jueves, 18 de enero de 2018

Germany issues final decree on withholding tax on outbound payments for software and database usage

Germany’s Ministry of Finance (MOF) issued a final decree on 27 October 2017 regarding the withholding tax treatment of payments made to nonresidents under software, cloud and/or database licensing arrangements. The final decree is based on a draft decree published on 17 May 2017.
The final decree confirms that outbound payments for the use of software are royalties subject to German withholding tax only where the user obtains a comprehensive right to economically exploit the software under the licensing arrangement. No withholding tax should be triggered if the arrangement for which the payment is made focuses only on the designated or intended use of the software.
The final decree contains 16 examples that describe circumstances where payments for the use of software would and would not be subject to German withholding tax. The final decree includes three additional examples – one in a new section on payments for the use of databases by universities and public libraries – and some clarifications. No further significant changes have been made, compared to the draft version. The three new examples are as follows:

  • New Example 1 involves a situation where a German company receives the right to distribute, copy, publish and modify graphics software from a Singapore entity. The German company adapts the software to the German market and distributes it as part of a graphic software package. The payments to the Singapore entity trigger withholding tax because the German company is exploiting the software and in a manner that goes beyond the mere use of the software.
  • New Example 3 describes a situation where a German company receives standard software for internal company-wide use from a US software provider. There are certain interfaces to integrate the software into the company’s ERP system, but alterations to the software’s functionality are not permitted. The German company has the right to use 5,000 copies for internal use and to make changes to the software so that it can be integrated into the ERP system. The decree confirms that no withholding tax should apply in this situation because the payment is made solely for the intended use of the software and no comprehensive right to exploit the software is granted.
  • New Example 16 involves a university that uses a database of a US service provider in return for the payment of license fees. The use of the database by students and employees of the university is free, but non-members have to pay a nominal, cost-based fee to the university. The decree confirms that, in this case, no withholding tax is due on the payments from the university because the university is not exploiting the right to use the database, since it grants access either free of charge or for a nominal fee. 


Source: Deloitte

miércoles, 17 de enero de 2018

Germany: Capital gains from sale of shares by non-treaty-protected shareholder are fully tax-exempt

Germany’s federal tax court (BFH) issued a decision on 31 May 2017 (published on 25 October 2017), in which it held that capital gains from the sale of shares by a foreign corporate shareholder with limited German tax liability are 100% exempt from German tax, regardless of the existence of (or provisions in) a tax treaty. In other words, the normal add-back of 5% deemed nondeductible business expenses does not apply to a limited liability taxpayer/nontreaty protected foreign shareholder. In reaching its decision, the BFH overruled the decision of the lower tax court of
Hesse, which had ruled for the tax authorities. The BFH decision brings an end to a long-running dispute between tax practitioners and the tax authorities.
Under Germany’s participation exemption and section 8b of the corporate income tax code, capital gains from the sale of shares generally are 100% tax exempt for corporate shareholders. However, 5% of the gains are deemed to be nondeductible business expenses and are added back to taxable income, which effectively limits the benefit of the participation exemption to 95%. Foreign shareholders are subject to limited German tax liability if they owned, directly or indirectly, at least 1% of the capital of a German corporation within the five-year period before the sale.
In the case decided by the BFH, a Bermuda corporation owned approximately 11% of the shares in a German corporation through a Bermuda partnership. The partnership sold the shares in the German corporation and the German tax authorities assessed a 5% taxable gain for the Bermuda corporate shareholder for corporate income tax purposes.
Since the Bermuda corporation indirectly owned more than 1% of the shares in the German corporation, it was treated as being subject to limited German tax liability (the Bermuda partnership is considered transparent for German tax purposes) in respect of the capital gains from the sale of the shares. Germany does not have a tax treaty with Bermuda that would provide protection to a Bermuda corporate shareholder. The German tax authorities assessed a 5% taxable gain and imposed corporate income tax and the solidarity surcharge at the general rate of 15.825%.
The commonly accepted view (also shared by the tax authorities) in the context of the trade tax is that capital gains derived by a foreign resident shareholder from the sale of shares should not be taxable in the absence of a German permanent establishment (PE). The BFH now has confirmed that the same rule should apply for corporate income tax purposes. That is, the 5% addback of deemed nondeductible expenses does not apply where the nonresident shareholder does not have a PE or dependent agent in Germany, and if the 5% does not apply, the gains should be fully exempt.
The consequences of the BFH decision should apply to the capital gains tax treatment of all non-treaty-protected foreign corporate shareholders that are subject to limited German tax liability. This includes corporate taxpayers that are resident in non-treaty countries or in countries where the relevant treaty allocates the taxing rights to Germany.
In the latter case, this also should cover shareholdings in German real estate-rich companies, since Germany’s treaties typically allocate the right to tax capital gains from the sale of shares to Germany in such cases.

