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Worldwide Tax News

Approved Changes (1)

Mauritius

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Mauritius Issues Communiqué on the Taxation of Securities Capital Gains

The Mauritius Revenue Authority has recently issued a communiqué on the taxation of capital gains from the sale of shares or other securities. The communiqué states that capital gains derived from the sale of securities are outside the scope of Income Tax, as Mauritius does not have a capital gains tax in its tax legislation. However, gains from the sale of shares or securities held for less than 6 months in the course of the business of trading are treated as profits subject to Income Tax, with the exception of companies holding a Category 1 Global Business License, which are exempt.

The communiqué also states that the treatment of capital gains from the sale of securities as clarified by a Practice Note dated 30 October 2006, including the 6 month threshold, has been has been incorporated in the Income Tax Regulations. The treatment has also been expanded to include capital gains derived from the sale of gold, silver or platinum.

Click the following link for the Mauritius Revenue Authority communiqué.

Proposed Changes (4)

Estonia

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New Estonian Government Tax Plans

Estonia's new government, which took office 9 April 2015, has announced its tax plans. The main changes that will be proposed include:

  • Greater scrutiny of related party cross border transactions to reduce the outflow of untaxed profits;
  • Abolishing the taxation of dividend payouts for shareholder holding less than 10% of a company's capital;
  • Reducing the social tax on company payroll from 33% to 32%;
  • Increasing the individual income tax exemption from EUR 154 to EUR 205 per month;
  • Increasing taxes on tobacco, alcohol and transport fuels; and
  • Abolishing the reduce VAT rate on certain services, including tourism services

The plans are not yet finalized and are subject to change. It is expected that any changes made would apply from 1 January 2016.

Hong Kong

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Hong Kong Gazettes Amendment Bill 2015 Including Tax Cuts

On 17 April 2015, Hong Kong's Inland Revenue Department gazetted the Inland Revenue (Amendment) (No. 2) Bill 2015. The main measure is a 75% reduction in salaries tax, profits tax and tax under personal assessment with a ceiling of HKD 20,000 per taxpayer for the year of assessment 2014-15. A taxpayer who is separately chargeable to salaries tax and profits tax can enjoy the tax reduction under each of the tax types. The reduction applies for the final tax of the year only, and not to the provisional tax of the same year.

The Bill will be introduced into the Legislative Council on April 29. Once enacted, the adjustment will be made automatically. If any final assessment for 2014-15 is issued before the enactment of the law, the Inland Revenue Department will make a reassessment after the enactment. No action is required from the taxpayer.

Click the following link for the Inland Revenue Department press release.

Israel

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Israel's Draft Circular on the Digital Economy and Permanent Establishment

The Israeli Tax Authorities (ITA) issued a draft circular on permanent establishment (PE), corporate tax and value added tax (VAT) issues for foreign companies supplying digital services to Israeli customers via the internet. The draft circular is open for public comment, and no date has been indicated for the application of the provisions. The key aspects of the circular are summarized as follows.

A PE may be deemed constituted in Israel when a foreign supplier has a significant digital presence in Israel. The circular provides several factors that may give rise to a PE even if there is no physical location in Israel or no servers located in the country, including:

  • The foreign supplier maintains an operation in Israel;
  • The foreign supplier's website is accessible to the Israeli market and highly used by Israeli customers;
  • The foreign supplier's website is adapted for use by Israeli customers in terms of language, currency, etc.;
  • Representatives of the foreign supplier perform activities in Israel, such as sourcing customers or collecting information, engaging in ongoing contact with the Israeli customers, providing substantial marketing and support service, etc; or
  • An individual is formally employed by an Israeli resident company, but is managed by the foreign supplier and/or the foreign supplier is involved in the recruitment and setting of employment terms

A PE may also be deemed constituted when services are provided through a dependent agent in Israel, which could include a related Israeli company or other subcontractors. Specific factors that will be looked at in determining if an agent PE exists include:

  • Whether the agent has the authority to negotiate agreements on behalf of the foreign supplier;
  • Whether the agent has the authority to set prices and terms that are binding on the foreign supplier;
  • The level of involvement of the agent in customizing agreements based on the requirements of the customers; and
  • The agent's status as a party to agreements between the foreign supplier and Israeli customers

When a PE is constituted, the ITA will allocate the profit to the PE in accordance with the approach of the 2010 OECD Report on the Attribution of Profits to Permanent Establishments. The allocated profit will be subject to tax (standard rate 26.5%) and the foreign supplier will be required to file a tax return. Foreign suppliers will also be required to register for VAT (standard rate 18%) and appoint a representative.

United States

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U.S. Legislators Re-Introduce Legislation Banning Federal Contracts for Inverted Companies

On 16 April 2015, U.S. Senators Jack Reed (D-RI), Sheldon Whitehouse (D-RI), Dick Durbin (D-IL), and Al Franken (D-MN), and U.S. Representatives Rosa DeLauro (D-CT), Sander Levin (D-MI) and Lloyd Doggett (D-TX) re-introduced legislation banning inverted companies from holding federal contracts.

The legislation was introduced in the Senate as the American Business for American Companies Act and in the House of Representatives as the No Federal Contracts for Corporate Deserters Act. In addition to banning federal contracts for inverted companies, the legislation also bans federal contracts for companies that subcontract with inverted companies and reduces the retained U.S. ownership threshold for a company to be deemed inverted from 80% to 50%.

Similar legislation had been introduced in the 2014-2015 session of congress, but was not passed.

Treaty Changes (3)

Guernsey-Monaco

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Tax Treaty between Guernsey and Monaco to Enter into Force

Guernsey has announced that its income tax treaty with Monaco will enter into force on 9 May 2015. The treaty, signed 7 April 2014 in Guernsey and 14 April 2014 in Monaco, is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Guernsey income tax, and Monaco profit tax on commercial income of individuals and profit tax on companies.

Withholding Tax Rates

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

Capital Gains

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

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other Party; and
  • Gains from the alienation of shares directly or indirectly deriving more than 50% of their value from immovable property situated in the other Party

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

Double Taxation Relief

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

No Prejudicial or Restrictive Measures

Article 23 (No Prejudicial or Restrictive Measures) includes the provision that neither Contracting Party may apply prejudicial or restrictive measures based on harmful tax practices to residents, non residents or nationals of either Party.

The article defines such measures as those applied by one Party to residents or nationals of either Party on the basis that the other Party does not engage in effective exchange of information and/or because it lack transparency in the operation of its laws, regulations or administrative practices, or on the basis of no or nominal taxes and one of the preceding criteria. Specific examples of measures include:

  • The denial of a deduction, credit or exemption;
  • The imposition of a tax, charge or levy;
  • The inclusion on a discriminatory list or any similar or assimilated measure or practice; and
  • The requirement for a special reporting

Effective Date

The treaty applies from 1 January 2016.

Jersey-Rwanda

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Tax Treaty between Jersey and Rwanda under Negotiation

According to a recent announcement by the Jersey government, negotiations have begun for an income tax treaty with Rwanda. Any resulting treaty will be the first of its kind directly between the two jurisdictions, and must be finalized, signed and ratified before entering into force.

Additional details will be published once available.

Kyrgyzstan-Netherlands

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Tax Treaty between Kyrgyzstan and the Netherland under Negotiation

According to a recent announcement by the Kyrgyzstan government, the second round of negotiations for an income tax treaty with the Netherlands will be held 20 to 23 April 2015. Any resulting treaty will be the first of its kind directly between the two countries, although the treaty between the Netherlands and the former Soviet Union had applied, but was terminated. The treaty must be finalized, signed and ratified before entering into force.

Additional details will be published once available.

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