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Worldwide Tax News

Approved Changes (2)

Bolivia

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Bolivia Extends Financial Transactions Tax

On 1 July 2015, Bolivia enacted Law no. 176/2015-2016, which extends the financial transactions tax through 2018 and includes a year-on-year increase in the rate. The tax applies to foreign currency transactions and domestic currency transactions if pegged to a foreign currency (boliviano currently not pegged to any currency). Affected transactions include credits and debits in current and savings accounts, payments or transfers of funds, transfers or remittances to or from Bolivia, etc. The rates are as follows:

  • 2015: 0.15%
  • 2016: 0.20%
  • 2017: 0.25%
  • 2018: 0.30%

Withholding agents required to withhold and remit payment include entities governed by the Law on Banks and Financial Entities, entities legally established in Bolivia to provide funds transfer services, and management companies of investment funds in certain cases.

Spain

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Update - Spain Reduces Individual Income Tax Rates and Withholding Tax Rates

On 11 July 2015, Royal Decree-law 9/2015 was published in Spain's Official Gazette. The law entered into force the following day, reducing individual income tax rates, non-resident tax rates, and the resident withholding tax rate.

Individual Income Tax Rates

The general individual income tax rates are reduced by 0.5% for the first three brackets and 1% for the top two as follows:

  • Up to EUR 12,450 - 19.5%
  • Over EUR 12,450 up to 20,200 - 24.5%
  • Over EUR 20,200 up to 34,000 - 30.5%
  • Over EUR 34,000 up to 60,000 - 38%
  • Over EUR 60,000 - 46%

Savings income tax rates are reduced by 0.5% as follows:

  • Up to EUR 6,000 - 19.5%
  • Over EUR 6,000 up to 50,000 - 21.5%
  • Over EUR 50,000 - 23.5%

Non-Resident Income Tax (NRIT) Rates

  • The general NRIT rate remains at 24%;
  • The NRIT rate for EU and EEA residents is reduced from 20% to 19.5%; and
  • The general NRIT rate for dividends, interest, capital gains and branch profits is reduced from 20% to 19.5%

Resident Withholding Tax Rate

The withholding tax rate that applies on income of resident taxpayers is reduced from 20% to 19.5%.

Effective Dates

The individual income and savings tax rates generally apply for the whole of 2015, while the NRIT and resident withholding tax rates apply from 12 July 2015. The rates are to be further reduced in 2016, except for the general NRIT rate.

Proposed Changes (3)

Barbados

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Barbados 2015 Budget Presented

The Barbados Minister of Finance Christopher Sinckler presented the country's 2015 Budget on 15 June 2015. The main tax related measures proposed are summarized as follows:

Value Added Tax (VAT)

  • From 1 September 2015, certain food items not available from local sources will be recategorized as subject to the standard 17.5% VAT rate instead of zero-rated, and all betting and gaming services will no longer be VAT exempt; and
  • From 1 January 2016, the VAT registration threshold will be increased from BBD 80,000 per year to BBD 200,000.

Corporate Taxation

  • Effective tax year 2015, the additional deduction incentive of 120% or 150% for certain expenses will be abolished, including expenses related to research and developments, tourism marketing, listing of shares on the Securities Exchange of Barbados, and others; and
  • Group relief (loss offset) will no longer be available, and the carry forward period for losses will be reduced from 9 years to 7 years.

Individual Taxation

  • Effective tax year 2015, the two individual income tax bracket rates will be reduced from 17.5% and 35% to 16% and 33.5% respectively.

Other Measures

  • Business registration and licensing fees will be reduced;
  • The municipal solid waste tax will be repealed; and
  • The land tax will be increased from 0.50% to 0.70% for non-residential property, from 0.60% to 0.80% for vacant land, and the tax brackets for residential would be reduced with the top band (0.75%) reduced from BBD 1.25 million to 1 million.

Click the following link for the 2015 Budget presentation.

