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Approved Changes (6)

Armenia-Belarus-Kazakhstan-Kyrgyzstan-Russia

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Armenia Joins Eurasian Economic Union

According to recent reports, Armenia joined the Eurasian Economic Union (EEU) on 2 January 2015, following the recent completion of the ratification procedures for the country's accession to the EEU treaty. The EEU is a single market with no customs control and a zero VAT rate. It effectively replaces the Eurasian Customs Union formed in 2007.

Armenia joins Belarus, Kazakhstan and Russia, which had ratified the EEU treaty in October 2014, but will have limited representation in the organization until the end of 2015. Kyrgyzstan is also planning to join the EEU on 1 May 2015.

Belarus

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Belarus Approves 2015 Tax Code Amendments

On 19 December 2014, the Belarusian Senate approved Tax Code amendments for 2015. The key amendments are summarized as follows:

Corporate Taxation

  • The reduced 9% capital gains tax rate on gains from the sales of shares is abolished, and the 18% rate applies
  • The corporate tax rate for banks and insurance companies is increased from 18% to 25%

Individual Taxation

  • The individual income tax rate is increased from 12% to 13%, although additional deductions will be allowed

Transfer Pricing

  • The scope of the Belarusian transfer pricing rules is expanded to cover the sale of works and the provision of services (previously only immovable property transactions and transactions involving goods are covered)
  • The minimum transaction value threshold of BYR 60 billion is reduced to BYR 1 billion
  • The comparable profits method is introduced as one of the acceptable transfer pricing methods, which also includes the comparable uncontrolled price (CUP) method, the resale price method, and the cost-plus method

Thin Capitalization

  • The scope of controlled debt subject to thin capitalization rules is expanded to include not only controlled debt obligations to a foreign organization directly or indirectly controlling 20% or more of a Belarusian entity, but also:
    • Debt obligations to affiliates of such a foreign organization,
    • Debt obligations guaranteed by such a foreign organization or affiliates
  • Contractual penalties and fines related to loan agreements are considered controlled debt subject to thin capitalization rules, as well certain fees and other expenses including fees payable under management, engineering, informational, marketing and consulting services agreements, expenses for the acquisition or use of trademarks and service marks, and amortization of industrial property
  • A 1:1 debt to equity ratio is introduced for manufacturers of alcoholic beverages with an alcohol amount of up to 7% and goods subject to excise duty, and for fees and expenses considered controlled debt as above when owed to Belarusian resident company that holds more than 20% of the shares in the debtor company

Value Added Tax

  • VAT Exemption is introduced for payments received in the course of a finance lease arrangement with an option to purchase the lease object provided that the lessee is an individual
  • VAT Exemption is introduced for proceeds from the sale of intellectual property rights, such as rights to inventions, utility models, industrial design, breeding achievements, integrated circuit topographies and know-how

The amendments to the Tax Code generally apply from 1 January 2015.

Italy

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Italy Approves Stability Law for 2015

On 22 December 2014, the Italian Parliament approved the Stability Law for 2015, which includes measures introduced in the Budget for 2015. The law was published in the Official Gazette on 29 December 2014, and generally applies from 1 January 2015.

The key measures of the law include:

IRAP (Regional Production Tax)

  • Companies are allowed to fully deduct labor costs for permanent employees from the IRAP tax base
  • The 2014 reduction in the standard IRAP rate to 3.5% is reverted to 3.9% with retroactive effect for tax years following the tax year ongoing as of 31 December 2013 - for enterprises operating based on public concessions the rate is 4.2%, for banks and other financial institutions the rate is 4.65%, and for insurance companies the rate is 5.9%
  • A tax credit equal to 10% of the amount of IRAP due is introduced for companies with no employees

R&D Tax Credit

A new R&D tax credit regime is introduced starting from the tax year following the tax year ongoing as of 31 December 2014, and applies until the tax year ongoing as of 31 December 2019. The credit applies as follows:

  • The tax credit is equal to 25% of qualifying R&D expenditure exceeding €30,000, with a credit cap of €5 million
  • A 50% credit applies for R&D expenditures for high qualified personnel, and R&D activities outsourced to universities and similar bodies

Patent Box

An elective patent box regime is introduced which grants an exemption from corporate income tax and IRAP on income derived from qualifying intangible assets, such as patents, know-how and other intellectual properties. The exemption is equal to 30% for 2015, 40% for 2016 and 50% from 2017. Once elected, the exemption must be applied for at least 5 years.

The regime follows the nexus approach with the amount of income eligible for exemption determined proportionally to the R&D activities actually performed by the taxpayer.

Capital gains from the disposal of qualifying intangibles are also exempt with the condition that 90% of the related consideration is reinvested by the taxpayer for the development of similar IP by the end of the second tax year following the year of disposal.

In order to be eligible for the exemption, taxpayers must be engaged in R&D activities, and in most cases an advanced ruling is required. For non-resident taxpayers, there must also be a tax treaty in place between Italy and the non-resident's country of residence that allows for an adequate exchange of information.

Luxembourg

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Luxembourg Publishes VAT Changes under Budget 2015

On 24 December 2014, Luxembourg published in the Official Gazette the Budget for 2015. Various amendments are made under the budget which apply from 1 January 2015, including changes to the country's value added tax (VAT) rates.

