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Approved Changes (4)

Denmark

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Denmark Recovers EUR 235 Million in Dividend Fraud Investigation

On 3 November 2015, Denmark's State Prosecutor for Serious Economic and International Crime announced that it has recovered EUR 235 million in a case involving EUR 835 million in fraudulent dividends tax refund claims. The investigation into the fraud was launched in August 2015 with the assistance of the authorities of other EU Member States. The investigation involves more than 100 non-resident companies that are suspected of having fraudulently claimed tax refunds on dividend of mainly Danish listed companies during the 2012 to 2015 tax year for shareholdings that did not actually exist.

Click the following link for the press release on the recovery.

Poland

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Poland Adopts EU Parent-Subsidiary Directive Dividend Anti-Abuse Rule

On 27 October 2015, Poland's President Andrzej Duda signed into law the legislation to implement the anti-abuse rule for dividends that was added to the EU Parent-Subsidiary Directive earlier in 2015. Under the new rule, Poland will not provide the participation exemption for dividends if connected with an arrangement or a series of arrangements where the arrangement(s) are only put in place to receive a tax benefit and not for valid commercial reasons that reflect economic reality.

The new rule applies from 1 January 2016.

Singapore

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Singapore Publishes Revised GST Guide for Property Owners and Property Holding Companies

On 29 October 2015, the Inland Revenue Authority of Singapore published e-Tax Guide GST: Guide for Property Owners and Property Holding Companies (Second Edition). The purpose of the guide is to explain how goods and services tax (GST) affects property owners and property holding companies, including how GST is applied for the sale and lease of property in Singapore and requirement to registers for GST when involved in property transactions.

In particular, the guide covers:

  • In what cases GST must be charged and accounted for (generally excludes the sale and lease of residential property);
  • The determination of residential property for GST purposes;
  • The requirements to register for GST, which include a general threshold of taxable supplies exceeding SGD 1 million in the past 12 months or expected to exceed SGD 1 million in the next 12 months;
  • GST on the sale of property, including how and when to account for GST and examples;
  • GST on the letting of property, including how and when to account for GST and examples; and
  • Information on claiming input tax.

The amendments made in the second edition concern leasing businesses and rent-free periods.

Click the following link for the e-Tax Guide - GST: Guide for Property Owners and Property Holding Companies (Second Edition) on the IRAS website.

United States

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Washington DC Council Removes Tax Haven Black List

On 3 November 2015, Washington DC's council decided to remove the recently adopted tax haven blacklist. The blacklist, which includes 39 jurisdictions, had been adopted as part of the Fiscal Year 2016 Budget Support Act of 2015 (previous coverage).

Following its initial adoption, several of the jurisdictions listed in the blacklist voiced their opposition to being included. As a result, the council decided it should be removed until a review of the jurisdictions is completed, which will likely occur when the council prepares the 2017 fiscal budget next year.

Proposed Changes (1)

Ukraine

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Ukraine Considering Proposals to Revise the Tax Code

On 26 October 2015, 114 parliament members (deputies) registered in parliament a draft law to revise Ukraine's Tax Code. The proposed measures are quite different from the reform measures proposed by the Ministry of Finance, which includes a 20% flat tax rate for individual income tax, corporate tax and value added tax (previous coverage).

The main draft measures proposed by the deputies are as follows:

  • The corporate tax rate would be reduced from 18% to 15%, and would be levied on:
    • Distributed profits in the form of accrued dividends payable;
    • Equivalent payments such as interest exceeding the deductible limit under the thin capitalization rules;
    • Differences between contractual prices and market price for transactions with related parties and parties resident in tax havens;
    • Royalties paid to non-residents engaged in business activities in Ukraine; and
    • Any payments to nonprofit entities exceeding 0.5% of the taxpayer's taxable income;
  • Loss carry forward would be limited to three years;
  • The value added tax rate would be reduced from 20% to 15%;
  • A single security contribution of 20% payable by employers would replace the current system and the maximum contribution basis would be removed (currently, employee contributions are 3.6% and employer contributions are approximately 41% depending on industry);
  • A three-year moratorium would be applied on the modification of the base elements of taxes and levies collectible in Ukraine.

The proposed measures are intended to apply from 1 January 2016. However, the Ukrainian government must first consider the proposals and draft the final legislation, which must then be approved by parliament and signed into law by the president before entering into force.

Treaty Changes (3)

Georgia-Seychelles

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TIEA between Georgia and the Seychelles Signed

On 29 October 2015, officials from Georgia and the Seychelles signed a tax information exchange agreement. The agreement is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Hong Kong-South Africa

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Tax Treaty between Hong Kong and South Africa has Entered into Force

The Hong Kong Inland Revenue Department has announced that the income tax treaty between Hong Kong and South Africa entered into force on 20 October 2015. The treaty, signed by South Africa on 30 September 2014 and by Hong Kong on 16 October 2014, is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Hong Kong profits tax, salaries tax and property tax. It covers South African normal tax, withholding tax on royalties, dividend tax, withholding tax on interest and the tax on foreign entertainers and sportspersons.

Residence

If a company is considered resident of both Contracting Parties, its residence for the purposes of the tax treaty is the location of its effective management. In cases of doubt, the competent authorities of both Parties will determine the location of its effective management through mutual agreement. If no agreement is reached, the company will not be entitled to the benefits of the treaty, except those provided by Articles 21 (Methods for Elimination of Double Taxation), 22 (Non-Discrimination), and 23 (Mutual Agreement Procedures).

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting Party 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 10% of the paying company's capital, otherwise 10%
  • Interest - 10%
  • Royalties - 5%

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

Capital Gains

The following capital gains derived by a resident of one Contracting Party may be taxed by the other Party:

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other Party; and
  • Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other Party, with an exception for:
    • Shares quoted on a stock exchange of either Contracting Party or other exchange as may be agreed to by both Parties, or
    • Shares in a company that carries on its business in the immovable property from which the more than 50% value is derived

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

Double Taxation relief

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

Effective Date

The treaty applies in Hong Kong from 1 April 2016 and in South Africa from 1 January 2016.

Uganda-OECD

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Uganda Signs Mutual Administrative Assistance Convention

According to an update from the OECD, on 4 November 2015, Uganda signed the OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 protocol. The convention as amended must now be ratified by Uganda and the ratification instrument deposited before entering into force in the country.

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