Get an immediate FREE trial of Orbitax's International Tax Research & Compliance Expert (ITRCE) software for 7 days.

The Tax Hub

Daily Tax Newsletter

Worldwide Tax News

Approved Changes (2)

Belgium-European Union

Responsive image

European Commission Issues Decision that Belgium's Excess Profit Rulings Violate State Aid Rules

On 11 January 2016, the European Commission announced its decision that Belgium's "excess profit" tax rulings violate EU State aid rules. The investigation, launched in February 2015, concerned Belgium's tax rulings since 2005 that allowed Belgian resident members of MNE groups to deduct "excess profits" from their tax bases for Belgian tax purposes. The excess profits amounts are based on the premise that an MNE group member is able to generate additional profits due to being part of an MNE group that it would not be able to generate if it were a stand-alone company in a comparable situation. In practice, these rulings provided for a 50% to 90% reduction in the tax base.

In its decision, the European Commission found that the excess profits scheme derogated both from normal practice under Belgian company tax rules and the arm's length principle under EU State aid rules. Based on this and certain other factors, the scheme is found to provide preferential tax treatment that is illegal under EU State aid rules. As a result of the decision, approximately EUR 700 million in taxes will need to be recovered from 35 companies.

Click the following links for the European Commission announcement and the online case (SA.37667) page for additional information.

Ireland

Responsive image

Ireland Issues Regulation on CbC Report Filing Requirements for Constituent and Surrogate Entities

Irish Revenue has issued Taxes (Country-by-Country Reporting) Regulations 2015 (S.I. No. 629), which sets out the Country-by-Country (CbC) report filing requirements for domestic constituent entities and surrogate parent entities of MNE groups. The regulations following the enactment of the Finance Act 2015, which includes the CbC reporting requirement for ultimate parent entities of MNE groups that are resident in Ireland (previous coverage). The main aspects of the regulations are summarized as follows.

Domestic Constituent Entities and Equivalent CbC Report

Domestic constituent entities are defined as group entities that are tax resident in Ireland, but are not an ultimate parent or surrogate parent entity. The regulations also define an "equivalent CbC report", which is a CbC report that includes CbC information that is within the custody or possession of the constituent entity or the constituent entity has the power to obtain or acquire.

A domestic constituent entity will be required to submit an equivalent CbC report if:

  • The ultimate parent entity of its MNE group is not required to provide a CbC report in its jurisdiction of tax residence;
  • The jurisdiction in which the ultimate parent entity of the MNE group is resident for tax purposes does not have in effect a qualifying competent authority agreement for CbC report exchange with Ireland by the due date of the report (12 months after the last day of the fiscal year concerned); or
  • There has been a systemic failure by the jurisdiction of tax residence of the ultimate parent entity of the MNE group and the Revenue Commissioners have notified the domestic constituent entity that such a failure has occurred.

If multiple constituent entities are resident in Ireland, the MNE group may designate a single entity to file the report, and such designation must be notified to the Revenue Commissioners.

Surrogate Parent Entity

The constituent entity filing requirement will not apply if a surrogate parent entity has been appointed by the MNE group, and

  • One or more of the above conditions for the constituent entity to file apply; and
  • The surrogate entity is tax resident in a jurisdiction that:
    • Requires CbC reports;
    • Has in effect a qualifying competent authority agreement for CbC report exchange with Ireland by the due date of the report;
    • Has not notified the Revenue Commissioners of a systemic failure; and
    • Has been notified of the appointment of the surrogate parent entity.

If the surrogate parent entity is tax resident in Ireland, it provides a standard CbC report, not an equivalent CbC report.

Notification Requirements

The regulations also include the following notification requirements:

  • An ultimate parent or surrogate parent entity tax resident in Ireland must notify the Revenue Commissioners in writing that it is such an entity by the last day of the fiscal year concerned; and
  • A constituent entity tax resident in Ireland must notify the Revenue Commissioners in writing the identity and jurisdiction of tax residence of the reporting entity by the last day of the fiscal year concerned (if multiple constituent entities, only one is required to notify).

Effective Date

The regulations apply from 1 January 2016.

Click the following link for the Taxes (Country-by-Country Reporting) Regulations 2015.

Treaty Changes (6)

Azerbaijan-San Marino

Responsive image

Update - Tax Treaty between Azerbaijan and San Marino

The income and capital tax treaty between Azerbaijan and San Marino was signed on 8 September 2015. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Azerbaijan tax on profit of legal persons, income tax of physical persons, tax on property, and land tax. It covers San Marino general income tax on individuals and on bodies corporate and proprietorships.

Permanent Establishment

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services 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.

A permanent establishment will also be deemed constituted when an insurance enterprise collects premiums in a Contracting State or insures risks situated in a Contracting State through a non-independent agent. An exemption applies for re-insurance.

