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Approved Changes (2)

Australia

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Australian Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 Receives Royal Assent

The Australian Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 received Royal Assent on 11 December 2015 and is enacted. The legislation includes new transfer pricing documentation and country-by-country (CbC) reporting requirements and other measures to counter tax avoidance. It was approved by the Australian Parliament on 3 December 2015 (previous coverage).

Tunisia

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Tunisian Parliament Approves Draft Finance Law 2016

On 10 December 2015, the Tunisian parliament reportedly approved the draft Finance Law 2016, which includes changes in value added tax, incentives and others. Some of the main measures in the Law are summarized as follows:

  • The 18% standard VAT rate and the 6% reduced VAT rate will be increased to 20% and 8% respectively, and the 12% reduced rate will be abolished;
  • The 8% reduced VAT rate will apply for imports of equipment for investments purposes, and equipment acquired locally for investment purposes will be eligible for the VAT suspension regime;
  • VAT exemptions for state-owned establishments and retail pharmaceutical products will be abolished;
  • Customs duty rates will be reduced, with rates ranging from 0% to 20%;
  • Companies eligible for the 10% reduced corporate tax rate (handicraft, agricultural and fishing companies, and certain exports) will be subject to the standard 25% rate on incidental income not connected to their business activities;
  • New tax incentives will be introduced to promote small and medium-sized enterprises; and
  • Individual income tax brackets and rates will be amended.

The changes will generally apply from 1 January 2016. Additional details will be published once available.

Proposed Changes (2)

Bahrain-Kuwait-Oman-Qatar-Saudi Arabia-Untd A Emirates

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GCC Countries to Implement VAT Regime by 2018

According to a statement from the United Arab Emirates Ministry of Finance on 7 December 2015, the Members of the Gulf Cooperation Council (GCC) are making progress on draft regulations for the implementation of a GCC-wide value added tax (VAT) system by the end of 2018. The GCC includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

The standard VAT rate has not been set, although a 5% rate suggested by the IMF is being considered. Regarding zero-ratings and exemptions, the GCC States have agreed to a zero-rate for education, healthcare and social services, and exemptions for several food items. An exemption for financial services is also being considered, but not yet agreed to.

Zimbabwe

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Zimbabwe 2016 Budget Presented to Parliament

Zimbabwe's Ministry of Finance Patrick Chinamasa presented the 2016 Budget to parliament on 26 November 2015. The main tax related measures are summarized as follows:

  • Transfer pricing regulations will be strengthened to provided additional guidance and counter base erosion and profit shifting;
  • An interest withholding tax exemption will be introduced for long-term deposits of more than 12 months;
  • The mineral royalty rate for gold will be reduced from 5% to 3%;
  • A VAT exemption will be introduced for protective clothing and certain foodstuffs, including eggs, milk, vegetables, fruits and cereals;
  • VAT and customs duty exemptions will be introduced for capital equipment imports valued above USD 1 million for use in the mining, agriculture, manufacturing and energy sectors; and
  • The duty rebates for capital equipment and vehicles imported by tourism and safari operators will be extended for 2 years.

Subject to approval, the measures will generally apply from 1 January 2016.

Treaty Changes (6)

India-Korea, Rep of

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India and Korea Sign MoU Agreeing to Suspend Tax Collection during MAP

On 9 December 2015, officials from India and South Korea signed a memorandum of understanding in which they agreed to suspend the collection of taxes during mutual agreement procedure under the India-South Korea income tax treaty.

India-Netherlands-United States

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Indian Tribunal Holds that Make Available Clause Concerning Fees for Technical Services may be Incorporated by MFN Clause of the India-Dutch Tax Treaty

In a recently published decision, the Ahmedabad Tax Appellate Tribunal held that the most favored nation (MFN) clause of the 1988 India-Dutch tax treaty incorporates the make available clause of the 1989 India-U.S. tax treaty concerning the definition of fees for technical services (FTS).

The case involved a Netherlands BV (NBV) providing basic refinery package services in India. NBV claimed 50% of the fees received for the services as fees for commercial services, which according to NBV are non-taxable as FTS because the nature of those services does not make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. For the other 50%, tax was paid without dispute.

The make available clause referenced is not included in the India-Dutch treaty, but NBV claimed that the MFN clause included in the final protocol to that treaty would incorporate the make available clause of the US-India treaty. The MFN clause provides that if India should enter into a tax treaty with a third OECD member state that provides a more favorable rate or more restricted scope for FTS, such rate or scope should apply for the Netherlands. The Indian assessing officer, however, did not accept this position, and the case made its way to the Tribunal.

In reviewing the case, the Tribunal found that the MFN Clause of the India-Dutch treaty does in fact provide for the incorporation of the make available clause of the India-U.S. tax treaty, and does so automatically.

Kuwait-Kyrgyzstan

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Tax Treaty between Kuwait and Kyrgyzstan Signed

On 13 December 2015, officials from Kuwait and Kyrgyzstan signed an income and capital tax treaty. The treaty is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Norway-South Africa

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

According to a recent update from the South African Revenue Service, the 2012 protocol to the 1996 income tax treaty between South Africa and Norway entered into force on 20 November 2015. The protocol, signed 16 July 2012, replaces Article 26 (Exchange of Information), bringing it in line with the OECD standard for information exchange.

The protocol applies from 20 November 2015.

Philippines-Turkey

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Philippines Approves Tax Treaty with Turkey

According to a press release issued 14 December 2015, the Philippine Senate has ratified the pending income tax treaty with Turkey. The treaty, signed 18 March 2009, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Philippine income taxes and stock transactions tax. It covers Turkish income tax, corporation tax and levies on those taxes.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 10% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
  • Interest - 10%
  • Royalties -
    • 10% for royalties for the use of, or the right to use, any copyright of literary, artistic or scientific work, any patent, trade mark, design or model, plan, secret formula or process, or from the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience; and
    • 15% for royalties for the use of, or the right to use, any cinematographic films and films or tapes for television or radio broadcasting

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 of a company or interest in a partnership or a trust, the property of which consists principally of 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 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.

Spain-Finland

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Spain to Sign New Tax Treaty with Finland

On 11 December 2015, Spain's Council of Ministers authorized the signature of a new income tax treaty with Finland. The treaty will be the second of its kind between the two countries, and must be finalized, signed and ratified before entering into force. Once in force and effective, the new treaty will replace the 1967 income and capital tax treaty between the two countries, which currently applies.

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