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Worldwide Tax News

Approved Changes (4)

China

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China Introduces Tax Exemption on Gains from Technology Transfers and other Incentives for Innovation Zones

On 9 June 2015, the China Ministry of Finance and State Administration of Taxation jointly issued Circular 62 (2015) introducing tax incentives for businesses operating in the Zhongguangchun National Innovation Demonstration Zone, the He Wu Bang Innovation Trial Zone, the Mian Yang Scientific City, and other National Innovation Demonstration Zones.

One of the key incentives is an enterprise income tax exemption on gains from technology ownership transfers. The exemption applies on gains of up to CNY 5 million, with excess amounts eligible for a 50% tax reduction. Another key incentive is allowing legal entity shareholders of an enterprise operating in a qualifying zone to deduct up to 70% of the investment amount from their taxable income from the enterprise. In order for the incentive to apply, the invested enterprise must not be listed and the shares must be held for at least 2 years. Any unutilized deduction may be carried forward.

The new incentives apply retroactively from 1 January 2015.

France-European Union

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CJEU Advocate General Finds that French Group Tax Rule Violates Freedom of Establishment in Recent Opinion

On 11 June 2015, an opinion of Advocate General (AG) Kokott on whether certain French group tax rules violate freedom of establishment was published on the site of the Court of Justice of the European Union (CJEU). The opinion is in regard to a case being dealt with by the Versailles Administrative Court of Appeal concerning a French company seeking to deduct a 5% proportion for costs and expenses that would be allowed for dividends from a French subsidiary but not from a non-resident subsidiary.

The question referred to the CJEU by the French Court was essentially whether the freedom of establishment provisions of the Treaty on the Functioning of the EU (TFEU) preclude the French group taxation rules that enable a parent company to neutralize the add-back of the proportion of costs and expenses, fixed at 5% of the net amount of dividends received by it from resident companies included within the tax group, when such a right is refused if the dividend paying group company is resident in another EU Member State.

In the opinion, the AG found that the freedom of establishment under Article 43 EC (now Article 49 TFEU) and Article 48 EC (now Article 54 TFEU) precludes legislation of a Member State which under a special rule on group taxation available only to domestic companies allows group companies to deduct the charges relating to holdings in other group companies when this deduction is otherwise excluded.

Click the following link for the full AG opinion as published.

Norway

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Norway Relaxes Reduced Withholding Rate Restrictions for Dividends Paid to Transparent Foreign Entities

From July 2015, Norway will allow payers of dividends to foreign transparent entities to withhold tax based on the rate that would be applicable for the underlying investor in the entity instead of the 25% rate.

The 25% withholding tax rate currently applies for transparent entities regardless of the rate that would apply for the investor under a tax treaty or the exemption provided for EEA Member State residents, although an investor may apply for a refund after a dividend distribution. From July, the refund application process will no longer be needed.

United States

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U.S. IRS Updates General FATCA FAQ

On 9 June 2015, the U.S. IRS updated the general frequently asked questions (FAQ) on the Foreign Account Tax Compliance Act (FATCA). The FAQ covers several FATCA topics related to compliance and other matters. The latest update provides additional guidance concerning the FATCA Report (Form 8966).

Click the following link for the FATCA - FAQs General on the IRS.Gov website.

Proposed Changes (2)

Belgium

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Belgium to Increase Small Business VAT Threshold

The Belgian government has recently approved a bill that would increase the threshold for the special VAT system for small businesses from EUR 15,000 to EUR 25,000. The increase is the result of efforts to simplify compliance for small business and follows an increase of the threshold from EUR 5,580 to EUR 15,000 in early 2014. Businesses that elect to apply the system are allowed to treat their supplies as VAT inclusive, but lose the right to deduct VAT.

If approved by parliament, the change will apply from 1 January 2016.

Kenya

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Kenya's 2015-2016 Budget Presented

On 11 June 2015, the Kenyan Cabinet Secretary presented the 2015-2016 Budget to the National Assembly. The main tax measures of the budget include:

  • The 5% capital gains tax on the sale of shares will be replaced with a 0.3% transaction withholding tax based on the value of the shares;
  • The loss carry forward limit will be extended from 5 years to 10 years;
  • Incentives will be introduced for film production, including a withholding tax exemption on payments from producers to actors and crew members and a VAT exemption on goods and services purchased for use in film production;
  • The reduced corporate tax rate of 25% for companies listed on the on the Nairobi Securities Exchange will no longer be subject to the condition that at least 20% of the company's share capital is listed;
  • VAT exemption will be introduced on goods and services purchased for use in infrastructure construction projects in industrial and recreational parks of 100 acres or more;
  • Goods in transit will be zero rated for VAT purposes instead of exempt; and
  • A stamp duty exemption will be introduced for transfers of assets into Real Estate Investment Trusts and Asset Backed Securities.

The measures will enter into force after the Finance Bill for 2015 is enacted.

Treaty Changes (4)

Botswana-Finland

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TIEA between Botswana and Finland has Entered into Force

The tax information exchange agreement between Botswana and Finland entered into force on 16 May 2015. The agreement, signed 20 February 2013, is the first of its kind between the two countries and is in line with the OECD standard for information exchange. It applies for criminal tax matters from the date of its entry into force and for other tax matters from 1 January 2016.

Bulgaria-Guernsey

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TIEA between Bulgaria and Guernsey Signed

A tax information exchange agreement between Bulgaria and Guernsey was signed by Bulgarian officials on 25 May 2015 and by Guernsey officials on 11 June 2015. The agreement is the first of its kind between the two jurisdictions, and will enter into force after the ratification instruments are exchanged.

Hong Kong-Macedonia

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Tax Treaty between Hong Kong and Macedonia under Negotiation

Officials from Hong Kong and Macedonia met 9-12 June for the first round of income tax treaty negotiations. Any resulting treaty will be the first of its kind between the two jurisdictions, and must be finalized, signed and ratified before entering into force.

Macao-United Kingdom

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TIEA between Macau and the UK has Entered into Force

The tax information exchange agreement between Macau and the United Kingdom entered into force on 20 May 2015. The agreement, signed 3 September 2014, is the first of its kind between the two jurisdictions. It applies for criminal tax matters from the date of its entry into force and for other tax matters from 1 January 2016.

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