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Worldwide Tax News

Approved Changes (1)

China

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China Publishes Notice on Joint Punishments for Serious Tax Crimes

On 30 March 2015, China's State Administration of Taxation (SAT) published an English version of a notice concerning an MOU signed by 21 government departments for the implementation of measures for imposing joint punishments for parties Involved in serious tax crimes, which requires coordination among various departments. The notice was jointly issued by:

  • The National Development and Reform Commission,
  • The State Administration of Taxation,
  • The Central Committee of the Spiritual Civilization Construction,
  • The Supreme People’s Court,
  • The Ministry of Public Security,
  • The Ministry of Finance,
  • The Ministry of Land and Resources,
  • The Ministry of Transport,
  • The Ministry of Commerce, and
  • The People’s Bank of China

Local taxation departments at all levels, including the SAT, are to publish information on cases involving serious tax crimes on their official websites on a quarterly basis. This information is then to be forwarded to the relevant departments that are responsible for the implementation of punishment measures. The punishments include, but are not limited to:

  • Preventing travel abroad,
  • Restricting access to credit by financial institutions,
  • Restricting the access to government supplied land resources,
  • Restricting government financial support and issuance of enterprise bonds,
  • Banning the participation in government purchase activities and the use of customs-certified enterprise management,
  • Restricting certain for import quotas, and
  • Increased supervision and management over inspection and quarantine work

The punishments may be imposed on both enterprises and natural persons, including their legal and financial representatives.

Click the following link for the notice published on the SAT website.

Proposed Changes (1)

Australia

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Australia Issues Tax Discussion Paper for Reform

On 30 March 2015, the Australian government issued a tax discussion paper for reform of the country's tax system, which is seen as outdated and too reliant on income taxes. The paper broadly reviews the country's tax system, challenges, individual taxation, business taxation, administration and others.

Click the following link for the discussion paper and related media.

Comments must be submitted by 1 June 2015.

Treaty Changes (4)

Bulgaria-United Kingdom

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Update- New Tax Treaty between Bulgaria and the UK

A new income and capital tax treaty was signed by officials from Bulgaria and the United Kingdom on 26 March 2015. Once in force and effective, it will replace the 1987 income and capital tax treaty between the two countries, which is currently in force.

Taxes Covered

The treaty covers Bulgarian personal income tax and corporate income tax. It covers UK income tax, corporation tax and capital gains 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 aside from those covered in Article 21 (Elimination of Double Taxation), Article 23 (Non-Discrimination) and Article 24 (Mutual Agreement Procedure).

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company (other than dividends paid by an investment vehicle), or a pension scheme; otherwise 5%. A 15% rate applies for dividends paid out of income (including gains) derived directly or indirectly from certain immovable property by an investment vehicle which distributes most of this income annually and whose income from such immovable property is exempted from tax.
  • Interest - 0% for interest paid in connection with credit sales of equipment, merchandise or services; on any loan granted by a financial institution; to a pension scheme; or between companies where one directly holds at least 10% of the other's capital for at least one year prior to the payment of interest, or a third company directly holds at least 10% of the capital of both companies for at least a year; otherwise 5%
  • Royalties - 5%
  • Capital gains - generally exempt, except for gains from the alienation 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 comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares regularly traded on a stock exchange)

Double Taxation Relief

Both countries generally apply the credit method for the elimination of double taxation. However, the UK will exempt dividends paid by a Bulgarian company to a company resident in the UK if the conditions for an exemption under UK law are met. Exemption may also apply for profits of a permanent establishment in Bulgaria of a UK company if the conditions for an exemption under UK law are met.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged.

For withholding taxes, the treaty will apply in both countries from 1 January of the year following its entry into force. For other taxes, the treaty will apply in Bulgaria from 1 January of the year following its entry into force. In the UK it will apply for corporation tax from 1 April of the year following its entry into force, and for income tax and capital gains tax from 6 April of the year following its entry into force.

The provisions of Article 24 (Mutual Agreement Procedure), Article 25 (Exchange of Information) and Article 26 (Assistance in the Collection of Taxes) will apply from the date of the treaty's entry into force.

The provisions of the 1987 income and capital gains treaty between Bulgaria and the UK will cease to have effect for the relevant taxes on the dates the new treaty applies, and will terminate on the last such date.

Kyrgyzstan-Qatar

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Update - Tax Treaty between Kyrgyzstan and Qatar

The income tax treaty between Kyrgyzstan and Qatar was signed 1 June 2014. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Kyrgyz tax on profits and income of legal persons and individual income tax, and covers Qatari taxes on income.

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 the same or connected project for a period or periods aggregating more than 6 months within any 12 month period.

Withholding Tax Rates

  • Dividends - 0%
  • Interest - 0%
  • Royalties - 5%
  • Capital gains - generally exempt, except for gains from the alienation of immovable property and gains from alienation of movable property forming part of the business property of a permanent establishment

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

Liberia-Turkey

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Tax Treaty between Liberia and Turkey under Negotiation

During a meeting held 26 March 2015 between officials from Liberia and Turkey, Liberia expressed its intent to further negotiations for an income tax treaty. The two countries initially agreed to negotiation a tax treaty in May 2014. 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.

Sweden-United Kingdom

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New Tax Treaty between Sweden and the UK Signed

On 26 March 2015, officials from Sweden and the United Kingdom signed a new income and capital tax treaty. Once in force and effective, the new treaty will replace the 1983 income and capital tax treaty between the two countries, which is currently in force.

Taxes Covered

The treaty covers Swedish national income tax, withholding tax on dividends, income tax on nonresidents, income tax on nonresident artistes and athletes, and municipal income tax. It covers UK income tax, corporation tax and capital gains 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 aside from those covered in Article 21 (Elimination of Double Taxation), Article 22 (Non-Discrimination) and Article 23 (Mutual Agreement Procedure).

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company directly or indirectly controlling at least 10% of the paying company's voting power, otherwise 5%. A 15% rate applies for dividends paid out of income (including gains) derived directly or indirectly from certain immovable property by an investment vehicle which distributes most of this income annually and whose income from such immovable property is exempted from tax.
  • Interest - 0%
  • Royalties - 0%
  • Capital gains - generally exempt, except for gains from the alienation 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 comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State (exemption for shares regularly traded on a stock exchange)

Double Taxation Relief

Both countries generally apply the credit method for the elimination of double taxation. However, in regard to dividends paid by a company of one Contracting State to a company of the other State, the exemption method is applied if the conditions for an exemption under the law of the other State are met. Exemption may also apply for profits of a permanent establishment in Sweden of a UK company if the conditions for an exemption under UK law are met.

Limitation on Benefits for Preferential Regimes

The treaty includes provisions that the benefits of the treaty providing for an exemption or a reduction of tax will not apply for a company resident in a Contracting State, when the company:

  • derives income primarily from other states:
    • from shipping and financial activities, or
    • from being a headquarters, coordination center or similar entity providing administration and 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

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged.

For withholding taxes, the treaty will apply in both countries from 1 January of the year following its entry into force. For other taxes, the treaty will apply in Sweden from 1 January of the year following its entry into force. In the UK it will apply for corporation tax from 1 April of the year following its entry into force, and for income tax and capital gains tax from 6 April of the year following its entry into force.

The provisions of Article 23 (Mutual Agreement Procedure) and Article 24 (Exchange of Information) will apply from the date of the treaty's entry into force.

The provisions of the 1983 income and capital gains treaty between Sweden and the UK will cease to have effect for the relevant taxes on the dates the new treaty applies, and will terminate on the last such date.

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