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Approved Changes (2)

Brazil

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Brazil Extends Provisional Measure for Monthly Individual Income Tax Brackets

On 4 May 2015, Brazil published National Congress Act 16/2015 in the Official Gazette. The Act extends the validity of Provisional Measure (PM) 670/2015, which was published on 11 March 2015, and sets out the monthly individual income tax brackets.

The monthly income brackets and rates are as follows:

  • up to BRL 1,903.98 - 0%
  • over BRL 1,903.98 up to 2,826.65 - 7.5%
  • over BRL 2,826.65 up to 3,751.05 - 15.0%
  • over BRL 3,751.05 up to 4,664.68 - 22.5%
  • over BRL 4,664.68 - 27.5%

The bracket thresholds apply from 1 April 2015 and are used to determine the monthly tax payable. Slightly different brackets apply for the annual tax return, which were published 1 April 2015 (previous coverage).

PM 670/2015 must be approved, or extended, by the National Congress within 60 days to remain in effect.

Sri Lanka

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Main Measures of Sri Lanka's Budget for 2015

The measures included in Sri Lanka's Budget for 2015 were presented on 24 October 2014 and further measures presented 29 January 2015. The key tax measures now in effect are summarized as follows:

Personal Income Tax

The maximum pay-as-you-earn personal income tax rate is cut to 16% for all employment income. Previously the maximum rate applied only for certain professional income.

Value Added Tax

A number of changes are made in regard to VAT, including a reduction in the standard VAT rate from 12% to 11% effective 1 January 2015. If supplies were made prior to 1 January 2015 but invoiced after, the 12% rate still applies.

The standard VAT registration is increased to LKR 3.75 million per quarter (15 million per annum), although the chargeability threshold for retail and wholesale is reduced to LKR 100 million per quarter.

Incentives

Incentives are introduced for investment of at least USD 2 million in manufacturing and export activities, including:

  • A 3-year 50% income tax reduction;
  • A 5-year dividends tax exemption; and
  • A 100% depreciation allowance for machinery and equipment

Other incentive incentives introduced include:

  • A 5-year 50% income tax reduction holiday for the production of movies and plays;
  • A 50% income tax reduction on profits from projects in certain lagging regions; and
  • A 50% income tax reduction on profits in the vegetable and food processing industry

Super Gain Tax

A one-off Super Gain Tax is introduced at a rate of 25%. The tax is levied on the profits of individuals or companies whose profits during the 2013-2014 tax year exceeded LKR 2 billion. The tax has to be paid in three equal instalments by 15 May, July and September 2015.

Effective Date

The above measures generally apply from 1 April 2015, aside from the VAT measures which apply from 1 January 2015.

Proposed Changes (2)

European Union

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European Parliament Legal Affairs Committee Approves Revisions to Shareholder Rights Directive

On 7 May 2015, the European Parliament Legal Affairs Committee approved draft revisions to the Shareholder Rights Directive (2007/36/EC) in order to strengthen transparency with regard to the engagement policies of institutional investors and asset managers, the remuneration for directors of listed companies, and the tax strategies of large and listed companies. The revisions include:

  • A clause enabling shareholders to vote at least once every three years on a company’s remuneration policy for directors;
  • A requirements that large undertakings and public-interest entities publish country-by-country (CbC) information on profit or loss before tax, taxes on profit or loss, and public subsidies received;
  • A requirement that companies with more than 500 employees and a balance sheet total of EUR 86 million or a net turnover of EUR 100 million disclose information on tax rulings; and
  • A requirement that EU Member States introduce specific mechanisms to reward long-term shareholders, such as additional voting rights, tax incentives, loyalty dividends or loyalty shares

The CbC reporting and tax ruling disclosure requirements are separate from the CbC reporting requirement developed as part of the OECD BEPS Project and the automatic exchange of information on tax rulings recently proposed by the European Commission.

The Legal Affairs Committee will now begin talks with the EU Council to develop the text for the proposed revisions. The revisions must then be approved by the EU Council and Parliament, and transposed into the domestic legislation of the individual EU Member States.

