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Approved Changes (2)

Australia

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Australian Parliament Passes Tax Measures Supporting Small Businesses

On 15 June 2015, the Australian parliament passed tax measures included in the 2015 Budget to support small businesses. The measures include an increased asset value limit for accelerated depreciation and a reduced corporate tax rate.

Accelerated Depreciation

Accelerated depreciation for small businesses is expanded by allowing small businesses with aggregate annual turnover of less than AUD 2 million to immediately deduct assets they start to use or install ready for use, provided the asset costs less than AUD 20,000 (previous limit AUD 1,000). Assets valued at AUD 20,000 or more can be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% in each subsequent year. If the balance of the depreciation pool is less than AUD 20,000, the pool can be immediately deducted.

The change applies for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017.

Reduced Tax Rate

Small businesses with aggregate annual turnover of less than AUD 2 million will be allowed to benefit from a reduced tax rate of 28.5% (standard rate 30%). The rate cut applies from 1 July 2015.

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OECD Publishes Discussion Draft Comments on BEPS Project Action 8 (Hard-to-Value Intangibles)

On 19 June 2015, the OECD published comments received in response to the discussion draft for Action 8 (Hard-to-value intangibles) of the Base Erosion and Profiting Shifting (BEPS) Project.

The discussion draft sets out an approach to hard-to-value intangibles and proposes revisions to the guidance in Section D.3 of the 2014 BEPS Report “Guidance on Transfer Pricing Aspects of Intangibles”. The revised guidance explains the difficulties faced by tax administrations in verifying the arm’s length basis on which pricing was determined by taxpayers for transactions involving a specific category of intangibles.

The discussion draft also proposes an approach based on the determination of the arm’s length pricing arrangements, including any contingent pricing arrangements that would have been made between independent enterprises at the time of the transaction. This approach is applied when specific conditions are met and it is intended to protect tax administrations against the negative effects of information asymmetry.

Click the following links for the discussion draft and the over 210 pages of comments received:

A public consultation meeting concerning Action 8, 9 and 10 will be held in Paris at the OECD Conference Centre on 6-7 July 2015. The meeting will be broadcast live via http://video.oecd.org/.

Treaty Changes (4)

Andorra-France

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Tax Treaty between Andorra and France to Enter into Force

The income Tax Treaty between Andorra and France will enter into force on 1 July 2015. The treaty, signed 2 April 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Andorran corporation tax, tax on income from economic activities, tax on income of non-residents, and real estate capital gains tax. It covers French income tax, corporation tax, and contributions on corporation tax.

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 - 0% when paid in connection with the sale on credit of any industrial, commercial or scientific equipment, or of any merchandise or services by one enterprise to another enterprise, or interest paid between financial institutions; otherwise 5%
  • Royalties - 0% for copyrights or similar royalties (excluding software, movies and other image or sound reproduction); otherwise 5%

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 shares or other rights in a company, trust or any other institution or entity where 50% or more of the value of its assets or property is directly or indirectly derived from immovable property situated in the other State (excluding immovable property used for its own business activity); and
  • 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 other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

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

Exchange of Information

For the purpose of the treaty, the 2009 tax information exchange agreement between the two countries applies. The 2009 agreement has been in force and effective since 22 December 2010.

Limitation on Benefits

The treaty includes a limitation on benefits provision under Article 25 (Miscellaneous). According to the provision, the benefits of any reduction in or exemption from tax provided for in the treaty will not apply when the main purpose or one of the main purposes of a resident or a related person is to gain the benefits provided by the treaty.

Effective Date

The treaty generally applies from 1 January 2016.

Australia-Slovenia

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Tax Treaty between Australia and Slovenia to be Negotiated

According to recent reports, officials from Australia and Slovenia discussed the negotiation of an income tax treaty during a meeting held 16 June 2015. Any resulting treaty would be the first of its kind between the two countries, and will need to be finalized, signed and ratified before entering into force.

Canada-Cook Isl

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TIEA between Canada and the Cook Islands Signed

On 15 June 2015, officials from Canada and the Cook Islands signed a tax information exchange agreement. The agreement is the first of its kind between the two jurisdictions, and will enter into force once the ratification instruments are exchanged.

The agreement will apply 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.

Kyrgyzstan-Saudi Arabia

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Saudi Arabia Approves Tax Treaty with Kyrgyzstan

On 15 June 2015, the Saudi Arabian Cabinet approved for ratification the pending income tax treaty with Kyrgyzstan. The treaty, signed 2 December 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Kyrgyz tax on profits and income of legal persons and individual income tax, and covers Saudi Zakat and income tax including the natural gas investment tax.

Service PE

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

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 7.5%

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; and
  • Gains from the alienation of shares in a company resident in the other 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

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

Entry into Force and Effect

The treaty will enter into force on the first day of the second month following the exchange of the ratification instruments, and will apply from 1 January of the year following its entry into force.

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