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Approved Changes (2)

Cyprus

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Cyprus Extends 2013 Tax Return Deadline

The Cypriot Department of Taxation recently published a notice stating that the deadline for 2013 fiscal year tax returns has been extended to 30 April 2015. Normally the deadline is 31 March when filing returns electronically. The deadline for the 2014 fiscal year tax return remains 31 March 2016.

Malaysia

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Malaysia Issues Details on New Incentives for Investment in Underdeveloped Regions, Automation, and Regional Principal Hubs

As promised in the 2015 Budget, on 6 April 2015 Malaysia issued additional details on new tax incentives. These include incentives for investment in underdeveloped regions, incentives for investment in automation equipment, and incentives for establishing regional principal hubs in Malaysia.

Investment in Underdeveloped Regions

Companies that establish manufacturing or service operations in underdeveloped regions of Malaysia may qualify for a number of incentives, including:

  • A full income tax exemption for 15 years beginning the year the company first derives income, or
  • An a income tax allowance equal to 100% of their qualifying capital expenditure within a period of 10 years, which may be carried forward until fully offset.

Additional incentives include:

  • A stamp duty exemption on the transfer or lease of land or buildings,
  • A withholding tax exemption on fees for technical advice or royalties, and
  • A customs duty exemption on imported raw materials, components, machinery, and equipment if not produced locally

Application for the incentives must be made by 31 December 2020.

Also, previously announced is a 5 year income tax exemption incentive for companies engaged in managing, maintaining and upgrading industrial parks in underdeveloped areas. For other regions a 70% exemption applies for 5 years.

Investment in Automation

The automation incentive is a 200% capital allowance for investment in manufacturing automation equipment for highly labor intensive industries, including manufacturing of rubber products, plastics, wood, furniture, and textiles. This applies for investments of up to MYR 4 million per year from 2015 to 2017. For other types of manufacturing, the incentive is a 200% capital allowance for investments of up to MYR 2 million per year from 2015 to 2020.

Conditions for the incentive include that the company must be in operation for at least 36 months and the new automation equipment must be more advanced than its current equipment.

Establishing Regional Principal Hubs

Multinationals that establish an incorporated regional principal hub in Malaysia will be eligible for a number of incentives if certain conditions are met. The incentives include:

  • Reduced income tax rates between 0% and 10% depending on the paid-in capital amount, annual business spending and number of jobs created
  • No ownership restrictions
  • Customs duty exemption on the import of raw materials, components, and finished products for production and repacking before final delivery
  • Flexible foreign exchange controls

In order to qualify for the incentives, a number of conditions must be met, including:

  • Paid-in capital of at least MYR 2.5 million and annual business spending of at least MYR 3 million
  • The creation of a number of high-value jobs (minimum monthly salary MYR 5,000), and key strategic and management positions (minimum monthly salary MYR 25,000)
  • At least 3 of the following qualifying services must be provided to at least 3 related companies outside Malaysia:
    • Bid and tender management
    • Treasury and fund management
    • Research and development
    • Project management
    • Marketing and sales promotion
    • Business development
    • Technical support and consultancy
    • Information management and processing
    • Economic / investment research analysis
    • Sourcing, procurement and distribution
    • Logistics
    • Training and human resource management
    • Finance and accounting
    • General administration
    • IT services
    • Of the 3 services, the company must perform at least 1 of the following:
      • Region P&L / Business unit management
      • Strategic business planning and corporate development
      • Corporate finance advisory
      • Brand management
      • IP management
      • Senior-level talent acquisition and management

The incentives apply for 5 years, and may be extended for an additional 5 years with the condition that jobs are increased by 20% or business spending is increased by 30%.

The regional principal hub incentive scheme replaces the current incentive schemes for procurement centers, distributions centers and operational headquarters. These schemes will be terminated effective 30 April 2015.

For all the incentives, application must be made with the Malaysian Investment Development Authority.

Treaty Changes (3)

Belgium-Vietnam

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Belgium Approves Protocol to the Tax Treaty with Vietnam

On 3 April 2015, the Belgian Council of Ministers approved the law for the ratification of the pending protocol to the 1996 income and capital tax treaty with Vietnam. The protocol, signed 12 March 2012, modifies the competent authority in respect of Belgium and replaces Article 26 (Exchange of Information), bringing it in line with the OECD standard for information exchange.

The protocol will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

Moldova-Morocco-Romania

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Moldova to Negotiate First Tax Treaty with Morocco and New Tax Treaty with Romania

The Moldovan government has authorized the negotiation of tax treaties with Morocco and Romania. Any resulting treaty from the negotiations with Morocco would be the first of its kind between the two countries. Any resulting treaty from the Negotiations with Romania would replace the 1995 income and capital tax treaty between the two countries, which is currently in force.

Both treaties will need to be finalized, signed and ratified before entering into force.

Seychelles-Guernsey

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Seychelles Ratifies Tax Treaty with Guernsey

On 16 March 2015, Seychelles published in its Official Gazette the statutory instrument ratifying the pending income tax treaty with Guernsey. The treaty, signed 27 January 2014, is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Guernsey income tax, and Seychelles business tax, income and non-monetary benefits tax, and petroleum income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting Party furnishes services in the other Contracting Party through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days in any 12 month period.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 5%
  • 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

Double Taxation Relief

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

Entry into Force and Effect

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.

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