Worldwide Tax News
On 27 March 2015, Belgium published in its Official Gazette the investment allowance rates for the 2015 tax year. The following summarizes the applicable allowance rates for specific investment types made by companies:
- 13.5% for investment in patents; environmentally friendly R&D; and energy saving and ventilation systems in hotels, restaurants and bars
- 3% for investment in recycling of packing materials
- 20.5% for investment in safety by small companies
- 30% for investment in seagoing vessels by companies earning profits exclusively from ocean shipping
The rates apply for the normal investment deduction available for taxpayers based on the acquisition price in the year of investment. Any unused allowance may generally be carried forward.
The French government recently published a non-exhaustive list of 17 arrangements or activities that carry significant risks of being challenged by the French tax authorities resulting in the launch of anti-abuse procedures. The list includes abuse through:
- Management/Executive package schemes;
- Dividend stripping;
- Relocation of profits after restructuring;
- Unwarranted commission payments;
- Fictitious lowering of the wealth tax base computation;
- Undisclosed foreign wages;
- Foreign commission payments to French directors;
- Fictitious relocation of staff;
- Tax treaty abuses (treaty shopping);
- Non-application of dividend withholding tax;
- Double deductions of interest;
- Circumvention of the territoriality threshold for donation duties;
- VAT avoidance on hidden service payments;
- Abuse of the plan d’épargne en actions (PEA - share savings plan through investment in European equities) by use of cross participations;
- Abuse of the PEA by use of conduit companies;
- Failure to disclose online distance sales (EU) to French customers when exceeding the EUR 100,000 annual threshold; and
- Fictitious lowering of the wealth tax cap
Click the following link for the list as published, including additional links providing further details of each abuse (French language).
On 4 May 2015, the OECD published comments received in response to the public discussion draft on the Base Erosion and Profit Shifting (BEPS) Project Action 12: Mandatory Disclosure Rules.
The Action 12 draft provides an overview of mandatory disclosure regimes, based on the experiences of countries that have such regimes, and sets out recommendations for a modular design of a mandatory disclosure regime including recommendations on rules designed to capture international tax schemes. It also sets out a standard framework for a mandatory disclosure regime that ensures consistency while providing sufficient flexibility to deal with country specific risks and to allow tax administrations to control the quantity and type of disclosure.
Click the following links for the discussion draft and the over 270 pages of comments received:
A public consultation meeting for Action 12 will be held at the OECD Conference Centre in Paris on 11 May 2015, from 10 am to 4:30 pm CET. The meeting will be broadcast live via http://video.oecd.org/.
The U.S. Internal Revenue Service issued the third quarter update of the 2014-2015 Priority Guidance Plan on 28 April 2015. The guidance covers the 12-month period beginning July 2014 through June 2015 (the plan year).
The Priority Guidance Plan is used by the U.S. Treasury Department's Office of Tax Policy and the IRS to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. It also sets out the schedule for routine publications for each month of the plan year. The third quarter updates include 25 additional projects that have become priorities, as well as guidance published during the period beginning 1 January 2015 through 31 March 2015.
Both the initial and updated 2014-2015 Priority Guidance Plan versions and prior years' plans can be found on the IRS Priority Guidance Plan webpage. Based on the timing of previous year's releases, the initial version of the 2015-2016 Priority Guidance Plan will likely be issued late August 2015.
On 21 April 2015, the Guernsey tax authorities published an update on the status of current tax treaty negotiations. Currently, Guernsey is negotiating tax treaties with Estonia, Latvia, Saudi Arabia and Thailand. Any resulting tax treaties will be the first of their kind between Guernsey and the respective countries.
Each treaty must be finalized, signed and ratified before entering into force. Additional details of each will be published once available.
The OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol entered into force in respect of Indonesia on 1 May 2015. The amended convention, signed by Indonesia on 3 November 2011, will generally apply in the country from 1 January 2016.
On 30 April 2015, the Mexican Senate approved the law for the ratification of the pending income tax treaty with Costa Rica. The Treaty, signed 12 April 2014, is the first of its kind between the two countries.
The treaty covers Costa Rican income tax, and Mexican federal income tax.
- Dividends - 5% if the beneficial owner is a company directly holding at least 20% of the paying company's capital, otherwise 12%
- Interest - 10%
- Royalties - 10%
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 in a company deriving more than 50% of their value directly or indirectly from immovable property situated in the other State; and
- Gains from the alienation of stocks, shares or other rights (other than the above) in the capital of a company which is a resident of the other State if the alienator at any time in the 12-month period preceding the alienation held a direct or indirect participation in the company of at least 25%
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Both countries apply the credit method for the elimination of double taxation.
The treaty includes a substantial limitation on benefits article (Article 24). The provisions of the article are summarized as follows.
The benefits of the treaty will only apply for a company incorporated in a Contracting State if:
- The company's shares are listed on a recognized stock exchange; or
- At least 50% of the company's voting rights or shares are directly or indirectly held by one or more individuals resident in a Contracting State and/or other persons incorporated in a Contracting State (the voting rights or shares in such other persons must also be directly or indirectly held by one or more individuals resident in a Contracting State).
Notwithstanding the above, the benefits will be denied if:
- More than 50% of a company's gross income is paid directly or indirectly to persons who are not resident in either Contracting State; and
- Such payments are deductible in computing a tax covered by the treaty in the person's state of residence.
However, the above limitation will not apply if the competent authorities agree that the company claiming the benefits carries on an active business in a Contracting State, and the conduct of its operations do not have the principle purpose of obtaining the benefits of the treaty.
Furthermore, the benefits will not apply for a resident of a Contracting State if:
- The income of that resident is exempt or subject to tax at a lower rate than would be applicable to the same income earned by other residents of that State; or
- That resident receives concessions or benefits in regard to foreign taxes paid that are not provided for other residents of that State.
In any of the above cases, the competent authorities of the Contracting States will consult each other before the treaty benefits are denied.
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.