Source: Deloitte

martes, 16 de enero de 2018

Ecuador: Tax haven jurisdictions defined

Legislation introduced on 17 August 2017 contains a definition of a “tax haven” for Ecuadorian tax purposes. Under the new rules, which apply as from 1 September 2017, a foreign jurisdiction will be deemed to be a tax haven if it operates a regime that fulfills two of the following three conditions:

  1. Has an effective income tax rate of less than 60% of the Ecuadorian rate (i.e. a rate that is under 13.2%);
  2. Allows for the undertaking of economic, financial, production or commercial activities that are not substantially performed within the foreign jurisdiction, where the taxpayer concerned avails itself of the tax benefits offered by that jurisdiction; and
  3. Does not provide for the exchange of information in accordance with international standards on transparency.

The effects of inclusion on Ecuador’s tax haven list, which is issued by the tax authorities and currently includes 88 jurisdictions, include the following:

  • An income tax rate of 25% (rather than the standard rate of 22%) for an Ecuadorian company on taxable income corresponding to the shareholding of partners or shareholders resident in a tax haven (which may be applied to the entire entity if the shareholding exceeds 50%);
  • A domestic withholding tax of 10% on dividends paid to a recipient in a tax haven (otherwise, dividends paid to a nonresident generally are not subject to withholding tax in Ecuador). The 5% special tax on the remittance of funds abroad also applies to the dividends; and
  • A domestic withholding tax rate of 35% (normally 22%) on certain types of Ecuador-source income, including interest, royalties and technical service fees paid to a recipient in a tax haven. 


Source: Deloitte

lunes, 15 de enero de 2018

French amended finance law and bill for 2017 contain measures affecting companies

An amended finance law and an amended finance bill for 2017 contain measures that will have a significant impact on companies doing business in France.
On 14 November 2017, the parliament approved the first amended finance law, which includes the anticipated exceptional one-time surtax on corporate income tax liabilities to be levied on very large companies (i.e. companies whose annual turnover exceeds EUR 1 billion). The proposal for the surtax was presented to parliament on 2 November 2017.
The second amended finance bill for 2017, released on 15 November, contains measures that would abolish the requirement for French companies to obtain advance approval of cross-border mergers to qualify for benefits under the EU merger directive, disallow a deduction for withholding tax levied under a tax treaty and reduce the default interest rate.
Source & more info: Deloitte

jueves, 11 de enero de 2018

India: Place of effective management rules clarified

India’s Central Board of Direct Taxes (CBDT) issued a circular on 23 October 2017 to clarify the guidelines for determining whether a foreign company has a place of effective management (POEM) in India (and thus is considered an Indian tax resident) in cases involving a multinational group with a regional headquarters structure in India.

Background

The POEM concept was introduced into the Income-tax Act, 1961, effective from assessment year 2017-2018, for purposes of determining whether a foreign company is a tax resident of India. The POEM is the place where key management and commercial decisions necessary for the conduct of the business of an entity as a whole are made, in substance. (Previously, a foreign company was considered an Indian tax resident only if the control and management of its affairs was carried out entirely in India.)

