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Approved Changes (2)

China

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China Small Business Tax Relief Threshold Increased

During a meeting of China's State Council on 25 February 2015, the decision was made to increase the taxable income threshold for small business tax relief from RMB 100,000 to RMB 200,000 with effect from 1 January 2015. Businesses with taxable income not exceeding the threshold are eligible to be taxed on 50% of their taxable income. The 50% relief can also be used in conjunction with China's reduced tax rate of 20% for business with taxable income not exceeding RMB 300,000, subject to certain other conditions including number of employees and asset value.

The 50% relief is made available up to the end of 2017.

Venezuela

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Venezuela Publishes Tax Unit Value for 2015

Resolution SNAT/2015/0019 was published in Venezuela's Official Gazette on 25 February 2015, increasing the tax unit value from VEF 127 to VEF 150 for 2015. The tax unit is used as a reference value for a number of tax matters including determining applicable income tax rates, deductions, penalties and other matters.

Proposed Changes (2)

Canada

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Canada to Extend Mineral Exploration Tax Credit for Flow-Through Shares

Canadian Finance Minister Joe Oliver and Natural Resources Minister Greg Rickford  have announced that Government proposes to extend the 15% Mineral Exploration Tax Credit for investors in flow-through shares for an additional year, until 31 March 2016. The tax credit applies to investors of junior mining companies that raise equity through flow-through shares.

Also proposed is treating the costs of undertaking environmental studies and community consultations required to obtain an exploration permit as Canadian Exploration Expenses. Such treatment would allow for the immediate deduction of such costs for tax purposes. The treatment also enables companies to “flow through” their unused deductions to investors using flow-through shares.

India

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Indian Budget 2015-2016 Delivered

On 28 February 2015, Indian Finance Minister Arun Jaitley delivered the country's 2015-2016 Union Budget, including several proposed tax measures. Key proposed measures include:

Corporate Tax Rate

The base corporate tax rate excluding the surcharge and education cess will be reduced from 30% to 25% over 4 years beginning in the 2016-2017 tax year. However beginning from the 2015-2016 tax year, the surcharge on the income of domestic companies exceeding INR 10 million up to INR 100 million will be increased from 5% to 7%, and the surcharge on income exceeding INR 100 million will be increased from 10% to 12%.

The education cess of 3% for all companies, and the surcharge of 2% on the income of foreign companies exceeding INR 10 million up to INR 100 million and 5% on income exceeding INR 100 million will remain unchanged.

GAAR Implementation

The pending implementation of the general anti-avoidance rule (GAAR), will be delayed to 1 April 2017, in order to take into account changes resulting from the OECD Base Erosion and Profit Shifting (BEPS) Project. In addition, investments made prior to 1 April 2017 will be grandfathered.

Retroactive Taxation of Capital Gains

The 2012 tax amendment to section 9 of the ITA which allows the retroactive levy of capital gains taxes on indirect transfers of Indian assets between foreign companies dating back to April 1, 1962, would be revised. The revisions include that the retroactive taxation would be limited to transactions that exceed INR 100 million and involve underlying tangible or intangible Indian assets that account for at least 50 percent of the total value of the assets owned by the foreign company or entity. In addition, an exemption will apply when the seller does not control the foreign company and does not hold more than 5% of the share capital or voting power of the foreign company.  This change would apply from 1 April 2016

Corporate Residence Definition

The definition of corporate residence for tax purposes will be changed from being based on incorporation in India or when an entity is wholly controlled and managed in India, to instead being based on whether the place of effective management is in India.

Withholding Tax on Royalties and FTS

The withholding tax rate on royalties and fees for technical services (FTS) paid by an Indian resident to a nonresident will be reduced from 25% to 10%.

MAT for Foreign Investors

Foreign institutional investors will be exempted from the Minimum Alternate Tax (MAT) in relation to long-term capital gains from securities transactions.

PE for Offshore Funds

The ITA will be amended to specifically include that the presence of a fund manager or investment advisor in India will not constitute a permanent establishment (PE) for an offshore fund, with the condition that over 95% of the funds investors are nonresidents, and no single investor, including connected persons, holds more than 10% of the fund.

