Worldwide Tax News
On 29 December 2014, Algeria's draft Finance Law 2015 was signed by the President. Key tax measures are summarized as follows:
- The current corporate tax rates of 19% and 25% (depending on industry) is replaced with a single tax rate of 23%
- The maximum revenue amount for the special lump-sum tax regime is increased from DZD 10 million to DZD 30 million
- A 5-year exemption from corporate tax, individual income tax and the tax on professional activities is made available for specific industrial activities
- An exemption from VAT and customs duties is made available for qualifying investments in research and development activities
The changes introduced by the law generally apply from 1 January 2015.
On 22 December 2014, the Australian Taxation Office (ATO) published eligibility guidance on its website for simplified transfer pricing record keeping options. The guidance covers eligibility for small taxpayers, distributors, intra-group services, and low-level loans.
General eligibility requirements for all four entity/transaction types include that the taxpayer:
- Has not derived sustained losses
- Has not had related-party dealings with entities in specified countries
- Has not undergone a restructure within the year
- Does not have related-party dealings involving royalties, license fees, or research and development arrangements
- Has assessed compliance with the transfer pricing rules
Specific eligibility requirements by entity/transaction type include:
- Turnover of the Australian economic group does not exceed AUD 25 million
- Specified service related-party dealings (either as expenses or as income) are not greater than 15% of the small taxpayer's turnover
- The taxpayer is not a distributor (which are subject to separate requirements below)
- Turnover of the Australian economic group does not exceed AUD 50 million
- The profit-before-tax ratio is not less than 3%
- International related-party services dealings must either:
- Not exceed AUD 1 million, or
- If exceeding AUD 1 million, the value of services received must not exceed 15% of the total expenses of the Australian economic group, or the value of services provided must not exceed 15% of the total revenue of the Australian economic group
- The mark-up on costs of the relevant services must be 7.5% or less for services received and 7.5% or more for services provided
- The combined cross-border loan balance must be AUD 50 million or less for the Australian economic group at all times throughout the financial year
- For inbound loans:
- The interest rate may not be more than the Reserve Bank of Australia (RBA) indicator lending rate for 'small business; variable; residential-secured; term'
- The funds provided under the loan must be in Australian dollar funds
- The associated expenses paid must be in Australian dollars
The guidance applies for 3 years starting from 29 June 2013. If eligible and a simplified option is selected, a taxpayer must inform the ATO of the selection through a disclosure on the International Dealings Schedule, which is included in the income tax return.
For more information, please click on the following link to the Simplifying transfer pricing record keeping guidance on the ATO website.
On 23 December 2014, China's Ministry of Finance and State Administration of Taxation issued Circular 2014 no. 122 which clarifies the thresholds for exemptions from certain government funds charges.
Exemption from education surcharges, local education surcharges, water conservancy construction charges and cultural development fees is provided for enterprises with monthly revenue not exceeding CNY 30,000, or quarterly revenue not exceeding CNY 90,000. The exemption applies from 1 January 2015 to 31 December 2017.
Exemption from social security payments for disabled personnel is provided for taxpayers with 20 or fewer employees, regardless of whether the prescribed proportion of disabled employees is met. The exemption applies for 3 years beginning from the date of the enterprise's registration.
Constitutional Review Completed for French Second Amended Finance Act for 2014 and Finance Act for 2015
On 29 December 2014, France's Constitutional Court issued its rulings on the compatibility of the Second Amended Finance Act for 2014 and the Finance Act for 2015 with the French Constitution. The bills for each were approved by the French Parliament on 18 December 2014.
In regard to the Second Amending Finance Act 2014, two of the Act's provisions were found to be unconstitutional.
The first provisions found unconstitutional is the denial of participation exemption when the dividends are paid out of profits not subject to corporate income tax or similar tax because the Court found the provision unclear. However, the provision for the denial of participation exemption when the dividends are tax deductible for the distributing entity is retained.
The second provision found unconstitutional is the 75% tax on real estate capital gains realized by residents of Non-Cooperative States or Territories. The reasons is that the total taxation rate including social contributions on investment would amounts to 90.5%, a rate considered by the Court to be excessive.
In regard to the Finance Act for 2015, the only important provision found to be unconstitutional was the penalty introduced for third-party persons who allow or facilitate tax evasion. The Court found that the measure was unclear and allowed for different interpretation, and therefore violated the constitutional principle of clear definition of crimes and punishments.
Following the Constitutional Court review, both Acts were published in the Official Journal on 30 December 2014 and generally apply from 1 January 2015, aside from the measures found unconstitutional.
On 29 December 2014, Luxembourg published the decree on advance tax ruling procedures in the Official Gazette. Key aspects of the decree include:
- Advance tax ruling requests by both individuals and companies must be submitted in writing to the competent tax office or the Director of Contributions if the competent tax office cannot be determined
- A request must contain the following information at a minimum:
- Full details of the applicant including name, domiciles and file number,
- Details of the parties involved and other relevant third parties including a description of their activities,
- A detailed description of the planned transaction, and
- An analysis of the legal issues, and a detailed motivation for the legal position of the applicant
- Company advance ruling requests are sent to the Ruling Commission for review
- The main facts of all advance rulings will be published anonymously in the annual report of the tax administration
- The fee for an advance ruling is determined by the Director of the Contributions, and must be paid within one month
The advance tax ruling procedures apply from 1 January 2015.
The rate of Poland's standard interest penalty for late payments of tax, including for tax advances, has been reduced from 10% to 8%. The rate is equal to twice the interest rate on pawn credits as announced by the National Bank of Poland plus 2%, with a minimum rate of 8%.
When a self-correction is made prior to a notice of procedures for an amended assessment and the payment is made within 7 days of filing the corrected return, a reduced rate applies. With the change in the standard rate, this reduced rate is reduced from 7.5% to 6% (75% of standard rate).
According to the Polish Ministry of Finance, the new rates apply from 9 October 2014.
According to recent reports, Japan is seriously considering moving forward with plans to subject e-services supplied by non-residents to consumption tax. Currently Japan's 8% consumption tax only applies to resident suppliers of e-services, which is seen as unfair by domestic providers. e-services that would be brought under the scope of consumption tax include net apps, e-books, and streaming or downloads of games, music and film sold by platforms outside of Japan.
Currently the plan is to subject non-resident e-services to consumption tax from 1 October 2015. The new change would require non-resident suppliers to register with the Japanese authorities and submit periodic Japanese returns.
Further details will be published once available.
The income tax agreement between Austria and Taiwan entered into force on 20 December 2014. The agreement, signed 12 July 2014, is the first of its kind between the two countries.
The agreement applies to Austrian income tax and corporation tax, and Taiwan profit-seeking enterprise income tax, individual consolidated income tax and income basic tax.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a territory through employees or other engaged personnel for the same or a connected project for a period or periods aggregating more than 6 months in any 12 month period.
- Dividends - 10%
- Interest - 0% for interest paid on loans granted, guaranteed or insured by an approved financial institution of the other territory for the purposes of promoting exports and on loans between banks, otherwise 10%
- Royalties - 10%
- 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
Taiwan generally applies the credit method for the elimination of double taxation, while Austria generally applies the exemption method. However, in the case of dividend, interest and royalty income, Austria will apply the credit method.
The agreement includes a limitation on benefits article, whereby the benefits of the treaty will not apply when the conduct of operations by a resident or connected person had the main purpose or one of the main purposes to obtain the benefits of the agreement.
The agreement applies from 1 January 2015.