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Approved Changes (2)

Egypt

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Egypt Publishes Guidelines on Dividends, Capital Gains and Individual Income Taxation Amendments

On 12 November 2015, the Egyptian tax authorities published Guideline No. 28/2015, which clarifies changes to the tax treatment of dividends, capital gains, and individual income under Law No. 96, published 20 August 2015 (previous coverage). The main points of the guidelines are summarized as follows.

Dividends Withholding Tax

The dividends withholding tax for dividends distributed by Egyptian-based companies to other domestic entities is made a final withholding tax of 10% (5% if holding 25% or more of the capital or voting rights for two years), with no further taxation of the dividends in the hands of the recipient. However, investment and financing costs incurred in connection with dividends received are not deductible. The non-deductible cost is determined as a percentage of the overall costs and the value of the dividends.

The change applies for tax years ending after Law No. 96 was published (20 August 2015), regardless of whether the dividends received in the tax year were received before or after the Law entered into force.

Capital Gains Tax Suspension

The capital gains tax (10%) on shares listed on the Egypt stock exchange is suspended for two years with effect for gains derived in tax years that end after 17 May 2015, regardless of the date of the gains. Expenses incurred in connection with the exempt capital gains are non-deductible, as with dividends above.

In addition, non-resident companies that have already incurred withholding taxes on capital gains from listed shares in tax years that end after 17 May 2015 are entitled to a refund.

5% Surtax on Income Exceeding EGP 1 Million

The 5% surtax on corporate and individual income exceeding EGP 1 million applies for only one tax year (was originally to apply for three years). It applies for the tax year ending after 5 June 2014.

Individual Income Tax Brackets

The new individual income tax brackets, with a top rate of 22.5%, apply from the 2015 tax year (1 January 2015 to 31 December 2015).

South Africa

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South Africa Publishes Rates and Monetary Amounts and Amendment of Revenue Laws Act 2015

On 17 November 2015, South Africa published the Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2015 (Act No. 13 of 2015), as approved by the National Assembly and assented by the President. The Act includes amendments to rates introduced in the 2015 Budget.

Transfer Duty

The rates and brackets for transfer duty on the sale of property are adjusted, including an increase of the transfer duty exemption threshold from ZAR 600,000 to ZAR 750,000 and the addition of a new bracket with an 11% rate for property transfers above ZAR 2.25 million. The brackets and rates for property acquired on or after 1 March 2015 are as follows:

  • up to ZAR 750,000 - 0%
  • over ZAR 750,000 up to ZAR 1.25 million - 3%
  • over ZAR 1.25 million up to 1.75 million - 6%
  • over ZAR 1.75 million up to 2.25 million - 8%
  • over ZAR 2.25 million - 11%

Individual Income Tax

Individual income tax rates for the year of assessment commencing on 1 March 2015 or ending 29 February 2016 are increased by 1% and the brackets adjusted as follows:

  • up to ZAR 181,900 - 18%
  • over ZAR 181,900 up to 284,100 - 26%
  • over ZAR 284,100 up to 393,200 - 31%
  • over ZAR 393,200 up to 550,100 - 36%
  • over ZAR 550,100 up to 701,300 - 39%
  • over ZAR 701,300 - 41%

Small Business Progressive Rates

The lower bracket (0% rate) for small business corporations subject to progressive rates is increased from taxable income up to ZAR 70,700 to taxable income up to ZAR 73,650. The brackets and rates for the 12-month period ending 31 March 2016 are as follows:

  • up to ZAR 73,650 - 0%
  • over ZAR 73,650 up to 365,000 - 7%
  • over ZAR 365,000 up to 550,000 - 21%
  • over ZAR 550,000 - 28%

Micro Businesses Rates

For the turnover-based tax regime for micro businesses with annual turnover below ZAR 1 million, the number of brackets and rates are reduced. The brackets and rates for the 12-month period ending 29 February 2016 are as follows:

  • up to ZAR 335,000 - 0%
  • over ZAR 335,000 up to 500,000 - 1%
  • over ZAR 500,000 up to 750,000 - 2%
  • over ZAR 750,00 up to 1,000,000 - 3%

Click the following link for the full text of the Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2015.

Proposed Changes (1)

Slovenia

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Slovenia Planning Reduction in Tax Allowances

Slovenia's Ministry of Finance has recently proposed a number of amendments to the country's Corporate Income Tax Law concerning tax allowances. The main proposals include:

  • Reducing the R&D investment allowance for in-house R&D and certain third party R&D service expenses from 100% to 50%;
  • Reducing the investment allowance for equipment from 40% to 20%; and
  • Abolishing the tax allowance for hiring new employees.

Subject to approval, the proposed changes would apply from 1 January 2016.

Treaty Changes (5)

China-Romania

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New Tax Treaty between China and Romania under Negotiation

According to an announcement from the Chinese Ministry of Foreign Affairs on 24 November 2015, negotiations are underway for a new income tax treaty with Romania. Any resulting treaty will need to be finalized, signed and ratified before entering into force, and once in force and effective will replace the 1991 income tax treaty between the two countries, which currently applies.