The standard VAT rate is increased from 15% to 17%, while the reduced rate of 12% is increased to 14% and the super reduced rate of 6% is increased to 8%. Luxembourg's third reduced rate of 3% remains unchanged.

Also included is the time period after which interest compensation is granted on the refund of excess VAT paid. The standard time period after which interest is paid is 4 months after the refund request is made. When additional information is requested, the time period is 6 months.

Malaysia

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Malaysia Issues Ruling Clarifying Special Allowances for Small Value Assets for 2015

On 31 December 2014, the Inland Revenue Board of Malaysia on issued Public Ruling 10/2014 which provides clarification of the tax rules for special allowances for small-value assets for the 2015 year of assessment. Key aspects of the ruling are summarized as follows:

  • Small-value assets for the purpose of the special allowances includes plant or machinery used for the purpose of a person's business with an acquisition cost not exceeding MYR 1,300 (increased from MYR 1,000), but excludes assets with an expected life span of two years or less
  • The acquisition cost of qualifying small-value assets may be written off in full as a special allowance, but claims are limited to a total of MYR 13,000 (increased from MYR 10,000) per year of assessment
  • For small and medium-sized enterprises (SMEs), there is generally no restriction on the total amount claimed per year of assessment as long as the following conditions are met:
    • The SME is resident in Malaysia, and
    • The SME's paid up ordinary share capital does not exceed MYR 2.5 million at the beginning of the basis period for a year of assessment
  • In addition to the above conditions, the following cases will limit an SME to claims of MYR 13,000 per year of assessment:
    • More that 50% of the paid up ordinary share capital of the SME is directly or indirectly owned by a related company,
    • The SME directly or indirectly owns more than 50% of the paid up ordinary share capital of a related company, or
    • More than 50% of the paid up ordinary share capital of the SME and a related company is directly or indirectly owned by a third company

Additional information and examples can be found in the full Public Ruling on the Inland Revenue Board website.

Norway

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Norway Enacts Budget Bill for 2015

Norway's Budget Bill for 2015 was enacted on 15 December 2014. Changes are made in regard to business taxation, individual taxation and value added tax (VAT). The main changes include:

Business Taxation

  • Limited partners are no longer able to deduct partnership losses against ordinary income from other sources, but will instead be able to carry such losses forward to offset future partnership income or gains upon realization of partnership interests
  • The deductibility cap for internal R&D is increased from NOK 8 million to NOK 15 million, and the deductibility cap for outsourced R&D is increased from NOK 22 million to NOK 33 million - the total cap for combined internal and outsourced R&D is NOK 33 million

Individual taxation

  • The surtax threshold for bracket 1 is increased by NOK 7,500
  • The net wealth tax on individuals is reduced from 1% to 0.85% instead of 0.75% as initially planned, and the basic allowance is increased from NOK 1 million to NOK 1.2 million
  • The planned 0.1% reduction for employee and self employed social security contributions was not enacted

Value Added Tax

  • The standard VAT registration threshold is maintained at NOK 50,000 in taxable sales instead of the previously proposed increase to NOK 150,000
  • The low-value exemption threshold for imported goods is increased from NOK 200 to NOK 350 instead of NOK 500 as initially planned
  • A new arrangement is introduced to neutralize value added tax for central government contracts

The changes generally apply from 1 January 2015.

Proposed Changes (1)

Australia

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Australia Considers Lowering Foreign E-Commerce GST Exemption Threshold

The Australian government is considering lowering the AUD 1,000 Goods & Services Tax (GST) exemption threshold for purchases made through foreign e-commerce platforms such as Amazon and eBay. Currently, consumers are allowed to make single acquisitions up to AUD 1,000 without the 10% GST being charged.

A review of lowering the threshold is currently ongoing and is expected to be completed in February 2015.

Treaty Changes (4)

Belgium-Saudi Arabia

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Tax Treaty between Belgium and Saudi Arabia Initialed

On 18 December 2014, officials from Belgium and Saudi Arabia concluded the second round of negotiations and initialed an income tax treaty. The treaty will be the first of its kind between the two countries, and must be signed and ratified before entering into force.

Cyprus

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Cyprus Deposits Ratification Instrument for Mutual Assistance Convention

On 19 December 2014, Cyprus deposited the ratification instrument for the Council of Europe-OECD Convention on Mutual Administrative Assistance in Tax Matters and amending protocol. The convention and amending protocol will enter into force 1 April 2015.

Guinea-Untd A Emirates

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Update - Tax Treaty between Guinea and the United Arab Emirates

The income and capital tax treaty between Guinea and the United Arab Emirates was signed 23 November 2011. The treaty is the first of its kind between the two countries and has not yet entered into force.

Taxes Covered

The treaty covers the income tax and corporate tax of both countries.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other engaged personnel for a period or periods aggregating more than 6 months.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 0%
  • Capital Gains - generally exempt, except for gains from the alienation of immovable property, and gains from the alienation of movable property forming part of the business property of a permanent establishment

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.

Netherlands-France-Thailand-Belgium-Germany-Iraq-Mozambique-Senegal

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Netherlands Tax Treaty Negotiations for 2015

The Dutch government has announced new and continued tax treaty and protocol negotiations for 2015. The country will continue tax treaty negotiations with France and Thailand, and will continue treaty protocol negotiations with Belgium and Germany. New tax treaty negotiations to begin in 2015 are with Iraq, Mozambique and Senegal.

Additional details for each treaty and protocol will be published once available.

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