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Approved Changes (6)

Belgium

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New Belgian Government's Program Law Published

On 29 December 2014, the first Program Law of Belgium's new center-right coalition government was published in the Official Gazette. Key tax measures include:

Secret Commissions Tax

The secret commissions tax on improperly reported salaries, commissions and other similar fees is reduced from 309% (including additional crisis tax) to 103% for individual taxpayers and 51.5% for companies.

The change applies from 29 December 2014, including for disputes not settled at that date.

Taxation of Intermunicipal Entities

Intermunicipal entities, collaborations and project associations will no longer automatically be subject to the preferential tax on legal entities, and will be instead be subject to corporate income tax depending on certain criteria, such as if they exploit an enterprise or are for profit and others.

The change applies from the 2015 tax year.

Liquidation Reserve for SMEs

The transitory regime introduced with the increase in the withholding tax on liquidation gains from 10% to 25% is expanded for SMEs. The regime for SMEs includes that up to 100% of after tax profits can be allocated to a liquidation reserve subject to a non-deductible tax of 10%. The reserve can then be distributed tax-free upon liquidation. However, if such reserve is distributed prior to liquidation, a 15% withholding tax will apply if distributed within 5 years of its creation, and a 5% withholding tax will apply if distributed after 5 years.

The change applies from the 2015 tax year.

France

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France Issues Interest Rate Limits for Shareholder Loan Interest Payment Deductions for Tax Years Ending between 31 December 2014 and 30 March 2015

On 26 December 2014, France published the interest rates used in determining the deductibility of interest payments to shareholders for companies whose tax year ends between 31 December 2014 and 30 March 2015.

The portion of interest payments exceeding the following rates are generally not deductible unless documentation is provided demonstrating that the interest rate applied for is at arm's length.

  • Between 31 December 2014 and 30 January 2015 - 2.79%
  • Between 31 January 2015 and 27 February 2015 - 2.76%
  • Between 28 February 2015 and 30 March 2015 - 2.72%

The interest rate limits are determined by the Central Bank of France based on the average annual interest rates charged by financial institutions on medium-term variable rate loans of 2 years or more.

Malaysia

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Malaysia Issues Ruling Clarifying the Deduction of Private Retirement Scheme Contributions

On 24 December 2014, the Inland Revenue Board of Malaysia issued Public Ruling 9/2014, which clarifies the deductibility of individual and employer contributions to private retirement schemes (PRS).

For individuals, the deduction for PRS is limited to a maximum of MYR 3,000 in a year of assessment. The MYR 3,000 amount is inclusive of premiums paid for deferred annuity.

For employers, the deduction for contributions for employee's retirement benefits, including the employee provident fund (EPF) and ERS, is limited to 19% of the employee's remuneration. The required EPF contribution is 12% of the employee's remuneration, so the deductible ERS contribution limit is 7% of remuneration.

Click the following link for additional information in the full Public Ruling 9/2014, including examples.

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Peru Sets Tax Unit (UIT) Value for 2015

On 30 December 2014, the decree setting the value for the tax unit (Unidad Impositiva Tributaria - UIT) for 2015 was published in the Official Gazette. The value is increased from PEN 3,800 (2014) to PEN 3,850.

The UIT is used for various tax regulations in Peru.

Portugal

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Portugal Publishes Budget Law for 2015 Including Corporate Tax Rate Reduction

On 31 December 2014, Portugal's Budget Law for 2015 was published in the Official Gazette. The main change is the reduction of the corporate tax rate from 23% to 21% for 2015.

Taiwan

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Taiwan Issues Press Release on the Impact on The Implementation of the 50% Imputation Tax Credit

On 31 December 2014, the National Taxation Bureau of Taipei, Ministry of Finance issued a press release on the impact of the implementation of the amendment to the Income tax Act concerning the imputation tax credit for dividends. The amendment was made by Legislative Yuan on 16 May 2014, and changes the imputation credit available for individual shareholders from a full credit to a 50% credit.

As a result of the change, Taiwan resident shareholders receiving dividends from a Taiwan resident company may only claim 50% of the corporate tax paid by the company (the imputation credit) from their individual income tax. The transfer of the imputation credit when dividends are distributed by a resident company to another resident company is not affected.

In regards to dividends distributed to by a Taiwan resident company to a non-resident shareholder, the imputation credit doesn't apply, but according to the press release, the amendments also affect the offsetting of the retained earnings tax. The retained earnings tax is applied at a rate of 10% on undistributed earnings of a company. When dividends are distributed to a non-resident shareholder, the retained earnings tax was fully deductible from the applicable withholding tax (20% unless reduced by a tax treaty). With the amendments made in May, only 50% of the retained earnings tax may be used to offset the withholding tax liability.

Click the following link for the press release on the Taiwan Ministry of Finance website.

Treaty Changes (2)

Cyprus-Iceland

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Tax Treaty between Cyprus and Iceland has Entered into Force

According to an update by the Cypriot Ministry of Finance, the income tax treaty between Cyprus and Iceland entered into force on 22 December 2014. The treaty, signed 13 November 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty Covers Cypriot income tax, corporate income tax, the special contribution for the Defense of the Republic, and capital gains tax. It covers Icelandic state and municipal income taxes.

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 - 0%
  • Royalties - 5%
  • Capital Gains - generally exempt, except for gains from the alienation of immovable property, gains from the alienation of movable property forming part of the business property of a permanent establishment, and gains from the alienation of shares or deriving more than 50% of their value directly or indirectly from immovable property in a Contracting State

Double Taxation Relief

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

Effective Date

The treaty applies from 1 January 2015.

Isle Of Man-Lesotho

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TIEA between the Isle of Man and Lesotho has Entered into Force

According to an announcement by the Isle of Man Treasury, the tax information exchange agreement between the Island of Man and Lesotho entered in to force on 3 January 2015. The agreement, signed 16 September 2013, applies for criminal tax matters from the date of its entry in to force, and other tax matters for tax period beginning on or after that date.

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