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Worldwide Tax News

Approved Changes (2)

United Kingdom-Ireland

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Northern Ireland to Implement 12.5% Corporate Tax Rate from 2018

The Northern Ireland Executive and the UK and Irish governments have agreed to the implementation of a 12.5% corporate tax rate for Northern Ireland from 2018. The implementation of the new rate is part of the Stormont Agreement and Implementation Plan. The plan sets out the devolution of certain powers from the UK government to the Northern Ireland Executive, including corporate taxation powers (previous coverage).

The 12.5% rate will apply from April 2018.

Click the following link for the Stormont Agreement and Implementation Plan, and a related news release from the UK government.

United States

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U.S. Treasury to Issue Additional Guidance to Deter Corporate Inversions and Calls on Congress for Legislative Action

In a letter dated 18 November 2015 from U.S. Secretary of the Treasury Jack Lew to Senator Ron Wyden D-OR, Senator Orrin Hatch R-UT, Representative Kevin Brady R-TX and Representative Sander M. Levin D-MI, Secretary Lew announced Treasury's intent to issue additional targeted guidance to deter and reduce further the economic benefits of corporate inversions. The planned guidance follows significant guidance issued in September 2014 (previous coverage).

In addition to the planned guidance, Lew also calls on Congress to provide Treasury with new statutory authority in order to stop tax-driven inversions decisively.

Additional details of the new guidance will be published once available.

Click the following link for a copy of the letter.

Treaty Changes (4)

Belgium-Turkey

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Belgium Approves SSA with Turkey

On 12 November 2015, Belgium's Chamber of Representatives approved the pending social security agreement (SSA) with Turkey. The agreement, signed 11 April 2014, will replace the 1966 SSA between the two countries. It will enter into force after the ratification instruments are exchanged.

Poland-Sri Lanka

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Update - New Tax Treaty between Poland and Sri Lanka

The new income tax treaty between Poland and Sri Lanka was signed on 6 October 2015. Once in force and effective, the new treaty will replace the 1980 tax treaty between the two counties, which currently applies.

Taxes Covered

The treaty covers Polish personal income tax and corporate income tax. It covers Sri Lanka income tax, including the income tax based on the turnover of enterprises that have entered into agreements with the Board of Investment.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 10%
  • Royalties and Fees for Technical Services (managerial, technical or consultancy services) - 10%

Capital Gains

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

  • Gains from the alienation of 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 deriving more than 50% of their value directly or indirectly from 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 if the alienator at any time during the 12-month period preceding the alienation held directly or indirectly 50% or more of the capital of that company

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

Double Taxation Relief

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

Limitation on Benefits

Article 27 (Limitation on Benefits) includes the provision that the benefits provided by the treaty will not be available if the main purpose or one of the main purposes for entering into an arrangement was to obtain any benefits that would not be otherwise available.

Entry into Force and Effect

The treaty will enter into force 3 months after the ratification instruments are exchanged, and will generally apply from 1 January of the year following its entry into force. However, Articles 23 (Mutual Agreement Procedure) and 24 (Exchange of Information) will apply from date the treaty enters into force.

The 1980 income and capital tax treaty between Poland and Sri Lanka will terminate and cease to have effect from the date the new treaty applies.

Russia-Singapore

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Protocol to the Tax Treaty between Russia and Singapore Signed

On 17 November 2015, officials from Russia and Singapore signed a protocol to the 2002 income tax treaty between the two countries. The protocol is the first to amend the treaty. The main changes are summarized as follows.

Permanent Establishment

Article 5 (Permanent Establishment) is amended. Under the amended article, the length of time for a construction PE to be deemed constituted is extended from 6 months to 12 months, and the length of time for a service PE is extended from 3 months to 183 days in any 12-month period.

Dividends

Article 10 (Dividends) is replaced. Under the new article, the general withholding tax rates are unchanged (5% if directly holding at least 15% of the paying company's capital, otherwise 10%), but the minimum investment of at least USD 100,000 for the 5% rate is removed and a 10% rate for distributions paid by a real estate investment fund is added.

Interest

Article 11 (Interest) is replaced. Under the new article, the withholding tax rate for interest payments is reduced from 7.5% to 0% (exempt).

Royalties

Article 12 (Royalties) is amended. Under the amended article, the withholding tax rate for royalty payments is reduced from 7.5% to 5%

Limitation on Benefits

Article 22 (Limitation on Benefits) is replaced with the following:

"This Agreement shall not apply to any person who became a person covered by the Agreement if the principal goal of such a person is to enjoy the benefits of any reduction in or exemption from tax provided by this Agreement. In no case shall this exclusion apply to any person engaged in real business activity. The competent authorities of the Contracting States shall consult each other on the application of this provision."

In addition, anti-abuse provisions are added to Articles 10 (Dividends), 11 (Interest) and 12 (Royalties). In summary, the provisions state that the benefits of the treaty will not apply if it was the main purpose of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the dividends, interest or royalties are paid was to take advantage of those Articles by means of that creation or assignment.

Exchange of Information

Article 26 (Exchange of Information) is replaced, bringing it in line with the OECD standard for information exchange.

Entry into Force and Effect

The protocol will enter into force once the ratification instruments are exchanged. It will apply in Russia from 1 January of the year following its entry into force. It will apply in Singapore in respect of withholding taxes and exchange of information from 1 January of the year following its entry into force, and will apply in respect of other taxes from 1 January of the second year following its entry into force.

Senegal-Turkey

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Tax Treaty between Senegal and Turkey Signed

On 14 November 2015, officials from Senegal and Turkey signed an income tax treaty. The treaty is the first of its kind between the two countries and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

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