The protocol to the treaty, signed the same date, includes that a server located in a Contracting State may be considered a permanent establishment.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital and the investment in that company amounts to at least EUR 250,000 or equivalent in another currency; otherwise 10%
  • Interest - 10%
  • Royalties - 5% for royalties paid for the use of, or the right to use, computer software or any patent, trade mark, design or model, plan, secret formula or process or for the use or right to use any industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience; otherwise 10%

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 or other corporate rights in company the assets of which directly or indirectly consist mainly of immovable property situated in the other State; 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

Azerbaijan applies the credit method for the elimination of double taxation, while San Marino generally applies the exemption with progression method. However, in the case of income covered by Articles 10 (Dividends), 11 (Interest) and 12 (Royalties), San Marino applies the credit method.

Limitation on Benefits

Article 29 (Limitation on Benefits) includes the provision that any reduction in or exemption from tax provided for by the treaty will not apply for a resident of a Contracting State if the main purpose or one of the main purposes of the creation or existence of such resident or any person connected with such resident is to obtain the benefits of the treaty that would not otherwise be available.

In addition, a company that is entitled to special fiscal treatment under the provisions of any legislation or administrative practice of either Contracting State will not be entitled to the benefits of the treaty. The same applies to income received by a resident of a Contracting state from companies that are entitled to such special fiscal treatment, or in respect of shares or other corporate rights in the capital of such companies.

Entry into Force and Effect

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

Botswana-Iceland

Responsive image

TIEA between Botswana and Iceland has Entered into Force

The tax information exchange agreement between Botswana and Iceland entered into force on 17 September 2015 according to a recent announcement from the Icelandic Ministry for Foreign Affairs. The agreement, signed 20 February 2013, is the first of its kind between the two countries and is in line with the OECD standard for information exchange. It applies from the date of its entry into force for criminal tax matters and from 1 January 2016 for other matters.

Brunei-Iceland

Responsive image

TIEA between Brunei and Iceland has Entered into Force

The tax information exchange agreement between Brunei and Iceland entered into force on 20 March 2015 according to a recent announcement from the Icelandic Ministry for Foreign Affairs. The agreement, signed 27 June 2012, is the first of its kind between the two countries. It applies from the date of its entry into force for criminal tax matters and from 1 January 2016 for other matters.

Bulgaria-United Kingdom

Responsive image

Tax Treaty between Bulgaria and the UK has Entered into Force

On 15 December 2015, the income and capital tax treaty between the United Kingdom and Bulgaria entered into force. The treaty, signed 26 March 2015, replaces the 1987 income and capital tax treaty between the two countries.

Taxes Covered

The treaty covers Bulgarian personal income tax and corporate income tax. It covers UK income tax, corporation tax and capital gains tax.

Residence

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 no agreement is reached, the company will not be entitled to the benefits of the treaty aside from those covered in Articles 21 (Elimination of Double Taxation), 23 (Non-Discrimination) and 24 (Mutual Agreement Procedure).

Withholding Tax Rates

  • Dividends -
    • 0% if the beneficial owner is a company or pension scheme;
    • 15% if paid out of income (including gains) derived directly or indirectly from immovable property within the meaning of Article 6 (Income from Immovable Property) by an investment vehicle that distributes most of this income annually and whose income from such immovable property is exempted from tax;
    • Otherwise 5%
  • Interest -
    • 0% for interest paid:
      • In connection with a sale on credit of any equipment, merchandise or services;
      • On any loan granted by a financial institution;
      • To a pension scheme; and
      • Between companies where one directly holds at least 10% of the other's capital for at least one year prior to the payment of interest, or a third company directly holds at least 10% of the capital of both companies for at least a year prior to the payment;
    • Otherwise 5%
  • Royalties - 5%

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 or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares regularly traded on a 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 generally apply the credit method for the elimination of double taxation. However, the UK will exempt dividends paid by a Bulgarian company to a company resident in the UK if the conditions for an exemption under UK law are met. Exemption may also apply for profits of a permanent establishment in Bulgaria of a UK company if the conditions for an exemption under UK law are met.

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 20 (Other Income) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest, royalties or other income are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

Article 22 (Limitation on Relief) includes the provision that if income or gains are taxed in a Contracting State by reference to the amount remitted or received in that State and not by reference to the full amount, then any relief from tax provide for by the treaty in the other State will be limited to the amount taxed by the first-mentioned State.

Effective Date

The treaty applies in Bulgaria from 1 January 2016. In the UK, the treaty applies:

  • From 1 January 2016 in respect of withholding taxes;
  • From 1 April 2016 in respect of corporation tax; and
  • From 6 April 2016 in respect of income tax and capital gains tax.

The provisions of Articles 24 (Mutual Agreement Procedure), 25 (Exchange of Information) and 26 (Assistance in the Collection of Taxes) apply from the date of the treaty's entry into force, 15 December 2015.

The provisions of the 1987 income and capital gains treaty between Bulgaria and the UK cease to have effect for the relevant taxes on the dates the new treaty applies, and will terminate on the last such date.

