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Approved Changes (2)
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Update - Peru Adopts New R&D Tax Incentive

The law for Peru's new tax incentive for scientific research, development, and technological innovation has been published in the Official Gazette and is in force from 14 March 2015.

With the new incentive, Peru-based taxpayers incurring expenses for such activities will be allowed a 175% deduction for projects directly developed by them or through a Peru-based research centers. When projects are developed jointly with foreign-based research centers, the deduction is 150%.

The extra deduction is capped at 1,335 tax units. For 2015, the tax unit value is PEN 3,850 (~USD 1,250).

The incentive applies until fiscal year 2019.

United Kingdom

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New UK Criminal Offences and Higher Penalties for Tax Evasion

UK Chief Secretary to the Treasury Danny Alexander has announced plans to implement new criminal offences and higher penalties for tax evaders and enablers of tax evasion. The plans include:

  • Introducing a new strict liability criminal offence for offshore evasion, so it's no longer possible to plead ignorance in an attempt to avoid criminal prosecution
  • Making it a criminal offence for companies that fail to prevent tax evasion or otherwise facilitate tax evasion
  • Increasing the financial penalties for evaders, including linking the penalty amount to value of the asset kept in an offshore bank account
  • Introducing new civil penalties on those who enable evasion so they will face the same penalty as the tax evader
  • Publicly naming both evaders and those who enable evasion

Click the following link for more details in the report on Tackling tax evasion and avoidance published by HMRC on 19 March 2015.

Treaty Changes (5)

Albania-Iceland

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Update - Tax Treaty between Albania and Iceland Signed

On 13 March 2015, Albania ratified the pending income tax treaty with Iceland. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Albanian personal income tax, corporate profits tax, and the tax on small business activities. It covers Icelandic income tax to the state, and income tax to the municipalities.

Service PE

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

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital, otherwise 10%
  • Interest - 10%
  • Royalties - 10%
  • Capital Gains - generally exempt, except for gains from the alienation of immovable property, gains from the alienation of movable property forming party of the business property of a permanent establishment, and gains from the alienation of shares of a company or an interest in a partnerships or trust whose property directly or indirectly consists principally of immovable property situated in a Contracting 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 the year of its entry into force.

Croatia-India

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Update - Tax Treaty between Croatia and India

The income tax treaty between Croatia and India entered into force on 11 February 2015. The treaty, signed 12 February 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Croatian income tax and profit tax, and Indian income tax including any surcharges.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital, otherwise 15%
  • Interest - 10%
  • Royalties and Fees for Technical Service - 10%

Capital Gains Taxation

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation 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,
  • Gains from the alienation of shares of a company whose property directly or indirectly consists principally of  immovable property situated in the other State, and
  • Gains from the alienation of shares, other than the above, of a company resident in the other State

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Limitation on Benefits

A protocol to the treaty, signed the same date, includes a limitation on benefits provision concerning Articles 10 Dividends, 11 Interest, 12 Royalties and 13 Capital gains.

The provision states that when more than 50% of the share capital of a company resident in a Contracting State is directly or indirectly held by persons not resident of that State, the benefits of treaty will not apply in regard to dividends, interest, royalties or capital gains arising in the other Contracting State. However, the limitation will not apply if the company is engaged in substantive business operations, other than the mere holding of shares or property, in its State of residence. If the condition is not met, the benefits of the treaty may still apply if the competent authorities of both Contracting States agree that the establishment of the company and the conduct of its operations are founded on sound business reasons, and not just to obtain the treaty benefits.

Effective Date

The treaty will apply from 1 January 2016 in Croatia and from 1 April 2016 in India.

European Union-Switzerland

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Negotiations Concluded for Automatic Exchange of Information Agreement between the EU and Switzerland

Both the European Commission and Switzerland have published announcements that an agreement between the EU and Switzerland on the automatic exchange of information in tax matters was initialed on 19 March 2015. The agreement allows for the exchange of financial account information, and is in line with the new OECD/G20 global standard for the automatic exchange of information. It will replace the taxation of savings agreement between Switzerland and the EU, which has been in force since 2005.

The agreement will apply between Switzerland and all 28 EU Member States on a reciprocal basis, and is expected to enter into force by 1 January 2017, with the first financial data exchanged in 2018.

Faroe Isl-Uruguay

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TIEA between the Faroe Islands and Uruguay has Entered into Force

The tax information exchange agreement between the Faroe Islands and Uruguay entered into force on 19 February 2015. The agreement, signed 14 December 2011, is the first of its kind between the two countries and is line with the OECD standard for information exchange.

The agreement applies for criminal tax matters from the date of its entry into force, and for other matters in respect of tax periods beginning on or after that date.

Qatar-Swaziland

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Tax Treaty between Qatar and Swaziland under Negotiation

Negotiations for an income tax treaty between Qatar and Swaziland have begun during a meeting between officials held 16 to 18 March 2015. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.

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