
S ou t h A f ri c a
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Controlled foreign companies
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 3 9
S ou t h A f ri c a
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
Personal income tax burden
L ow er
N o ch ang e
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
N o ch ang e
H ig h er
X
H ig h er
X
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — details
2 .5 Political landscap e
Corp orate income taxes
• Local elections in 2016 may put the Government under
pressure not to raise VAT or personal income tax.
• The focus will likely be on increasing revenue collected from
the corporate tax base. This is likely to be effected through
broadening the tax base, increased enforcement, closing
loopholes and revising or removing certain incentives.
2 .6 Current tax p olicy and tax administration
leaders
Taxes on w ag es and emp loyment
• There is a possibility of an increase in the headline rate,
increased enforcement, and widening of the tax net.
V AT, G ST and sales taxes
• Possible increase in headline rate.
1 4 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
T ax p oli c y leaders
• Ismail Momoniat, Deputy Director-General (Tax and Financial
Sector Policy), National Treasury
• Cecil Morden, Chief Director, Economic Tax Analysis, National
Treasury
T ax adm i n i st rat i on leader
• Tom Moyane, Commissioner, South African Revenue Services
S ou t h A f ri c a
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Reinstatement of controlled foreign company diversionary
rules.
• Deletion of the so-called section 6quin which allowed foreign
tax credits in relation to taxes incorrectly withheld by foreign
governments.
• Review of retirement taxation framework.
2 .8 Pending tax p rop osals
• 2016 Budget in February will set the agenda.
2 .9 Consultations op ened/ closed
• Consultations are currently underway for the 2016 agenda.
• The Davis Tax Review Committee (committee set up to
investigate aspects of the South African tax system)
consultations are continuing.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 4 1
Sp ain
1
| Tax rates (2015–16)
Tax p olicy
E du ardo V erdú n
Eduardo.verdunfraile@es.ey.com
+34 91 5727 421
Tax controversy
M ax i m i n o L i n ares
maximino.linaresgil@es.ey.com
+34 91 5727 123
1 .1 K ey tax rates
2 0 1 5
2 0 1 6
Top corporate income
tax (CIT) rate (national
and local average,
if applicable)
28%
25%
Top individual income
tax rate (national
and local average,
if applicable)
General base:
45%
General base:
45% 2
Saving base:
23%
Saving base:
23%
Standard value-added
tax (VAT) rate
21%
21%
Percentag e
ch ang e
1
3
-10.7%
—
—
2
S tay u p to date w ith
develop m ents in S p ain
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Corporate Income Tax rate decreased from 28% to 25% as of 1 J anuary 2016.
• Country-by-country reporting (hereinafter, CbCR) obligations take effect for tax
years starting on or after 1 J anuary 2016.
• Possible upcoming General Elections in 2016. Elections were held in December
2015, but the results were inconclusive and the political situation remains unclear.
New elections could take place in spring 2016, so there will not be any tax changes
until at least late spring or summer.
C on t en t p rov i si on dat e
J anuary 2016
1
Corporate Income Tax Law 27/2014, Art 29
2
Personal Income Tax Law 35/2006, Arts 63, 66, 74 and 76.
3
Value Added Tax Law 37/1992, Art 90.
1 4 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
S p ai n
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer Pricing changes
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 4 3
S p ai n
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
X
N o ch ang e
H ig h er
H ig h er
H ig h er
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• Private Investment vehicles (named SICAV), currently taxed
at a 1% Corporate Income Tax rate, will be reviewed in order
to prevent the low taxation linked to these type of structures.
2 .5 Political landscap e
• General Elections were held in December 2015, but
the results were inconclusive and the political situation
remains unclear. New elections could take place in
spring 2016.
Taxes on w ag es and emp loyment
• Social Security contributions could be lowered to promote
indefinite labor contracts.
2 .6 Current tax p olicy and tax administration
leaders
V AT, G ST and sales taxes
• Cristóbal Montoro (Ministry of Finance and of Public
Administrations)
• The maj ority of the most important political parties will
seek to decrease the VAT rate applicable to cultural shows
(including cinema) to 10% from the current 21% to stimulate
domestic consumption.
1 4 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
• Santiago Menéndez (Central Tax Administration Director)
• Miguel Ferre ( Secretary of State for Finance)
S p ai n
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
2 .8 Pending tax p rop osals
D irect taxation
N ew V AT comp liance oblig ations:
• Corporate Income Tax: Base broadening focused on a higher
restriction to deductibility of certain expenses and less quota
deductions (except the Research & Development deduction),
and simultaneous tax rate reduction from 30% to 28% .
• Starting 1 January 2017, taxpayers who must file VAT
returns monthly because (i) they have a turnover exceeding
€6 million; (ii) are included in the monthly refund regime; or
(iii) are applying the VAT Grouping provisions, will need to
report, together with their VAT return, the books required
by the VAT regulations (i.e., invoices issued or received,
investment goods and other intra-Community operations).
The books will be transmitted electronically and almost
immediately to the Spanish Tax Authorities.
• Some restrictions and anti-fraud measures in line with the
OECD’s BEPS recommendations have been included in the
new Corporate Income Tax Law (deductibility of interest
accrued in Profit Participating Loans)
• Personal Income Tax rate reductions announced in J uly 2015
were scheduled to take effect 1 J anuary 2016.
G eneral Tax L aw
• Amendments in the General Tax Law: new statute of
limitation period for auditing net operating losses (increased
to 10 years), and length of the audit procedure increased to
18 months (formerly 12 months).
• Tax Administration is entitled to publish the list of tax
defaulters. The first listing will be published in January 2016.
• The text for the new rules was not approved in December
2015. It is extremely unlikely that the current Government
will get it passed in the immediate future, so it may not be
decided until later in 2016.
2 .9 Consultations op ened/ closed
• None.
B EPS
• CbCR obligations are already included in the Corporate
Income Tax regulations.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 4 5
Sw itz erland
1
| Tax rates (2015–16)
Tax p olicy
C lau di o F i sc h er
claudio.fischer@ch.ey.com
+41 5 8286 3433
1 .1 K ey tax rates1
2 0 1 5
Tax controversy
S tay u p to date w ith
develop m ents in
S w itz erland by accessing
E Y ' s g lobal tax alert library
at www.ey.com/taxalerts.
EY k ey contacts
W alo S t aeh li n
walo.staehlin@ch.ey.com
+41 5 8286 6491
C on t en t p rov i si on dat e
J anuary 2016
1 4 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Percentag e
ch ang e
Top corporate
income tax rate
(national and
local average if
applicable)
24% (However,
approximately
7.8% of the rates
relate to the
federal tax. The
rates depend
on the canton
and commune in
which the taxable
entity performs its
activities.)
24 %
(However,
approximately
7.8% of the
rates relate
to the federal
tax. The rates
depend on
the canton
and commune
in which the
taxable entity
performs its
activities.)
—
Top individual
income tax rate
(national and
local average if
applicable)
36.5% (The
maximum overall
rate of federal
income tax is
11.5% . The various
cantonal and
municipal taxes
are also levied at
progressive rates,
with a maximum
combined cantonal
and municipal rate
of approximately
35%)
2016 rates are
not yet known
N/A
Standard Value
Added Tax rate
1
2 0 1 6
Art. 25 Swiss Federal VAT Act.