Foreign Assets Disclosure

New disclosure rules will apply including that beneficial owners or beneficiaries of foreign assets are obligated to file returns disclosing foreign assets whether there is taxable income or not, and harsher penalties will be introduced for tax evasion in regard to foreign assets. The penalties include:

  • Undisclosed foreign income or income from undisclosed foreign assets regardless of the amount, will be taxed at the highest marginal tax rate and will not be eligible for deductions or exemptions
  • Concealment of foreign income and assets will result in a penalty of 300% of the tax due, as well as imprisonment for up to 10 years, and the offender will not be permitted to approach the Settlement Commission
  • Failure to file returns or filing returns that inadequately disclose foreign assets will result in imprisonment for up to 7 years, and potential confiscation of undisclosed foreign assets or equivalent assets in India

Pass-Through Status for Investment Funds

Pass-through status will be made available for alternative investment funds (AIF) registered with the Securities and Exchange Board of India as Category I AIFs or Category II AIFs, including onshore venture capital, infrastructure, private equity and debt funds.

Individual Income Tax

There will be no changes in the base rates of individual income tax, but the 10% surcharge on individual income exceeding INR 10 million will be increased to 12%.

Wealth Tax

The wealth tax will be abolished with effect from 1 April 2015.

Indirect Taxes and Duties

The country-wide goods and services tax (GST) regime will be implemented from 1 April 2016. GST will be a destination-based tax levied simultaneously by federal and state governments, with the former collecting central GST and the latter collecting state GST on all transactions in a state. For interstate supplies, the federal government will collect an integrated goods and services tax (IGST), and then distribute the IGST proportionately to the states.

The current service tax of 12.36% including cess will be increased to a consolidated rate of 14% as part of a transition to GST.

The excise duty on manufactured goods will be increased from 12% to 12.5%.

Transfer Pricing Rules Application Threshold

The threshold for the Indian transfer pricing rules to apply for specified domestic transactions will be increased from INR 50 million to INR 200 million. The change will apply from the 2016-2017 assessment year.

Effective Date

The changes introduced must be approved as part of the Finance Bill 2015 by both houses of the Indian Parliament and receive assent by the President. The changes will generally apply from 1 April 2015, unless otherwise indicated.

Treaty Changes (2)

Belgium-Bahrain

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Tax Treaty between Belgium and Bahrain has Entered into Force

According to a recent announcement by the Belgian Federal Public Service Finance, the income and capital tax treaty with Bahrain and amending protocol entered into force 11 December 2014. The treaty was signed 4 November 2007 and the amending protocol was signed 23 November 2009. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Bahraini income tax, and Belgian individual income tax, corporate income tax, income tax on legal entities, income tax on non-residents on income sourced in Belgium, the supplementary crisis contribution, and any prepayments and surcharges.

Withholding Tax Rates

  • Dividends - 0% if, at the moment of payment, the beneficial owner has directly held at least 10% of the paying company's capital for an uninterrupted period of at least 12 months; otherwise 10%
  • Interest - 0% for interest paid on commercial debt-claims resulting from deferred payments for goods, merchandise or services supplied by an enterprise; interest paid on export loans/credits granted, guaranteed or insured by the government of a Contracting State; and interest paid on debt-claims or loans to a banking enterprise or paid on deposits made with a banking enterprise; otherwise 5%
  • Royalties - 0%
  • 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

Bahrain applies the credit method for the elimination of double taxation, while Belgium generally applies the exemption method. However, subject to the provisions of Belgian law, Belgium will apply the credit method for interest and royalty income.

Limitation on Benefits

Article 28 Limitation on Benefits includes the provision that the benefits of the treaty in regard to Article 10 Dividends, Article 11 Interest and Article 12 Royalties will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation of a right or debt-claim in respect of which dividends, interest or royalties are paid was to take advantage of those articles of the treaty.

Protocol

The protocol, signed 23 November 2009, replaces Article 26 Exchange of Information, bringing it in line with the OECD standard for information exchange.

Effective Date

The treaty and amending protocol both apply from 1 January 2015.

Italy-Monaco

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TIEA between Italy and Monaco Signed

On 2 March 2015, officials from Italy and Monaco signed an information exchange agreement. The agreement is the first of its kind between the two countries, and is in line with the OECD standard for information Exchange. It will enter into force after the ratification instruments are exchanged.

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