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Approved Changes (4)

Netherlands

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Netherlands Investment and R&D Deduction Incentives for 2016

The Netherland's Tax Plan for 2016, which was approved 22 December 2015 (previous coverage), includes a number of amendments concerning the investment deduction, environmental and energy-saving investments deduction, and the R&D wage tax reduction. The changes generally apply from 1 January 2016.

Investment Deduction

The investment thresholds for the investment deduction regime are adjusted with the minimum investment amount kept at EUR 2,300 and the maximum amount increased to EUR 311,242. The investment deduction amounts are as follows:

  • For investments between EUR 2,300 and EUR 56,024, the deduction is equal to 28% of the amount invested;
  • For investments between EUR 56,024 and EUR 103,748, the deduction is equal to EUR 15,687;
  • For investments between EUR 103,748 and EUR 311,242, the deduction is equal to 15,687 minus 7.56% of the amount over € 103,748; and
  • For investments over EUR 311,242, no deduction is available.

Environmental and Energy-Saving Investments Deduction

For investments in newly acquired assets that are recognized as environmental-friendly, the investment deduction is equal to:

  • 36% of the amount invested for class 1 assets;
  • 27% for class 2 assets; and
  • 13.5% for class 3 assets.

The minimum investment is EUR 2,500 and the maximum investment is EUR 25 million.

For investments in new assets that are qualified as energy-saving investments, the investment deduction is increased to 58% with a minimum investment of EUR 2,500 and a maximum investment of EUR 120 million.

R&D Wage Tax Reduction

The tax allowance for R&D expenditure (excluding labor costs) and the wage tax incentive for R&D labor costs have been integrated. The changes involve expanding the wage tax incentive to apply for all for all R&D expenditure and repealing the other incentive. The basic structure of the wage tax incentive is maintained.

Under the integrated regime, the available wage tax reduction is reduced from 35% to 32% of expenditure on the first EUR 350,000 in R&D expenditure, and increased from 14% to 16% of the excess. For startups, the initial percentage is reduced from 50% to 40% of expenditures, and the percentage for the excess is 16%. The previous cap of EUR 14 million is removed.

Poland

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Poland Issues 2016 Penalty Interest Rates for Late Tax Payments

On 8 January 2016, Poland published the decree setting the applicable penalty interest rates for late tax payments. The standard rate is 8%, which is unchanged from 2015.

In addition to the standard rate, a new 4% reduced rate (previously 6%) and 12% increased rate apply. The reduced rate applies when a self-correction is made prior to a notice of procedures for an amended assessment and the payment is made within 7 days of filing the corrected return. The increased rate applies for serious compliance failures.

The rates apply for late payment of tax arising on or after 1 January 2016.

Sri Lanka

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Sri Lanka Budget 2016 VAT Changes in Effect

On 29 December 2015, the Sri Lankan Department of Inland Revenue announced that the value added tax (VAT) changes included in the Budget for 2016 (previous coverage) are effective 1 January 2016. The changes include the replacement of the standard 11% VAT rate with the following rates:

  • 12.5% for supplies of services, including financial services;
  • 8% for supplies of goods;
  • 0% for exported goods; and
  • 0% for services supplied outside Sri Lanka with payment made in foreign currency

The 11% rate continues to apply for supplies made prior to 1 January 2016, even if invoiced on or after that date.

Click the following link for guidance on the VAT changes from the Department of Inland Revenue.

Thailand

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Thailand Introduces Amnesty Program and Extends Corporate Tax Relief for SMEs

On 1 January 2016, Thailand published two Royal Decrees in the Official Gazette, which introduce a new tax amnesty program and provide a related extension of the corporate tax exemption for SMEs. The measures are meant to encourage tax compliance.

Tax Amnesty

The tax amnesty program provides for an exemption from additional corporate tax, value added tax, specific business tax and stamp duty tax, and any related penalties and fines for the 2015 and prior tax years.

The program is available for Thai companies with annual gross revenue up to THB 500 million (~USD 13.8 million) in the tax year ending on or before 31 December 2015, subject to the following conditions:

  • The company is not under a tax investigation initiated prior to 1 January 2016;
  • The company has not used or issued fake invoices;
  • The company is not subject to a legal inquiry or under prosecution; and
  • Certain other conditions.

In order to take part in the program, a notice and application must be submitted to the Revenue Department. Once accepted, the company must meet a number of compliance conditions to remain eligible, including:

  • Timely filing of relevant tax returns and correctly paying taxes due;
  • Maintaining accounting records and financial statements in accordance with accounting law; and
  • Never taking any tax avoidance actions.

