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Approved Changes (3)

China

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China Cancels Pre-Approval Requirement for 22 Tax Items

On 18 August 2015, China's State Administration of Taxation (SAT) issued Announcement No. 58 of 2015. The announcement notifies tax authorities at all levels on the cancelation of the administrative pre-approval requirement for 22 tax items. The change is part of China's efforts to decentralize and simplify certain tax-related matters.

The items include certain tax exemptions and other concessions available in several areas, such as:

  • Western regions development;
  • Technology transfers;
  • Venture capital;
  • Infrastructure projects; and
  • Environmental protection, and energy and water conservation.

Click the following link for the list of tax items provided by the SAT (Chinese Language).

Lithuania

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Lithuania Adopts Tax Administration Amendments

On 25 June 2015, the Lithuanian parliament adopted several amendments to the country's Law on Tax Administration. The amendments are focused primarily on individual financial reporting requirements, but also include a number of new requirements for legal entities. Under the new rules, legal entities must annually report:

  • Any money received from individual members if the amount is equal to or exceeds EUR 15,000;
  • Any liabilities to or of individuals if related to business activities and the amount is equal to or exceeds EUR 15,000;
  • Any employed non-resident individuals; and
  • Any services received from a non-resident legal entity in Lithuania if the total value of the services from a single entity is equal to or exceeds EUR 15,000.

In addition to the reporting requirements, the amendments also provides the tax authorities 90 days to perform a tax audit on any tax return submitted or amended 90 days or less before the statute of limitations expires, and verify and recalculate the amount of tax due. Lithuania's general statute of limitation is 5 years following the year a return is filed or due, and 10 years in cases of suspected tax avoidance or evasion.

New Zealand

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New Zealand Publishes Guide on Non-Resident Withholding Tax

On August 21 2015, New Zealand Inland Revenue published a guide for payers of non-resident withholding tax (NRWT). The guide provides a general overview on

  • Deducting NRWT;
  • Registering as an NRWT payer
  • End of year filing obligations; and
  • NRWT rates.

In addition to the standard domestic rates of 30% for dividend payments, and 15% for interest and royalty payments, the guide also provides specific rates for residents of countries with which New Zealand has entered into a tax treaty. For each country, the guide indicates whether the NRWT is a final tax, or a minimum or maximum tax that must be included in the non-resident's tax return.

Click the following link for the NRWT guide the Inland Revenue website.

Treaty Changes (2)

Liechtenstein-Czech Rep

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Liechtenstein Approves Tax Treaty with the Czech Republic

The government of Liechtenstein recently announced that is has approved for ratification the pending income and capital tax treaty with the Czech Republic. The treaty, signed 25 September 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Czech income tax on individuals and legal persons, and the tax on Immovable property. It covers Liechtenstein personal and corporate income taxes, real estate capital gains tax, wealth tax and coupon 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 a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company that has directly held at least 10% of the paying company's capital for an uninterrupted period of at least one year, otherwise 15% (if the holding period requirement is not met at the time of payment but subsequently met, the beneficial owner is entitled to a refund of the tax withheld)
  • Interest - 0%
  • Royalties - 10% if paid in respect of any patent, trade mark, design or model, plan, secret formula or process, tailor made computer software, or industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience; otherwise 0%

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 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 other 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 or other interests 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

The Czech Republic applies the credit method for the elimination of double taxation, while Liechtenstein generally applies the exemption with progression method. However, for income covered by Articles 10 (Dividends) and 12 (Royalties), Liechtenstein applies the credit method.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.

Nigeria-Sweden

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Tax Treaty between Nigeria and Sweden has Entered into Force

According to recent reports, the income and capital tax treaty between Nigeria and Sweden entered into force on 31 December 2014. The treaty, signed 18 November 2004, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Nigerian personal income tax, companies income tax, petroleum profits tax, capital gains tax, and education tax. It covers Swedish national income tax, withholding tax on dividends, income tax on non-residents, income tax on non-resident artistes and athletes, and municipal income 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 a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 7.5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10%
  • Interest - 7.5%
  • Royalties - 7.5%

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if the rights or property in respect of which the dividends, interest or royalties are paid were created or assigned mainly for the purpose of taking advantage of the benefits of those articles and not for bona-fide commercial reasons. The limitation is included in each of those Articles. If a Contracting State contemplates to deny benefits to a resident of the other Contracting State based on the limitation, the competent authorities should consult with each other.

In addition, the treaty includes a Limitation on Benefits Article (26), which states that the provisions of the treaty providing for an exemption or reduction of tax will not apply for the income of a company resident in a Contracting State or dividends paid by the company if:

  • The company derives income primarily from other States:
    • From banking, shipping, financing or insurance activities; or
    • From being a headquarters, coordination center or similar entity providing administration or other support to group members primarily carrying on business in other States; and
  • The income from such activities bears a significantly lower tax burden due to a preferential regime.

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; and
  • Gains from alienation of movable property forming part of the business property of a permanent establishment in the other State

Double Taxation Relief

Both countries generally apply the credit method for the elimination of double taxation. However, for dividend income, Sweden applies the exemption method in accordance with Swedish law.

Provisions are also included for a tax sparing credit whereby Sweden will treat as Nigerian tax paid any tax that would have been payable but was reduced or exempted through incentives included in Nigerian law. This applies only for Swedish companies that have a permanent establishment in Nigeria and where the reduction or exemption is granted for profits from activities carried out in Nigeria, in the following areas:

  • The export of Nigerian products;
  • The mining industry;
  • The installation, operation or maintenance of fixed or mobile telecommunication systems and related equipment;
  • Industrial and manufacturing activities;
  • The oil and gas industry;
  • Agriculture; and
  • Tourism

In addition, for royalties received in respect of the above business activities, the Nigerian tax paid will be considered to have been paid with an additional amount of 5%, and if no tax has been charged, will be considered to have been paid at a rate of 5%. This applies for royalties received as consideration for the use of any patent, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.

The tax credit treatment for qualifying companies with a permanent establishment in Nigeria and for royalties applies for the first 10 years the treaty is in effect.

Effective Date

The treaty applies from 1 January 2015.

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