In a change of direction, China enacted a new Enterprise Income Tax Law (“New Law”) on March 16 that unifies the income tax treatment of domestic and foreign enterprises. For nearly 20 years, China has operated a dual tax system, which has resulted in significant disparities in the effective tax rates generally applicable to domestic Chinese enterprises and to FIEs. The New Law, which becomes effective on January 1, 2008, will end the differing EIT and FEIT tax and incentive systems and create a level playing field for all enterprises in China.
Also in this issue:
- Canada
- Federal budget proposes important changes to cross-border financing.
- Belgium
- Reduced rate of tax-exempt reserves approved; Patent deduction agreement reached.
- Royal decree published on VAT grouping.
- Brazil
- Tax on software payments abolished and filing requirement introduced for exporters.
- Central Bank issues guidance on foreign capital registration.
- China
- Guidance issued on treaty with Mexico.
- Estonia
- Advance rulings available from 2008.
- European Union
- ECJ concludes former U.K. thin cap rules may be compatible in specified circumstances.
- ECJ rules Germany must grant imputation credit in respect of foreign-source dividends.
- European Commission extends formal investigation on prolongation of BCCs.
- European Commission to investigate Hungary’s 50 percent interest deduction rule.
- European Commission issues APA guidelines.
- Germany
- Tax court rules on attribution of shareholdings to PE.
- Hungary
- Guidance issued on transfer pricing documentation penalties.
- Iceland
- Changes made to taxation of dividends.
- India
- Budget 2007/08 presented.
- Malta
- Tax system reformed.
- United Kingdom
- No major international changes in 2007 budget.
- United States
- Notes published on U.S.-Jersey reciprocal exemption agreement for shipping.
- Venezuela
- Thin capitalization rules introduced.