Corporate Tax Exemption for SMEs

In connection with the tax amnesty program, the corporate tax exemption for small and medium-sized enterprises (SME) with revenue under THB 300,000 is extended through 2017 (previous coverage) and an exemption regardless of revenue is provided for 2016 if the following conditions are met:

  • The SME was established prior to 1 January 2016;
  • The SME has applied for and is taking part in the tax amnesty program; and
  • The SME has never been found to be non-compliant with the tax amnesty program.

Qualifying SMEs are those with paid up capital not exceeding THB 5 million (~USD 138,000) and annual revenue not exceeding THB 30 million (~USD 827,000).

Treaty Changes (5)

Belgium-Korea, Rep of

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Protocol to the Tax Treaty between Belgium and South Korea has Entered into Force

The 2010 protocol to the income tax treaty between Belgium and South Korea entered into force on 1 December 2015. The protocol, signed 8 March 2010, is the second to amend the treaty. It replaces Article 25 (Exchange of Information), bringing it in line with the OECD standard for information exchange. It applies from 1 January 2016.

Croatia-Luxembourg

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Tax Treaty between Croatia and Luxembourg has Entered into Force

On 13 January 2016, the income and capital tax treaty between Croatia and Luxembourg entered into force. The treaty, signed 20 June 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Croatian profit tax, income tax, and the local income tax and any surcharges. It covers Luxembourg individual income tax, corporation tax, capital tax and the communal trade tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital, otherwise 15%
  • Interest - 0% if the beneficial owner is a financial institution or collective investment vehicle, otherwise 10%
  • 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 movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares listed on an approved stock exchange, shares alienated as part of a corporate reorganization, and shares whose value is derived from immovable property in which business is carried on)

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Croatia applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption with progression method. However, in respect of income covered by Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 17 (Artistes and Sportspersons), Luxembourg applies the credit method.

Effective Date

The treaty applies from 1 January 2017.

Gabon-Korea, Rep of

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Tax Treaty between Gabon and South Korea has Entered into Force

The income tax treaty between Gabon and South Korea entered into force on 2 December 2015. The treaty, signed 25 October 2010, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Gabonese company tax and flat-rate minimum tax, tax on income of natural persons, complementary tax on salaries, special immovable property tax on rentals, and tax on income from movable capital. It covers Korean income tax, corporation tax, special tax for rural development, and local income tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
  • Interest - 0% for interest paid in connection with the sale on credit of any industrial, commercial or scientific equipment, or paid in connection with the sale on credit of any merchandise by one enterprise to another enterprise; otherwise 10%
  • Royalties - 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 movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated 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

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

Effective Date

The treaty applies from 1 January 2016.

Germany-United Kingdom

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Protocol to the Tax Treaty between Germany and the United Kingdom has Entered into Force

On 29 December 2015, the protocol to the 2010 income and capital tax treaty between the United Kingdom and Germany entered into force. The protocol, signed 17 March 2014, is the first to amend the treaty. It replaces Article 7 (Business Profits), bringing it line with the 2010 OECD Model Tax Convention. It also amends Article 18 (Government Services) and replaces Article 30 (Members of Diplomatic Missions and Consular Posts) in order to harmonize taxation rights with Article 14 of the Consular Convention of 30 July 1956 between Germany and the UK.

The protocol applies in Germany from 1 January 2016, and applies in the UK from 1 April 2016 in respect of corporation tax and from 6 April 2016 in respect of income and capital gains tax.

Luxembourg-Serbia

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Update - Tax Treaty between Luxembourg and Serbia

The income and capital tax treaty between Luxembourg and Serbia was signed 15 December 2015. It is the first of its kind between the two countries.

Taxes Covered

The treaty covers Luxembourg income tax on individuals, corporation tax, capital tax and communal trade tax. It covers Serbian corporate income tax, personal income tax and tax on capital.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 10%
  • Interest - 10%
  • Royalties -
    • 5% for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for radio or television broadcasting;
    • 10% for the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, 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; 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

Serbia applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption with progression method. However, in respect of income covered by Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 17 (Artistes and Sportspersons income), Luxembourg applies the credit method.

MFN Clause

The protocol to the treaty, signed the same date, includes the provision that if Serbia signs a tax treaty with a third State that is a member of the EU and such treaty provides for a lower rate of tax on interest or royalties, then negotiations will begin to revise the rates provided for under the Luxembourg-Serbia tax treaty.

Entry into Force and Effect

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

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