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Approved Changes (1)

Brazil

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Brazil Publishes Provisional Measure on Changes to Interest on Equity Capital and Other Changes

On 30 September 2015, Brazil published Provisional Measure (PM) 694/2015 in the Official Gazette. PM 694 includes the following changes:

  • Interest on equity capital (JCP) paid to partners or shareholders may be deducted at the lower of Brazil's long-term interest rate (TLJP currently 7%) on a pro-rata basis per day or 5% per year;
  • Withholding tax rate on JCP is increased from 15% to 18%;
  • R&D incentives under Law 11,196/2005 are suspended, including the additional 60% to 100% deduction for certain R&D expenses, the 50% reduction in federal excise tax (IPI) on the purchase of machinery and equipment for R&D, and others.
  • Rates of PIS/COFINS on imported listed chemicals are set at 1.11%/5.02%

The changes included in (PM) 694/2015 generally apply from 1 January 2016. It must be approved or extended by the National Congress within 60 days to remain in effect.

Proposed Changes (1)

Trin & Tobago

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Trinidad and Tobago Budget for 2016 Presented

On 5 October 2015, Trinidad and Tobago's Minister of Finance Colm Imbert presented the Budget for 2016 to the House of Representatives. The main measures include:

  • Increasing the Business Levy rate from 0.2% to 0.6% of gross revenue (payable if greater than the corporate tax liability);
  • Increasing the Green fund levy rate from 0.1% to 0.3%;
  • Reducing the value added tax (VAT) rate from 15% to 12.5% and increasing the registration threshold from TTD 360,000 to TDD 500,000, while reducing the number of zero-rated and exempt items;
  • Ending the moratorium on property tax that began in 2010 using the old rates as a starting point (it is unclear if this means 7.5% of the assessed value for buildings under previous rules, or the rates on assessed value under the Property Tax Act approved the end of 2009 - 3% for residential buildings, 5% for commercial buildings, and 6% for industrial buildings);
  • Introducing transfer pricing legislation based on OECD guidelines (no specifics provided on planned effective date); and
  • Increasing the maximum monthly income basis for national insurance contributions from TTD 12,000 to TDD 13,600, and increasing the contribution rate from 12% to 13.2% (2/3 paid by employer and 1/3 paid by employee) effective 4 July 2016.

The measures will generally apply from 1 January 2016, except for the national insurance changes and transfer pricing legislation.

Click the following link for the full text of the Budget Speech 2016.

Treaty Changes (3)

Austria-Chile

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Tax Treaty between Austria and Chile has Entered into Force

The 2012 income and capital tax treaty between Austria and Chile entered into force on 9 September 2015. The treaty, signed 6 December 2012, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Austrian income tax, corporation tax, land tax, the tax on agricultural and forestry enterprises and the tax on the value of vacant plots. It covers Chilean taxes imposed under the Income Tax Act.

Residence

If a company is considered resident in both Contracting States, then the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement based on the place of effective management, the place of its main or head office, place of incorporation, or any other relevant factors. If the authorities cannot reach mutual agreement, the benefits of the treaty will not apply except for Articles 24 (Non-Discrimination) and 25 (Mutual Agreement Procedure).

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 and the activities continue for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 15%
  • Interest - 5% on interest derived from loans granted by banks and insurance companies; bonds or securities that are regularly and substantially traded on a recognized securities market; or a sale on credit of machinery and equipment; otherwise 15%
  • Royalties - 5% on royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment; otherwise 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;
  • Gains from the alienation of shares or other rights representing the capital of a company that is a resident of the other State if:
    • The alienator directly or indirectly owned shares or other rights representing at least 20% of the capital of the company in the 12-month period preceding the alienation; or
    • The gains derive more than 50% of their value directly or indirectly from immovable property situated in the other State; and
  • Aside from the above, any other gains from the alienation of shares or other rights representing the capital of a company that is a resident of the other State may also be taxed by that other State, but such tax is limited to 17%

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

Double Taxation Relief

Chile applies the credit method for the elimination of double taxation, while Austria generally applies the exemption method. However, Austria will apply the credit method in regard to income covered by Articles 11 (Interest), 12 (Royalties), 13 paragraph 4 (Capital Gains from shares), and 21 paragraph 3 (Other Income). Austria also applies the credit method in regard to income covered by Article 10 (Dividends), but the credit is limited to the lesser of the Chilean tax payable or 15% of the gross amount of the dividend.

Limitation on Benefits and Anti-Abuse

The protocol to the treaty, signed the same date, includes a limitation on benefits provision and an anti-abuse provision.

The limitation on benefits provision states that the treaty benefits provided under Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of a right or debt-claim in respect of which dividends, interest or royalties are paid was to take advantage of those articles.

The anti-abuse provision states that the benefits of the treaty will not apply when:

  • A resident of one Contracting State derives income from the other State which is attributable to a permanent establishment of that resident in a third jurisdiction; and
  • The total tax actually paid on the income in the first mentioned State and the third jurisdiction is less than 60% of the tax that would have been paid in the first mentioned State had the income not been attributed to the permanent establishment.

In such case, the income will be subject to tax under the provisions of the domestic law of the other State.

MFN Clause

The protocol to the treaty includes the provision that if Chile signs any agreement or convention with a third state that is a member of the OECD that provides for an exemption or lower rate on tax on interest or royalties than provided in the Austria-Chile treaty, then such exemption or lower rate will automatically apply with effect from the date on which the provisions of that agreement or convention become effective.

Effective Date

The treaty applies from 1 January 2016.

Cyprus-South Africa

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Protocol to the Tax Treaty between Cyprus and South Africa has Entered into Force

A protocol to the 1997 income and capital tax treaty between Cyprus and South Africa entered into force on 18 September 2015. The protocol, signed 1 April 2015, is the first to amend the treaty and includes the following:

  • The definition of a "resident of a Contracting State" under paragraph 1 of Article 4 (Resident) is replaced;
  • Article 10 (Dividends) is replaced, with a 5% withholding tax if the beneficial owner is a company directly holding at least 10% of the paying company's capital, otherwise 10%; and
  • Article 26 (Exchange of Information) is replaced, bringing it in line with the OECD standard for information exchange.

The protocol applies from 1 April 2012, the date of the introduction in South Africa of the system of taxation of dividends at the shareholder level.

India-Maldives

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Tax Treaty between India and the Maldives under Negotiation

During a meeting held 10-11 October 2015, officials from India and the Maldives discussed the conclusion of an income tax treaty. The two sides have also been negotiating a tax information exchange. Any resulting agreements would be the first of their kind between the two countries, and must be finalized, signed and ratified before entering into force.

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