Ireland-South Africa

Responsive image

Protocol to the Tax Treaty between Ireland and South Africa under Negotiation

According to a recent update from Irish Revenue, negotiations are underway for a protocol to the 1997 income and capital tax treaty with South Africa. The protocol will be the second to amend the treaty, and must be finalized, signed and ratified before entering into force.

Additional details will be published once available.

Kosovo-United Kingdom

Responsive image

Tax Treaty between Kosovo and the UK has Entered into Force

On 16 December 2015, the income and capital tax treaty between Kosovo and the United Kingdom entered into force. The treaty, signed 4 June 2015, replaces the 1981 income tax treaty between the UK and the former Yugoslavia as it applies in respect of Kosovo.

Taxes Covered

The treaty covers Kosovo personal income tax and corporation tax. It covers UK income tax, corporation tax and capital gains tax.

Residence

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 no agreement is reached, the company will not be entitled to the benefits of the treaty aside from those covered in Articles 21 (Elimination of Double Taxation), 23 (Non-Discrimination) and 24 (Mutual Agreement Procedure).

Withholding Tax Rates

  • Dividends - 0% in most cases, although a 15% rate applies if paid out of income (including gains) derived directly or indirectly from immovable property within the meaning of Article 6 (Income from Immovable Property) by an investment vehicle that distributes most of this income annually and whose income from such immovable property is exempted from tax
  • Interest - 0%
  • Royalties - 0%

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 or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares regularly traded on a 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 generally apply the credit method for the elimination of double taxation. However, the UK will exempt dividends paid by a Kosovo company to a company resident in the UK if the conditions for an exemption under UK law are met. Exemption may also apply for profits of a permanent establishment in Kosovo of a UK company if the conditions for an exemption under UK law are met.

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 20 (Other Income) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest, royalties or other income are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

Article 22 (Limitation on Relief) includes the provision that if income or gains are taxed in a Contracting State by reference to the amount remitted or received in that State and not by reference to the full amount, then any relief from tax provide for by the treaty in the other State will be limited to the amount taxed by the first-mentioned State.

Effective Date

The treaty applies in Kosovo from 1 January 2016. In the UK, the treaty applies:

  • From 1 January 2016 in respect of withholding taxes;
  • From 1 April 2016 in respect of corporation tax; and
  • From 6 April 2016 in respect of income tax and capital gains tax.

The provisions of Articles 24 (Mutual Agreement Procedure), 25 (Exchange of Information) and 26 (Assistance in the Collection of Taxes) apply from the date of the treaty's entry into force, 16 December 2015.

The provisions of the 1981 income tax treaty between the UK and the former Yugoslavia cease to have effect for the relevant Kosovo or UK taxes on the dates the new treaty applies.

Sitemap

Powerful Tax Tools

NEW

FX Rates

Global FX Rates including Tax Year Average FX Rates and Spot Rates for all Reporting Currencies.

NEW

Corporate Tax Rates

Corporate tax rates, surtaxes, and effective tax rates for the current year, as well as historical rates and approved future rates.

NEW

Country Analysis

Detailed tax guidance for companies doing business in over 100 countries, including summaries and snapshots of key tax facts and issues.

NEW

Cross Border Tax Calculator

Calculate total tax costs and benefits of a cross border transaction including withholding tax, participation exemption and foreign tax credit rules.

NEW

Cross Border Tax Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment streams.

NEW

OECD BEPS Project

Complete overview of the OECD BEPS Project, including daily BEPS news, country adoption of BEPS measures, and an overview of the 15 BEPS Actions.

NEW

Tax Calendar

Customizable calendar tool that tracks corporate income tax, value added tax and transfer pricing obligations by country or entity.

NEW

Tax Forms

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

NEW

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

NEW

Worldwide Tax Planner

Calculates the worldwide tax cost of what-if scenarios based on legal entity structure, taxable income, and cross border transactions.

NEW

Certified Rates Report

Customizable Certified Rates Report providing updated corporate and withholding tax rates at the end of each month for over 100 countries.

NEW

Withholding Tax Minimizer

Enables quick calculation of tax costs and benefits of cross border transactions considering all possible transaction combinations and optimal routes.

NEW

VAT Rates

Provides value added tax (VAT) rates, goods and services tax (GST) rates and other indirect tax rates for over 100 countries.

NEW

NOL Calculator

Country specific calculator to determine how net operating losses can be utilized in carryback and carryforward years.

NEW

Transfer Pricing Calculator

Calculates TP ratios under various TP methods and calculates the difference between target ratios and actual ratios.

NEW

Individual Income Tax Rates

Individual tax rates for over 100 countries.

Play of the Day

FX Rates

Global FX Rates including Tax year Average FX Rates and Spot Rates for all Reporting Currencies.

Get Started with Orbitax Today

With Orbitax, you get reliable and comprehensive solutions for international tax research, compliance and planning. Contact us today to get started with Orbitax.

We’re here to help

We’re here to answer any questions you have about the Orbitax products and services.

Send us a message

Who’s behind Orbitax?

We’re committed to providing high value, low cost tax research and management solutions.

Learn More