8%
8%
1
—
S w i t z erlan d
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• The Swiss government pursues a sustainable fiscal policy.
Successful instruments such as the debt brake ensure a
balanced federal budget and low debt ratio. The overall
fiscal policy aims at maintaining a strong fiscal position
internationally, necessitating continuous improvement of the
fiscal system.
• The key driver for tax policy change is international
developments, in particular the BEPS initiative. The Swiss
Corporate Tax legislation will be aligned with international
developments, in particular the G20/OECD standards.
• C
☐ apital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• The ongoing third series of corporate tax reforms should
put an end to the different taxation of domestic and foreign
company profits, and will help develop the Swiss tax system
further and strengthen competitiveness while taking
international developments into account.
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .2 Tax burdens in 2 0 1 6
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Headline CIT rate
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 .☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
Increased burden in 2016
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 4 7
S w i t z erlan d
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
X
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
C orp orat e i n c om e t ax es
• As
☐ a result of international developments, Swiss policies on
the granting of tax privileges in the cantons are under review.
Plans are to abolish the status of “ domicile company,” to
adj ust the cantonal holding privilege to meet international
standards, and to introduce a minimum tax rate for holding
and mixed companies. In addition, foreign and domestic
income generated by mixed companies is to be handled
equally for tax purposes in order to satisfy EU calls for an end
to what is known as “ ring-fencing.”
H ig h er
H ig h er
H ig h er
• In June 2015, the Federal Government presented a draft law
containing the following measures:
• Introduction of a patent box, mandatory also at a cantonal
level, with privileged taxation of income from e.g., patents,
supplementary protection certificates, first-notifier
protection (Swiss Law on Therapeutic Products), software
(copyrighted) and other IP assets.
• Optional cantonal R&D-”super”-deduction up to 150%.
• Abolishment of one-time capital duty.
• Targeted reliefs of annual capital tax (by cantons).
• Lump sum tax credit for PEs of foreign Subs.
• Increase of partial dividend taxation up to 70% .
• Uniform Swiss-wide approach to tax with systematic
transition into new system.
1 4 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
S w i t z erlan d
• In addition, it is expected that cantons will lower their
average corporate income tax rates to around 14% or even
further.
• The
☐
introduction of an interest-adjusted profit tax on aboveaverage levels of equity capital (notional interest-deduction)
is not proposed, but under discussion and could still be
introduced.
• Any
☐
law changes will not be enacted before 2017 or 2018.
T ax es on w ag es an d em p loy m en t
• Restrictions of lump-sum taxation of wealthy foreigners will
be enacted as of 2016 because this tax model is perceived
as somewhat unfair and under international pressure. On
the other side, an initiative to completely abolish lump-sum
taxation was dismissed by the Swiss people in 2014.
• The cantons, which enjoy significant autonomy (e.g., in tax
matters), have similar parliamentary systems.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Ueli
☐
Maurer, Head of Federal Department of Finance (since 1
January 2016)
T ax adm i n i st rat i on leaders
• Adrian Hug, Director General of the Federal Tax
Administration
• 26 cantonal tax administrators
I n h eri t an c e T ax
• In 2015 the Swiss people dismissed an initiative aimed at
introducing an inheritance tax with a flat rate of 20% and a
general exemption threshold of CHF2 million for inheritance.
This also means that in the future there will be no inheritance
or gift tax at the federal level.
V A T , GS T an d sales t ax es
• A reform of the Swiss VAT system was launched in 2014
and is scheduled to take effect in J anuary 2017. Most of the
proposed changes are of a rather technical nature. However,
as a consequence of the proposed broadening of the tax
base, more foreign businesses will have to register for Swiss
VAT if they do business in Switzerland.
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• In order to reflect the new international standards in
exchange of information, a new law on exchange of
information was drafted and is currently being finalized. In
a relatively short period of time, the formerly restrictive
information exchange policy has been broadened and will
soon be granted on an automatic basis. Many bilateral double
tax-treaties have been re-negotiated and updated.
2 .8 Pending tax p rop osals
• Corporate
☐
income tax (see section 2.4)
• VAT (see section 2.4)
2 .5 Political landscap e
• Switzerland is a federal multiparty parliamentary democratic
republic, with the Federal Council acting as the head of
Government. The Federal Council is a seven-member
executive council that heads the federal administration,
operating as a combination cabinet and collective presidency.
• The largest party is the right-wing Swiss People’s Party,
followed by the left-wing Socialist Party. In the recent
parliamentary elections held in October 2015, the right-wing
was strengthened. The Federal Council election was held 9
December 2015; as expected, the Conservative Democratic
Party left the Government, and the Swiss People’s Party
sent an additional member. There are now four parties
represented in the Federal Council (prior to the election,
five parties were represented): Free Democratic Party (two
members), Socialist Party (two members), Swiss People’s
Party (two members), and Christian Democratic Party (one
member).
2 .9 Consultations op ened/ closed
• Corporate
☐
Tax Reform (closed)
• Federal Act on the unilateral application of the OECD
standard for information exchange (closed)
• Federal Law on the debtor and the paying agent principle of
withholding tax (closed)
• Tax-based Climate and Energy Steering System (closed)
• International automatic exchange of information in tax
matters (closed)
• Federal Law on the tax treatment of financial sanctions
(planned)
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 4 9
Taiw an
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates
S tay u p to date w ith
develop m ents in Taiw an
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
S op h i e C h ou
sophie.chou@tw.ey.com
+886 2 2757 8888
ext. 88872
C on t en t p rov i si on dat e
23 December 2015
1 5 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate
income tax
rate (national
and local
average if
applicable)
17%
17%
—
Top individual
income tax
rate (national
and local
average, if
applicable)
45%
45%
Standard
value-added
tax (VAT) rate
5%
5%
2
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Minimize
☐
inequality of the tax system.
• Improve
☐
government fiscal consolidation.
• Incentivize
☐
enterprises in order to increase employment.
—
—
T ai w an
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 5 1
T ai w an
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
H ig h er
N o ch ang e
H ig h er
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• No maj or changes expected.
Taxes on w ag es and emp loyment
• Effective 1 J anuary 2016, gains on sale of land that is
acquired on or after 2 January 2014 and is held for a period
of less than 2 years before disposal, or is acquired on or
after 1 J anuary 2016, will be subj ect to income tax. Land
value incremental tax is still applicable but can be creditable
against the tax payable on the gain of property.
V AT, G ST and sales taxes
• No maj or changes expected.
1 5 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
X
H ig h er
2 .5 Political landscap e
• Taiwan elected a new President, Tsai Ing-wen of the
opposition Democratic Progressive Party (DPP), on 16
January 2016. Tsai, who will be Taiwan’s first female
President, assumes office on 20 May 2016. In addition, the
DPP gained a maj ority of the Legislative Yuen, winning 68
seats in the 113-seat legislature (up from 40 in the 2012
election), thus giving them a majority. At this point, it is not
yet clear if there will be changes in tax policy.
2 .6 Current tax p olicy and tax
administration leaders
• Sheng-Ford Chang, Minister of Finance (Note: Newly-elected
Tsai Ing-wen of the opposition Democratic Progressive Party
will assume the Presidency on 20 May 2016).
