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Worldwide Tax News

Approved Changes (2)

Hong Kong

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Hong Kong Passes Inland Revenue (Amendment) (No. 2) Bill 2015 Including 75% Tax Relief (Capped)

The Inland Revenue (Amendment) (No. 2) Bill 2015 was passed by the Hong Kong Legislative Council on 9 July 2015. The main measure is a 75% reduction in salaries tax, profits tax and tax under personal assessment with a ceiling of HKD 20,000 per taxpayer for the year of assessment 2014-15. Taxpayers that are separately chargeable to salaries tax and profits tax can enjoy the tax reduction under each of the tax types. The reduction applies for the final tax of the year only, and not to the provisional tax of the same year.

The adjustment will be made automatically, and if a final assessment for 2014-15 has already been issued, the Inland Revenue Department will make a reassessment. No action is required from the taxpayer.

Click the following link for the government press release.

United States

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U.S. Treasury Publishes List of International Boycott Countries

On 8 July 2015, the U.S. Treasury Department published the current list of countries that may require participation in, or cooperation with, an international boycott. The publication is dated 1 July 2015, and the countries listed include:

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

Any person or a member of a controlled group with operations in or related to a country on the list, or with the government, a company, or a national of a listed country is required to file Form 5713 (International Boycott Report).

Form 5713 must also be filed by any person with operations in a non-listed country that requires participation in, or cooperation with, an international boycott as a condition of doing business with such country.

Taxpayers required to file the form may lose certain tax benefits, including:

  • The foreign tax credit (section 908(a));
  • Deferral of taxation of earnings of a CFC (section 952(a)(3));
  • Deferral of taxation of IC-DISC income (section 995(b)(1)(F)(ii));
  • Exemption of foreign trade income of a FSC (section 927(e)(2), as in effect before its repeal); and
  • Exclusion of extraterritorial income from gross income (section 941(a)(5), as in effect before its repeal).

The exact limits on benefits are determined by the form.

Proposed Changes (3)

Australia

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Australia Issues Draft Legislation for Foreign Resident Capital Gains Withholding Tax

On 8 July 2015, the Australian Treasury issued an exposure draft of the Tax and Superannuation Laws Amendment (2015 Measures No. 5) Bill 2015: Foreign resident capital gains withholding payments. The legislation includes a non-final withholding tax of 10% on property sales where the seller is a foreign resident. The tax is to be withheld and remitted by the buyer, and applies to sales of:

  • Taxable Australian real property;
  • An indirect Australian real property interest; or
  • An option or right to acquire such property or interest.

The withholding tax will not apply to:

  • Transactions involving residential property valued less than $2.5 million;
  • An arrangement that is conducted through a stock exchange; or
  • An arrangement that is already subject to an existing withholding obligation.

Click the following links for:

The closing date for submission is 7 August 2015.

Brazil

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Brazil Considering Increasing Revenue Threshold for Simplified Tax Regime

Brazil is currently considering proposed legislation that would increase the revenue thresholds under which micro and small enterprises may apply the simplified tax regime (Simples Nacional). Currently, the thresholds are annual gross revenue of BRL 360,000 for micro enterprises and annual gross revenue of BRL 3.6 million for small enterprises. The proposed legislation would increase the thresholds for micro and small enterprises to BRL 900,000 and BRL 14.4 million respectively.

Under the simplified tax regime, eligible companies pay a single tax in place of corporate income tax, certain social security contributions, value added tax, and others. The simplified rates range from 4% to 22.90% based on the taxpayer's business classification and annual gross revenue.

Greece-European Union

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Greece Agrees to Bailout Package Including Major Tax Reform

Although not completely finalized, Greece has reportedly agreed to implement multiple tax reform measures in order to extend its bailout. Despite holding a referendum on 5 July 2015 that resulted in a no vote on accepting a previous package, the package that has now been agreed to is largely the same (previous coverage). Main measures include increasing the VAT rate on most goods and services to the standard 23% rate, increasing the corporate tax rate from 26% to 28%, and requiring 100% advance payment of tax.

Additional details will be published as the Greek parliament completes the approval process for the measures, which is to begin 15 July 2015.

Treaty Changes (2)

Aruba-Czech Rep

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TIEA between Aruba and the Czech Republic Signed

On 8 July 2015, officials from the Netherlands, on behalf of Aruba, and the Czech Republic signed a tax information exchange agreement. The agreement is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Jersey-Rwanda

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Update - Tax Treaty between Jersey and Rwanda

The tax treaty between Jersey and Rwanda was signed on 26 June 2015. It is the first of its kind between the two jurisdictions and will enter into force after the ratification instruments are exchanged.

Taxes Covered

The treaty covers Jersey income tax, and Rwandan personal income tax, corporate income tax, withholding taxes and tax on rent of immovable properties.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement based on its 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 claim any relief or exemption from tax provided by the treaty.

Permanent Establishment

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 for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

A permanent establishment will also be deemed constituted if an installation or structure is used in the exploration for natural resources provided that the installation or structure continues for a period of at least 90 days.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 10%
  • Royalties - 10%
  • Management or Professional Fees - 12%

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not be available if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

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.

Provisions are also included for a tax sparing credit whereby a credit will be allowed for tax that would have been paid but was exempted or reduced in accordance with laws which establish schemes for the promotion of economic development in Rwanda or Jersey. Such credit will only apply for schemes mutually agreed to by the competent authorities of the Contracting States.

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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