Worldwide Tax News
China Expands List of Industries Eligible for Accelerated Depreciation Methods
On 17 September 2015, China's State Administration of Taxation announced that the list of industries eligible to apply accelerated depreciation methods has been expanded to include:
- Light industry;
- Textile manufacturing;
- Machinery manufacturing; and
- Automotive manufacturing.
For fixed assets newly purchased on or after 1 January 2015 for use in these industries, the prescribed depreciation period of the asset may be reduced by 40%, or the double declining balance method or sum-of-the-year's digits method may be applied (accelerated methods). In addition, qualifying small and low-profit enterprises in the above industries may deduct the cost of machinery and equipment in full in the current accounting period if used for R&D purposes and the acquisition cost is less than RMB 1 million.
Russia Clarifies Withholding Tax Refunds Process for Non-Residents
The Russian Ministry of Finance recently issued Guidance Letter 03-08-05/48127, which clarifies the process for obtaining a refund of excess corporate tax withheld in cases where applicable treaty benefits were not applied at the time of payment.
According to the letter, a request for a refund must be made with the Russian tax authority with which the withholding tax agent is registered, and must be made within three years from the end of the tax period in which the payment to the non-resident was made. The request may be made by the non-resident or the withholding tax agent, and must include the following:
- A tax refund petition;
- A copy of the contract or other document under which the income was paid;
- Documentation certified by the competent authority of the non-resident's jurisdiction confirming the non-resident's permanent tax residency and that the income was paid; and
- A copy of documentation confirming that the Russian tax was withheld
If accepted, a refund will be provided within one month from the date the request and supporting documentation was submitted.
Changes in Spain's Rules on Amortization of Intangible Assets
Spain has amended the rules regarding the amortization intangible assets through Audit Law 22/2015, which was published in the Official Gazette on 21 July 2015. The change applies from 1 January 2016.
Under Spain's current rules, intangible assets are amortized based on their useful life for both accounting and tax purposes. Intangible assets with unlimited useful life, including acquired goodwill, may not be amortized for accounting purposes but may be amortized over 20 years for tax purposes (rate limited to 2% for the 2012 to 2015 tax years and 1% for goodwill).
Under the new rules, all intangible assets will be amortizable for accounting purposes based on their useful life. If the useful life cannot be determined, a deemed useful life of 10 years will apply. However, for tax purposes, amortization over 20 years continues to apply if the useful life cannot be determined. The difference between accounting and tax amortization will be registered as a deferred tax asset, which will revert once the accounting value of the intangible asset has been fully amortized.
Kazakhstan Budget Plans Include Replacement of VAT and an Increase in Individual Income Tax Rates
The government of Kazakhstan has reportedly approved its budget plan for 2016 to 2020. The main proposed changes include:
- Replacing the value added tax regime (current rate 12%) with a simple sales tax regime, with a rate of 12% for cash payments, 7% for non-cash payments, and 5% for online purchases; and
- Increasing the individual income tax rate from 10% to 11% in 2017 and to 12% in 2018.
Additional details of the planned changes will be published once available.
Poland's Lower Chamber of Parliament Approves Transfer Pricing Legislation
On 11 September 2015, Poland's lower chamber of parliament (Sejm) approved the latest draft legislation amending the country's transfer pricing (TP) rules. The legislation makes a number of changes, including new documentation requirements in line with the OECD guidance developed as part of Action 13 of the BEPS Project. The main changes are summarized as follows.
The shareholding threshold for determining if parties are related will be increased from 5% to 25%.
The following documentation requirements will be introduced:
- A local file detailing related party transactions and other information of the local entity;
- A benchmarking study if annual revenue exceeds EUR 10 million;
- A simplified related-party transactions report attached to the tax return if annual revenue exceeds EUR 10 million;
- A master file detailing the transfer pricing policy of the group, its organizational structure, business activities, intangibles, etc. if annual revenue exceeds EUR 20 million; and
- A country-by-country (CbC) report if annual consolidated group revenue exceeds EUR 750 million - CbC report to be prepared by the parent company of the group
An exemption from the documentation requirements is provided for companies with annual revenue below EUR 2 million. In addition, thresholds are provided in determining which transactions are covered based on the taxpayer's annual revenue as follows:
- If revenue is EUR 2 million up to EUR 20 million, the covered transactions threshold is EUR 50,000 plus EUR 5,000 per EUR 1 million of annual revenue over EUR 2 million;
- If revenue is over EUR 20 million up to EUR 100 million, the covered transactions threshold is EUR 145,000 plus EUR 45,000 per EUR 10 million of annual revenue over EUR 20 million; and
- If revenue is over EUR 100 million, the covered transactions threshold is EUR 500,000.
Payments to entities in low-tax jurisdictions are subject to a covered transactions threshold of EUR 20,000 regardless of the taxpayer's revenue.
The deadline for preparing the transfer pricing documentation will be the taxpayer's income tax return filing deadline. The time limit for submitting TP Documentation following a request by the tax authorities will be within 7 days.
The transfer pricing legislation must be approved by Poland's upper chamber of parliament (Senat) and signed by the president before entering into force. The new rules were initially to apply from 1 January 2016, but were pushed back to 2017. However, the CbC report requirement will reportedly apply for tax years beginning on or after 1 January 2016.
Tax Treaty between Botswana and the Czech Republic to be Negotiated
Officials from Botswana and the Czech Republic will meet on 5 October 2015 for the first round of negotiations for an income tax treaty. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.
Tax Treaty between Egypt and the Ivory Coast to be Negotiated
According to an announcement from the Egyptian Ministry of Finance, officials from Egypt and the Ivory Coast agreed to the negotiation of an income tax treaty during a meeting held 23 September 2015. Any resulting treaty will be the first of its kind between the two countries, and must be finalized, signed and ratified before entering into force.