T ai w an
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Effective 1 J anuary 2016, gains on sale of land that is
acquired on or after 2 January 2014 and is held for a period
of less than 2 years before disposal, or is acquired on or
after 1 J anuary 2016, will be subj ect to income tax. Land
value incremental tax is still applicable but can be creditable
against the tax payable on the gain of property.
• From 1 January 2016, income tax on gains derived from
securities transactions ceased to be imposed.
2 .8 Pending tax p rop osals
• Introduction of controlled foreign corporation rules
(proposed in April 2013)
• Expansion of “place of effective management” definition
(proposed in April 2013)
• Double tax agreement signed by Mainland China and Taiwan
in August 2015
• Double tax agreement signed by J apan and Taiwan in
November 2015
2 .9 Consultations op ened/ closed
Currently op en:
• Address the tax challenges of the digital economy (Action 1
of BEPS)
• Neutralize the effects of hybrid mismatch arrangements
(Action 2 of BEPS)
• Re-examine transfer pricing documentation (Action 13 of
BEPS)
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 5 3
Th ailand
1
| Tax rates (2015–16)
Tax p olicy
Y u p a W i c h i t k rai sorn
yupa.wichitkraisorn@th.ey.com
+66 2264 9090 ext 55003
1 .1 K ey tax rates123
Tax controversy
K am olrat N u c h i t p rasi t c h ai
kamolrat.nuchitprasitchai@th.ey.com
+66 2264 9090 ext 77062
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income
tax (CIT) rate (national
and local average, if
applicable)
20%
20%
1
—
Top individual income
tax rate (national
and local average, if
applicable)
35%
35%
2
—
Standard value-added
tax (VAT) rate
7%
7%
3
—
2
S tay u p to date w ith
develop m ents in Th ailand
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contact
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• Key drivers remain broadly the same as 2015, i.e., tax reforms aimed at creating fairness,
reducing disparity and increasing tax revenue for the government in the long term.
• The target is for tax revenue to reach at least 20% of GDP. The top three priority
tasks to be carried out are (1) to change tariff items in a bid to improve the country’s
competitiveness, (2) to attract investors by making tax filing easier and fairer, and (3) to
remove some goods and services from the VAT-exempt category.
• The Cabinet approved tax incentives, under the Board of Investment (BOI) promotion
scheme, for industrial clusters and to encourage investment in special economic zones
in order to increase the country’s competitiveness. Amendments to the regulatory
framework necessary to support this initiative can be expected.
C on t en t p rov i si on dat e
11 J anuary 2016
1
2
3
1 5 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Revenue Department website (http://www.rd.go.th/publish/6044.0.html)
Revenue Department website (http://www.rd.go.th/publish/6045.0.html)
Revenue Department website (http://www.rd.go.th/publish/6043.0.html)
T h ai lan d
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 5 5
T h ai lan d
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
X
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• The Cabinet approved the permanent reduction of the
corporate income tax rate from 30% to 20% , effective
for accounting periods commencing on or after
1 J anuary 2016.
Note: Th e reg u latory f ram ew ork req u ired to enf orce th is
Cabinet resolu tion is not yet in p lace.
• The Revenue Department has announced income tax rate
reductions and tax exemptions for companies or j uristic
partnerships with registered capital of no more than THB
5 million as of the last date of an accounting period and
with income of no more than THB 30 million from sales of
goods and services in the same accounting period (“SMEs”),
effective for the accounting period commencing on or after
1 January 2015. Under this scheme the first THB 300,000
of net income is exempted from corporate income tax, and
then tax is payable at 15% on net income in the range of
THB 300,001–THB 3,000,000 and 20% for THB 3,000,001
and above.
Taxes on w ag es and emp loyment
• The Cabinet has approved an extension of the reduced
personal income tax rates for another tax year (calendar
year 2016).
• The Cabinet has approved an extension of the tax incentive
period for investments in long-term equity funds (LTFs)
1 5 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
H ig h er
H ig h er
H ig h er
and the tax exemptions on capital gains derived from the
disposal of LTFs for another 3 years, until 31 December
2019. The period for which LTFs must be held will also be
adj usted from 5 to 7 years, effective for investments made
from 1 J anuary 2016.
Note: Th e reg u latory f ram ew ork req u ired to enf orce th ese
Cabinet resolu tions is not yet in p lace.
V AT, G ST and sales taxes
• The Cabinet earlier approved an extension of the reduced
VAT rate of 7% for another one year, to 30 September 2016,
and on 26 September 2015, Royal Decree No. 592 gazetted
this measure as part of the Government’s economic stimulus
measures.
• The effective VAT rate will return to 10% (which consists of
9% VAT plus 1% municipal tax) from 1 October 2016.
2 .5 Political landscap e
• Following the rejection of a draft of a new constitution by the
National Reform Council (NRC), another constitution now
needs to be drafted, likely delaying elections until 2017.
There are therefore unlikely to be any significant changes
in the direction of tax policy in the near future.
• A new economics team has been appointed and the Cabinet
has been reshuffled by the military government in the hope
of spurring economic growth.
T h ai lan d
• The reforms proposed by the NRC and the military, and
measures introduced by the new economic team, may
include a focus on the issues of income disparity and
economic stimulus, and tax measures may be used as one
of the tools to help achieve this.
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Apisak Tantivorawong, Minister of Finance
• Krisda Chinavicharana, Director of Fiscal Policy Office
T ax adm i n i st rat i on leaders
• Prasong Poontaneat, Director General of Revenue Department
• Tipawan Chayutimanta, Director of Bureau of Large Business
Tax Administration
• Hirunya Suchinai, Secretary General of the Board of Investment
• Somchai Sajjapongse, Director General of Customs Department
• Somchai Poolsawasdi, Director of Excise Department
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• The Inheritance Tax Act and gift tax regulations were
published in the Royal Gazette on 5 August 2015 and will
become effective 180 days after that date. Under this Act
and relevant regulations, tax will be payable on inheritances
at 5% (if received by descendants or parents) or 10% (if the
deceased person is single) on estates valued at over THB 100
million. Moreover, gifts transferred to heirs or other persons
before the principal’s death will either be exempt or taxable
at 5% .
• As a tax measure to promote property businesses, the
official fee for registration of the transfer and mortgage of
the following properties with the Land Department has been
temporarily reduced from 2% to 0.01% for 6 months (from
29 October 2015 to 28 April 2016):
• Residential properties (including detached houses,
duplexes, row houses and commercial buildings);
• Land allotment properties (including single houses,
duplexes, row houses and commercial buildings under the
Land Allotment law);
• Condominium properties: registration fees for sales and
purchases, transfers and mortgages of condominiums or
condominium units.
• The Revenue Department has provided tax incentives
through the implementation of International Headquarters
(IHQ), Treasury Center (TC) and International Trading Center
(ITC) schemes.
• The Board of Investment (BOI) has implemented tax
measures to stimulate investment for the years 2015
and 2016. These include incentives for proj ects in certain
provinces and/or industries or in Special Economic
Development Zones (SEZ), incentives to support the
government’s Cluster Development Policy (to develop
potential and manufacturing based areas for targeted
industries), and incentives for projects that start operation
by 2017.