Botswana-Lesotho-Mozambique-Namibia-South Africa-Swaziland-Zambia

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Southern Africa Countries Hold Forum on BEPS and other Cross Border Tax Issues

On 16 July 2015, the South Africa Revenue Services held a forum on base erosion and profit shifting and other cross border tax issues. Countries taking part in the forum include Botswana, Lesotho, Mozambique, Namibia, South Africa, Swaziland and Zambia.

Some of the areas discussed during the forum include:

  • Applying a lower threshold for CbC reporting requirements than the recommended threshold provided in the OECD guidelines (EUR 750 million);
  • Implementing information exchange on aggressive tax and duty schemes and other compliance matters; and
  • Developing measures to counter tax fraud, with a focus on VAT and the effects of the digital economy

Click the following link for a joint statement issued after the forum, which includes a full list of matters discussed and agreed to.

Ukraine

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Ukraine Planning to Reduce Natural Resource Tax Rates for Oil and Gas

Ukraine's Minister of Finance Natalie Jaresko has recently announced that the government is planning to introduce legislation that will reduce the natural resource royalty tax rates for oil and gas fields. The top rate was increased from 28% to 55% in 2014.

For oil and gas fields with wells up to 5 km deep, the 55% rate will be reduced to 29%, and for wells more than 5km deep, the rate will be reduced from 28% to 14%. In addition, reduced rates will be introduced for new wells at the rate of 20% for wells up to 5 km deep and 10% and for wells over 5 km deep.

If approved, the reduction in the standard rates would apply from 1 October 2015, and the reduced rates for new wells would apply for 2016.

Treaty Changes (3)

Ireland-Saint Kitts and Nevi

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TIEA between Ireland and St. Kitts and Nevis Signed

On 21 July 2015, officials from Ireland and St. Kitts and Nevis signed a tax information exchange agreement. The agreement is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Mexico-Turkey

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Tax Treaty between Mexico and Turkey has Entered into Force

The income tax treaty between Mexico and Turkey entered into force on 23 July 2015. 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 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 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; 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. However, if the time between the acquisition and alienation of such other property does not exceed 1 year, such gains may also be taxed by the other State if derived from that State.

Double Exemption

A protocol to the treaty, signed the same date, includes the provision that for the purposes of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 13 (Capital Gains), both Contracting States keep the right of taxing in accordance with its domestic laws any income where double exemption results from a differing classification of the income concerned.

Double Taxation Relief

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

Effective Date

The treaty applies from 1 January 2016.

Netherlands-Zambia

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Update - New Tax Treaty between the Netherlands and Zambia

The new income tax treaty between the Netherlands and Zambia was signed 15 July 2015. Once in force and effective, the new treaty will replace the 1997 income tax treaty between the two countries, which currently applies.

Taxes Covered

For the European part of the Netherlands, the treaty covers income tax, wages tax, company tax, and dividend tax. For the Caribbean part (BES Islands), it covers income tax, wages tax, property tax and revenue tax.

Zambian taxes covered include the income tax.

Permanent Establishment

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.

The treaty also includes the provision that a permanent establishment will be deemed constituted if an enterprise of one Contracting State carries on offshore activities in the territorial sea of the other State for a period or periods aggregating 30 days or more within any 12-month period.

In regard to an installation or structure used for the exploration for natural resources, a permanent establishment will be deemed constituted if the installation or structure continues for a period of 183 days or more. If the installation or structure is located offshore as describe in the above paragraph, the limit is 30 days.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner directly holds at least 10% of the paying company's capital, or is a pension fund; otherwise 15%
  • Interest - 10%
  • Royalties - 7.5%

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if it was the main purpose or one of the main purposes 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. The limitation is included in each of those Articles.

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 deriving more than 50% of their value directly or indirectly from immovable property situated 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

Zambia applies the credit method for the elimination of double taxation while the Netherlands may apply the exemption or credit method depending on the type of income and the applicable provisions of its domestic law.

Entry into Force and Effect

The treaty will enter into force on the last day of the month following the month in which the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

The 1977 income tax treaty between the Netherlands and Zambia will cease to have effect in respect of any tax from the date the relevant provisions of the new treaty apply, and will terminate on the last such date.

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