The CBDT issued final guidelines for the determination of the POEM for an entity in a circular dated 24 January 2017, and the rules were further clarified in another circular dated 23 February 2017. The latter guidance provided that the POEM provisions will not apply to companies with turnover or gross receipts of no more than INR 500 million in a financial year.

The January 2017 circular states that if, on the basis of the relevant facts and circumstances, the board of directors of a foreign company is not actually exercising its powers of management, and such powers instead are being exercised by a holding company or any other person(s) resident in India, the foreign company will be considered to have a POEM in India.

The CBDT received several requests for clarification on whether a POEM in India would be triggered merely because a multinational group operates a “regional headquarters” in India that conducts certain routine activities that are not specific to any foreign entities or subsidiaries/group companies.

Clarification from the CBDT

Referring to the specific conditions set forth in the January 2017 circular, the CBDT now has clarified that, in and of themselves, the activities of a regional headquarters will not establish a POEM in India, provided:

  • The regional headquarters carries out activities for subsidiaries/group companies in line with general and objective global policies set forth by the group parent entity (in areas such as payroll and human resource functions, accounting, information technology infrastructure and network platforms, supply chain functions and routine banking operational procedures); and
  • These activities are not specific to any subsidiaries/group companies.

The general anti-avoidance rules may be triggered if the clarifications provided by the circular are used for purposes of abusive/aggressive tax planning.

miércoles, 10 de enero de 2018

China: SAT issues guidance on EIT withholding on income derived by NREs

China’s State Administration of Taxation (SAT) published guidance (Bulletin 37) on 27 October 2017 that contains updated guidance on the collection of enterprise income tax (EIT) on China-source income derived by nonresident enterprises (NREs), and includes measures to reduce the administrative burden on withholding agents and coordinate responsibilities among different competent tax authorities involved in the withholding process.

Bulletin 37 fully repeals two sets of guidance dating from 2009 relating to the collection of withholding tax on income of NREs (i.e. Circular 3 and Circular 698), as well as specific individual articles in other circulars. Unless otherwise noted below, the provisions in Bulletin 37 will apply as from 1 December 2017.

Bulletin 37 abolishes the requirement for withholding agents to submit relevant contracts to the Chinese tax authorities and clarifies the following:

  • Date for tax to be withheld from dividend payments;
  • Situations where a withholding agent will be deemed to have withheld tax but not to have paid the tax to the tax authorities (as opposed to not having withheld the tax at all), and the timeframe for an NRE to report and pay tax on its own in cases where the withholding agent fails to withhold;
  • Foreign currency exchange rules relating to the calculation of taxable income; and
  • Duties and cooperative practices that apply among the Chinese tax authorities involved in EIT withholding.

Abolition of requirement to submit contracts

Under Circular 3, where a contract involving the withholding of EIT has been concluded or amended, the withholding agent must complete a specific form and submit the form, the contract and other documents to the Chinese tax authorities within 30 days from the date the contract was signed or amended.

Bulletin 37 effectively eliminates this contract registration requirement by repealing Circular 3 in its entirety (although withholding agents and NREs still may be required to submit contracts to the tax authorities under other tax rules). Nevertheless, under Bulletin 37, withholding agents still will be required to maintain proper files relating to the relevant contracts, and the tax authorities will have the right to request a contract from a withholding agent.

Date for withholding from dividend payments

Where a Chinese resident enterprise pays dividends to an NRE that does not have an office or other premises in China, existing rules (article 5 of Bulletin 24) require the resident enterprise to withhold the tax on the earlier of: (i) the date on which the board of directors decides to distribute the profits; or (ii) the date on which the dividend payment is made. Bulletin 37 abolishes article 5, and clarifies that the withholding obligation on dividends paid to an NRE will be triggered on the date the dividends are paid. This provision will have retroactive effect for income that has arisen, but “has not been dealt with” (the terminology used by the SAT) before 1 December 2017.