2 .8 Pending tax p rop osals
• The government is in the process of drafting tax reform,
including 46 regulations. To reduce the gap between the
corporate income tax rate (which will be reduced from 30%
to 20%), and personal income tax rates of which the current
highest rate is 35% , the government is in the process of
drafting a regulation to implement a personal income tax
rate reduction. The government plans to complete the legal
procedure within 2016 so as to become effective for the tax
year 2017 (returns filed by March 2018); it is considering
whether to reduce the rate to 28% or 30% . The reform will
likely also include changes to tax allowances and deductions
and increases in the excise tax rates on a number of products
and services.
• The Revenue Department is planning to propose an
amendment to the Revenue Code concerning transfer pricing
next year, aiming to provide greater clarity regarding the
transfer pricing documentation that must be in place when
a tax return is filed, and relevant enforcement of these
requirements.
• Improvements to the withholding tax system have been
proposed by the Fiscal Policy Office (FPO) to reduce
overlapping tax payments due to the reduction of corporate
and personal income tax rates.
• A draft of a new Land and Building Tax Act is being prepared,
but it is too early to say when this might be implemented.
• A draft of a new Customs Act is being prepared but it is too
early to say when this might be implemented.
2 .9 Consultations op ened/ closed
• No consultations opened/closed.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 5 7
U nited K ing dom
1
| Tax rates (2015–16)
Tax p olicy
C h ri s S an g er
csanger@uk.ey.com
+44 20 7951 0150
1 .1 K ey tax rates
Tax controversy
J i m W i lson
j wilson8@uk.ey.com
+44 20 7951 5912
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate
income tax (CIT) rate
(national and local
average, if applicable)
20%
20%
—
Top individual income
tax rate (national
and local average, if
applicable)
45%
45%
—
Standard value-added
tax (VAT) rate
20%
20%
—
2
S tay u p to date w ith
develop m ents in th e
U nited K ing dom by
accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
C on t en t p rov i si on dat e
18 December 2015
1 5 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .1 K ey drivers of tax p olicy ch ang e
In the current economic climate fiscal consolidation is a key priority for the
Government.
The 2015 Spending Review (SR) carried out by the Ministry of Finance (HM Treasury)
set out the Government’s plans to reduce public expenditure over the next four
years (by 2019-20). As part of the SR, the Government delivered £12 billion of fiscal
consolidation. This was achieved through reductions in departmental spending of
£ 21.5bn, offset by £ 9.5bn of expenditure into its political priorities. In addition to
this, the Government will develop plans to deliver £ 12bn of welfare savings a year by
2019-20.
Other drivers include:
• Anti- avoidance: To aid in deficit reduction and reduce revenue lost through
” aggressive” tax avoidance, the Government has invested £ 750,000 in the tax
administration to raise £ 7.2bn in extra tax by 2019-20.
U n i t ed K i n g dom
• I ncreasing th e stock of af f ordable h ousing / encourag ing
h ome ow nersh ip . One of the key priorities of this
Government is to address the housing supply shortage in
the UK. The Government has sought to address this problem
by increasing taxes on second homes bought for investment
purposes.
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• I nvestment in dig ital: The Government aims to transform
the UK’s tax authority (HMRC) into one of the most digitally
advanced tax administrations in the world. The reforms
will introduce personalised digital tax accounts to provide
taxpayers with greater certainty about the tax they owe. It is
envisaged that these changes will make it easier and cheaper
for business to comply with the tax system, which will result
in greater overall tax revenues and reduce costs for HMRC to
administer the tax system and check that businesses
are complying.
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 5 9
U n i t ed K i n g dom
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
V AT/ G ST/ sales tax burden
L ow er
i
ii
N o ch ang e
X
N o ch ang e
H ig h er
ii
H ig h er
H ig h er
Overall tax burden has increased due to apprenticeship levy, not corporation tax which remains the same in 2016.
Increase in dividend tax.
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• Overall the Government has introduced a number of revenueraising measures to aid in deficit reduction and strengthen
anti-avoidance policy including:
• B ank Corp oration Tax Surch arg e: The measure imposes a
surcharge of 8 percentage points on the profits of certain
banks from 1 January 2016. The new profit surcharge will
bring in £ 1.7bn of revenues over the next 5 years.
• B ank L evy ref orm: The Government will reduce the full
Bank Levy rate from 0.21% to 0.18% in 2016, 0.17% in
2017, 0.16% in 2018, 0.15% in 2019, 0.14% in 2020 and
0.10% in 2021. This will only partially offset the new Bank
CT surcharge.
1 6 0
X
i
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
•
as
si a P fi
i i
The Government
has introduced legislation that gives the UK the power
to implement the OECD model for country-by-country
reporting. The new rules will require multinational
enterprises to provide high-level information to HMRC for
accounting periods beginning on/after 1 January 2016,
within 12 months of the end of the period.
• Tools to encourag e voluntary comp liance and sp ecial
measures to tack le th e h ig h est risk businesses: The
Government will legislate to introduce a new requirement
that large businesses publish their tax strategies as
they relate to or affect UK taxation. This will impose an
additional administrative burden on business.
• Taxes on oil and g as- Petroleum R evenue Tax: The
Government has reduced tax on oil and gas from 50% to
35% for chargeable periods ending after 31 December
2015 to promote investment in older oil fields.
U n i t ed K i n g dom
Taxes on w ag es and emp loyment
• A new Apprenticeship levy of 0.5% of total salary costs
exceeding £ 3m per annum will apply from April 2017.
This will raise additional tax revenues of £ 2.7bn a year
from 2017/18 onwards, which will be earmarked to fund
Apprenticeships.
• Trip le tax lock : The Government has legislated to set a
ceiling for the remaining years of this Parliament (until 7
May 2020) on the main rates of income tax, the standard
and reduced rates of VAT, and employer and employee social
security contributions, ensuring that they cannot rise above
their current (2015-16) levels.
V AT, G ST and sales taxes
2 .5 Political landscap e
• From 1 May 2016 the Union Customs Code (“UCC”) replaces
the Community Customs Code (which sets the rules and
procedures to ensure the implementation of Tariff and other
measures in connection with trade between the European
Union (EU) and non-Member States). The aim is to streamline
and simplify customs procedures. With the change comes a
maj or overhaul of the way international supplies of goods are
valued for customs duty purposes, particularly in respect of
the valuation of royalties, license fees and trademarks.
• The General Election in May 2015 elected a new
Conservative Government, which succeeded the former
Conservative-Liberal Democrat Coalition Government.
• V AT: From 1 January 2016 the partial exemption
calculations will be revised to follow the interpretation
within the CJEU case of Credit Lyonnais. HMRC has also
revised its interpretation of the UK’s VAT grouping rules
following the European ruling in Skandia, so that an overseas
establishment of a UK established entity will be treated as a
taxable person.
• At the end of 2016, HMRC expects the rules for VAT
recovery by Pension Funds to change, including the ability of
a business to deduct VAT paid on pension fund management
services.
