Worldwide Tax News
Curaçao Publishes Tax Rates for 2016
The Curaçao tax administration has published the applicable tax rates for 2016. The changes are as follows:
- Corporate tax rate reduced from 25% to 22%; and
- Individual income tax rates and bracket thresholds are generally reduced overall as follows:
- up to ANG 30,000 - 9.75%
- over ANG 30,000 up to 40,000 - 15%
- over ANG 40,000 up to 60,000 - 23%
- over ANG 60,000 up to 85,000 - 30%
- over ANG 85,000 up to 125,000 - 37.5%
- over ANG 125,000 - 46.5%
The changes apply from 1 January 2016.
Saudi Arabia to Introduce 2.5% Tax on Undeveloped Land
Saudi Arabia's Cabinet has approved the introduction of a new 2.5% tax on the value undeveloped urban land. The tax will apply 180 days after it is published in the Official Gazette, and will be levied annually.
Ukraine Publishes Draft Law for a Flat 20% Tax Rate for Corporate Income, Individual Income and VAT
On 30 November 2015, Ukraine's Ministry of Finance published a draft law that would introduce a flat 20% rate for corporate income tax, individual income tax, value added tax (VAT) and social security contributions. The law would also abolish the 7% reduced VAT rate, increase the VAT registration threshold to UAH 2 million, and strengthen certain transfer pricing requirements.
The Ukrainian government has been considering a number of proposals for tax reform. It initially proposed a 20% flat rate in September 2015 (previous coverage), and later considered alternate proposals in October (previous coverage).
The current draft law must be approved by parliament and signed into law by the president before entering into force. If approved, its measures will generally apply from 1 January 2016.
UK Publishes Overview of Draft Finance Bill 2016 including Patent Box and Hybrid Mismatch Measures
On 9 December 2015, the UK HMRC published an overview of the legislation included in the draft Finance Bill 2016 (further updated 10 December). The draft legislation includes measures from the 2015 Budget, Summer Budget and Autumn Statement.
The overview covers measures concerning individual income tax, corporation tax, capital gains tax, VAT, stamp duty land tax and other duties, tax avoidance and evasion, and tax administration. Some of the key measures affecting businesses as summarized in the overview are as follows.
Patent Box: Substantial Activity
Finance Bill 2016 will include legislation to amend the Patent Box rules (Part 8A of CTA2010) to ensure they comply with the new international framework for Intellectual Property (IP) regimes set out by the OECD BEPS Project (Action 5), and in particular that profits qualifying for a reduced rate of Corporation Tax are determined by reference to the company’s direct engagement in R&D. The changes generally have effect from 1 July 2016, although some IP acquired after 1 January 2016 will also be affected. (Draft clauses 31 and 32 and tax information and impact note (TIIN))
The legislation introduces rules to neutralize the effect of hybrid mismatch arrangements in accordance with the recommendations of the OECD BEPS Project (Action 2). The aim is to tackle aggressive tax planning, typically involving multinational groups, where either one party gets a tax deduction for a payment while the other party does not pay tax on the receipt, or where there is more than one deduction for the same expense. The legislation will have effect from 1 January 2017. (Draft clause 33 and TIIN)
Leasing and Capital Allowances Anti-Avoidance
The legislation introduces rules to counter avoidance of tax through artificially low disposal values for capital allowances purposes and non-taxable payments in arrangements involving transfer of lessee obligations. This measure will ensure that the disposal value is increased so that there is no longer a tax advantage and that payments received for agreeing to assume lease obligations are taxed as income. The changes will take effect for arrangements and agreements on or after 25 November 2015. (Draft clauses 35 and 36 and TIIN)
Capital Allowances: Enterprise Zones
Secondary legislation will be introduced to establish 26 new Zones, 10 of which will provide for enhanced capital allowances for qualifying expenditure. The enhanced capital allowances will be available for expenditure incurred on or after 25 November 2015.
