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Approved Changes (1)
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OECD Publishes Revised Discussion Draft for BEPS Action 6: Prevent Treaty Abuse

On 22 May 2015, the OECD published a revised discussion draft for Action 6 (Prevent Treaty Abuse) of the Base Erosion and Profiting Shifting (BEPS) Project.

The revised draft is the third discussion draft on Action 6. The first was issued 14 March 2014 and the second was issued on 21 November 2014 as a follow up to the September 2014 Report on Action 6. The new revised discussion draft reflects the conclusions and proposals that resulted from the comments received and public consultation meetings held on the previous drafts. The new draft and the comments received on it will be discussed at the Working Party 1 meeting of 22-26 June 2015, and used to produce a final version of the Report on Action 6.

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Comments should be submitted by 17 June 2015. Instructions for submission are included in the new draft.

Proposed Changes (2)

India

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India Issues Draft Rules on Arm's Length Price Computation for Public Comment

On 21 May 2015, the Indian Ministry of Finance published draft rules for the computation of the arm’s length price of an international transaction or specified domestic transaction undertaken on or after 1 April 2014. The main change in the new rules is the adoption of the range concept instead of the arithmetic mean concept for determining the arm's length price, as well as the use of multiple year data. This change was announced as part of the 2014-2015 Budget, and the required amendments to facilitate the change were made to the Indian Income Tax Act by the Finance (No. 2) Act 2014.

According to the draft rules, the range concept and multiple year data may be used when determining the arm's length price using the transaction net margin method, resale price method, or cost plus method. When using the range concept, at least 9 comparable entities must be selected as tested parties and 3-years of data must be used including the current year in which the transaction takes place. In cases where the range concept does not apply, the arithmetic mean concept is to be used.

Comments on the draft rules should be submitted by 31 May 2015. Click the following link for the draft rules published on the Ministry of Finance website, which includes instructions for submitting comments.

New Zealand

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New Zealand's 2015-2016 Budget Delivered

On 21 May 2015, New Zealand's Finance Minister Bill English delivered the country's 2015-2016 Budget. The tax measures of the budget are mainly targeted at individual taxpayers, including new rules on the taxation of capital gains from the sale of homes owned for less than two years and the introduction of a border clearance levy on passengers from 1 January 2016.

Measures that impact businesses are for the most part limited to a reduction in Accident Compensation Corporation (ACC) levies and increased spending on tax law enforcement. The increased spending will be primarily focused on increasing compliance in regard to property tax, complex financing transactions, including hybrid instruments, and the hidden economy. The Finance Minister also mentioned in his Budget speech that the government plans to begin reducing income tax rates in 2017, although no specific details have been provided.

Treaty Changes (3)

Grenada-Switzerland

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TIEA between Grenada and Switzerland Signed

On 19 May 2015, officials from Grenada and Switzerland signed a tax information exchange agreement. The agreement is the first of its kind between the two countries and will enter into force once the ratification instruments are exchanged. It will apply from the date of its entry into force for requests made in relation to tax periods beginning on or after 1 January of the year following its entry into force.

Hungary-Saudi Arabia

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Tax Treaty between Hungary and Saudi Arabia has Entered into Force

On 1 May 2015, the income and capital tax treaty between Hungary and Saudi Arabia entered into force. The treaty, signed 23 March 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Hungarian personal income tax, corporate tax, land parcel tax, and building tax. It covers Saudi Zakat, and the income tax including the natural gas investment tax.

Service PE

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

Withholding Tax Rates

  • Dividends - 5%
  • Interest - 0%
  • Royalties - 5% when paid for the use of, or the right to use, industrial, commercial, or scientific equipment; otherwise 8%

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 or comparable interests 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, which are owned directly or indirectly in a company resident in the other State, unless listed on a stock exchange in that State

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

Double Taxation Relief

Hungary generally applies the exemption method for the elimination of double taxation, although the credit method may apply in regard to income covered by Articles 10 (Dividends) and 12 (Royalties). Saudi Arabia generally applies the credit method.

Effective Date

The treaty applies from 1 January 2016.

Liechtenstein-St. Vincent

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Exchange of Notes Amending the TIEA between Liechtenstein and St. Vincent and the Grenadines has Entered into Force

On 20 May 2015, the exchange of notes amending the tax information exchange agreement between Liechtenstein and St. Vincent and the Grenadines entered into force. The notes include amendments to Article 1 (Object and Scope of the Agreement) and Article 7 (Possibility of Declining a Request). The amendments generally apply from 1 January 2010.

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