Personal taxes
• Stamp D uty: The Government is making it more expensive
to buy second homes and buy-to-let properties, in order to
increase the stock of housing. From 1 April 2016 a three
percentage point higher rate of Stamp Duty Land Tax (SDLT)
will apply on purchases of additional residential properties,
where the purchase price exceeds £ 40,000. These changes,
together with the previously announced direct tax changes
to the taxation of buy-to-let properties, may significantly
affect the buy-to-let market.
• D ividend tax: To reduce tax motivated incorporation, from 6
April 2016 dividend income in excess of £ 5,000 dividend tax
allowance and the 10% dividend tax credit will be abolished.
Dividend income in excess of this allowance will be taxed
at 7.5% for basic rate taxpayers, 32.5% for higher rate
taxpayers and 38.1% for additional rate taxpayers. This is in
effect a 7.5 percentage point increase in the income tax rate
on dividends above the new £ 5,000 allowance.
• A significant manifesto pledge of this Government has
been to eliminate the structural deficit by 2018. This has
driven forward a tight programme of fiscal consolidation;
significantly reducing public expenditure and raising revenue
to produce a budget surplus of £ 10bn by 2019-20. Political
priorities of this Government have also included reducing
unemployment, increasing wages and increasing j obs from
the private sector to yield economic growth.
• The direction of the current Government has been to adopt
a ” twin track” approach which involves policies that foster
economic growth ensuring ”Britain is open for business,” but
at the same time present tough austerity measures to repay
debt and ensure that people pay their ” fair share of tax.”
• This political ethos has driven forward a series of policies
to make the UK more competitive, increase the standard of
living and create economic growth:
• The reduction in the CT rate from 20% to 19% in 2017 and
to 18% by 2020.
• A new National Living Wage of £ 7.20 an hour for those
aged 25 and over will be introduced. This will rise to over
£ 9 an hour by 2020.
• The Apprenticeship Levy to create a hypothecated pot of
money to fund businesses taking on apprentices.
• BEPS: measures include adopting country-by-country
reporting to fulfill transparency obligations, providing
business documentation and a new Diverted Profits Tax.
EU R ef erendum
The UK will hold an “in-out” referendum on the UK’s continued
membership of the European Union by 31 December 2017.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 6 1
U n i t ed K i n g dom
2 .6 Current tax p olicy and tax administration
leaders
T ax adm i n i st rat i on leaders
• Lin Homer (Permanent Secretary HMRC)
• Edward Troup (Second Permanent Secretary HMRC, and Tax
Assurance Commissioner)
• Sir Nick Macpherson (Permanent Secretary HM Treasury)
T ax p oli c y leaders
• The Rt Hon George Osborne (Chancellor of the Exchequer)
• Greg Hands MP (Chief Secretary to the Treasury)
• David Gauke MP (Financial Secretary to the Treasury) Damian
Hinds MP (Exchequer Secretary to the Treasury) Harriett
Baldwin MP (Economic Secretary to the Treasury)
• Lord O’Neill of Gately (Commercial Secretary to the Treasury)
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• A new i
fi s a (DPT) at 25% from April
2015. The DPT is intended to apply to large multinational
enterprises with business activities in the UK who enter into
”contrived” arrangements to divert profits from the UK by
avoiding a UK taxable permanent establishment (PE) and/
or by other ” contrived” arrangements between connected
entities.
• R eduction in th e sup p lementary ch arg e payable in respect
of profits from oil and gas production in the UK from 30% to
20% from 1 J anuary 2015.The policy change is a response to
recommendations of the 2014 Wood Review of UKCS oil and
gas recovery, specifically looking at how economic recovery
could be maximised.
• B ank losses relief restriction: A restriction on the amount of
a bank’s annual profit that can be offset by carried-forward
losses to 50% from 1 April 2015. The restriction applies
to losses accruing up to 1 April 2015 and will include an
exemption for losses incurred in the first 5 years of a bank’s
authorisation.
1 6 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
•
2 .8 Pending tax p rop osals
a a sac ific Autumn Statement 2015 announced that
the Government remained ” concerned” about the growth of
salary sacrifice arrangements and is considering what action
is necessary. Currently it is gathering further evidence,
from employers, on salary sacrifice arrangements to inform
its approach. A change in policy may have significant
consequences on firms who deliver benefits to employees
through these arrangements.
• R ef orms to disg uised emp loyment: The Government is
currently consulting on the tax and social security rules
relating to disguised employment (for example, where
individuals who would be employees interpose a company to
avoid being treated as employees). Proposals may result in
increased costs for the self-employed.
• B EPS Action 4 : HM Treasury released a consultation on Tax
Deductibility of Corporate Interest Expense in October and
is consulting on how to implement proposals, no earlier than
2017.
• B usiness Tax R oadmap : The Government will publish a
Business Tax Roadmap by April 2016, setting out plans for
business taxes over the rest of the Parliament. The aim of
the Review is to provide businesses with certainty to help
them plan and make long-term investments. This will include
the conclusions of the Government’s review of Business
Rates (property taxes paid by businesses) which considered
the way rates are paid, who pays them and how they raise
revenue.
U n i t ed K i n g dom
2 .9 Consultations op ened/ closed
Concluded
U nder review
• Business rates review: terms of reference and discussion
paper
• Cash, tax evasion and the hidden economy: call for evidence
• Apprenticeships levy: employer owned apprenticeships
training
• Tax deductibility of corporate income expense
• Simplification of the tax and national insurance treatment of
termination payments.
• Technical consultation: country-by-country reporting
• Reform of small business taxation
• Strengthening the incentive to save: a consultation on
pension tax relief
• Tobacco levy
• Tax-advantaged venture capital schemes: draft legislation
and explanatory notes
• Orchestra tax relief
• Tax Enquiries: Closure Rules
• Improving access to research and development tax credits
• Intermediaries Legislation (IR35): discussion document
• Deduction of income tax from interest: peer-to-peer lending
• Employment Intermediaries and Tax Relief for Travel and
Subsistence
• Patent Box: substantial activities
• Tackling offshore evasion
• Reforms to the taxation of non-domiciles Consultation on
restricting tax relief for banks
• Compensation expenditure
• Simplification of the tax and National Insurance treatment of
termination payments
• Improving large business tax compliance
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 6 3
U nited States
1
| Tax rates (2015–16)
Tax p olicy
M i c h ael M u n dac a
michael.mundaca@ey.com
+1 202 327 6503
1 .1 K ey tax rates
3
E ri c S olom on
eric.solomon@ey.com
+1 202 327 8790
Top corporate income tax
(CIT) rate (national and local
average, if applicable)
C at h y K oc h
cathy.koch@ey.com
+1 202 327 7483
N i c k Gi ordan o
nick.giordano@wc.ey.com
+1 202 467 4316
Top individual income tax
rate (national and local
average if applicable)
M i c h ael D ell
michael.dell@ey.com
+1 202 327 8788
Standard Value Added
Tax rate
2 0 1 5
2 0 1 6
39%
39%
39.6%
39.6%
0%
0%
Percentag e
ch ang e
—
1
3
—
2
—
B arbara A n g u s
barbara.angus@ey.com
+1 202 327 5824
R obert C arroll
robert.carroll@ey.com
+1 202 327 6032
F ran k N g
frank.ng@ey.com
+1 202 327 7887
E lv i n H edg p et h
elvin.hedgpeth@ey.com
+1 u 202
S tay
p to 327
date w 8319
ith
develop m ents in I taly
by accessing E Y ' s g lobal
tax
alert
S tay
u p library
to dateat
w ith
www.ey.com/taxalerts.
develop m ents in th e
U S by accessing E Y ' s
g lobal tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
Tax controversy
2
| 2016 tax policy outlook
C on t en t p rov i si on dat e
12 February 2016
2 .1 K ey drivers of tax p olicy ch ang e
• The gradual economic recovery continues, with moderate growth of gross domestic
product (GDP) and lower unemployment rates than in recent years. Real GDP is
expected to grow 2.5% in 2016; unemployment, which averaged 6.2% in 2014, was
expected to average 4.8% in 2016.4
• The federal budget deficit continues to shrink as a percentage of GDP. According to
the Congressional Budget Office (CBO), fiscal 2015 is the sixth consecutive year in
which the deficit has declined as a percentage of GDP, although within several years
it is expected to rise again relative to GDP. These short-term trends have lessened
the urgency of using tax policy to address fiscal shortfalls.
