Thursday, 9 August 2018

Canada's 2017 APA report reflects progress

The Advance Pricing Arrangement (APA) program of the Canada Revenue Agency (CRA) is administered through the CRA’s Competent Authority Services Division (CASD) in Ottawa. The APA program is a service offered by the CRA to assist taxpayers in reaching increased certainty with respect to future transfer pricing issues.

The CASD recently released its annual report on Canada’s APA program covering the year ended December 31, 2017 (the report). Note: Since 2016 the annual report has been based on a calendar year, whereas previous annual reports were based on the CRA’s March 31 fiscal year.

This year, the APA program reported a marked improvement in APA closures and inventory balances. In addition, APA program officials appear to have spent more time discussing cases with their counterparts in other jurisdictions and less time gathering facts during the due diligence phase of an APA.

Source & more info: PwC

Wednesday, 8 August 2018

OECD releases guidance for tax administrations on hard-to-value intangibles

The OECD on June 21 released Guidance (the ‘Guidance’) for tax administrations on application of the approach to hard-to-value intangibles (HTVI).  The aim of the Guidance is to create a common understanding among tax administrations on how to apply adjustments resulting from application of the HTVI approach, while improving consistency and reducing the risk of double taxation.

The Guidance sets forth the underlying principles that govern the HTVI approach and provides two examples that are intended to assist in clarifying the approach.  Finally, the Guidance links the HTVI approach with granting access to the mutual agreement procedure.

The Guidance was mandated under the OECD’s BEPS Actions 8-10 Report - Aligning transfer pricing outcomes with value creation.  A public discussion draft was released in May 2017 (see Tax Insight and Tax Policy Bulletin of June 9, 2017) requesting comments from interested parties on the proposed approach in the discussion draft.

This Insight discusses the approaches to HTVI that are confirmed in the Guidance or that have changed compared to the discussion draft published in May 2017.

Source & more info: PwC

Tuesday, 7 August 2018

OECD publishes long-awaited additional guidance on use of profit split methods

The OECD on June 21 published revised guidance on application of the profit split method (the ‘Final Report’ or ‘Paper’).

The Final Report follows a mandate in Action 10 of the BEPS Action Plan, seeking clarification on application of the profit split method in light of global value chains.  The Final Report, which also succeeds two prior discussion drafts and public consultations over 2016 and 2017, represents a full revision of the current guidance on the use of profit splits in Chapter II of the OECD’s Transfer Pricing Guidelines for Multinational Enterprises (TPG), as well as the associated Annex II with examples.

The Final Report, similar to the other BEPS initiatives, aims to tax profits where economic activities take place and value is created. It will take effect as the following sections of Section C, Part II, Chapter II and Annex II to that Chapter in the TPG:

  • C1 (s. 2.114 – 2.115): Providing general information on the transactional Profit Split Method (PSM)
  • C2 (s. 2.116 – 2.145): Guidance on when the PSM is likely to be appropriate
  • C3 (s. 2.146 – 2.153): Providing general guidance on the application of the PSM
  • C4 (s. 2.154 – 2.165): How to determine the profits to be split
  • C5 (s. 2.166 – 2.183): Guidance on how to split the profits, including example profit split factors
  • Annex II: 16 Examples to demonstrate the principles of the new PSM Guidelines
Source & more info: PwC

OECD and UN updated income and capital Model Tax Conventions provide guidance on BEPS and other issues

The Organisation for Economic Cooperation and Development (OECD) and United Nations (UN) have now both published updates to their respective Model Tax Conventions on income and capital. These Models form the basis for negotiations between territories in agreeing bilateral double tax treaties. These treaties provide for how much the two countries are prepared to forego taxing rights that would be available under domestic law, with a view to avoiding double taxation, preventing tax evasion and avoidance, and encouraging investment.

Source & more info: PwC

Germany to extend non-resident capital gains taxation to shares in foreign real estate-rich corporations

Recently published German draft legislation would extend the German non-resident taxation rules on capital gains from disposal of shares in a German corporation to capital gains from disposal of shares in a foreign corporation that is deemed to be ‘real estate-rich.’

If a 100% participation exemption is deemed available for non-resident corporations, the proposed rules would be expected to affect primarily non-resident individuals and partnerships with individuals as partners.