Failure of withholding agent to remit tax

Where the withholding agent does not remit the EIT to the Chinese tax authorities, different legal consequences will arise for the agent depending on whether (i) the agent is considered to have withheld the tax but not to have paid the tax to the tax authorities; or (ii) the agent is considered not to have withheld the tax at all. Bulletin 37 provides the following guidance on how to distinguish between these two situations:

  • Where the income has been paid to the NRE, but the withholding agent did not remit the tax to the Chinese tax authorities, and any of the following circumstances is present, the withholding agent will be considered to have withheld the tax, but not to have paid the tax to the tax authorities:
  • The withholding agent expressly informs the payee that the tax was withheld;
  • The amount of the tax payable is booked as a separate item in the withholding agent’s accounting ledger;
  • The amount of the tax payable is deducted or starts to be amortized as a separate item in the withholding agent’s tax filing; or
  • There is other evidence that the tax actually was withheld.
  • In all other cases, the withholding agent will be deemed not to have withheld the tax.

Where a withholding agent fails to withhold EIT, the current rules contain strict time requirements for an NRE to report and remit the tax to the Chinese tax authorities on its own to avoid the imposition of late payment interest for noncompliance.

Bulletin 37 provides a new rule that is more beneficial to taxpayers. Where an NRE voluntarily reports and pays the tax to the Chinese tax authorities before being requested to do so, the date on which the tax payment is made will be deemed to be the due date of the tax payment, and late payment interest will not be levied. It also appears that late payment interest will not be levied even where the competent tax authorities set a date for the tax payment for the first time and the NRE complies. This new rule will have retroactive effect, similar to that applicable for withholding on dividend payments.

Foreign currency issues

Where a payment that was made or becomes payable by a withholding agent is in a foreign currency, Bulletin 37 prescribes that the foreign currency is to be converted into RMB as follows:

  • Where the withholding agent withholds the tax, based on the median exchange rate published on the date the withholding obligation is triggered;
  • Where an NRE reports and pays the tax voluntarily before the tax authorities request the payment, based on the median exchange rate published “on the day before the day on which the tax payment form is completed”; and
  • Where the tax authorities request the NRE to pay the tax within a prescribed period, based on the median exchange rate published “on the day before the day on which the tax authority makes the decision to request the tax payment” (the tax authorities will issue a notification of the decision with a specific date).

Duties of tax authorities

Since there may be multiple tax authorities involved in the collection of withholding tax, guidance is needed to specify and coordinate the duties and responsibilities of the authorities. Bulletin 37 provides the following rules:

  • If a withholding agent does not withhold tax at all, the competent tax authorities in the place where the withholding agent is located will have to pursue the liability of the agent in accordance with the relevant laws and regulations. If it is necessary to recover the tax from the NRE, the tax authorities in the place where the income is derived should do so.
  • If the location of a withholding agent is different from the place where the income is derived, and the competent tax authorities in the place where the income is derived are responsible for collecting the tax, those authorities will be responsible for verifying the relevant information with the competent tax authorities in the place where the withholding agent is located.
  • If the competent tax authorities in the place where the withholding agent is located have confirmed that the agent did not withhold or pay the tax, these tax authorities will have to notify the relevant authorities in the place where the income is derived about the tax issues related to the NRE by sending a letter within five business days from the date the tax authorities make such confirmation.


Source: Deloitte

martes, 9 de enero de 2018

Barbados: Status of various regimes in context of OECD BEPS project

Barbados’ Ministry of International Business recently announced that the government will review the operation of its existing preferential tax regimes in the context of meeting its commitments under the OECD inclusive framework (Barbados joined the framework on 4 July 2017). Members of the inclusive framework are committed to implementing the key BEPS actions, and they will participate as BEPS associates of the OECD’s Committee on Fiscal Affairs in developing further standards to address remaining BEPS issues.

