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Worldwide Tax News

Approved Changes (1)

Nigeria

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Nigeria Reduces Pioneer Status Tax Holiday Duration

Nigeria's Investment Promotion Council had reduced the duration of the tax exemption holiday granted to qualifying Pioneer Status companies from a maximum of 5 years to a maximum of 3. The potential for an extension of 1 to 2 years for qualifying companies is still available.

It is expected that the change will apply for pioneer status companies that are still in the initial 3 year period and for new applicants for Pioneer Status. It is unclear how the change will apply to companies that have already exceeded a 3 year tax holiday, and whether a refund will be provided for companies that have already paid the 2% service charge on the estimated tax savings for a 5 year holiday.

Additional clarification will be published once available.

Proposed Changes (1)

Thailand

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Thailand Considering New Progressive Tax Rates for SMEs

According to recent reports, Thailand is considering a proposal for new progressive tax rates for small and medium-sized enterprises (SME). The rates proposed rates are:

  • 5% on profit up to THB 5 million
  • 10% on profit over THB 5 million up to THB 10 million
  • 15% on profit over THB 10 million up to THB 20 million
  • 20% on profit over THB 20 million

Reduced rates already apply for SMEs with paid up capital of THB 5 million or less, and annual turnover not exceeding THB 30 million in any accounting period. For qualifying SMEs the first THB 300,000 is exempt, and a reduced rate of 15% applies on profit exceeding THB 300,000 up to THB 3 million (increased from THB 1 million from 1 January 2015). Profits exceeding THB 3 million are subject to the standard rate of 20%. It is not yet clear how the proposed rates would affect the current reduced rates for SMEs, or if certain paid up capital or maximum turnover conditions would apply.

Treaty Changes (3)

Germany-Norway

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Protocol to the Tax Treaty between Germany and Norway has Entered into Force

On 3 February 2015, the protocol to the 1991income and capital tax treaty between Germany and Norway entered into force. The protocol, signed 24 June 2013, is the first to amend the treaty. The main amendments include:

  • Article 7 Business Profits is replaced in line with OECD Model (2010)
  • Article 10 Dividends is replaced, with the new article including that the withholding tax rates on dividends is 0% if the beneficial owner is a company directly holding at least 25% of the paying company's capital, otherwise 15%. Also, the language concerning differing rates of tax on distributed and undistributed profits is removed.
  • Article 23 Avoidance of Double Taxation is replaced
  • Article 26 Exchange of Information is replaced in line with the OECD standard for information exchange
  • Article 27 Assistance in Tax Collection is replaced

Other articles amended include Article 2 Taxes Covered; Article 9 Associated Enterprises; Article 18 Pensions, Maintenance Payments, Life Annuities, and Similar Payments; and Article 24 Non-Discrimination.

The protocol applies from 1 January 2015.

Japan-Qatar

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Tax Treaty between Japan and Qatar Signed

On 20 February 2015, officials from Japan and Qatar signed an income tax treaty. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Japanese income tax, corporation tax, special income tax for reconstruction, local corporation tax and local inhabitant tax. It covers Qatari taxes on income.

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 the same or connected project for a period or periods aggregating more than 183 days within any 12 month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company that has directly or indirectly held at least 10% of the paying company's capital for at least 6 months ending on the date on which entitlement to the dividends is determined, otherwise 10%
  • Interest - 10%, but an exemption applies if interest is beneficial owned by:
    • A bank,
    • An insurance company,
    • A securities dealer,
    • An enterprise that derives more than 50% of its liabilities from issuing bonds in financial markets or from taking deposits at interest, and less than 50% of the assets of the enterprise consist of debt-claims against Associate Enterprises as defined in the treaty, or
    • A pension fund when more than 50% of its members or participants are individuals who are residents of either Contracting State at the end of the prior taxable year
  • Royalties - 5%
  • Capital Gains - generally exempt, except for:
    • Gains from the alienation of immovable property,
    • Gains from the alienation of movable property forming part of the business property of a permanent establishment, and
    • Gains from the alienation of shares or interests in a company deriving at least 50% of the value of its property directly or indirectly from immovable property situated in the other Contracting State, unless the shares or interest are traded on a recognized stock exchange and the alienator and related persons owns in the aggregate 5% or less of the shares or interests

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 the provision that the relief provided for under the treaty will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of any shares, debt-claims or other rights or properties in respect of which income arises was to take advantage of the treaty.

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged, and will generally apply from 1 January of the year following its entry into force. However, the provisions of Article 25 Exchange of Information will apply from the date of the treaty's entry into force regardless of the date the taxes are levied or the taxable year to which the taxes relate.

Once in force and effective, the 2009 Shipping and Air Transport Agreement between Japan and Qatar will be terminated and cease to have effect.

Mexico-Turkey

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Turkey Ratifies Tax Treaty with Mexico

On 20 February 2015, Turkey published the decree ratifying the pending income tax treaty with Mexico. The treaty, signed 17 December 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Mexican federal income tax and business flat rate tax, and covers Turkish income tax and corporation tax.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If the authorities cannot reach mutual agreement, the company will not be entitled to the benefits of the treaty.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital, otherwise 15%
  • Interest - 10% if the gross amount of the interest is paid to a bank, otherwise 15%
  • Royalties - 10%
  • Capital gains - the following 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 similar rights in a company whose property consists directly or indirectly principally of immovable property situated in the other State,
    • Gains from the alienation of shares, participation or other rights in the capital of a company resident 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 other property in the other State when the time between the acquisition and alienation of such property does not exceed 1 year

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 30 days after the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.

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