Source & more info: PwC

Monday, 6 August 2018

Hong Kong enacts new BEPS and transfer pricing law

The new base erosion and profit shifting (BEPS) and TP Ordinance (Ordinance) is a milestone in Hong Kong taxation, as it formally introduces a transfer pricing (TP) regulatory regime and documentation requirement into Hong Kong tax law. As a member of the Inclusive Framework, Hong Kong has begun to fulfill its pledge to put in place the OECD BEPS Initiatives with this enactment. The Ordinance implements certain minimum standards (Actions 5, 13, and 14) under the OECD’s BEPS Action Plan. Please refer to the Appendix for a summary of the effective dates (some retroactive) and the relevant deadlines, where applicable, of the key measures in the Ordinance.

The Ordinance, which aligns with the OECD’s BEPS Action Plan, is the first piece of legislation to explicitly address TP matters in Hong Kong. The legislation is lengthy and complex, with many intricate provisions. In addition, uncertainties as to the interpretation and practical application of the provisions remain, with further guidance expected from the Inland Revenue Department (IRD) in new or revised Departmental Interpretation and Practice Notes (DIPNs). Business groups should assess if and how the provisions apply to them and watch for further developments.

Source & more info: PwC

Friday, 3 August 2018

Cyprus adopts new rules for investment funds, updates treaties with UK, Luxembourg, and Andorra

Cyprus has enacted tax legislation that includes new rules related to investment fund taxation. Key provisions cover the taxation of carried interest/performance fees for managers of Alternative Investment Funds (AIFs) and Undertakings for Collective Investment in Transferable Securities (UCITS), non-creation of permanent establishments (PEs) when certain activities take place, and treatment of each AIF/UCITS compartment as a separate taxpayer. These provisions are intended to enhance Cyprus’s attractiveness to the international funds business sector.

Cyprus also continues to expand its tax treaty network. The new double tax treaty and accompanying protocol between Cyprus and the United Kingdom, signed on March 22, 2018, entered into force on July 18, 2018 based on a recent update by the Cyprus Ministry of Finance. Further, Cyprus and Luxembourg signed their first tax treaty on May 8, 2017. The treaty is effective January 1, 2019, according to a recent update from the Cyprus Ministry of Finance. In addition, on June 1, 2018, Cyprus ratified its first tax treaty with Andorra, which was signed on May 18, 2018.

Source & more info: PwC

Thursday, 2 August 2018

European Court of Justice to consider financial transaction tax on derivatives

The Regional Tax Court of Lombardy has granted the reference for a preliminary ruling to the European Court of Justice, as sought by a French bank represented by PwC Italy, in order to assess the consistency of the Italian financial transaction tax (so-called Tobin tax) on derivatives with the fundamental freedoms set forth by EU Treaties.
Source & more info: pwc

Belgian transfer pricing decision analyzes profit attribution to a PE

A First Instance Belgian Court ruled in favor of the Belgian tax authorities in a recently published case. The dispute deals with profit attribution between a Belgian taxpayer and its French permanent establishment (PE). The taxpayer and the tax authorities did not challenge the existence of the PE in itself.

The Court referred to the OECD Transfer Pricing Guidelines, the OECD 2010 Report on the attribution of profits to PE, and Belgian domestic legislation. The Court decided the case by adopting a somewhat novel approach — i.e. the Court interpreted the initial wording of the 1964 tax treaty between Belgium and France by partially adopting the most recent best practices, since the Authorised OECD Approach has been addressed only in a certain extent.

The ruling also covers important aspects of the fundamentals of a transfer pricing analysis: comparability including the functional analysis, transfer pricing documentation (with reference to the burden of proof), selection of the transfer pricing method, and benchmarking analysis.