1
The top federal marginal rate is 35%, but many US states and municipalities also levy their own
corporate income taxes, with rates ranging from 0% to 12% , as well as other types of business taxes
determined on other bases, such as net worth or gross receipts. For US federal income tax purposes, an
alternative minimum tax is imposed. EY, “ 2015 Worldwide Corporate Tax Guide,” J anuary 1, 2015.
2
In addition to the federal rate, US state and municipal individual income tax rates apply, ranging from
0% to 13.3% . Additionally, a federal net investment income tax went into effect on J anuary 1, 2013. The
3.8% tax applies to certain net investment income of individuals, estates and trusts that have income over
statutory threshold amounts.
3 However, many state and local governments impose sales taxes, with rates varying from 0% to 10.5%. It
is estimated that there are about 7,600 separate sales tax rate jurisdictions in the United States.
4
1 6 4
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Blue Chip Economic Indicators, Vol. 40, No. 12, 10 December 2015.
U n i t ed S t at es
• Between 2016 and 2025, however, the cumulative deficit will
push debt held by the public up to roughly twice the average
it’s been over the past five decades, according to the CBO.
This could increase the cost to the government of financing
its debt and limit the government’s range of tax and spending
policy options.
• There is a general desire to reform the US tax system to
increase US competitiveness relative to some of its trading
partners that have lower corporate income tax rates and
territorial tax systems. However, political differences, an
upcoming 2016 presidential election and a change in House
leadership have slowed efforts to move actual legislative
proposals forward. The focus of tax reform has narrowed over
the past year from comprehensive reform, to business-only
reform, to changes only on the international side.
• The Obama Administration outlined some of its tax priorities
February 9, 2016 with the release of its FY 2017 budget
blueprint; these proposals are unlikely to gain much traction in
the Republican-controlled Congress.
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016
• Interest deductibility
Change proposed or known for 2016
Additional change possible or somewhat likely in 2016
Lower burden in 2016
: Same burden in 2016
Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• The United States has also had significant involvement in the
OECD Base Erosion and Profit Shifting (BEPS) project, with the
• Treatment of losses
US Treasury a member of the BEPS project’s governing body.
Change proposed or known for 2016 ☐
Concern about the potential for tax base erosion has also been
Additional change possible or somewhat likely in 2016 ☐
a focus of US international tax reform discussions, legislative
Lower burden in 2016 ☐
proposals, and the Administration’s budget proposals.
: Same burden in 2015 ☐
Increased burden in 2016 ☐
• On 21 December 2015, the US Treasury and IRS published
proposed regulations to implement the country-by-country
• Capital gains tax
(CbC) reporting requirement in line with BEPS Action 13.
Change proposed or known for 2016 ☐
The CbC reporting obligation would apply to US entities that
Additional change possible or somewhat likely in 2016 ☐
are the ultimate parent of a multinational group and that
Lower burden in 2016 ☐
had revenue of US$850 million or more for the preceding
: Same burden in 2016 ☐
year. The CbC report would be required to be filed with the
Increased burden in 2016 ☐
ultimate parent entity’s income tax return. The regulations
• VAT, GST or sales tax rate
are proposed to be applicable to tax years beginning on or
Change proposed or known for 2016 ☐
after the date of publication of final regulations. Treasury
Additional change possible or somewhat likely in 2016 ☐
and the IRS are requesting comments on areas where further
Lower burden in 2016 ☐
refinement or additional guidance is needed.
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• VAT, GST or sales tax base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Controlled foreign companies
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 6 5
U n i t ed S t at es
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Top marginal personal income tax (PIT) rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• R&D incentives
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Other business incentives – including depreciation/
amortization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
Personal income tax burden
L ow er
X
N o ch ang e
X
N o ch ang e
V AT/ G ST/ sales tax burden
L ow er
(V aries from state to state)
1 6 6
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
H ig h er
N o ch ang e
X
H ig h er
H ig h er
U n i t ed S t at es
2 .4 Tax p olicy outlook f or 2 0 1 6 — details
Corp orate income taxes
F Y 2 0 1 7 bu dg et blu ep ri n t
• FY 2017 budget blueprint. The Obama Administration
outlined some of its tax priorities February 9, 2016, with the
release of its FY 2017 budget blueprint; these proposals are
unlikely to gain much traction in the Republican-controlled
Congress. Much of what was put forth in the President’s FY
2017 budget blueprint has been presented in prior year
budgets, including a 14% one-time tax on accumulated
foreign earnings and a 19% minimum tax on future foreign
earnings, a fee on certain financial institutions, LIFO
repeal, taxing carried interests as ordinary income and
instituting the “Buffett rule” (a minimum 30% income tax
rate on individuals with earnings of $2 million or more).
Key new proposals include a $10.25 per-barrel fee on oil
paid by oil companies (with the revenue earmarked to fund
infrastructure investment), a proposal to modify the ACA’s
Cadillac Tax to better account for plans offered in high-cost
areas, and a proposal to extend the reach of the 3.8% tax on
net investment income to all trade or business income over
the threshold amount — either through the Net Investment
Income Tax (NIIT) or the self-employed contributions tax
act (SECA).
T ax ref orm
• Since becoming House Speaker in November (see section
2.6), Rep. Paul Ryan (R-WI) has indicated his top goals for tax
reform are simplification, lowering tax rates for businesses
and reforming the international tax system. As Ways and
Means Committee chairman, Ryan had worked closely with
Senate Finance Committee member Chuck Schumer (D-NY)
on a bipartisan international tax reform effort. Sen. Schumer
and Sen. Rob Portman (R-OH), as co-chairs of one of five
Finance Committee tax reform working groups formed in
2015, also endorsed a framework for international tax
reform. The conversations on international tax reform will
continue in 2016.
• The December 18, 2015, enactment of legislation making a
number of “ tax extenders” permanent may help further the
debate over tax reform in 2016.
• As part of the international tax reform discussion, lawmakers
in recent months have discussed the possibility of the US
adopting an “innovation box” that would allow qualifying
business income derived from intellectual property (IP) to
be taxed at a rate lower than the US corporate income tax
rate. House Ways and Means Committee members Charles
Boustany (R-LA) and Richard Neal (D-MA) released a draft
proposal in J uly 2015 as a starting point for discussion that
would offer a 10.15% tax rate for qualifying IP. To date, the
proposal remains in draft form and has not been formally
introduced as legislation.