The Barbados government announcement followed the release of a report (“Harmful Tax Practices – 2017 Progress Report on Preferential Regimes”) by the OECD on 16 October 2017 that sets out the results of peer reviews undertaken by the Forum on Harmful Tax Practices (FHTP) over the last 12 months. The progress report is an update to the 2015 report on action 5 of the BEPS project, and contains the results of the FHTP review of 164 preferential tax regimes that have been identified worldwide (including Barbados’ regimes).

One of the goals of the FHTP is to identify the features of preferential tax regimes that can facilitate BEPS and can negatively impact the tax base of another jurisdiction. Countries with preferential tax regimes will need to place a renewed focus on substance, transparency and eliminating ring-fencing characteristics in their domestic legislation.

Status of Barbados’ regimes

The FHTP report captures the review of preferential regimes globally, including in Barbados, and identifies the steps that already have been taken by affected countries and what still needs to be done. The scorecard for Barbados shows that there are two potentially harmful regimes, and that the Barbados government is committed to amending regimes that are under review. The categories of regimes reviewed include intellectual property regimes, headquarters regimes, financing and leasing regimes, banking and insurance regimes, distribution center and service center regimes, shipping regimes, holding company regimes and miscellaneous regimes.

The following table outlines the status of Barbados regimes:

Types of regimes
Regimes
Status
Intellectual property regimes
International societies with restricted liabilities (ISRL) and international business companies (IBC)
In the process of being amended
Headquarters regimes
IBC (reviewed as a financing and leasing regime)
In the process of being amended
Financing and leasing regimes
IBC
In the process of being amended
Financing and leasing regimes
International financial services (also reviewed as a headquarters regime)
Potentially harmful
Banking and insurance regimes
Exempt insurance and qualifying insurance companies
In the process of being amended
Distribution center and service center regimes
Fiscal Incentives Act
Out of scope / not being reviewed at this time
Shipping regimes
Shipping regime
Under review
Holding company regimes
ISRL and international trusts (also reviewed as a financing and leasing regime)
In the process of being amended
Miscellaneous regimes
Credit for foreign currency earnings/credit for overseas project or services
Potentially harmful (the Ministry of International Business has signaled that changes may be made to this aspect of the Barbados income tax legislation)

The report provides meanings of the terms used, except for the terms “out of scope” and “under review.”

Status
Meaning
In the process of being amended
Barbados has communicated to the FHTP that the government is committed to abolishing or amending the regime in light of the discussions by the FHTP about features of the regime that are of concern. The FHTP can reconsider the description of these regimes if insufficient progress is made.
Potentially harmful
The regime includes potentially harmful features due to ring fencing and the lack of substantial activities or activities that lack economic substance.

Timeframes and grandfathering

The OECD report contains timeframes and grandfathering measures for the regimes as follows:
  • No new entrants will be allowed into IP regimes after 30 June 2018 (with existing entities grandfathered until 2021); and
  • Non-IP regimes are to be shut down as soon as possible, but no later than 31 October 2018 or, where necessary, by 31 December 2018 because of the legislative process.
Source: Deloitte

lunes, 8 de enero de 2018

Austria: Supreme Administrative Court clarifies scope of anti-tax loss trafficking rule

Austria’s Supreme Administrative Court issued a decision on 13 September 2017, concluding that an indirect transfer of the shares in an Austrian company is not “harmful” within the meaning of the anti-tax loss trafficking rule in the Corporate Income Tax Act.

Under the anti-tax loss trafficking (or change-in-ownership) rule, existing tax loss carryforwards of a company subject to Austrian corporate income tax are forfeited if harmful events are present. Such events will exist if the taxpayer’s identity is substantially changed due to a material change in its organizational and business structures, in combination with a material change in its shareholder structure, following a disposal of shares for consideration. However, the loss carryforwards will not be forfeited if the changes are a consequence of a reorganization structured in such a way to preserve a substantial proportion of jobs. Similar provisions exist in other tax areas, such as the Reorganization Tax Act.

