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Approved Changes (2)
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OECD Publishes Discussion Draft Comments on BEPS Action 11: Data Analysis

On 13 May 2015, the OECD published comments received in response to the public discussion draft on the Base Erosion and Profit Shifting (BEPS) Project Action 11: Data Analysis.

Action 11 focuses on improving the availability and analysis of data on BEPS and actions to address it. Specifically to: Develop recommendations regarding indicators of the scale and economic impact of BEPS and ensure that tools are available to monitor and evaluate the effectiveness and economic impact of the actions taken to address BEPS on an ongoing basis. This will involve developing an economic analysis of the scale and impact of BEPS (including spillover effects across countries) and actions to address it. The work will also involve assessing a range of existing data sources, identifying new types of data that should be collected, and developing methodologies based on both aggregate (e.g. FDI and balance of payments data) and micro-level data (e.g. from financial statements and tax returns), taking into consideration the need to respect taxpayer confidentiality and the administrative costs for tax administrations and businesses.

The discussion draft sets out the context and background to the work on Action 11, and includes chapters that focus on three key areas:

  • Chapter 1 is an assessment of existing data sources relevant for BEPS analysis, describing the available data and their limitations for undertaking an economic analysis of the scale and impact of BEPS and BEPS countermeasures;
  • Chapter 2 provides potential indicators of the scale and economic impact of BEPS and their various strengths and limitations; and
  • Chapter 3 sets existing empirical analyses of BEPS and proposes two complementary approaches to estimating the scale of BEPS

Click the following links for the Action 11 discussion draft and the comments received.

A public consultation meeting for Action 11 will be held at the OECD Conference Centre in Paris on 18 May 2015, from 10 am to 6:00 pm CET. The meeting will be broadcast live via http://video.oecd.org/.

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Oman's Duqm Special Economic Zone Tax Exemption Regulations in Force

On 26 April 2015, the head of Oman's Duqm Special Economic Zone (SEZD) authority issued the decision for the regulations on the tax benefits provided in the zone. The decision entered into force on that date.

The main benefit is a tax exemption for income from qualifying activities conducted in the SEZD. The period of exemption is 30 years or the term of the lease or usufruct agreement, whichever is shorter. The exemption starts from the starting date of the qualifying activities in the Zone and may be renewed.

Other benefits that may be granted for qualifying taxpayers include:

  • 100% foreign ownership of capital;
  • Relaxed minimum capital requirements;
  • Relaxed foreign exchange rules;
  • Relaxed import restrictions; and
  • Others

In order to qualify, the taxpayer must:

  • Be registered in the SEZD;
  • Be licensed to perform qualifying activities in the SEZD and perform those licensed activities within the zone's boundaries; and
  • Commit to a certain level of Omanization as set by the SEZD authority (Omanization is the replacement of expatriate staff with Omani staff)

The tax exemption and other benefits are restricted for certain sectors, including banks, financial institutions, insurance, reinsurance, telecommunications services and land transport companies. In order for the exemption and benefits to apply for these sectors, the company must be registered with SEZD authority and conduct their business permanently within the boundaries of the zone.

If the qualifying activities are no longer regularly performed in the SEZD or if any of the requirements are no longer met, the tax exemption and other benefits will be canceled.

Proposed Changes (2)

India

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India's GST Bill Delayed by Upper House of Parliament

India's upper house of parliament, Rajya Sabha, has delayed its vote on the bill amending the constitution to allow for the introduction of a national goods and services tax (GST). The bill had been passed by the lower house of parliament, Lok Sabha on 6 May 2015 (prior coverage), and its delayed passage by the upper house may jeopardize the government's ability to implement the new GST regime on 1 April 2016 as planned.

The bill has been referred to a parliamentary select committee for further review, and is expected to be to be resubmitted to the upper house in July 2015. If approved, it must then be ratified by at least 15 of the 29 Indian states.

Jamaica

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Jamaica Introduces Draft Transfer Pricing Legislation

The Jamaican government has submitted draft transfer pricing legislation to the House of Representatives. The legislation was developed with the assistance of the OECD and will apply to multinational companies with affiliates in Jamaica and to Jamaican companies with resident and/or non-resident affiliates. The draft includes specific rules concerning:

  • Transactions with unrelated parties resident in a tax haven;
  • The transfer pricing of intangibles;
  • Payments of management fees and royalties
  • Documentation requirements;
  • Tax return requirements; and
  • Advanced pricing agreements

Additional details and guidance will be published once available.

Treaty Changes (3)

Austria-Turkmenistan

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Tax Treaty between Austria and Turkmenistan Signed

On 12 May 2015, officials from Austria and Turkmenistan signed an income tax treaty. The treaty will enter into force after the ratification instruments have been exchanged, and once in force and effective will replace the 1981 tax treaty between Austria and the former Soviet Union, which currently applies in respect of Turkmenistan.

Additional details will be published once available.

Malawi-Netherlands

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Update - Tax Treaty between Malawi and the Netherlands

Officials from Malawi and the Netherlands signed an income tax treaty on 19 April 2015. The treaty is the first of its kind directly between the two countries; although the 1948 tax treaty between the Netherlands and the UK had been extended to Malawi through the exchange of notes in 1969 and was later terminated by Malawi with effect from 1 January 2014.

Taxes Covered

The treaty covers Malawi income tax and fringe benefits tax, and covers Netherlands income tax, wage tax, company tax including the government share in the net profits of the exploitation of natural resources levied pursuant to the Mining Act, and dividends tax.

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 in any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10% if the paying company is a resident of Malawi and 15% if the paying company is a resident of the Netherlands (exemption if the beneficial owner is a pension fund)
  • Interest - 10% (exemption if the beneficial owner is a pension fund)
  • 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 or other comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State, although an exemption is provided when:
    • The alienator owns less than 30% of the shares or other comparable interests;
    • The shares or other comparable interests are traded on a recognized stock exchange;
    • The shares or other comparable interests derive their value from immovable property in which the company or the holders of those interests carry on their business;
    • The gains are derived in the course of a corporate reorganization, amalgamation, division or similar transaction; or
    • The alienator is a pension fund, provided that the gains are not derived from the carrying on of a business, directly or indirectly by that pension fund

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

Double Taxation Relief

Malawi applies the credit method for the elimination of double taxation, while the Netherlands may apply the credit or exemption method depending on the income type and the application of the Netherlands domestic law for the avoidance of double taxation.

Entry into Force and Effect

The treaty will enter into force on the last day of the month following the month in which the ratification instruments are exchanged. The treaty will apply in Malawi from the fiscal year next following the year in which it enters into force, and will apply in the Netherlands from 1 January of the year following the year in which it enters into force.

Qatar-Fiji

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Qatar Approves Tax Treaty with Fiji

According to a recent release by Qatar's Ministry of Foreign Affairs, the pending income tax treaty with Fiji has been approved for ratification. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Fiji normal income tax, non-resident dividend withholding tax, royalty withholding tax, interest withholding tax, dividend tax and capital gains tax. It covers Qatari income tax.

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 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • 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; 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, and will apply from 1 January of the year following its entry into force.

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