Taxes on w ag es and emp loyment
• Under the Affordable Care Act, beginning in 2015, “large
employers” are subj ect to excise taxes, which are generally
imposed if the employer does not offer a certain level of
health care coverage to its full-time employees, and those
employees purchase coverage through a health insurance
exchange and receive a premium tax credit. Also effective
in 2015 (for filing in 2015), employers are required to meet
new and expansive health insurance information reporting
requirements.
• The US Supreme Court ruled in 2015 that a state must
recognize the marriage between couples of the same
gender. This resulted in a change in the state income and
unemployment insurance tax treatment of same-gender
spousal benefits in 14 US jurisdictions that had continued to
rej ect for tax purposes the marriage between a same gender
couple.
• The US Department of Labor and numerous states have
increased their focus on whether employers are improperly
treating their workers as independent contractors rather
than employees for tax purposes. Congress may take a
renewed interest in paring down the number of tax-favored
fringe benefits available to employees. Focus may also
turn to addressing impending solvency issues in the Social
Security, Disability and Medicare insurance trust funds, which
may change how much social insurance tax employers and
employees pay in the future.
• Tax refund fraud involving false wage and tax statements
(Forms W-2) has caused a large number of states to
accelerate the employer Form W-2 filing deadline. To address
the issue at the federal level, the US Internal Revenue
Service is conducting a pilot for the 2015 tax year involving
the use of verification codes on the employee copy of
the Form W-2. The verification code must be used for US
taxpayers filing the federal income tax return electronically.
Congress is also considering a move that would accelerate
the due date for filing federal Forms W-2.
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 6 7
U n i t ed S t at es
• The Obama Administration continues to be concerned that
state unemployment insurance trust fund reserves are not
adequate to withstand a future recession. Accordingly,
the Administration is proposing to increase the federal
unemployment insurance wage base from $ 7,000 to
$ 40,000 and to impose a minimum state unemployment
insurance contribution for each employee. The proposal also
calls for an annual indexing of the federal unemployment
wage base for inflation. The federal unemployment insurance
wage base has stood at $ 7,000 since 1983.
For more on US payroll and employment tax trends in the last
30 years, and how they are shaping the future of US payroll
management, see our special report:
h ttp : / / resp onse.ey.com/ CSG 3 / 2 0 1 5 / 1 5 1 1 / 1 5 1 1 1 7 4 3 2 7 7 / 3 0 years/ p df / 3 0 yearsinp ayroll.p df
V AT, G ST and sales taxes
• Collection of sales and use tax on remote sales has been
an area of focus in j urisdictions across the country. At
least one state (Alabama) has already begun a challenge to
constitutional limitations on the states’ ability to impose sales
tax collection obligations on remote sellers.
• A growing number of states enacted tax amnesty
programs in 2015.
• In Lu cent Tech nolog ies v. S tate B oard of E q u aliz ation, a
California Court of Appeal found software licensed by a
technology company to be exempt from sales and use tax
as a matter of law, and segregation of receipts between
taxable and non-taxable activities may be an emerging issue
in other states.
1 6 8
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
2 .5 Political landscap e
• The path to tax reform took a detour when Paul Ryan (R-WI),
former chairman of the House Ways and Means Committee,
replaced John Boehner (R-OH) as House Speaker in
November 2015, with Kevin Brady (R-TX) becoming the new
Ways and Means Committee chairman. The shift in leadership
may mean new priorities next year depending on Brady’s
legislative focus within the Ways and Means Committee, but
it also means that the House leader will be someone who has
previously expressed his commitment to tax reform and is
familiar with the issues.
• Due to the political focus on the upcoming presidential
election in November 2016 and significant differences in
priorities between the two political parties, it is not likely that
major US federal income tax reform will be enacted before a
new president takes office.
• However, tax reform continues to be a key policy issue for
the presidential candidates. While some of their proposals
are not detailed, many of the current contenders have called
for reduced corporate and/or individual rates, elimination of
many business tax expenditures, a shift to a territorial tax
system and overall base-broadening and simplification.
U n i t ed S t at es
2 .6 Current tax p olicy and tax
administration leaders
T ax p oli c y leaders
• Barack Obama, President
• Jack Lew, Treasury Secretary
• Mark Mazur, Treasury Assistant Secretary (Tax Policy)
• Rep. Kevin Brady (R-TX), Chairman, House Ways and
Means Committee
• Rep. Sander Levin (D-MI), Ranking Member, House Ways
and Means Committee
• Sen. Orrin Hatch (R-UT), Chairman, Senate
Finance Committee
• Sen. Ron Wyden (D-OR), Ranking Member, Senate
Finance Committee
• Thomas Barthold, Chief of Staff, Congressional Joint
Committee on Taxation
T ax adm i n i st rat i on leaders
• John Koskinen, Internal Revenue Service (IRS) Commissioner
• Douglas O’Donnell, IRS Large Business and International
Commissioner
2 .7
K ey tax p olicy ch ang es in 2 0 1 5
T ax ex t en ders p ac k ag e
• In December 2015, Congress passed, and the President
signed into law, a bipartisan deal that funds the government
for the remainder of FY 2016 and makes a number of “tax
extender” provisions permanent (including the research
and development credit), extends others for five years, and
extends the remainder for two years, through 2016. The
permanency of select tax provisions, many of which have
been allowed to lapse in years past to then be retroactively
extended, adds a level of certainty for businesses and may
help further the tax reform debate.
• Health tax provisions are also addressed: the omnibus bill
delays for two years the “ Cadillac” tax on high cost employersponsored health coverage and suspends for one year the
health insurance tax, while the tax extenders bill suspends
the 2.3% excise tax on medical devices through 2017. The
omnibus bill also extends the Internet Tax Freedom Act (ITFA)
(generally prohibiting states from imposing sales tax on
Internet services) through October 1, 2016.
F ederal bu dg et ag reem en t
• On November 2, President Obama signed a budget
agreement (the Bipartisan Budget Act of 2015) that
increases spending caps by $ 80 billion for two years and
suspends the federal debt limit through March 15, 2017.
• The budget legislation included changes to the audit rules
for partnerships generally effective for tax returns filed for
years beginning after December 31, 2017. The legislation
streamlined the audit rules into a single set of rules for
auditing partnerships and their partners at the partnership
level. Under the new approach, the IRS will examine the
partnership’s items of income, gains, losses, deductions,
credits and partners’ distributive shares for a particular year
of the partnership. Any adj ustments are to be taken into
account by the partnership (not the partners) in the year that
the audit or any j udicial review is completed. Partnerships
with fewer than 100 partners are permitted to opt out of the
new rules.
2 .8 Pending tax p rop osals
• Not applicable
2 .9 Consultations op ened/ closed
• Not applicable
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 6 9
V ietnam
1
| Tax rates (2015–16)
Tax p olicy and
controversy
1 .1 K ey tax rates12
H u on g V u
huong.vu@vn.ey.com
+84 4 3831 5100
2 0 1 5
2 0 1 6
Percentag e
ch ang e
Top corporate income tax
rate (national and local
average if applicable)
22%
22%
1
– 9.1%
Top individual income tax
rate (national and local
average if applicable)
35%
35%
2
—
Standard Value Added
Tax rate
10%
10%
—
2
S tay u p to date w ith
develop m ents in V ietnam
by accessing E Y ' s g lobal
tax alert library at
www.ey.com/taxalerts.