Since the language of the statute appears to provide that only a direct transfer of the shares in an Austrian company is covered by the anti-tax loss trafficking rule, the prevailing opinion has been that an indirect share transfer higher up the shareholding chain is irrelevant for purposes of triggering the rule. However, the Austrian tax authorities recently have, on occasion, taken the position that an indirect share transfer (e.g. a transfer of shares in the parent company of the Austrian loss-making company) is deemed to be harmful within the meaning of the anti-tax loss trafficking rule.

In its September 2017 decision, the Supreme Administrative Court concluded that the anti-tax loss trafficking rule cannot be triggered merely by an indirect share transfer. For a change to fall within the scope of the rule, a change at the shareholder level definitely refers to a transfer of shares in the Austrian loss-making company itself.

The decision is important for multinational groups of companies with Austrian affiliates since it offers some legal reassurance in terms of preserving Austrian tax loss carryforwards where, for example, the top holding company is acquired or a restructuring involves intragroup share transfers at a level above the Austrian company in the shareholding chain.

Source: Deloitte

viernes, 5 de enero de 2018

New Israeli deemed distribution rules — intercompany loans, balances, and guarantees should be reviewed

Further to an amendment to the Income Tax Ordinance (ITO), multinational companies with Israeli affiliates having intercompany loans, outstanding balances, or guarantees which exceed ILS 100,000 as of December 31, 2016, might trigger a deemed distribution tax event for 2017. Companies should review potential deemed income and withholding tax implications that may arise in their specific situations.  Where relevant, consideration should be given to repaying amounts due before December 31, 2017.

Source & more info: PwC

jueves, 4 de enero de 2018

German tax authorities release circular on non-resident taxation of royalties for software and databases

The German tax authorities on November 2, 2017, released a circular on German non-resident income taxation and withholding tax (WHT) on royalties for the use of software and databases (the Circular).The Circular is relevant for all foreign taxpayers with royalty income from the licensing of software or databases that are used in a German business or institution.

Source & more info: pwc

miércoles, 3 de enero de 2018

Dutch government proposes response measures for EU cases involving the Dutch fiscal unity

Advocate General (AG) Camps Sánchez-Bordona on October 25, 2017, issued his opinion on two joined cases that were referred to the European Court of Justice (ECJ) by the Dutch Supreme Court. These cases raise various questions for the ECJ regarding application of the ‘per element’ approach in the Dutch fiscal unity regime with respect to interest deductibility and currency losses. The outcome of the cases may affect multinational enterprises (MNEs) especially since the proposed Dutch response measures could have retroactive effect.

Source & more info: pwc

martes, 2 de enero de 2018

Increased taxpayer rights for tax dispute resolution under new EU Directive

The European Union is taking an important step forward in order to achieve more effective and efficient tax dispute resolution procedures. On October 10, 2017, the Council adopted the Directive on Tax Dispute Resolution mechanisms in the European Union (the Directive). The Directive builds on the existing Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (90/436/EEC; the so-called ‘EU Arbitration Convention’) and aims to implement a harmonized and transparent framework in the EU in order to cope with an increasing number of double or multiple taxation cases.

Source & more info: pwc

lunes, 1 de enero de 2018

Indian rules on Master File and Country-by-Country-Reporting requirements

Reiterating India’s commitment to implement the OECD’s BEPS Action Plan 13, the Indian Central Board of Direct Taxes (CBDT) has prescribed the rules for maintaining and furnishing the Master File (MF) and Country-by-Country (CbC) report. 

While the rules provide guidance on applicability, content, and the filing process, certain aspects remain unclear. We hope that the Government of India (GoI) will soon release FAQs to clarify some of these aspects and provide additional guidance on implementation of the rules. 

