Worldwide Tax News
The Barbados parliament has reportedly approved the Budget for 2015. Some of the key tax related Budget measures include:
- Increasing the VAT registration threshold to BBD 200,000;
- Abolishing the additional deduction incentive of 120% or 150% for certain expenses, including expenses related to research and developments, tourism marketing, listing of shares on the Securities Exchange of Barbados, and others;
- Reducing the carry forward period for losses from 9 years to 7 years, and no longer allowing group relief (loss offset); and
- Reducing the two individual income tax bracket rates from 17.5% and 35% to 16% and 33.5% respectively.
The measures generally apply from the 2015 tax year, except for the VAT threshold increase, which applies from 1 January 2016.
Greece Clarifies Bank Guarantee Requirement for Dividends Tax Exemption under Parent-Subsidiary Directive
On 5 August 2015, the Greek Public Revenue Authority published clarification on providing a bank guarantee to obtain the income tax exemption on dividends under the EU Parent-Subsidiary Directive. Under Greece's implementation of the Directive into Greek law, a two-year shareholding period is required in addition to the standard minimum 10% shareholding participation requirement.
According to the clarification provided by the Public Revenue Authority, when a Greek company has received a dividend distribution before the two-year holding period is met, it may choose to either:
- Submit a bank guarantee to its local tax office in order to obtain the income tax exemption immediately; or
- Pay the tax on the dividend income and later submit an amended tax return with the applicable tax adjustment for the exemption after the two-year holding period is met.
If the two-year holding period is met during the period between receiving the distribution and filing the tax return, the bank guarantee or amended return requirement does not apply.
On 29 July 2015, the Italian government issued a decree including implementing measures for the country's new patent box regime, which was introduced as part of the Stability Law for 2015 in December 2014 (previous coverage), and expanded by decree in January 2015 (previous coverage).
The regime provides exemption from corporate income tax and IRAP equal to 30% of the qualifying income derived from qualifying intangible assets for 2015, 40% for 2016 and 50% from 2017. Qualifying intangible assets include patents, commercial trademarks, designs, models and know-how as long as the assets are capable of legal protection.
In order to determine the amount of qualifying income, a ratio of qualifying costs/total costs incurred for the development, maintenance and improvement of the intangible assets is applied. In determining this ratio, qualifying costs are equal to the sum of the:
- Direct R&D costs;
- Costs of R&D outsourced to unrelated third parties; and
- Costs of R&D outsourced to related parties and R&D acquisition and licensing costs, limited to 30% of the total direct and unrelated party outsourced costs.
Taxpayers eligible for the patent box regime exemption include individuals, companies, partnerships and other entities resident in Italy, and Italian branches of non-residents if resident in a jurisdiction with which Italy has a tax treaty in force that provides for the full exchange of information, and the qualifying intangible assets are attributed to them.
For the 2015 and 2016 tax years, the Italian Revenue Agency (IRA) will issue instructions for taxpayers to inform the IRA that they are claiming the patent box regime exemption. For 2017 and subsequent years, the election should be made in the tax return.
On 14 August 2015, the Inland Revenue Board of Malaysia published Taxation of Limited Liability Partnership, Public Ruling (PR) No. 5/2015, which provides guidance on the tax treatment and certain other aspects of registered limited liability partnerships (LLP). The main areas covered include:
- An overview of LLPs, including formation, record keeping requirements and residence determination;
- Capital contributions;
- Differences between LLPs, conventional partnerships and companies;
- Compliance obligations, including appointment of a compliance officer;
- Conversions of a conventional partnership or company to an LLP;
- Tax Treatment of LLPs, including examples;
- Tax Treatment of partners of an LLP; and
- Bilateral and unilateral tax credits.
Click the following link for PR No. 5/2015 on the Inland Revenue Board of Malaysia website.
The Inland Revenue Authority of Singapore (IRAS) has updated its online guide covering the tax treatment of business expenses. The updated guide, dated 14 August 2015, provides details and examples on the deductibility of several expenses types for tax purposes, including:
- Employee equity-based remuneration;
- Expenses incurred before commencement of business;
- Interest adjustments to account for expenses related to non-income producing assets;
- Registration costs for patents, trademarks, designs and plant varieties;
- R&D expenditure;
- Statutory and regulatory expenses; and
- Several others.
Click the following link for the Tax Treatment of Business Expenses guide on the IRAS website.
The Brazilian Senate is currently reviewing Senate Law Project 298/2015 (PLS 298), which includes measures for the creation of a new voluntary disclosure program for unreported foreign assets: the Currency and Tax Compliance Special Regime (Regime Especial de Regularização Cambial e Tributária, RERCT). The program will allow both individual and corporate taxpayers to voluntarily disclose any legally obtained funds, assets or rights that have been remitted or kept abroad or repatriated into Brazil without appropriate notification of the tax authorities.
Under the program, such disclosures will be subject to tax at the rate 17.5% plus an amount equal to the tax as a penalty. No other penalties or criminal charges will apply. However, taxpayers will not be eligible if they have been indicted or convicted on charges of tax evasion, omission of tax information, tax fraud, forgery, and certain other offenses.
In order to apply, a taxpayer must submit a RERCT statement to the Federal Revenue Department detailing the unreported assets and their value in Brazilian real as of 31 December 2013. The corresponding tax and penalty must then be paid by the end of the month in which the statement is filed. If a disclosed asset is significantly undervalued, the tax authority may challenge the value and make an adjustment within 5 years of the disclosure. After the disclosure of assets, the taxpayer's tax returns for the 2013 tax year and subsequent years must be amended accordingly.
PLS 298 must be approved by the Senate and the Chamber of Deputies before being enacted, and taxpayers will have 120 day from the date of its entry into force to take part. There is also the possibility that the program will first be enacted directly by the Brazilian president through a provisional measure, although such measures must be still approved or extended by the Senate and Chamber of Deputies within 60 days to remain in effect.
On 15 August 2015, officials from Botswana and Mauritius signed a protocol to the 1995 income and capital 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. It will enter into force after the ratification instruments are exchanged.
On 8 August 2015, the Russian government issued a resolution approving the signing of a tax residency agreement with Kazakhstan. The agreement will be concluded through an exchange of notes on the 1996 income and capital tax treaty between the two countries, and will provide that a confirmation of permanent residency issued by the competent authority of either country that has been certified with its official seal will be accepted for the purpose of claiming tax treaty benefits.
The agreement must be finalized, signed and ratified before entering into force, and once in force will apply retroactively from 1 January 2011.