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Approved Changes (2)

Argentina

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Argentine Court Rules Branches of Foreign Companies Not Subject to Net Wealth Tax

Argentina's Supreme Court recently ruled on whether a foreign company's branch in Argentina is subject to the net wealth tax (impuesto sobre los bienes personales, ISBP). The tax is levied on individuals domiciled in Argentina and estates situated in Argentina, as well as on resident companies whose shares or participation rights are held by non-resident individuals, estates or entities. Base on this, the Argentine tax authority determined that this included branches of foreign companies, which was appealed.

In coming to its conclusion, the Supreme court considered whether a branch of a foreign company was equivalent to the holding of shares or participation rights of resident company held by a non-resident entity. Because branches do not issue shares or participation rights, the Court ruled that the two were not equivalent, and therefore branches are not subject to ISBP.

Nicaragua

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Nicaragua Tax Reform for 2015

The law containing Amendments to the Nicaragua Tax Law was approved 10 December 2014, and published 18 December 2014. The main changes include:

  • The withholding tax rate on interest, royalty and leasing income derived by non-residents is increased from 10% to 15%
  • The withholding tax on employment income derived by non-residents is reduced from 20% to 15%
  • The requirement for Nicaraguan VAT payers to self-assess VAT on supplies from suppliers not established in Nicaragua is abolished
  • The provision for a reduction in the rate of tax on income from economic activities from 2016 by 1% per year over 5 years is abolished

The changes generally apply from 1 January 2015.

Proposed Changes (1)

Ireland

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Ireland Department of Finance Launches Consultation on Knowledge Development Box

On 14 January 2015, Ireland's Department of finance launched a public consultation on the introduction of the Knowledge Development Box (KDB), which will provide for an effective tax rate for intellectual property income that is below the normal headline rate of corporation tax. The KDB consultation is part of the  incentive Road Map for Ireland’s Tax Competitiveness introduced as part of Budget 2015.

The final KDB measures will be designed to comply with the work currently being done as part of the OECD base erosion and profit shifting (BEPS) Project, which will likely be based on a modified nexus approach linking tax benefits provided by a jurisdiction with R&D expenditures incurred in that jurisdiction.

The consultation includes the following 7 questions:

Question 1:

It appears likely that the benefits of income-based IP regimes will be limited to income derived from "patents and assets that are functionally equivalent to patents" (see paragraph 8 Annex I) while marketing intangibles will be excluded. Please provide a description of the assets that you believe to be functionally equivalent to patents and the basis for that belief.

Question 2:

In designing the Knowledge Development Box it is necessary to consider the following items:

a) The method of calculation of the income qualifying for the preferential rate

b) The interaction of the regime with current loss relief legislation

c) The interaction of the regime with double taxation relief

Please comment on the above items and on any other design issues that should also be considered (that are not mentioned in any of the other questions).

Question 3:

What expenditure should be included in the definitions of "qualifying expenditure" (see paragraphs 10 & 11 of Annex I) and "overall expenditure" under the modified nexus approach? Please also provide an explanation of why the expenditure should be included.

Question 4:

How should the Knowledge Development Box interact with current legislation in the area of intellectual property and research and development, including the tax credit for R&D expenditure and capital allowances for intangible assets?

Question 5:

How should IP income be defined -- for example, in relation to royalty income embedded in sales of goods and services (see paragraph 17 of Annex 1)?

Question 6:

How should the tracking element of the regime (see paragraphs 22 & 23 of Annex I) operate to ensure that income benefitting from the preferential rate is traceable to the qualifying expenditure but also user-friendly for both companies and Revenue?

Question 7:

Are there any provisions that should be included in the regime to specifically encourage small indigenous enterprises?

Consultation Period

The consultation period will run from 14th January 2015 to 8th April 2015. Any submissions received after this date will not be considered.

Click the following link for more information: Public Consultation Paper: The Knowledge Development Box (PDF).

Treaty Changes (1)

Kuwait-Tajikistan

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Tax Treaty between Kuwait and Tajikistan

The income and capital tax treaty between Kuwait and Tajikistan was signed 23 June 2013. The treaty is the first of its kind between the two countries and has been approved by both, but the ratification instruments have not yet been exchanged and it has not yet entered into force.

Taxes Covered

The treaty covers Tajikistan income tax, the tax on profits, and the tax on immovable property. It covers the following Kuwaiti taxes:

  • Corporate income tax,
  • The contribution from the net profits of the Kuwaiti shareholding companies payable to the Kuwait Foundation for Advancement of Science (KFAS),
  • The Zakat, and
  • The tax subjected according to the supporting of national employee law

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 personnel employed if the activities continue for a period or periods aggregating more than 6 months in any 12 month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly controlling at least 20% of the paying company's capital, or if the beneficial owner is an individual
  • Interest - 10%
  • Royalties - 10%
  • Capital Gains - generally exempt, except for gains from the alienation of immovable property, and gains from the alienation of movable property forming part of the business property of a permanent establishment

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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