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Approved Changes (4)

Austria-European Union

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CJEU Rules Austrian Group Goodwill Depreciation Rule Violates Freedom of Establishment

On 6 October 2015, the Court of Justice of the European Union (CJEU) ruled on an issue referred to the Court by the Austrian Higher Administrative Court concerning Austria's group taxation regime, which allows for the depreciation of goodwill derived from the acquisition of a participation in a resident group subsidiary. Under the regime, the parent company may depreciate the goodwill up to 50% of the purchase price of a holding in a resident company, but may not depreciate goodwill in the case of the acquisition of a holding in a non-resident company.

In its decision, the Court ruled that such differing treatment of resident and non-resident holdings violates the EU's freedom of establishment principle (Article 49 TFEU). Click the following link for the full text of the CJEU decision.

Kenya

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Kenya Enacts Finance Bill 2015

Kenya's Finance Bill 2015 was signed into law by President Uhuru Kenyatta on 15 September. The main tax-related measures are summarized as follows.

Corporate Tax

The main corporate tax related changes include:

  • The reduced corporate tax rate of 25% for companies listed on the on the Nairobi Securities Exchange is no longer subject to the condition that at least 20% of the company's share capital is listed;
  • The loss carry forward limit is extended from 5 years to 10 years;
  • The additional 50% investment deduction allowance (IDA) for large investments in buildings, machinery and equipment for manufacturing outside Nairobi, Mombasa and Kisumu is abolished (standard 100% IDA continues to apply);
  • The beneficial corporate tax rate for special economic zone companies is changed to a reduced rate of 10% for 10 years followed by a reduced rate of 15% for 10 years;
  • The beneficial withholding tax rate for special economic zone companies is changed to 10% for all payments to non-residents, except dividends.

Capital Gains

A capital gains tax exemption is introduced for gains from the sale of listed shares. The 5% capital gains tax continues to apply for property transactions and transactions involving unlisted securities.

VAT

The supply of services to special economic zone companies is exempt from VAT.

Effective Date

The changes generally apply from 1 January 2016.

OECD- G20

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G20 Finance Ministers Endorse Final BEPS Package

The OECD has announced that the G20 finance ministers have endorsed the final BEPS package during their meeting held 8 October 2015 in Lima, Peru, and have agreed to forward the final package to the G20 heads of state during their summit on 15-16 November in Antalya, Turkey.

The final BEPS package, including reports on all 15 Action Items, was released by the OECD on 5 October 2015 (previous coverage).

Click the following link for the full text of the OECD announcement on the G20 finance ministers' endorsement.

Switzerland

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Switzerland Sets Penalty and Refund Interest Rates for 2016

On 24 September 2015, the Swiss Federal Tax Administration published the applicable interest rates for penalties and refunds.

  • Late payment interest is 3%;
  • Overpayment refund interest is 3%; and
  • Compensatory Interest for early advance payment is 0.25%

These rates apply for the 2016 calendar year.

Proposed Changes (1)

European Union

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European Commission Launches Public Consultation on New Proposal for a Common Consolidated Corporate Tax Base

On 8 October 2015, the European Commission launched a public consultation to help identify the key measures for inclusion in the re-launch of the proposal for a Common Consolidated Corporate Tax Base (CCCTB). According to the release, a CCCTB would benefit companies operating across borders within the EU by providing a far simpler way to calculate their taxable profits. Under a CCCTB, businesses would have to comply with just one EU system for computing their taxable income, rather than the current situation where they have to comply with different rules in each Member State in which they operate.

The main areas the Commission expects to gather views on during the consultation include:

  • To what extent the CCCTB could function as an effective tool against aggressive tax planning, without compromising its initial objective of making the Single Market a more business-friendly environment.
  • Which criteria should determine the companies that will be subject to the rules of a mandatory CCTB/CCCTB. Whether non-qualifying companies should still be given the possibility to opt for applying the common rules.
  • Whether a 'staged' approach, whereby priority will be given to agreeing the tax base before moving to consolidation, would be a preferable way forward.
  • Whether, in the short-term, it would be useful to agree common rules for implementing certain international BEPS-related aspects of the common tax base based on the current proposal until the Commission adopts the new (revised) CCTB/CCCTB proposal.
  • How the debt bias issue should be addressed.
  • Which types of rules would best foster R&D activity.
  • Whether a cross-border loss relief mechanism aimed to balance out the absence of the benefits of consolidation during the first step (CCTB) could help in keeping the business in the CCCTB.

Click the following links for the European Commission press release, the Public Consultation and a Q&A on the CCCTB re-launch.

The consultation will run until 8 January 2016.

Treaty Changes (3)

Liechtenstein-United States

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Tax Treaty between Liechtenstein and U.S. under Negotiation

According to recent reports, negotiations for an income tax treaty between Liechtenstein and the U.S. are underway following a meeting between officials from the two countries held 5-6 October 2015. Any resulting treaty would be the first of its kind between the two countries, and would need to be finalized, signed and ratified before entering into force.

Poland-Sri Lanka

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New Tax Treaty between Poland and Sri Lanka Signed

On 6 October 2015, officials from Poland and Sri Lanka signed a new income tax treaty. Once in force and effective, the new treaty will replace the 1980 tax treaty between the two counties, which currently applies.

Additional details will be published once available.

Saudi Arabia-Tajikistan

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Tax Treaty between Saudi Arabia and Tajikistan has Entered into Force

According to recent reports, the income and capital tax treaty between Saudi Arabia and Tajikistan entered into force on 1 June 2015. The treaty, signed 13 May 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Saudi Zakat and income tax including the natural gas investment tax. It covers Tajik individual income tax, tax on legal persons, and immovable property tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise of one Contracting State furnishes services in the other State through employees or other engaged personnel if the activities continue for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.

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 - 8%
  • Royalties - 8%

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 that constitute a share in a company resident 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 apply the credit method for the elimination of double taxation.

Non-Discrimination

The treaty does not include non-discrimination provisions.

Effective Date

The treaty applies from 1 January 2016.

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