EY k ey contacts
| 2016 tax policy outlook
2 .1 K ey drivers of tax p olicy ch ang e
• 2016 is the year for implementation of new tax laws/regulations introduced in
2015, e.g. new CIT rate of 20% , which is more competitive than prior rate of 22% .
• Tax laws show the Government’s intention of encouraging enterprises to give their
employees more benefits by providing them with more flexible rules on deductible
expenses related to employees’ welfare
C on t en t p rov i si on dat e
19 J anuary 2016
1
2
1 7 0
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Corporate Tax Law 32/2013/QH13 dated 19 June 2013.
Law No. 32/2013/QH13 of 19 June 2013 on the amendments to the law on enterprise income tax.
V i et n am
2 .2 Tax burdens in 2 0 1 6
• Headline CIT rate
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016 ☐
• Interest deductibility
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• Hybrid mismatches
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 .☐
• Treatment of losses
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2015 ☐
Increased burden in 2016
• Capital gains tax
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• VAT, goods and services tax (GST) or sales tax rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• VAT, GST or sales tax base
: Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016 ☐
• Thin capitalization
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
• Transfer pricing changes
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• R&D incentives
: Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• Other business incentives — including depreciation/
amortization
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• Changes to tax enforcement approach
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
Same burden in 2016 ☐
: Increased burden in 2016
• Top marginal personal income tax (PIT) Rate
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016
• PIT base
Change proposed or known for 2016 ☐
Additional change possible or somewhat likely in 2016 ☐
: Lower burden in 2016 ☐
Same burden in 2016 ☐
Increased burden in 2016
• Controlled foreign companies
Change proposed or known for 2016 ☐
: Additional change possible or somewhat likely in 2016 ☐
Lower burden in 2016 ☐
: Same burden in 2016 ☐
Increased burden in 2016 ☐
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 7 1
V i et n am
2 .3 Tax p olicy outlook f or 2 0 1 6 — summary
Corp orate income tax burden
L ow er
X
N o ch ang e
Personal income tax burden
L ow er
X
N o ch ang e
V AT/ G ST/ sales tax burden
L ow er
X
N o ch ang e
2 .4 Tax p olicy outlook f or 2 0 1 6 — detail
Corp orate income taxes
• The tax rate was reduced to 20% .
Taxes on w ag es and emp loyment
• Utilities are inclusive in housing for comparison.
• More non-taxable benefits (i.e. wedding, funeral etc.) capped
at one monthly salary.
• Employer’s contribution to non-mandatory insurance
without.
V AT, G ST and sales taxes
• No changes expected in 2016.
1 7 2
| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
H ig h er
H ig h er
H ig h er
2 .5 Political landscap e
• No changes expected in 2016.
V i et n am
2 .6 Current tax p olicy and tax administration
leaders
T ax p oli c y leaders
• Mr. Phung Quoc Hien, Head of Financial & Budget Committee
of the National Assembly
• Ms. Vu Thi Mai, Deputy Minister of Ministry of Finance
• Mr. Bui Van Nam, General Director of General Department of
Taxation of Ministry of Finance
T ax adm i n i st rat i on leaders
• Mr Do Hoang Anh Tuan, Deputy Minister of Ministry of
Finance
• Mr Cao Anh Tuan, Deputy Director of General Department of
Taxation of Ministry of Finance
2 .8 Pending tax p rop osals
• Draft Circular providing guidance on VAT declaration and CIT
incentive applicable to supporting industry
• Draft Circular amending and supplementing Circular
124/20111/TT-BTC dated 31 August 20111 on registration
fee
2 .9 Consultations op ened/ closed
• Draft Circular providing guidance on VAT declaration and
CIT incentive applicable to supporting industry is open for
discussion
• Draft Circular amending and supplementing Circular
124/20111/TT-BTC dated 31 August 20111 on registration
fee is opened for discussion
2 .7 K ey tax p olicy ch ang es in 2 0 1 5
• Circular 96/2015/TT-BTC on CIT dated 22 June 2015
• Circular 26/2015/TT-BTC on VAT and invoicing dated 27
February 2015
• Circular 92/2015/TT-BTC on VAT and PIT dated 15 June
2015
• Law no. 71/2014/QH13 amending tax laws including CIT,
VAT, PIT, Tax management law passed on 26 November
2014 and effective from 1 J anuary 2015
• Decree 91/2014/ND-CP dated 1 October 2014 amending
and supplementing some articles of current tax decrees on
CIT, VAT, PIT and tax management
• Circular 151/2014/TT-BTC dated 10 October 2014
providing detail guidance for implementation of Decree 91
• Circular 191/2014/TT-BTC dated 25 August 2014 amending
and supplementing some articles of current tax circular on
CIT, VAT, PIT and tax management
T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
| 1 7 3
Th e 2 0 1 6 ou t look f or t ax p oli c y
covers a total of 3 8 j urisdictions.
All j urisdictions, as w ell as daily
EY g lobal tax alerts, can be
accessed on th e internet at:
ey . c om / 2 0 1 6 t ax p oli c y ou t look
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| T h e ou t look f or g lobal t ax p oli c y i n 2 0 1 6
Connect with us
The outlook for global tax policy in 2016 | 175
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Sw eden
Erik Hultman
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Sw itz erland
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Tax p olicy
Tax controversy
Tax p olicy and
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J ap an
Koichi Sekiya
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+81 3 3506 2447
Koichi Sekiya
koichi.sekiya@j p.ey.com
+81 3 3506 2447
1 8 2
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EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust
and confidence in the capital markets and in economies the world
over. We develop outstanding leaders who team to deliver on our
promises to all of our stakeholders. In so doing, we play a critical role
in building a better working world for our people, for our clients and
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EY refers to the global organization, and may refer to one or more,
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For more information about our organization, please visit ey.com.
About EY’s Tax Policy and Controversy Services
EY’s global tax policy network has extensive experience helping
develop policy initiatives, both as external advisors to governments
and companies and as advisors inside government. Our dedicated
tax policy professionals and business modelers can help address
your specific business environment and improve the chance of a
successful outcome.
Our global tax controversy network will help you address your global
tax controversy, enforcement and disclosure needs. In addition,
support for pre-filing controversy management can help you
properly and consistently file returns and prepare relevant backup
documentation. Our professionals leverage the network’s collective
knowledge of how tax authorities operate and increasingly work
together to help resolve controversy and pre-filing controversy
issues.
© 2016 EYGM Limited.
All Rights Reserved.
SCORE No. 00065-163Gbl
1512-1801274
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This material has been prepared for general informational purposes only and is not intended
to be relied upon as accounting, tax, or other professional advice. Please refer to your
advisors for specific advice.
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EY contacts
Global leaders
Chris Sanger
Global Tax Policy Leader
csanger@uk.ey.com
+44 (0)207 951 0150
Rob Hanson
Global Tax Controversy Leader
rob.hanson@ey.com
+1 202 327 5696