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Worldwide Tax News

Approved Changes (2)

Ireland

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Irish Parliament Adopts Collective Asset-Management Vehicles Bill

The Irish Parliament has adopted the bill introducing the Irish Collective Asset-Management Vehicle (ICAV). The new structure is introduced to minimize the administrative complexity and cost of establishing and maintaining collective investment schemes in Ireland. Some of the key aspects of the ICAV include:

  • May be formed by any 2 or more persons
  • Has limited liability
  • Registration is done through the Central Bank of Ireland
  • The sole object of an ICAV shall be the collective investment of its funds in property and giving members the benefit of the results of the management of its funds
  • An existing investment company may apply to convert to an ICAV
  • The ICAV's head office and registered office must be in Ireland
  • Must have at least 2 directors
  • Must have a secretary or joint secretaries, who may be one of the directors

Click the following link for the Irish Collective Asset-Management Vehicles Bill 2014.

Kuwait

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Kuwait Publishes Foreign Investment Negative List

On 1 February 2015, Kuwait published Ministerial Decision No. (75) of 2015 in the Official Gazette. Decision 75 sets out the negative list of sectors which are not eligible for the benefits of the Foreign Investment Law, which include the granting of an investment license allowing 100% foreign ownership, income tax holidays, customs duties exemption and others. The list includes:

  • Extraction of crude petroleum
  • Extraction of natural gas
  • Manufacture of coke oven products
  • Manufacture of fertilizers and nitrogen compounds
  • Manufacture of gas; distribution of gaseous fuels through mains
  • Real Estate, excluding privately operated building development projects
  • Security and investigation activities
  • Public administration and defense; compulsory social security
  • Activities of membership organizations
  • Activities of hiring labor including domestic labor

The negative list applies from 1 February 2015.

Proposed Changes (1)

Brazil

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Brazil Considering Withholding Tax on Dividends Paid to Nonresidents

The Brazilian Senate is currently considering amendments to Law 9,249/1995 that would impose a withholding tax on dividends paid by a Brazilian resident to a nonresident beneficial owner. Under Law 9,249/1995 an exemption has applied since 1996.

The amendments would adjust the wording of the law so that dividend payments made by a Brazilian company to Brazilian resident beneficial owners would remain exempt, but dividend payments to a nonresident beneficial owner would only be exempt if the shareholder's jurisdiction of residence provides reciprocal treatment for dividends paid to Brazil. If a jurisdiction does tax dividends paid to Brazilian beneficial owners, then a 15% withholding tax would apply on dividends paid by a Brazilian company to a resident of that Jurisdiction. If the dividend is paid to a resident of a tax-haven that does not provide reciprocal treatment, the rate would be increased to 25%.

If adopted, the change would apply from 1 January 2016.

Treaty Changes (4)

Chile-Finland

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Tax Treaty between Chile and Finland to be Negotiated

According to recent reports, officials from Chile and Finland are planning to meet to begin negotiations for a 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.

Additional details will be published once available.

Senegal-United Kingdom

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Tax Treaty between Senegal and the U.K. Signed

On 26 February 2015, officials from Senegal and the U.K. signed an income and capital tax treaty. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Senegalese corporate income tax, minimum corporate tax, individual income tax, and capital gains tax on developed and undeveloped land. It covers U.K. income tax, corporation tax, and capital gains tax.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If the authorities cannot reach mutual agreement, the company will not be entitled to the benefits of the treaty aside from those covered in paragraph 3 of Article 21 Elimination of Double Taxation, and Article 23 Non-Discrimination and Article 24 Mutual Agreement Procedure.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting State furnishes services in the other State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12 month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; 8% if the beneficial owner is a pensions scheme; otherwise 10%
  • Interest - 10%
  • Royalties  - generally 10%, except for payments of any kind received as a consideration for the use of, or the right to use, industrial, commercial or scientific equipment for which the 10% rate is applied to an adjusted amount of 60% of the gross amount of the royalties
  • Capital gains - the following gains derived by a resident of one Contracting State may be taxed by the other State:
    • Gains from the alienation immovable property situated in the other State,
    • 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 movable property forming part of the business property of a permanent establishment in the other State, and
    • Gains from the alienation of shares in a company resident in the other State, other than the above, if the alienator at any time in the 12 months prior to the alienation had directly or indirectly held at least 50% of the capital of that company (tax limited to 25% of the gain)

Double Taxation Relief

Both countries generally apply the credit method for the elimination of double taxation. However, the U.K. will exempt dividends paid by a Senegal resident company to a company resident in the U.K. if the conditions for an exemption under U.K. law are met. Exemption may also apply for profits of a permanent establishment in Senegal of a U.K. company if the conditions for an exemption under U.K. law are met.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged.

For withholding taxes, the treaty will apply in both countries from 1 January of the year following its entry into force. For other taxes, the treaty will apply in Senegal from 1 January of the year following its entry into force. In the U.K. it will apply for corporation tax from 1 April next following its entry into force, and for income tax and capital gains tax from 6 April next following its entry into force.

The provisions of Article 24 Mutual Agreement Procedure, Article 25 Exchange of Information and Article 26 Assistance in the Collection of Taxes will have effect from the date the treaty enters into force.

Turkey-Kosovo

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Turkey Approves Tax Treaty with Kosovo

On 26 February 2015, the Turkish Council of Ministers approved for ratification the pending income tax treaty with Kosovo. The treaty was signed 10 September 2012, and is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Kosovo personal income tax and corporate income tax, and covers Turkish income tax and corporation 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 15% (a protocol to the treaty, signed the same date, includes the provision that dividends paid by a resident of Kosovo to a resident of Turkey are exempt from withholding tax)
  • Interest - 10%
  • Royalties - 10%
  • Capital Gains - generally exempt, except for gains from the alienation of immovable property, and gains from the alienation if movable property forming part of the business property of a permanent establishment

Double Taxation Relief

Both jurisdictions 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.

Turkey-Vietnam

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Update -Tax Treaty between Turkey and Vietnam Signed

On 8 July 2014, officials from Turkey and Vietnam signed and income tax treaty The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Turkish income tax and corporation tax, and covers Vietnamese personal income tax and business income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting State furnishes services in the other State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 6 months within any 12 month period.

Withholding Tax Rates

  • Dividends - the rate depends on the ownership/investment as follows:
    • 5% if the beneficial owner is a company directly holding at least 50% of the paying company's capital or has invested more than USD 10 million, or equivalent in Turkish or Vietnamese currency, in the capital of the paying company;
    • 10% if the beneficial owner is a company directly holding at least 25% but less than 50% of the paying company's capital;
    • otherwise 15%
  • Interest - 10%
  • Royalties - 10%
  • Capital gains - the following gains derived by a resident of one Contracting State may be taxed by the other State:
    • Gains from the alienation 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,
    • Gains from the alienation of shares or comparable interests in a company whose assets consist wholly or principally of immovable property situated in the other State, and
    • Gains from the alienation of shares issued by a company resident in the other State, if the beneficial owner of the shares directly holds less than 25% of the capital of that company and if the period between acquisition and alienation does not exceed one year

Double Taxation Relief

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

MFN Clause

A protocol to the treaty, signed the same date, includes the provision that if Vietnam enters into an agreement with any other country that provides for a longer period of time before a construction PE is deemed constituted, then such longer period will apply for the purpose of the Turkey-Vietnam tax treaty.

The protocol also includes the provision that if Vietnam enters into an agreement after 23 October 2009 with an OECD Member State that provides for lower withholding tax rates for dividends, then such lower rates will apply for the purpose of the Turkey-Vietnam tax treaty.

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.

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