Estonia-Switzerland

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Protocol to the Tax Treaty between Estonia and Switzerland has entered into Force

The protocol to the 2002 income and capital tax treaty between Estonia and Switzerland entered into force on 16 October 2015. The protocol, signed 25 August 2014, is the first to amend the treaty. The main amendments to the treaty are summarized as follows.

Withholding Tax Rates

Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) are replaced, and include the following rates:

  • Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital for at least one year prior to payment; otherwise 10%
  • Interest - 0%
  • Royalties - 0%

In addition, a provision is added to the original protocol signed with the treaty that if the holding period for the dividends tax exemption is subsequently met after the payment is made, the beneficial owner will be entitled to a refund of the tax withheld.

Capital Gains

Paragraph 4 under Article 13 (Capital Gains) is replaced. Under the new paragraph, gains derived by a resident of a Contracting State from the alienation of share deriving more than 50% of their value directly or indirectly from immovable property situated in the other State will be taxable in that other State. An exemption is provided for the alienation of shares listed on a stock exchange established in either State.

Double Taxation Relief

Article 13 (Avoidance of Double Taxation) is replaced. The main changes include:

  • The double taxation relief method applied by Estonia is changed from the credit method to the exemption method. However, in the case of dividends subject to 10% withholding tax, Estonia will apply the credit method.
  • The provisions for a credit, lump sum reduction, or partial exemption provided by Switzerland for income covered by Articles 11 (Interest) and 12 (Royalties) under the original treaty is removed.

Exchange of Information

Article 26 (Exchange of Information) is replaced, brining it in line with the OECD standard for information exchange.

Limitation on Benefits

A limitation on benefits provision is added to the original protocol signed with the treaty.

The provision states that the benefits of the treaty under Articles 10 (Dividends), 11 (Interest) and 12 (Royalties) will not apply if the income is paid under or as part of a conduit arrangement. A conduit arrangement is defined as one in which a resident of a Contracting State normally entitled to the benefits of the treaty receives an item of income from the other State, and directly or indirectly pays all or substantially all of the income to a person not resident in either Contracting State, and the main purpose was to obtain the benefits of the treaty.

Other Changes

The protocol also amends Articles 3 (General Definitions), 4 (Resident), 5 (Permanent Establishment), 6 (Income from Immovable Property), 9 (Associated Enterprises) and 25 (Mutual Agreement Procedure).

Effective Date

The provisions of the protocol generally apply from 1 January 2016.

Iceland-Switzerland

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New Tax Treaty between Iceland and Switzerland has entered into Force

The new income and capital tax treaty between Iceland and Switzerland entered into force on 6 November 2015. The treaty, signed 10 July 2014, replaces the 1988 income and capital tax treaty between the two countries.

Taxes Covered

The treaty covers Icelandic income taxes to the state and to the municipalities. It covers Swiss federal, cantonal and communal taxes on income and capital.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital for at least 1 year prior to the payment, or is a pension fund; otherwise 15%
  • Interest - 0%
  • Royalties - 5% for the use of or the right to use any patent, trademark, design or model, plan, secret formula or process, otherwise 0%

A protocol signed with the treaty includes the provision that if the holding period for the dividends tax exemption is subsequently met after the payment is made, the beneficial owner will be entitled to a refund of the tax withheld.

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; although an exemption is provided for:
    • The alienation of shares quoted on a stock exchange established in either Contracting State; and
    • The alienation of shares in a company that carries on its business in the immovable property from which the value is derived

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Iceland generally applies the credit method for the elimination of double taxation, but if the income is only taxable in Switzerland under the treaty, Iceland will apply the exemption method.

Switzerland generally applies the exemption method, but in the case of income covered by Articles 10 (Dividends) and 12 (Royalties) Switzerland may apply the credit method, a lump sum reduction, or a partial exemption.

Limitation on Benefits

A protocol to the treaty includes a limitation on benefits provision whereby the benefits of the treaty provided by Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 21 (Other Income) will not apply for income paid under a transaction or derived by an entity if the main purpose of the transaction or establishment of the entity was to obtain the benefits of the treaty.

Effective Date

The treaty applies from 1 January 2016.

The treaty replaces the 1988 income and capital tax treaty between the two countries, although the 1988 treaty will continue to apply for tax years and periods that have ended before the new treaty applies.

Mauritius-Morocco

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Tax Treaty between Mauritius and Morocco Signed

On 25 November 2015, officials from Mauritius and Morocco signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into force after the ratification instruments are exchanged.

Additional details will be published once available.

Montserrat-Ireland

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Montserrat Ratifies TIEA with Ireland

On 12 November 2015, Montserrat ratified the pending tax information exchange agreement with Ireland. The agreement, signed 14 December 2012, is the first of its kind between the two jurisdictions and is in line with the OECD standard for information exchange. It will enter into force 30 days after the ratification instruments are exchanged, and will generally apply from that date.

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