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Approved Changes (4)

Canada

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Canada Publishes New Tax Folio Chapter on Interest Deductibility

The Canadian Revenue Agency (CRA) has published Income Tax Folio Chapter S3-F6-C1: Interest Deductibility. The tax folio chapter explains the CRA’s position on the deductibility of interest expense under paragraph 20(1)(c) of the Tax Act, as well as other provisions of the Act relating to interest deductibility. It is effective 6 March 2015, and replaces and cancels Interpretation Bulletin IT-533, Interest Deductibility and Related Issues.

As a newly published tax folio chapter, there is a 3-month public comment period which ends 6 June 2015.

Click the following link for the Income Tax Folio S3-F6-C1: Interest Deductibility on the CRA website, which includes instructions for comment.

China

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China Clarifies Eligibility for Western Regions Tax Incentive

On 17 March 2015, China's State Administration of Taxation released Public Notice 015] 14. The notice clarifies the eligibility of companies for the reduced 15% enterprise income tax incentive following the release of Catalog of Encouraged Industries in Western Regions, which is effective from 1 October 2014. The notice states that companies that were eligible for the incentive prior to the release of the new catalog will remain eligible as long as their main business is within the scope of the encouraged industries listed in the new catalog. The main condition is that at least 70% of a company's annual gross income is earned from one or more listed industries in a qualifying western region. If a company's main business is not listed, the incentive ceases to apply with effect from 1 October 2014.

The reduced rate incentive for western regions was introduced by Circular 001] 202, and amended and extended by Circular 011] 58, with the condition that the company's industry type must be in the Catalog of Encouraged Industries in Western Regions. However, since the Catalog was not yet published, the industries listed in certain other existing catalogs applied, including the Industry Restructuring Guidance Catalog, the Industry Restructuring Guidance Catalog, the Foreign Investment Industry Guidance Catalog, and the Priority Industry Catalog for Central and Western Regions.

The new Catalog of Encouraged Industries in Western Regions includes several of the industries covered in the previous catalogs as well as newly encouraged industries. The industries vary by region and include a focus on new/clean energy, high-tech manufacturing, biotechnology, new materials and others. The qualifying western regions include:

  • Chongqing Municipality
  • Gansu Province
  • Guangxi Zhuang Autonomous Region
  • Guizhou Province
  • Inner Mongolia Autonomous Region
  • Ningxia Hui Autonomous Region
  • Qinghai Province
  • Shaanxi Province
  • Sichuan Province
  • Tibet Autonomous Region
  • Xinjiang Uyghur Autonomous Region, and
  • Yunnan Province

The incentive is set to expire 31 December 2020.

Jamaica

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Jamaica Revenue Measures for 2015/2016 Presented

On 12 March 2015, Jamaica's Minister of Finance and Planning Peter Phillips presented the revenue measures for the Fiscal Year 2015/16. The main tax related measures are summarized as follows.

Life Insurance Company Tax Regime

The life insurance company tax regime will be amended, with changes including:

  • The asset tax rate will be reduced from 1% to 0.25% in line with the asset tax rate for financial institutions,
  • The Gross Premium Tax (3%) and the Net Investment Income Tax (15%) will be abolished, and
  • Corporate Income Tax at a rate of 25% will be introduced

The proposed amendment will be applicable for year of assessment 2015.

Consumption Taxes

A number of changes are made regarding consumption taxes, including:

  • An increase in the special consumption tax (SCT) charged per stick of cigarette from JMD 10.50 to JMD 12.00, effective 13 March 2015
  • An increase in the SCT rates on petrol by JMD 7 per liter, effective 18 March 2015
  • The 1% petroleum cess is replaced with a specific SCT of JMD 2 per liter, effective 18 March 2015
  • The general consumption tax on residential electricity will be re-imposed at the standard rate (16.5%) on usage above 350kWh, effective 1 April 2015

Withholding Tax on Services

A withholding tax on the supply of services with an invoice value exceeding JMD 50,000 will be introduced at the rate of 3%. The amount withheld will be creditable against the service provider's income tax liability when the payer provides a certificate showing the amount of tax withheld.

