Worldwide Tax News
Belgium Approves Program Law including Extension of the Liquidation Reserve for SMEs and a New Transparency Tax
On 24 July 2015, the Belgium Chamber of Representatives approved the Program Law Bill presented by the government in June (previous coverage). The Bill:
- Extends the availability of the liquidation reserve for SMEs to include the 2013 and 2014 tax years - the regime allows the allocation of up to 100% of after tax profits to a liquidation reserve subject to a non-deductible tax of 10%, and the reserve can then be distributed tax-free upon liquidation;
- Introduces a transparency tax on deemed income in the hands of Belgian founders/shareholders of trusts, foundations and other structures if exempt from tax or subject to an effective tax rate under 15% - exemptions apply for collective investment vehicles, listed companies, and certain other cases; and
- Introduces new start-up incentives for the digital sector, including an individual income tax credit of up to 30% for investment in the shares of SMEs and 45% for micro-enterprises, a 10% exemption from wage withholding tax for the first 4 years (20% for micro-enterprises), a 13.5% tax credit for investment in digital assets, and others.
The Bill as approved is expected to be published in the Official Gazette in the next few weeks.
Note - This article previously included that a reduced dividends withholding tax rate of 1.6995% had been introduced. However that reduced rate was introduced through a (subsequent program law).
OECD Issues Three Reports on the Implementation of Automatic Exchange of Information
On 7 August 2015, the OECD announced the release of three reports providing guidance for jurisdictions and financial institutions for the implementation of the global standard for automatic exchange of financial account information. The three reports as described in the release are as follows:
- Common Reporting Standard Implementation Handbook (the CRS Handbook): this first edition provides practical guidance to assist government officials and financial institutions in the implementation of the Standard. It sets out the necessary steps for implementation and will help financial institutions and governments implement the Standard more efficiently by promoting the consistent use of optional provisions, identifying areas for alignment with FATCA and addressing the operational and transitional challenges resulting from the staggered implementation of the Standard. It also contains answers to frequently asked questions (FAQs) received from business and governments, with a view to furthering the effective implementation of the Standard. The Handbook is intended to be a “living” document and will be updated on a regular basis.
- Offshore Voluntary Disclosure Programmes: this second edition contains a wealth of practical experience from 47 countries in relation to their voluntary disclosure programmes. The guidance on the design and implementation of such programmes has been updated, particularly taking into account the views of private client advisers. The limited time left until the automatic exchange of information under the Standard becomes a reality will in many instances be the last window of opportunity for non-compliant taxpayers to voluntarily disclose. This is therefore a crucial moment to update the publication and reflects OECD policy of encouraging countries to examine voluntary compliance strategies that enable non-compliant taxpayers to come forward.
- Model Protocol to the Tax Information Exchange Agreements (TIEAs): this report provides the basis for jurisdictions wishing to extend the scope of their existing TIEAs to also cover the automatic and/or spontaneous exchange of tax information.
According to the OECD, over 90 jurisdictions have committed to the automatic exchange of information by 2018, with early adopters beginning in 2017.
Korea Publishes Overview of 2015 Tax Revision Bill
On 6 August 2015, the Korean Ministry of Strategy and Finance published an overview of the measures included in the 2015 Tax Revision Bill. The Bill contains a number of measures aimed at stimulating the economy, supporting the working class and fairer taxation. In regard to business, the measures focus mainly on:
- Promoting private consumption;
- Boosting exports and investment;
- Supporting corporate restructuring;
- Increasing fairness;
- Reforming tax support;
- Increasing transparency; and
- Regulating overseas tax evasion.
Specific key measures include:
- Carried forward loss utilization will be capped at 80% of earnings per year;
- Additional documentation requirements will be introduced concerning multinational's international trade activities;
- Capital gains tax deferral will be made available for stock swaps and assets sales during restructuring; and
- The general capital gains tax exemption for listed shares will no longer be available for large shareholders - those owning 1% or more of KOSPI listed company shares or the value of shares is KRW 2.5 billion or more, and those owning 2% or more of KOSDAQ listed company shares or the value of shares is KRW 2 billion or more - capital gains tax rate of 20%.
Click the following link for the 2015 Tax Revisions Bill overview (link to full PDF near top of the page).
Spain Issues 2016 Budget Including Amendments to IP Regime
On 5 August 2015, the Spanish government issued the 2016 Budget. The main tax related measure of the budget is amending the country's patent box regime to be in line with the modified nexus approach developed under Action 5 of the OECD BEPS Project.
Under Spain's current patent box regime, taxpayers are allowed a 60% tax exemption on net income after amortization derived from granting the rights to use qualified IP and on capital gains from the sale of qualified IP to unrelated parties. Conditions for the exemption include:
- The taxpayer must have incurred at least 25% of the cost of creating the IP;
- The assignee cannot be located in a tax haven; and
- A related party assignee cannot generate revenue from the sale of products using the IP to the taxpayer.
Under the proposed amendments to the patent box regime, the 25% cost requirement would be removed and the 60% exemption would be adjusted based on a ratio of direct expenses incurred in the creation of the IP as follows:
Total direct expenses less payments to related parties multiplied by 130%, divided by direct expenses including payments to related parties, multiplied by 60% to determine the exemption percentage.
This essentially provides a direct link between the IP generating activity conducted by the taxpayer itself and the exemption benefit received.
Protocol to the Tax Treaty between Austria and Belarus to Enter into Force
The protocol to the 2001 income and capital tax treaty between Austria and Belarus will enter into force on 1 October 2015. The protocol, signed 24 November 2014, is the first to amend the treaty. It updates the competent authority for Belarus and replaces Article 26 (Exchange of Information), bringing it in line with the OECD standard for information exchange. It will apply for tax periods beginning on or after 1 January 2016.
Belgium Approves Protocol to Tax Treaty with Malta
On 16 July 2015, Belgium approved for ratification the pending protocol to the 1974 income tax treaty with Malta. The protocol, signed 19 January 2010, 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.
Tax Treaty between South Africa and Zimbabwe Signed
On 4 August 2015, officials from South Africa and Zimbabwe signed a new income tax treaty. Once in force and effective, the new treaty will replace the 1965 income tax treaty between the two countries, which currently applies.
Additional details will be published once available.