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Worldwide Tax News

Approved Changes (1)

India

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India Increases Service Tax Rate to 14.5% with Additional Cess

On 6 November 2015, the Indian Department of Revenue announced that from 15 November 2015, a Swachh Bharat Cess at the rate of 0.5% will be levied on all services. This will be in addition to the 14% Service Tax currently levied on services, and also applies where tax is withheld via reverse charge.

Proposed Changes (2)

Australia

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Australian Senate Committee Publishes Report on the Combating Multinational Tax Avoidance Bill including New Anti-Avoidance Rules and CbC Reporting

On 9 November 2015, Australia's Senate Economics Legislation Committee published a report on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 (previous coverage). The legislation includes:

  • A new multinational anti-avoidance law;
  • Increased scheme penalties for significant global entities; and
  • Country-by-Country reporting requirements in line with Action 13 of the OECD BEPS Project.

The Committee report covers concerns raised during the public consultation on the legislation as well as the views of the Committee. Although the committee recognizes the concerns, it does not recommend any changes. Its only recommendations include that the Senate pass the Bill and the government undertake a post-implementation review of the measures within 3 years of enactment.

Click the following link for the Senate Economics Legislation Committee Report.

France

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France Proposes New Tax Rules for E-Commerce and the Sharing Economy

According to recent reports, the French Senate Finance Committee is considering two proposals concerning the taxation of online transactions, including the collection of value added tax (VAT) through withholding for e-commerce transactions and the taxation of income derived through sharing economy platforms (peer-to-peer-based sharing of access to goods and services).

VAT Withholding on E-Commerce

The proposal for e-commerce includes the implementation of an automatic process where VAT on e-commerce transactions would be withheld by the bank of the online consumer at the time of purchase. This would apply for all online transactions, although the proposal also includes the possibility of an exemption for certain suppliers so they may continue charging and collecting VAT that may be offset by input VAT under existing rules.

Taxation of Sharing Economy Income

The proposal for sharing economy platforms includes the implementation of an automatic reporting system to track the amount of income individuals receive through such consumer-to-consumer platforms. Based on this tracking, a threshold of EUR 5,000 would apply, over which the excess income would be subject to French individual income tax.

Treaty Changes (4)

Bangladesh-Algeria-Bulgaria-Czech Rep-Ethiopia-Finland-Greece-Jordan-Luxembourg-Macedonia-Nigeria-Oman-Ukraine-Uzbekistan

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Bangladesh Negotiating Tax Treaties with 13 Countries

The Bangladesh Board of Revenue has announced that negotiations are underway for tax treaties with Algeria, Bulgaria, the Czech Republic, Ethiopia, Finland, Greece, Jordan, Luxembourg, Macedonia, Nigeria, Oman, Ukraine, and Uzbekistan. Any resulting treaties will be the first of their kind between Bangladesh and the respective countries, and must be finalized, signed and ratified before entering into force.

India-Turkmenistan

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Protocol to the Tax Treaty between India and Turkmenistan to be Signed

On 5 November 2015, the Indian Cabinet approved the signing of a protocol to the 1997 income and capital tax treaty with Turkmenistan. The protocol amends the treaty to bring it in line with the OECD standard for information exchange, and also adds a Limitation on Benefits Article. The protocol will be the first to amend the treaty, and must be signed and ratified before entering into force.

Italy-Gabon

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Italy's Council of Ministers Approves Tax Treaty with Gabon

On 6 November 2015, Italy's Council of Ministers approved for ratification the pending income tax treaty with Gabon. The treaty, signed 28 June 1999, is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

South Africa-Zimbabwe

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Update - Tax Treaty between South Africa and Zimbabwe

Officials from South Africa and Zimbabwe signed a new income tax on 4 August 2015. Once in force and effective, the new treaty will replace the 1965 income tax treaty between the two countries, which currently applies.

Taxes Covered

The treaty covers South African normal tax, dividends tax, withholding tax on royalties, tax on foreign entertainers and sportspersons, and withholding tax on interest. It covers Zimbabwean income tax, non-resident shareholders' tax, non-residents' tax on fees, non-residents' tax on royalties, capital gains tax, and residents' tax on interest.

Residence

If a company is considered resident in both Contracting States, the competent authorities of both States will determine the company's residence for the purpose of the treaty through mutual agreement based on the place of effective management, the place where it is incorporated or otherwise constituted, and any other relevant factors. If the authorities cannot reach mutual agreement, the company will not be entitled to any relief or exemption from tax provided by the treaty.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days 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 - 5%, although an exemption applies for interest that arises in respect of any debt instrument listed on the Johannesburg Stock Exchange, the Zimbabwe Stock Exchange, or any other stock exchange agreed upon by the competent authorities of the Contracting States
  • Royalties - 10%
  • Technical fees for any service of an administrative, technical, managerial or consultancy nature - 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, and gains from the alienation of shares in a company the assets of which consist directly or indirectly principally of such property; 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 apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged. It will apply in respect of withholding taxes from the first day of the second month following its entry into force, and in respect of other taxes from 1 January of the year following its entry into force.

The 1965 income tax treaty between the two countries will terminate and cease to have effect in relation to any tax for any period for which the new treaty applies.

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