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Proposed Changes (1)

Greece-European Union

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Tax Reforms in "Final" Bailout Package for Greece

Following the rejection of the tax reforms proposed by Greece on 22 June 2015 in order to extend its bailout, the Greek government has decided to hold a public referendum on whether or not to accept the counter proposal made by the European Commission. Key measures of the proposed package include:

  • Increasing the corporate tax rate from 26% to 28%;
  • Requiring 100% advance payment of corporate income and individual business income tax by the end of 2016;
  • Increasing the VAT rate on restaurants to 23%;
  • Repealing the reduced VAT rate that applies for certain islands; and
  • Phasing out tax breaks for the shipping industry

The package also calls for other reforms of Greece's income tax code and pension system, and the implementation of a new criminal law on tax evasion and fraud.

Greece, which has already missed a payment deadline of 30 June, will hold the referendum on whether or not to accept the latest bailout package on 5 July 2015.

Treaty Changes (6)

Cameroon-OECD

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Cameroon Deposits Ratification Instrument for Mutual Assistance Convention

On 30 June 2015, Cameroon deposited the ratification instrument for the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The convention as amended was signed by Cameroon on 25 June 2014, and will enter into force in the country on 1 October 2015.

Chile-China

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Update - Tax Treaty between Chile and China

The pending income tax treaty between Chile and China was signed on 25 May 2015, and is the first of its kind between the two countries.

Taxes Covered

The treaty covers Chilean taxes imposed under the Income Tax Act (Ley sobre Impuesto a la Renta), and covers Chinese individual income tax and enterprise income 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, any relief or exemption from tax provided by the treaty will not be available.

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 one or more individuals who are present and performing such services in that other State for a period or periods aggregating more than 183 days within any 12-month period.

For determining whether the 183 day threshold is exceeded, activities carried on by a connected enterprise that are substantial the same are included.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 4% in respect of interest derived from loans granted by banks, insurance companies and other financial institutions; otherwise 10% (interest subject to the 10% rate will instead be subject to a 15% for the first 2 years from the date the treaty is effective)
  • Royalties - 2% in respect of royalties for the use of or the right to use, industrial, commercial or scientific equipment; otherwise 10%

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;
  • Gains from the alienation of shares or other rights directly or indirectly deriving more than 50% of their value from immovable property situated in the other State at any time during the 3-year period preceding the alienation; and
  • Gains from the alienation of shares or other rights or interests representing the capital of a company resident in the other State - subject to certain conditions, an exemption is available for shares sold on a recognized stock exchange in the other State or in a public offer for the acquisition of shares

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.

Entitlement to Benefits

Treaty includes a substantial article limiting the benefits of the treaty; Article 26 (Entitlement to Benefits). The Article includes the provision that the benefits of the treaty will only be available for a resident of a Contracting State if the resident is a qualified person at the time the benefits would apply. A qualified person includes:

  • An individual;
  • A Contracting State;
  • A person other than an individual, if
    • More than 50% of the beneficial interest in such person is directly or indirectly owned by any combination of one or more individuals resident in one of the Contracting States; a Contracting State or local authority; or another company meeting these conditions; and
    • Less than 50% of the gross income of such person is paid or accrued to a person not meeting these conditions in the form of payments that are deductible for the purpose of the taxes covered by the treaty (excluding arm's length payments in the ordinary course of business for services or tangible property); or
    • It is a company which is a resident of a Contracting State and its principal class of shares is substantially and regularly traded on a recognized stock exchange.

However, if a resident does not meet the conditions above, the benefits may still apply if the competent authority, upon request, determines that the establishment, acquisition or maintenance of the resident and the conduct of its operations does not have as one of its principal purposes the obtaining of benefits under the treaty.

Furthermore, the treaty benefits will not be granted if a resident meets the conditions as a qualified person, but it is reasonable to conclude that the one of the principal purposes of any arrangement or transaction of the resident was to obtain a benefit.

MFN Clause

A protocol to the treaty, signed the same date, includes the provision that if Chile enters into an agreement with another country that provides for a lower rate of tax on interest, such lower rate will automatically apply for the purpose of the Chile-China tax treaty from the date the first-mentioned agreement applies.

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.

Hungary-Liechtenstein

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Tax Treaty between Hungary and Liechtenstein Signed

On 29 June 2015, officials from Hungary and Liechtenstein signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Liechtenstein-Monaco

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Tax Treaty between Liechtenstein and Monaco to be Negotiated

The Liechtenstein government has recently announced that is has agreed with Monaco to negotiate an income tax treaty. Any resulting treaty will be the first of its kind between the two countries, and will need to be finalized, signed and ratified before entering into force.

San Marino-United States

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Tax Treaty and SSA between San Marino and the U.S. to be Negotiated

According to a recent release issued by the San Marino Ministry of Foreign affairs, officials from San Marino and the U.S. agreed to begin negotiations for an income tax treaty during a meeting held 23 June 2015. They also agreed to negotiate a social security agreement (SSA). Any resulting treaty and SSA will be the first of their kind between the two countries, and must be finalized, signed and ratified before entering into force.

Senegal-Portugal

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Senegal Approves Tax Treaty with Portugal

On 24 June 2015, the Senegalese Council of Ministers approved for ratification the pending tax treaty with Portugal. The treaty, signed 13 June 2014, 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, contributions payable by employers, and capital gains tax on developed and undeveloped land. It covers Portuguese personal income tax, corporate income tax and surtaxes on corporate 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 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; otherwise 10%
  • Interest - 10%
  • Royalties - 10%
  • Technical Services - 8%

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;
  • Gains from the alienation of shares or similar rights directly or indirectly deriving more than 50% of their value from immovable property situated in the other State; and
  • Gains from the alienation of shares representing an interest exceeding 50% in a company resident in the other State (rate limited to 20% of the gains)

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 (30), which includes the provision that the benefits of the treaty will not apply if the main purpose or one of the main purposes of any person concerned with the creation or transfer of goods or rights for which the income is paid is to take advantage of the benefits through the creation or assignment.

Entry into Force and Effect

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

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