Source & more info: PwC

viernes, 29 de diciembre de 2017

Italy releases initial guidance on taxation of carried interest

​The Italian tax authorities released, on October 16, 2017, Circular n. 25/E, which includes initial guidance on taxation of carried interest, commonly known in Italy as the ‘carry.’  The tax rules on the carry were introduced a few months ago in Law Decree n. 50/2017.

Source & more info: pwc

jueves, 28 de diciembre de 2017

German Federal Tax Court grants foreign corporation full participation exemption for capital gains

The German Federal Tax Court ruled, in a recently published verdict, that capital gains realized by a foreign corporation upon the disposal of shares in a German corporation are fully exempt from German corporate income tax, and not effectively only 95% exempt. This exemption is available, provided the capital gains are not realized through a German business, such as a permanent establishment (PE).

The decision is relevant for foreign corporate taxpayers for whom a tax treaty does not provide a German tax exemption for capital gains.While the decision provides relief from the effective 5% tax burden, it remains to be seen how the German tax authorities and legislature will react to the decision.

Source & more info: pwc

miércoles, 27 de diciembre de 2017

Tax amendments in Saudi Arabia

A royal decree dated 20 September 2017 includes a number of changes to Saudi Arabia’s tax laws, including reduced tax rates for oil and gas companies and other measures to provide tax relief and clarify existing tax rules. Most of the amendments are effective from the beginning of the financial year following the issuance of the royal decree, although some of the new rules apply retroactively from 1 January 2017.

Saudi Arabia’s tax bylaws also will be amended to reflect the tax law revisions to provide additional clarity on the changes.

The key measures affecting companies are discussed below.

Taxable person
The definition of a resident capital company that is subject to tax is amended to include shares owned directly or indirectly by persons engaged in the production of oil and hydrocarbon materials. As a result of this amendment, companies engaged in oil and hydrocarbon activities as well as their subsidiaries are subject to income tax, whereas previously they only were subject to Zakat (a religious levy).

A nonresident person that has Saudi Arabian-source taxable income is subject to tax, regardless of whether it has a permanent establishment (PE) in the kingdom (previously, nonresidents were taxed only on income arising from or related to a PE).

Tax rates
The flat tax rate of 85% for taxpayers engaged in the production of oil and hydrocarbon materials is reduced for taxpayers with capital investment exceeding USD 60 billion, with the new rate based on the level of capital investment. The reduced rates, which apply as from 1 January 2017, are as follows:

  • 75% for companies with capital investment greater than USD 60 billion and up to 80 billion;
  • 65% for companies with capital investment greater than USD 80 billion and up to USD 100 billion; and
  • 50% for companies with capital investment greater than USD 100 billion.

A company’s capital investment includes the total value of a company’s assets (i.e. both tangible and intangible assets), as well as exploration, drilling and development expenses.

Exempt income
Capital gains realized from the disposal of securities traded on a stock exchange outside Saudi Arabia will be exempt from tax, provided the securities also are traded on the Saudi stock exchange (Tadawul), irrespective of whether the disposal occurred through a stock exchange or through any other means. The tax bylaws will set out the specific requirements for the exemption.

Cash or in-kind dividends received by a Saudi-resident capital company from investments in a Saudi-resident or nonresident company will be exempt from tax, provided the Saudi recipient owns at least 10% of the capital of the payer company for a period of at least one year.

Contributions to pension funds
As from 1 January 2017, capital companies may deduct their contributions to a retirement, social insurance or any other fund established for the purpose of settling employees’ end-of-service benefits or medical expenses, provided:

  • The deduction does not exceed the fund’s unfunded liabilities that are due at the beginning of the financial year for which a deduction is being claimed; and
  • The fund has an independent legal status, regardless of whether it is established inside or outside Saudi Arabia.

Capital companies will have to provide certain information relating to the funds to the General Authority of Zakat & Tax (GAZT); the required information will be specified in the tax bylaws.