Poland

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Poland Proposes New Transfer Pricing Rules including CbC Reporting

On 27 April 2015, the Polish government published draft measures to amend the countries transfer pricing (TP) rules, including a major change in the documentation requirements in line with requirements introduced as part of Action 13 of the OECD Base Erosion and Profit Shifting (BEPS) Project. The main changes include:

  • The shareholding threshold for determining if parties are related would be increased from 5% to 20%;
  • The following documentation requirements would be introduced:
    • A local file detailing related party transactions involving the local entity and other information;
    • A benchmarking study if annual revenue or costs exceeding EUR 10 million;
    • A simplified related-party transactions report attached to the tax return if annual revenue or costs exceed EUR 10 million;
    • A master file detailing the transfer pricing policy group, its organizational structure, etc. if annual revenue or costs exceed EUR 20 million; and
    • A country-by-country report prepared by parent companies of multinational groups if the group's consolidated annual revenue or costs exceeds EUR 750 million;
  • The deadline for preparing the transfer pricing documentation would be the deadline for the income tax return; and
  • The time limit for submitting TP Documentation following a request by the tax authorities would be within 7 days

An exemption from the documentation requirements is provided for companies with annual revenue or costs below EUR 2 million.

Subject to approval, the Polish government intends to have the new rules in force in 2016.

Treaty Changes (5)

Hungary-Iraq

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Tax Treaty between Hungary and Iraq to be Signed

The governments of Hungary and Iraq have announced that they are planning to sign an income tax treaty by the end of 2015. The treaty will be the first of its kind between the two countries and must be finalized, signed and ratified before entering into force.

Additional details will be published once available.

Ireland-Azerbaijan-Ghana-Jordan-Kazakhstan-Netherlands

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Ireland Announces the Negotiation of Tax Treaties with Azerbaijan, Ghana, Jordan, Kazakhstan and the Netherlands

Ireland Revenue has recently announced that tax treaty negotiations are ongoing with Azerbaijan, Ghana, Jordan, Kazakhstan and the Netherlands. Any resulting treaties would be the first of their kind between Ireland and the respective countries, except for the treaty with the Netherlands, which would replace the 1969 income and capital tax treaty that is currently in force.

Ireland-Thailand

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Tax Treaty between Ireland and Thailand has entered into Force

The income and capital tax treaty between Ireland and Thailand entered into force on 11 March 2015. The treaty, signed 4 November 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Irish income tax, corporation tax and capital gains tax, and covers Thai income tax and petroleum income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 10% if the beneficial owner is a financial institution (including insurance companies) or in connection to a sale on credit of any equipment, merchandise or services as long as dealing at arm's length; otherwise 15%
  • Royalties -
    • 5% for the use of or the right to use any copyright of literary, artistic or scientific work, including software, and motion pictures and works on film, tape or other means of reproduction for use in connection with radio or television broadcasting;
    • 10% for the use of or the right to use industrial, commercial or scientific equipment or any patent; and
    • 15% for the use of or the right to use any trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience

Capital Gains

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 shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other State unless the shares are quoted on a recognized stock exchange; and
  • 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 other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

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

In regard to dividends, the credit shall take into account the tax payable by the dividend paying company in respect of the profits out of which such dividend is paid, provided certain control thresholds are met.

For Irish companies receiving dividends, the threshold is at least 5% direct or indirect control of the voting power of the Thai company paying the dividends. For Thai companies receiving dividends, the threshold is at least 25% direct or indirect control of the voting power of the Irish company paying the dividends.

Effective Date

The treaty applies from 1 January 2016.

Paraguay-Spain

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Tax Treaty between Paraguay and Spain to be Signed

According to an announcement by the Spanish government, negotiations for an income tax treaty with Paraguay will be concluded in the near future. The treaty will be the first of its kind between the two countries and must be signed and ratified before entering into force.

Additional details will be published once available.

Romania-Untd A Emirates

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Tax Treaty between Romania and the U.A.E. Signed

According to recent reports, officials from Romania and the United Arab Emirates signed an income tax treaty on 5 May 2015. The treaty will enter into force after the ratification instruments are exchanged, and once in force and effective will replace the 1993 income and capital tax treaty between the two countries, which currently applies.

Additional details will be published once available.

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