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Approved Changes (2)

India

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India Issues Request for Public Comments on Minimum Alternative Tax on Foreign Institutional Investors

India's Ministry of Finance recently issued a release requesting public comments on Minimum Alternate Tax (MAT) on foreign institutional investors (FII). Under Finance Act 2015, from 1 April 2015 FIIs are exempted from MAT in relation to long-term capital gains from securities transactions and short-term gains if subject to securities transactions tax. However, the Indian government intends to pursue MAT claims arising prior to 1 April 2015, and a MAT committee has been formed to develop methods to resolve disputes.

The Release

Committee on Direct Taxes Matters Headed by Justice A.P. Shah Invites Suggestions and Representations on the Matter Relating to Minimum Alternate Tax (Mat) on FIIS From All Stakeholders, Including Industry Associations by 22nd June, 2015; if Required, Committee May Call Representatives for Interaction Between 29th June, 2015 and 06th July, 2015.

The Committee on Direct Taxes matters headed by Justice A.P. Shah which was constituted on 20.05.2015, held its first meeting on 25.05.2015. In accordance with the terms of reference, the Committee has decided to examine the matter relating to MAT on FIIs for the period prior to 01.04.2015.

The Committee has invited suggestions and representations from all stakeholders, including industry associations on the above issue under examination. The suggestions may be sent by e-mail to raman.chopra@nic.in by 22.06.2015. A hard copy of representations and suggestions may also be sent on the following address: --

Mr. Raman Chopra, Director (TPL-II), Central Board of Direct Taxes (CBDT), Room No.147-E, North Block, New Delhi-110001.

The Committee will go through the suggestions and representations received and thereafter, if required, call representatives for interaction between 29.06.2015 and 06.07.2015.

OECD-Czech Rep-Kazakhstan-Morocco

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OECD Publishes Peer Review Reports on Transparency and Information Exchange for the Czech Republic, Kazakhstan and Morocco

On 27 May 2015, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes published new peer review reports for the Czech Republic, Kazakhstan and Morocco:

The reports are part of a review process for compliance with the international standard for information exchange. Phase 1 reports include an evaluation of a jurisdiction's legal and regulatory framework for transparency and exchange of information, and provide recommendations for improvement. Jurisdictions deemed to have a sufficient framework in place move on to the Phase 2 report, which looks at the actual implementation of the standard for information exchange, and provides a compliance rating as well as recommendations for improvement.

Morocco moves to the next stage of the review process which will assess exchange of information practices during the second quarter of 2015. Kazakhstan is blocked from moving to Phase 2 of its review process due to significant gaps in its legal framework. The Czech Republic in its report received an overall rating of largely compliant.

Click the following link for an overview of the compliance ratings provided for 78 jurisdictions to date.

Treaty Changes (5)

Bahrain-Portugal

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Update - Tax Treaty between Bahrain and Portugal Signed

On 26 May 2015, officials from Bahrain and Portugal signed an income tax treaty. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Bahrain income tax payable under Amiri Decree No. 22/1979, and Portuguese personal income tax, corporate income tax and surtaxes on corporate income tax.

Hydrocarbon PE

The treaty includes the provision that a permanent establishment will be deemed constituted if for a period of more than 90 days an enterprise of one Contracting State is directly engaged in the exploration for or production of crude oil or other natural hydrocarbons arising from the ground in the other State, or when refining crude oil in its facilities in the other State.

Withholding Tax Rates

  • Dividends - 10% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties - 5%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Limitation on Benefits

The treaty includes a limitation on benefits article (27). The article includes the provision that the benefits of the treaty will not be granted to a resident of a Contracting State that is not the beneficial owner of the income derived from the other State. In addition, the benefits of the treaty will not be granted if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of the benefits provided by the treaty.

Entry into Force and Effect

The treaty will enter into force 30 days following the exchange of the ratification instruments, and will apply from 1 January of the year following its entry into force.

Belarus-Georgia

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Update - Tax Treaty between Belarus and Georgia Signed

On 23 April 2015, officials from Belarus and Georgia signed an income and capital tax treaty. The treaty is the first of its kind between the two counties.

Taxes Covered

The treaty covers Belarusian tax on income, tax on profits, income tax on individuals and tax on immovable property. It covers Georgian profit tax, income tax and property tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 5%
  • Royalties - 5%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or other participation interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

China-Colombia

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Tax Treaty between China and Colombia to be Negotiated

On 21 May 2015, officials from China and Colombia agreed to begin negotiations for an income tax treaty. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

Cyprus-Ukraine

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Cyprus and Ukraine to Revise Tax Treaty

On 19 May 2015, officials from Cyprus and Ukraine agreed to negotiate revisions to the 2012 income tax treaty between the two countries. Ukraine had approved a draft law to terminate the treaty in December 2014, although it is currently still in force. The reasons for termination, and the agreement to revise, include that the treaty provides significantly lower withholding tax rates than are provided in Ukraine's tax treaties with other countries and the Ukrainian government feels the treaty is not in line with the OECD model.

Any new treaty or protocol amending the current treaty will need to be finalized, signed and ratified before entering into force.

European Union-Switzerland

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Automatic Information Exchange Agreement between the EU and Switzerland Signed

On 27 May 2015, officials from the European Union and Switzerland signed an agreement for the automatic exchange of financial account information, which upgrades a 2004 agreement that ensured that Switzerland applies measures equivalent to those in an EU directive on the taxation of savings income. Under the agreement, information on the financial accounts of residents of EU Member States and Switzerland will be automatically exchanged in order to counter tax avoidance/evasion.

The agreement is expected to enter into force in 2017, and the automatic exchange of information will begin in 2018.

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