For the initial phase of implementation, the requirement to withhold on payments and issue withholding certificates will be limited to larger entities such as financial institutions, ministries/agencies/departments and utility companies.

The proposed implementation date is 1 May 2015.

Scope of the Environmental Levy

The scope of the 0.5% Environmental Levy will be expanded to include domestic sales in addition to imported goods, with a credit for environmental levy paid on imported inputs. An exclusion will apply for the services sector, charitable organizations, exempt organizations, international organizations and mining.

The implementation date is 1 April 2015.

Personal Income Tax Threshold

The Personal Income Tax threshold will be increased from JMD 557,232 to JMD 592,800, effective 1 January 2016.

United States

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U.S. Interest Rates on Overpaid and Underpaid Tax Remain Unchanged for Q2 2015

The IRS has announced that the interest rates for overpaid and underpaid tax will not be changed for the second quarter of the year beginning 1 April 2015. The rates are 3% for both underpayment and overpayment by individuals, and 2% and 3% for corporate overpayments and underpayments respectively.

The rate for corporate overpayment portion exceeding USD 10,000 in a tax period will remain at 0.5%. The rate for large corporate underpayments exceeding USD 100,000 will remain at 5%.

Treaty Changes (5)

Austria-Pakistan

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Protocol to the Tax Treaty between Austria and Pakistan Signed

On 17 March 2015, officials from Austria and Pakistan signed a protocol to the 2005 income tax treaty between the two countries. The protocol amends Article 27 Exchange of Information to bring it in line with the OECD standard for information exchange. The protocol is the first to amend the treaty, and will enter into force after the ratification instruments have been exchanged.

Bahrain-Cyprus

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Update - Tax Treaty between Bahrain and Cyprus Signed

On 9 March 2015, officials from Bahrain and Cyprus signed an income tax treaty. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Bahrain income tax, and Cypriot income tax, corporate income tax, the special contribution for the Defense of the Republic, and capital gains tax.

Hydrocarbon PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise of one Contracting State is directly engaged in the exploration for or production of crude oil or other natural hydrocarbons from the ground in the other State, or when refining crude oil in its facilities in the other State.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 0%
  • 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.

Belgium-Luxembourg

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Mutual Agreement to the Tax Treaty between Belgium and Luxembourg Signed

On 16 March 2015, official from Belgium and Luxembourg signed a mutual agreement to the 1970 income tax treaty between the two countries. The mutual agreement clarifies provisions of the treaty in regard to the avoidance of double taxation, and the tax treatment of dependent personal services.

Italy-Korea, Rep of

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Protocol to the Tax Treaty between Italy and South Korea has Entered into Force

The protocol to the 1989 income tax treaty between Italy and South Korea entered into force on 23 January 2015. The protocol, signed 3 April 2012, is the first to amend the treaty.

The protocol amends Article 2 Taxes Covered to include regional tax on productive activities (IRAP), Article 3 General Definitions, Article 23 Method for Elimination of Double Taxation in regard to Italy, and replaces Article 26 Exchange of Information bringing it in line with the OECD standard for information exchange.

The protocol applies from the date of its entry into force, 23 January 2015.

St. Vincent-Neth Antilles-Curacao-Sint Maarten-

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TIEA between Former Netherlands Antilles and St. Vincent and the Grenadines Entered into Force

According to a recent announcement by the Dutch government, the tax information exchange agreement between the former Netherland Antilles and St. Vincent and the Grenadines entered into force on 31 July 2013, and applies from that date. Since the Netherland Antilles was dissolved in 2010, the agreement applies between St. Vincent and the Grenadines and Curaçao, Sint Maarten and the Caribbean Netherlands.

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