Source & more info: PwC

Wednesday, 1 August 2018

EU insight on harmful tax measures includes new substance guidance

The EU’s inter-governmental Code of Conduct Group (Business Taxation) (CoCG) has put forward guidance for determining substance when considering whether a tax measure is harmful or ‘fair’. The guidance includes elements of behaviour that Member States must meet and requirements that nonMember States must adopt in order to avoid being included on the so -called blacklist of non-cooperative non-EU, third countries. The guidance was formally endorsed without further discussion at the ECOFIN meeting on 22 June 2018.
The CoCG has also published the following items relating to its mandate on harmful tax matters:

  • a summary of the status at 31 May 2018 of the 92 jurisdictions screened in 2017 which resulted in some being listed, others monitored and a few receiving comfort letters 
  • an overview of the preferential tax regimes it has examined since its creation in March 1998, and 
  • a work programme indicating areas where it will focus its attention for the foreseeable future.
Source & more info: PwC

Tuesday, 31 July 2018

Uruguay issues guidance on compliance obligations of digital services providers

Guidance issued by Uruguay’s tax authorities and published in the official gazette on 29 May 2018 clarifies the tax obligations of nonresidents supplying digital services in the country. The decree, which applies as from 1 July 2018, has both nonresident income tax (IRNR, a tax levied on the income of nonresidents that do not have a permanent establishment in Uruguay) and VAT implications.
Nonresident suppliers of certain e-services (see below) have been subject to IRNR and VAT since 1 January 2018 on supplies made to customers (both businesses (B2B) and private individuals (B2C)) in Uruguay. The decree requires such nonresident suppliers to pay IRNR and VAT on a monthly basis starting on 1 July 2018. The tax authorities will be announcing an installment regime for nonresidents to make payments relating to supplies made during the period 1 January to 30 June 2018.

Covered services
The following supplies fall within the scope of digital services:

  • Production, distribution or intermediation of films or tapes, TV streaming or audiovisual downloads through the internet or other technological platforms, apps or other similar means (advertising is not covered); and
  • Mediation and intermediation activities rendered by digital service providers carried out through the internet.

The mediation and intermediation services imply an intervention in the principal operation of the supplier (i.e. supply or demand of services):

  • The services primarily are automatic, which implies a minimum level of human intervention and the services cannot be carried out without information technology; and
  • The specific services are the principal operation of the supplier.

The services will be deemed to be wholly rendered in Uruguay (and therefore fully subject to IRNR and VAT) when both the buyer and the seller are located in the country. If either the seller or the buyer are located abroad, only 50% of the services will be deemed to be rendered in Uruguay and, thus, only 50% of the services will be subject to IRNR and VAT.

Criteria to determine customer location
The decree clarifies that a customer will be deemed to be in Uruguay for purposes of the above rules if the invoicing address or the IP address used to purchase the services is located in Uruguay. If the buyer’s location cannot be determined using the invoicing or IP address, a presumption will arise that the customer is in Uruguay if the service payments are made through electronic payment means managed from Uruguay (e.g. credit or debit cards).

Compliance requirements for nonresident suppliers
In cases of B2B supplies of digital services, the local recipient must withhold both IRNR and VAT on the payment starting on 1 July 2018. For B2C supplies, the tax authorities intend to require the nonresident supplier to register for Uruguayan VAT and account for the tax directly, although no mechanism to facilitate this process has been set up. In the interim, the tax authorities are likely to require nonresident entities that only provide the services outlined above to appoint an agent in Uruguay for tax purposes.

Source: Deloitte

Monday, 30 July 2018

Poland proposes significant changes to transfer pricing rules

The draft law amending the Personal Income Tax Act, the Corporate Income Tax Act, as well as other acts was published on July 16, 2018. The draft was presented for public consultation, so the final content of the regulations may differ from those recently published.

Non-recognition and recharacterization 
The new law, once enacted, will grant the tax authorities additional tools. The tax authority will be able to recharacterize or even disregard related-party transactions if the tax authority concludes that unrelated entities would not enter into the transaction declared by the taxpayer, or would conclude a different transaction. Consequently, when assessing the arm’s-length level of remuneration in a given transaction, the tax authority could refer to other transactions or terms that in its opinion could have been applied by unrelated parties.

Introduction of safe harbors 
Safe harbors will be introduced for two types of transactions: loans meeting specific requirements and low-valueadding services. In the case of the former, an official interest rate will be published by the Minister of Finance, whereas, for the latter, a mark-up of 5% will be recommended.

Transfer pricing adjustments 
The new regulations will modify rules on conducting transfer pricing adjustments, including the determination of the period in which an adjustment should be reported.

