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GLOBAL TAX WEEKLY a closer look
ISSUE 57 | DECEMBER 12, 2013
SUBJECTS TRANSFER PRICING INTELLECTUAL PROPERTY VAT, GST AND SALES TAX CORPORATE TAXATION INDIVIDUAL TAXATION REAL ESTATE AND PROPERTY TAXES INTERNATIONAL FISCAL GOVERNANCE BUDGETS COMPLIANCE OFFSHORE
SECTORS MANUFACTURING RETAIL/WHOLESALE INSURANCE BANKS/FINANCIAL INSTITUTIONS RESTAURANTS/FOOD SERVICE CONSTRUCTION AEROSPACE ENERGY AUTOMOTIVE MINING AND MINERALS ENTERTAINMENT AND MEDIA OIL AND GAS
EUROPE AUSTRIA BELGIUM BULGARIA CYPRUS CZECH REPUBLIC DENMARK ESTONIA FINLAND FRANCE GERMANY GREECE
HUNGARY IRELAND ITALY LATVIA LITHUANIA LUXEMBOURG MALTA NETHERLANDS POLAND PORTUGAL ROMANIA SLOVAKIA SLOVENIA SPAIN SWEDEN SWITZERLAND UNITED KINGDOM EMERGING MARKETS ARGENTINA BRAZIL CHILE CHINA INDIA ISRAEL MEXICO RUSSIA SOUTH AFRICA SOUTH KOREA TAIWAN VIETNAM CENTRAL AND EASTERN EUROPE ARMENIA AZERBAIJAN BOSNIA CROATIA FAROE ISLANDS GEORGIA KAZAKHSTAN MONTENEGRO NORWAY SERBIA TURKEY UKRAINE UZBEKISTAN ASIA-PAC AUSTRALIA BANGLADESH BRUNEI HONG KONG INDONESIA JAPAN MALAYSIA NEW ZEALAND PAKISTAN PHILIPPINES SINGAPORE THAILAND AMERICAS BOLIVIA CANADA COLOMBIA COSTA RICA ECUADOR EL SALVADOR GUATEMALA PANAMA PERU PUERTO RICO URUGUAY UNITED STATES VENEZUELA MIDDLE EAST ALGERIA BAHRAIN BOTSWANA DUBAI EGYPT ETHIOPIA EQUATORIAL GUINEA IRAQ KUWAIT MOROCCO NIGERIA OMAN QATAR SAUDI ARABIA TUNISIA LOW-TAX JURISDICTIONS ANDORRA ARUBA BAHAMAS BARBADOS BELIZE BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS COOK ISLANDS CURACAO GIBRALTAR GUERNSEY ISLE OF MAN JERSEY LABUAN LIECHTENSTEIN MAURITIUS MONACO TURKS AND CAICOS ISLANDS VANUATU
COUNTRIES AND REGIONS
GLOBAL TAX WEEKLY a closer look
Using the unrivalled worldwide multi-lingual research capabilities of leading law and tax publisher Wolters Kluwer and its new acquisition BSI (The Lowtax Network), CCH publishes Global Tax Weekly –– A Closer Look (GTW) as an indispensable up-to-the- minute guide to today's shifting tax landscape for all tax practitioners and international fi nance executives.
Topicality, thoroughness and relevance are our watchwords: BSI's network of expert local researchers covers 130 countries and provides input to a US/UK team of editors outputting 100 tax news stories a week. GTW highlights 20 of these stories each week under a series of useful headings, including industry sectors (e.g. manufacturing), subjects (e.g. transfer pricing) and regions (e.g. asia-pacifi c).
Alongside the news analyses are a wealth of feature articles each week covering key current topics in depth, written by a team of senior international tax and legal experts and supplemented by commentative topical news analyses. Supporting features include a round-up of tax treaty developments, a report on important new judgments, a calendar of upcoming tax conferences, and “The Jester's Column,” a light- hearted but merciless commentary on the week's tax events.
Read Global Tax Weekly –– A Closer Look in printable PDF form, on your iPad or online through Intelliconnect, and you'll be a step ahead of your world on Monday morning!
