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Approved Changes (4)

European Union-Hungary

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EU Commission Launches Formal State Aid Investigation into Hungarian Advertising Tax

On 12 March 2015, the European Commission announced in a press release the formal launch of an in-depth investigation into whether Hungary's Advertising Tax complies with the EU state aid rules.

The tax, which has applied from August 2014, is levied on advertising income from various media, including TV, print, online and other ad space/time. The rates are progressive, with an exemption on revenue up to HUF 500 million and a top rate of 50% on revenue exceeding HUF 20 billion. The Hungarian government is already considering a reduction in the tax following pressure from major media groups and the European Commission, which had launched a preliminary probe prior to the announced formal investigation.

For the investigation, the Commission will focus on whether the progressive application of the tax selectively favors certain companies and gives them an unfair competitive advantage. They will also look at whether only allowing a deduction of previous losses for companies not profit-making in 2013 provides a selective advantage, and whether the tax primarily affects Hungarian companies linked to companies with registered offices in other Member States.

According to the press release, the Commission has also made a separate decision prohibiting Hungary from applying progressive rates until the Commission has finished its assessment.

Jamaica

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Jamaica Announces Annual Tax Return Filing Deadline Extension

On 11 March 2015, Tax Administration Jamaica announced that the annual tax return filing deadline has been extended to 25 March 2015. The extension applies for self-employed individuals, partnerships, companies, other bodies and employed persons with additional sources of income. The standard annual return deadline is 15 March.

Failure to file the annual tax return by the deadline will result in a penalty of JMD 5,000 per month. This was recently reduced from a penalty of JMD 10,000 plus JMD 1,000 per day.

New Zealand

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New Zealand Reissues Public Ruling on the GST Zero-Rating of Legal Services Provided to Nonresidents

New Zealand Inland Revenue has issued BR Pub 15/03, which is a reissue of BR Pub 10/09, a binding public ruling concerning the goods and services tax (GST) zero-rating of legal services provided to a nonresident who is outside New Zealand at the time the service is provided. The legal services that are zero-rated are those in relation to:

  • Transactions involving the sale or purchase of land in New Zealand or the lease, license, or mortgage of land in New Zealand, or
  • Easements, management agreements, construction agreements, trust deeds, guarantees and other agreements concerning land in New Zealand, or
  • Disputes arising in relation to land in New Zealand

The specific legal services covered include:

  • Legal services relating to transactions involving the sale and purchase of land in New Zealand (including the drafting of agreements for the sale and purchase of land, the provision of legal advice in relation to the sale and purchase transaction and ancillary and related services leading up to the completion of the sale and purchase transaction);
  • Legal services relating to transactions involving the lease, license or mortgage of land in New Zealand;
  • Legal services relating to easements, management agreements, construction agreements, trust deeds, guarantees and other agreements relating to land in New Zealand; and
  • Legal services relating to disputes arising in relation to land in New Zealand (including drafting court documents, court appearances, representation in negotiations and settlements and general advice in relation to such disputes)

BR Pub 15/03 applies for an indefinite period beginning 24 March 2015, which is the day following the expiration of BR Pub 10/09.

Click the following link for BR Pub 15/03 including commentary as provided by Inland Revenue.

Switzerland

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Swiss Voters Reject Replacing VAT with a Carbon Tax on Non-Renewable Energy

On 8 march 2015, Swiss voters voted against replacing value added tax (VAT) with a new carbon tax on non-renewable energy. The proposal, introduced by the Green Liberal Party of Switzerland, was for a revenue-neutral replacement of VAT in order to promote lower carbon emissions and reduce global warming.

The tax would have applied to oil, gasoline, heating oil, natural gas, coal, and other non-renewable sources, while renewable sources such as solar and wind would have been exempt. A similar proposal was rejected in 2013.

Proposed Changes (1)

United States

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U.S. Senators Reintroduce Internet Sales Tax Bill

The Marketplace Fairness Act has been reintroduced in the U.S Senate by Senators Dick Durbin (D-Ill.), Lamar Alexander (R-Tenn.), Mike Enzi (R-Wyo.) and Heidi Heitkamp (D-N.D.). The bill is designed to allow states to require the collection of sales tax by out-of-state online retailers on sales to residents of a their state.

Supporters of the bill say that it would correct an unfair advantage that online retailers have over brick-and-mortar shops located in states that levy a sales tax. Opponents of the bill argue that it would give an unfair advantage to brick-and-mortar shops, as it would result in substantial compliance burdens for online retailers.

A similar bill of the same name was passed by the Senate in 2013, but was opposed by members of the House of Representatives and never brought up for a vote.

Treaty Changes (2)

Austria-Mauritius

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TIEA between Austria and Mauritius Signed

On 10 March 2015, officials from Austria and Mauritius signed a tax information exchange agreement. The agreement is the first of its kind between the two countries, and is in line with the OECD standard for information Exchange. It will enter into force after the ratification instruments are exchanged.

Hungary-Saudi Arabia

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Saudi Arabia Approves Tax Treaty with Hungary

On 9 March 2015, the Saudi Arabian Cabinet approved for ratification the pending income and capital tax treaty with Hungary. The treaty, signed 23 march 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Hungarian personal income tax, corporate tax, land parcel tax, and building tax. The treaty covers Saudi Arabian Zakat, and the income tax including the natural gas investment tax.

Service PE

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

Withholding Tax Rates

  • Dividends - 5%
  • Interest - 0%
  • Royalties - 5% when paid for the use of, or the right to use, industrial, commercial, or scientific equipment; otherwise 8%

Capital Gains Taxation

The following gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation 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 comparable interests 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 of a company resident in the other State, unless the shares are listed on a stock exchange in that State

Double Taxation Relief

Hungary generally applies the exemption method for the elimination of double taxation, although the credit method may apply in the case of dividends and royalties. Saudi Arabia generally applies the credit method.

Entry into Force and Effect

The treaty will enter into force on the first day of the second month following the exchange of the ratification instruments, and will apply from 1 January of the year following its entry into force.

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