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Approved Changes (2)

European Union-Belgium-Luxembourg-Netherlands

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EU Commission to Investigate IKEA Tax Structuring

The EU Commission confirmed that it will investigate reported aggressive tax planning by furniture giant IKEA. This follows from a study commissioned by the Green/EFA group in the European Parliament, which purported that the Swedish group dodged EUR 1 billion in taxes in the period 2009-2014 through onshore tax planning structures in the Netherlands, Belgium and Luxembourg. The inquiry is likely to follow in the steps of the State Aid investigations launched by the Commission over the past year. In its reaction to the accusations, Ikea stressed that it manages its operations in a responsible and sustainable way and pays taxes in full compliance with national and international tax rules and regulations.

Netherlands

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Supreme Court Advocate General Finds Wealth Tax Incompatible with Right to Property

The Netherlands applies a deemed yield tax on the average value of assets owned by individuals. The tax (known as Box 3 Tax) replaced the former wealth tax and is formally categorized as an income tax. Under the tax, the average net annual value of all assets owned by an individual is deemed to produce a yield of 4%, which is subject to income tax at the flat rate of 30%, thus translating in a tax of 1.2% on the net average value of taxable assets. The 4% yield is fixed, and applies regardless of the actual yield which can be a loss or a more substantial gain. Changes enacted from 2016 introduced progressive yield figures depending on the net annual value. However, also in this case, the progressive yield figures are fixed and do not necessarily correspond to the actual yield.

In his conclusions, the Advocate General found that in situations where the tax assessment under Box 3 is higher than the actual yield from the assets, the tax becomes an “expropriation” measure and is then in conflict with the right of property guaranteed by the European Human Rights Convention. The conclusions of the Advocate General are meant as guidance to the Supreme Court sitting bench. They are often, though not always, followed by the Court.

Proposed Changes (1)

United Kingdom

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Consultation on Changes to Non-Dom Taxation

HRMC released a consultation paper on the proposed changes to the non-dom tax regime, announced in September 2015. Under the regime, individuals who are resident in the UK but not domiciled therein are subject to income tax under standard rules, but are not taxable on foreign-source income and chargeable gains that are not brought into the UK (remittance basis of taxation). The regime was previously amended so that the tax advantage is accessible only if the non-dom pays an extra charge (Remittance Based Charge (RBC)), set at £30,000, £60,000 or £90,000 depending on the length of residence.

The proposed amendment, access to the non-dom regime would no longer be available to:

  • anyone born in the UK with a UK domicile of origin and whilst they are UK resident; and
  • anyone who has been resident in the UK for at least 15 out of the previous 20 tax years.

The changes would apply from 7 April 2017 and foreign chargeable gains arising during a temporary period of non-residence beginning before 8 July 2015 will not be assessed to tax. Also, long-term residents who had set up an offshore trust before they have lost the non-dom status as a result of being resident in the UK for 15 of the last 20 years, will not be taxed on income and gains that are retained in the trust.

More information on the proposed changes can be found in this LINK

Treaty Changes (4)

European Union-Andorra

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EU and Andorra Conclude Agreement on Automatic Exchange of Financial Account Tax Information

The EU and Andorra concluded on 12 February 2016 an agreement providing for the automatic exchange of tax information on financial accounts of each other’s residents from 2018. The agreement will replace the 2004 agreement between the EU and Andorra whereby the latter agrees to put in place measures equivalent to those provided for by the EU Savings Directive. The revision of the 2004 agreement became necessary now that the EU Savings Directive has been repealed and replaced by the amended provisions of the EU Administrative Assistance Directive.

Italy-Taiwan

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Tax Agreement Signed and in-Force

The Taiwanese Ministry of Foreign Affairs announced on 15 February 2015 that Italy and Taiwan have concluded a tax agreement. According to the announcement, the agreement was signed on 31 December 2015 and entered into force on 1 January 2016. Details of the agreement will be reported once the text is released.

The conclusion of this agreement brings Taiwan’s comprehensive income tax agreements network to 29 agreements, in addition to 13 other tax agreements limited to international transportation. Two income tax agreements with Canada and Japan, and a tax agreement limited to international transportation with Macau, have been signed but are not yet in force.

Singapore-Rwanda

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Singapore-Rwanda Tax Treaty Enters into Force

The first-time income tax treaty signed between Singapore and Rwanda on 26 August 2014 entered into force on 15 February 2016 and will become effective generally from 1 January 2017.

Singapore-Thailand

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Singapore-Thailand Tax Treaty Enters into Force

The tax treaty signed between Singapore and Thailand on 11 June 2015 to replace the existing 1975 treaty entered into force on 15 February 2016. The treaty will become effective as follows:

  • with respect to Singapore, from 1 January 2017 with respect to withholding taxes, and from 1 January 2018 with respect to other taxes;
  • with respect to Thailand, as from 1 January 2017.

The provisions of the 1975 treaty will cease to have effect for the relevant taxes on the dates the new treaty applies. Details of the treaty have been reported here

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