Global Tax Weekly – A Closer Look
ISSUE 57 | DECEMBER 12, 2013GLOBAL TAX WEEKLY a closer look
International Trade 58 WTO Clinches Historic Global Trade Deal
China To Strengthen E! orts To Sign More FTAs
Australia, S. Korea Conclude Trade Talks
NZ, South Korea To Resume Trade Talks
Progress Made In China-South Korea-Japan FTA Talks
Canada Unveils International Trade Blueprint
EU Advances Trade Relationships With Georgia & Moldova
Country Focus: United Kingdom 63 UK Chancellor Delivers Autumn Statement
UK Government Outlines Plan To Tackle ‘False Self Employment’
UK GAAR Not Fit For Purpose, TUC Warns
UK Gov't To Respond To E-Filing Ruling
Location Specifi c Advantages In Transfer Pricing: An Emerging Perspective by Dr. Shanto Ghosh, Deloitte, India 5 Recent Transfer Pricing Developments by Du! & Phelps 9 Topical News Briefi ng: A Good Week For Free Trade by the Global Tax Weekly Editorial Team 16 Canadian Tax Developments In 2013 by Steve Suarez and Stephanie Wong, Borden Ladner Gervais LLP 18 Dutch Ministry Of Finance Issues New Decree On ! e Arm's Length Principle by Michel van der Breggen and Eric Vroeman, PricewaterhouseCoopers, " e Netherlands 34
Developments In ! e OECD's And EU's Digital Tax Agenda by Stuart Gray, Senior Editor, Global Tax Weekly 37 Topical News Briefi ng: Mixed Signals From London by the Global Tax Weekly Editorial Team 44 Advance Ruling In Sweden – ‘Carried Interest’ Is Taxable As Business Income by Mac Berlin, Taxand, Sweden 45 Obamacare Still Dogged By Tax Issues by Stuart Gray, Senior Editor, Global Tax Weekly 47
ISSUE 57 | DECEMBER 12, 2013FEATURED ARTICLES
Canadian Tax Developments In 2013 by Steve Suarez and Stephanie Wong, Borden Ladner Gervais LLP
2013 brought signi! cant Canadian tax develop- ments in a number of areas. " is article takes a brief look at the most signi! cant Canadian tax develop- ments in 2013 of interest to international business- es, tax practitioners and executives.
Part I: Canadian Legislative Developments
! in Capitalization Rules Extended As a result of the Canadian government's 2013 fed- eral budget, the scope of Canada's thin capitaliza- tion rules will be extended. " e thin capitalization rules in sub sections 18(4) -(8) of the Income Tax Act (Canada) (the "ITA") currently apply to limit the amount of debt owing to related non-residents that a Canadian resident corporation ("Canco"), or a partnership of which Canco is a member, can deduct interest expense on for tax purposes. " e debt to which these rules ap- ply is debt owing by Canco to "speci! ed non-residents": non- residents who either are 25 per- cent plus shareholders (by votes or value) of Canco or do not deal at arm's-length with such shareholders. Under changes that took e# ect in 2013 (see Figure 1), Canco cannot deduct interest on any such debt to the
extent that it exceeds 150 percent of Canco's "equi- ty" (which is essentially the total of Canco's uncon- solidated retained earnings and the paid-up capital of Canco shares held by non-resident group mem- bers). Interest on the excess debt is non-deductible for Canadian tax purposes and is recharacterized as a dividend to which Canadian non-resident divi- dend withholding tax applies at a 25 percent rate, subject to reduction under an applicable tax treaty.
" e existing thin capitalization rules will be extended, with appropriate modi! cations, to apply to Canadi- an-resident trusts, to non-resident corporations and trusts carrying on business in Canada or electing to
be taxed as a Canadian resident under section 216 of the ITA, and to partnerships of which such a corpo- ration or trust is a member. ! ese amendments will take e" ect for taxation years beginning after 2013. 1
Foreign A! liate Dumping Rules – Proposed Amendments
On August 16, 2013 Canada's Department of Finance released for public comment proposed changes to the foreign a# liate dumping ("FAD") rules. First proposed in the 2012 federal budget, the FAD rules were enacted as section 212.3 of the ITA on December 14, 2012. 2
! e FAD rules target perceived tax avoidance by foreign-controlled Canadian corporations acquir- ing or making investments in foreign corporations that are (or become) foreign a# liates. If the FAD rules apply, they e" ectively treat a payment by a foreign-controlled Canadian corporation "down" the chain in respect of a foreign subsidiary ( e.g., acquiring its shares or making a loan to it) as if it were a distribution by the Canadian corporation "up" the chain to its foreign parent, by (1) reduc- ing the paid-up capital of the Canadian corpora- tion's shares and/or (2) deeming the Canadian corporation to have paid a dividend to which non- resident dividend withholding tax may apply. ! e FAD rules are complex and overbroad, and can catch transactions that are not o" ensive from a tax policy perspective. Although the 2013 proposed amendments do not signi$ cantly change the scope of the FAD rules, they introduce several technical
changes that modestly narrow the scope of the rules in circumstances where the Canadian tax authori- ties appear satis$ ed that no material abuse is likely to arise. ! ey also make the application of the FAD rules somewhat less punitive. ! e proposed amend- ments generally take e" ect from March 28, 2012 (the date on which the FAD rules were originally announced), unless a taxpayer elects to have them take e" ect on August 14, 2012 (the date on which draft legislation to implement the FAD rules was released).
Upstream Loan Rules Enacted First announced in the 2011 federal budget, the "upstream loan" rules in sub section 90(6) of the ITA were enacted on June 26, 2013. ! ese rules discourage a foreign a# liate of a Canadian corpo- ration 3 from making interest-free loans to its Ca- nadian parent ("Canco") as a means of repatriating foreign pro$ ts to Canada on a tax-free basis, instead of the foreign a# liate paying a dividend to Canco (which could be subject to Canadian tax depending on the circumstances).
! e rules generally require Canco to include in income an amount owed to a foreign a# liate