Intragroup asset transfers
Transfers of assets (cash, shares, securities, and tangible and intangible assets) between group companies will not be subject to tax, provided the companies are wholly owned (directly or indirectly) within the group and the assets remain within the group for at least two years from the date of transfer.

Other provisions
The decree also makes the following changes and clarifications:
  • Capital companies will be allowed to carry forward losses indefinitely, irrespective of whether there has been a change in ownership or control, provided they continue to perform the same activity.
  • The tax base of persons engaged in the production of oil and hydrocarbon materials will be their taxable income, less expenses allowed in accordance with the tax laws.
  • The GAZT’s right to receive information is extended to include information on rulings relating to the application of international treaties. The tax bylaws will specify the penalties for noncompliance.
Source: Deloitte

martes, 26 de diciembre de 2017

Morocco's finance law for 2017 contains beneficial measures for companies

Morocco’s finance law for 2017, published in the official gazette on 12 June 2017 and applicable as from that date, contains several beneficial measures affecting companies, including the following:

  • A five-year tax holiday is granted to industrial companies starting from the day business operations commence. The government will issue a list of qualifying companies.
  • Companies that register their shares for listing on the stock exchange (except for credit institutions, insurance and reinsurance companies, public-service concession companies and public companies) are entitled to a corporate tax reduction for the three consecutive years following the date of registration. The corporate tax rate is reduced by: (i) 25%, if the company enters the stock exchange by selling existing shares; and (ii) 50%, if the company enters the stock exchange by increasing its capital by at least 20%, accompanied by a waiver of preferential subscription rights.
  • Tax incentives that are available to export enterprises (i.e. a five-year corporate tax exemption, followed by a reduced rate of 17.5%) are extended to apply to sales of manufactured goods to other export enterprises, as well as to enterprises located in export free zones.
  • Companies that qualify as real estate collective investment vehicles (OPCIs) are exempt from tax on rental income derived from buildings constructed for professional use, as well as dividends and interest received. In addition, gains derived by persons that transfer real property to an OPCI in exchange for shares are entitled to a deferral of personal income tax until disposal of the shares, in addition to a 50% tax reduction on the sale.

The finance law also contains measures that provide favorable tax treatment for mergers and divisions, such as the following:

  • Exemption from capital gains tax on gains derived by the acquiring company on the disposal of shares in the target company;
  • Deferral of tax on gains derived by shareholders of the target company when exchanging their shares for shares of the acquiring company until disposal of the shares; and
  • Deferral of taxation of assets of the target company at the level of the acquiring company as follows:
  • In the case of nondepreciable assets (land, goodwill, etc.), until the assets are subsequently sold; and
  • In the case of depreciable assets, until the depreciation/amortization period ends or the assets otherwise are disposed of or withdrawn from the company’s books.
In addition, an intragroup restructuring related to the transfer of assets will be subject to tax-neutral treatment.

Finally, the finance law introduces a general anti-avoidance rule that is based on the French concept of “abuse of law.” The tax authorities will be able to invoke this provision to recharacterize transactions whose main purpose is to avoid or evade tax.

Source: Deloitte

lunes, 25 de diciembre de 2017

France's CbCr deadline is close

The France Country-by-Country (CbC) report shall be filed at the latest on  December 31, 2017 for fiscal year closing at December 31, 2016. French companies held or controlled by a multinational enterprise (MNE), meeting the requirement to file a CbC report, with their Ultimate Parent Company established in a State that has not introduced a compulsory requirement to file a CbC report or that does not exchange information with France in an automatic manner, must file on behalf of the MNE or evidence that another group entity has been designated to do so.

France follows the Organisation for Economic Co-operation and Development (OECD) guidelines in terms of voluntary filing by exempting from local filing French entities with Ultimate Parent Companies that voluntarily filed a CbC report.

Source & more info; PwC

Dbriefs Bytes - 22 December 2017