Anti-Avoidance: Penalties for the General Anti-Abuse Rule
Legislation will be introduced for a new penalty of 60% of tax due to be charged in all cases successfully counteracted by the General Anti-Abuse Rule to create a disincentive from entering into abusive tax avoidance. The government will also make small changes to the GAAR procedures to improve its ability to tackle marketed avoidance schemes. (Draft clauses 60, 61 and 62 and TIIN)
Click the following link for the Overview of legislation in draft Finance Bill 2016 on the UK.gov website.
Argentina has Concluded Negotiations for TIEAs with Hong Kong and Jamaica
According to an announcement from the Argentine government, negotiations were concluded for tax information exchange agreements with Hong Kong and Jamaica, with the initialing of the agreements on 9 December 2015. The agreements are the first of their kind between Argentina and the respective jurisdictions, and must be signed and ratified before entering into force.
Update - Tax Treaty between Argentina and Mexico
The income and capital tax treaty between Argentina and Mexico was signed 4 November 2015. The treaty is the first of its kind between the two countries.
The treaty covers Argentine income tax, presumptive minimum income tax and personal assets tax. It covers Mexican federal income tax.
If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If the authorities cannot reach mutual agreement, the company will not be entitled to the benefits of the treaty.
The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel if such activities continue for a period or periods aggregating more than 6 months within any 12-month period.
Substantially similar activities carried on in a Contracting State by an associated enterprise will be considered in determining if the period limit has been met.
Article 21 (Hydrocarbons) includes the provision that a permanent establishment will be deemed constituted if an enterprise carries on business consisting of, or relating to, the exploration, production, refining, processing, transportation, distribution, storage or marketing of hydrocarbons situated in the other Contracting State for a period or periods aggregating more than 30 days within any 12-month period.
As with a service PE, substantially similar activities carried on by an associated enterprise will be considered in determining if the period limit has been met.
- Dividends - 10% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
- Interest - 12%
- Royalties - 10% for royalties paid for the use of, or the right to use, any copyrights of literary, dramatic, musical, artistic or scientific work, any patents, designs and models, plans, secret formulas or processes, computer programs, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience, as well as for the rendering of technical assistance services; otherwise 15%
A maximum rate of 10% is included in Article 10 (Dividends) for the additional taxation of repatriated profits attributed to a permanent establishment.
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 movable property forming part of the business property of a permanent establishment in the other State;
- Gains from the alienation of shares or other participation rights deriving more than 50% of their value directly or indirectly from immovable property situated in the other State; and
- Gains from the alienation of shares or participations, other than the above, in the capital or property of company resident in the other State, limited to 10% if the direct participation in the capital of the company is at least 25%, otherwise 15%
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Both countries apply the credit method for the elimination of double taxation.
The treaty includes a substantial limitation on benefits article (Article 28). The provisions of the article are summarized as follows.
The benefits of the treaty will only apply for a company incorporated in a Contracting State if:
- The company's shares are listed on a recognized stock exchange; or
- At least 50% of the company's voting rights or shares are directly or indirectly held by one or more individuals resident in a Contracting State and/or other persons incorporated in a Contracting State (the voting rights or shares in such other persons must also be directly or indirectly held by one or more individuals resident in a Contracting State).
Notwithstanding the above, the benefits will be denied if:
- More than 50% of a company's gross income is paid directly or indirectly to persons who are not resident in either Contracting State; and
- Such payments are deductible in computing a tax covered by the treaty in the person's state of residence.
However, the above limitations will not apply if the competent authorities agree that the company claiming the benefits carries on an active business in a Contracting State, and the conduct of its operations do not have the principle purpose of obtaining the benefits of the treaty.
In any of the above cases, the competent authorities of the Contracting States will consult each other before the treaty benefits are denied.
In addition, the article includes the provision that a tax benefit under the treaty will not be granted if it is established that one of the main purposes of any arrangement or transaction was to obtain a benefit, unless it is granted in accordance with the object and intention of the relevant provisions of the treaty.
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.
SSA between China and Romania under Negotiation
On 3 December 2015, officials from China and Romania agreed to the negotiation of a social security agreement. Any resulting agreement will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.