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Approved Changes (4)

Czech Rep

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Czech Republic Sets Industrial Zones Eligible for New Real Estate Tax Exemption

On 8 July 2015, the Czech government approved the industrial zones eligible for the new real estate tax exemption introduced as part of the amendments to the country's investment incentive regime. Of the 90 industrial zones in the Czech Republic, investments in the following 3 may be eligible for a 5-year real estate tax exemption, subject to certain conditions:

  • Ostrava-Mosnov;
  • Holesov; and
  • Most-Joseph

Approval for the exemption is decided on a case-by-case basis.

Mauritius

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Mauritius Issues Guidelines on Filing Objections

The Mauritius Revenue Authority issued new guidelines for the filing of a notice of objection to tax assessments on 23 June 2015. The guidelines cover:

  • The types of assessments that may be objected to;
  • The sections of law under which an objection may be filed and the deadline (28 days from notice of assessment);
  • The assessment types that require a payment of 10% of the tax assessed in order for an objection to be valid, and methods of payment; and
  • The cases where a bank guarantee will be accepted in lieu of making the 10% payment.

The guidelines also note that from 1 July 2015, objections may be filed electronically.

Click the following links for the objection guidelines and the E-objection platform.

OECD-United Nations

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OECD Launches Tax Inspectors Without Borders Initiative

On 13 July 2015, the OECD in partnership with the United Nations Development Program launched the Tax Inspectors Without Borders initiative. The following release was published by the OECD following the initiative launch.

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The OECD and the United Nations Development Programme (UNDP) have launched a new initiative to help developing countries bolster domestic revenues by strengthening their tax audit capacities.

The Tax Inspectors Without Borders (TIWB) project was welcomed by stakeholders from business, civil society, as well as OECD and developing country governments attending the Third International Conference on Financing for Development in Addis Ababa. They said the initiative will help countries to mobilise much-needed domestic revenues in support of the post-2015 sustainable development agenda.

TIWB will facilitate targeted tax audit assistance in developing countries worldwide. Tax audit experts will work alongside local officials of developing country tax administrations to help strengthen tax audit capacities, including issues concerning international tax matters.

A number of pilot projects and international tax workshops are already underway, including in Albania, Ghana and Senegal. Evidence gathered from real time cases in Colombia indicate a significant increase in tax revenue, from USD 3.3 million in 2011 to USD 33.2 million in 2014, thanks to tax audit advice and guidance.

"The challenges faced by developing countries are being acknowledged internationally and we are delighted to mobilise the best experts worldwide in a practical contribution to domestic resource mobilisation," OECD Secretary-General Angel Gurría said during a launch event in Addis Ababa. "The new partnership between the OECD and UNDP on Tax Inspectors Without Borders will significantly extend the global reach of existing efforts to build audit capacity while sending a strong message of international support to developing countries."

"Effective domestic resource mobilisation is at the core of financing for sustainable development. But efforts to raise domestic resources are often constrained by tax evasion and avoidance, and by illicit financial flows," said UNDP Administrator Helen Clark.

"The Tax Inspectors Without Borders programme is an innovative and practical way of supporting developing countries to mobilise more domestic resources for development. With its country level presence and local knowledge, UNDP is well-placed to partner with the OECD and the best audit experts to scale-up this important work. TIWB can support countries to realise the post-2015 agenda," Helen Clark said.

Going forward, a dedicated central organising unit, the TIWB Secretariat,  supported by an oversight board of stakeholders, will operate as a clearing house to match the demand for auditing assistance with appropriate expertise. The Secretariat, composed of OECD and UNDP staff and based at the OECD in Paris, will facilitate full-time or periodic deployment of experts.

A TIWB Toolkit sets out guidelines for establishing TIWB programmes and protecting against potential confidentiality and conflict of interest concerns.

Further information on Tax Inspectors Without Borders is available at: www.oecd.org/tax/taxinspectors.htm.

Singapore

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Singapore Publishes Revised Guide - Income Tax and Stamp Duty: Mergers and Acquisitions Scheme

On 13 July 2015, the Inland Revenue Authority of Singapore published the third edition of the e-Tax Guide - Income Tax and Stamp Duty: Mergers and Acquisitions Scheme. The scheme, introduced in 2010 and enhanced in 2012, provides for tax allowances, stamp duty relief and double tax deductions (DTD) for qualifying M&A transactions.

The topics covered by the guide include:

  • Overview of M&A scheme;
  • Qualifying share acquisitions;
  • Qualifying conditions;
  • Determination of M&A allowance and stamp duty relief;
  • Manner of offset of M&A allowance and DTD on transaction costs;
  • Group relief, carry-back and carry-forward of unabsorbed M&A allowance and DTD on transaction costs;
  • Events resulting in forfeiture or reduction in M&A allowance and/ or stamp duty relief;
  • Abusive practices;
  • Registered business trust;
  • Administrative matters;
  • Contact information; and
  • Updates and amendments

The amendments made in the third edition of the guide include:

  • Changes to the M&A scheme as announced in Budget 2015 (effective 1 April 2015):
    • An increase in the M&A allowance rate from 5% to 25% and a reduction in the cap on the value of qualifying acquisitions from SGD 100 million to SGD 20 million per year (i.e. maximum M&A allowance claimable by an acquiring company remains unchanged at SGD 5 million per year of assessment);
    • A reduction in the cap on stamp duty relief on the transfer of unlisted shares from SGD 200,000 to SGD 40,000 per financial year;
    • The introduction of a new 20% qualifying threshold (subject to conditions); and
    • The removal of the 75% qualifying threshold as well as the option to elect for a 12-month look-back period after a 1-year transitional period from 1 April 2015 to 31 March 2016 (N/B: Transitional rules apply for the removal of the 75% qualifying threshold); and
  • Revisions to the administrative requirements concerning the submission of independent valuations report with effect 13 July 2015.

Click the following link for the e-Tax Guide - Income Tax and Stamp Duty: Mergers and Acquisitions Scheme (Third edition) on the IRAS website.

Proposed Changes (1)

Cyprus

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Proposed Tax Reform Submitted to Cyprus House of Representatives including Notional Interest Deduction and Dividend Exemption Restriction

On 2 July 2015, the Cyprus Cabinet submitted proposed tax reform to the House of Representatives. The main reform measures are summarized as follows.

Notional Interest Deduction

A notional interest deduction would be introduced on new corporate equity investment in Cyprus resident entities, as well as permanent establishments of non-residents. The notional interest would be equal to the Cyprus 10-year government bond yield plus 3%, multiplied by the amount of new equity.

The total deduction would be limited to 80% of taxable profit. Companies recognizing a loss would not be eligible for the deduction.

Dividend Exemption Restriction

Cyprus companies receiving dividends from non-residents would no longer be eligible for the dividend tax exemption if the dividends paid are deductible for the non-resident payer (hybrid mismatch). As a result of the change, dividends derived from hybrid instruments would no longer be subject to the special contribution for defense.

This change would apply from 1 January 2016.

Tax Treatment of Forex Gains/Losses

Forex gains/losses would no longer be taxable/deductible for most taxpayers. However, forex traders will have the option to continue to apply the current regime, or make an irrevocable election to apply the new regime.

Increased Annual Depreciation Allowance

The increased annual depreciation allowance of 20% for plant and machinery and 7% for industrial buildings and hotels would be extended to assets acquired through the end of 2016 (currently applies for assets acquired in 2012 through 2014).

Utilization of Non-Resident Tax Losses

Cyprus residents would be allowed to utilize losses of a group company resident in an EU Member State, with the condition that such company has no possibility to utilize, carry forward or surrender the losses in its State of residence or in a State where its intermediary holding company is resident.

Reduced Taxes on Immovable Property Disposals

From the date of the entry into force of the new measures up to the end of 2016, the transfer fee on immovable property in Cyprus would be halved, and the disposal of immovable property would be exempt from capital gains tax (CGT). However, the indirect disposal of immovable property through the disposal of shares deriving at least 50% of their value from property in Cyprus would still be subject to CGT.

Anti-Avoidance Rule for Reorganizations

A proposed anti-avoidance rules would allow the tax authority to recharacterize corporate reorganizations and reject their tax neutral treatment if it is shown that the main purpose was the deferral, reduction or avoidance of tax.

Transfer Pricing Adjustments

In order to eliminate issues of double taxation, if a transfer pricing adjustments is made that increases the tax base of a taxpayer that is a member of a group, a corresponding adjustment will be made to the tax base of the group counter party to the transaction giving rise to the initial adjustment.

Effective Date

The measures are expected to be enacted in the near future, and aside from the dividend exemption restriction, are to apply retroactively from 1 January 2015.

Treaty Changes (2)

Hungary-Liechtenstein

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Update - Tax Treaty between Hungary and Liechtenstein

The income and capital tax treaty between Hungary and Liechtenstein was signed on 29 June 2015. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Taxes Covered

The treaty covers Hungarian personal income tax, corporate income tax, land parcel tax and building tax. It covers Liechtenstein personal income tax, corporate income tax, real estate capital gains tax, wealth tax and coupon tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10%
  • Interest - 0%
  • Royalties - 0%

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 comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated 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 generally apply the exemption with progression method for the elimination of double taxation. However, both countries will apply the credit method in regard to income covered by Article 10 (Dividends). Hungary will also apply the credit method in regard to income covered by Article 7 (Business Profits).

Entitlement to Benefits

Article 28 (Entitlement to Benefits) of the treaty includes the provision that a resident of a Contracting State shall not receive the benefit of any reduction in or exemption from tax provided for by the treaty if the competent authority determines that one of the principal purposes of such resident or a person connected with such resident was to obtain the benefits of the treaty.

The limitation may only apply after the competent authorities of both Contracting State have consulted with each other.

Entry into Force and Effect

The treaty will enter into force on the 30th day following the exchange of the ratification instruments, and will apply from 1 January of the year following its entry into force.

Italy-Turkey

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SSA between Italy and Turkey to Enter into Force

The social security agreement between Italy and Turkey will enter into force on 1 August 2015. The agreement, signed 8 May 2012, is the first of its kind between the two countries and will generally apply from the date of its entry into force.

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