New transfer pricing documentation materiality thresholds
New transactional materiality thresholds applicable for transfer pricing documentation (local file) will be introduced:

  • PLN 10 million (approx. EUR 2.5 million) for transactions concerning tangible assets and financing, and 
  • PLN 2 million (approx. EUR 0.5 million) for other transactions.
In practice, the new thresholds will result in reducing the scope of  documentation requirements,
especially for small and medium -sized taxpayers.

The materiality threshold for master file will be set at PLN 200 million of consolidated revenue. Taxpayers submitting the CbC report (thoseachieving consolidated revenues exceeding EUR 750 million and meeting other specific requirements) also must submit the master file to the Head of the National Revenue Administration.

According to the new regulations, the master file may be prepared in English. Translation into Polish will only be required at the explicit request of the tax authorities.

Contents of transfer pricing documentation and benchmarking studies
The scope of mandatory elements of transfer pricing documentation also will change. The detailed contents of the local file and master file will be determined in a decree of the Minister of Finance.

Benchmarking studies will become a compulsory element of the documentation for each transaction
described in a local file (no specific materiality thresholds will be applicable), except for those to which safe harbors apply. If it is impossible to prepare such an analysis, the taxpayer must prepare an analysis showing compliance of the conditions on which the transaction was concluded with the conditions that would have been set by unrelated entities.

Extension of deadlines for the preparation of documentation
The deadline for filing a statement on the preparation of local transfer pricing documentation will be
permanently extended to nine months after the end of the tax year for local documentation. The deadline for preparing the master file will be 12 months after the end of the tax year.

New reporting responsibilities Taxpayers will be required to submit a new electronic form (TP-R form), which will replace the CIT TP/PIT-TP forms introduced recently. The new form must be submitted within nine months after the end of the financial year. The form will contain selected
information on the transactions carried out with related entities.

Source: PwC

Sunday, 29 July 2018

Mexico issues new rules for transfer pricing adjustments

The Mexican Tax Authority (SAT), on July 11, 2018, published amendments to the rules for transfer pricing adjustments, now contained in rules 3.9.1.1-3.9.1.5 of the Resolución Miscelánea Fiscal (RMF). Those rules provide the definition of transfer pricing adjustments, the types of adjustment, and additional requirements to be met for adjustments to income and deductions. The new rules should provide greater clarity and certainty to taxpayers in Mexico but require more supporting documentation.
Source & more info: PwC

Friday, 27 July 2018

Peru clarifies requirements for Master File and CbC Reporting

The Peruvian Tax Administration (SUNAT) published the Superintendence Resolution N° 163-2018/SUNAT, on June 29, 2018. The resolution establishes the scope and deadlines for the presentation of the Master File (MF) and the Country-by-Country Report Informative Returns (CbC Report), in accordance with Legislative Decree N° 1312 that modified Article 32°-A of the Peruvian Income Tax Law (PITL) and the amending norms in December 2016. With this guidance, multinational groups having operations in Peru that have not yet prepared these Informative Returns for Fiscal Year 2017 should do so as soon as possible.
Source & more info: PwC

Thursday, 26 July 2018

Ukraine clarifies consequences of transactions with residents in low tax jurisdictions

Guidance issued by Ukraine’s tax authorities on 2 May 2018 clarifies the consequences of transactions with residents of one of the countries included on the “low-tax” jurisdiction list, then subsequently removed from the list. Estonia, Georgia, Hungary, Latvia and Malta were removed from the low-tax jurisdiction list effective 7 March 2018 and Bulgaria was removed as from 25 April. The guidance addresses specifically whether transactions taking place in 2018 before the removal of the countries from the list should be deemed to be controlled transactions.
Countries are included on Ukraine’s low tax jurisdiction list if they have not concluded an exchange of information agreement with Ukraine, do not exchange information with Ukraine, or if the country’s corporate tax rate is five or more percentage points lower than the (18%) rate in Ukraine or the country operates a preferential tax regime and it is possible not to pay corporate income tax in the country.
In general, business transactions with residents of listed countries are treated as controlled transactions for transfer pricing purposes (regardless of whether the parties are related), and taxpayers may deduct only 70% of the cost of goods, work and services purchased in transactions with residents of listed countries unless the taxpayer can demonstrate that the transactions are on arm’s length terms.
In the May guidance, the tax authorities state that if a Ukrainian taxpayer engaged in a transaction with a counterparty from one of the excluded countries during the period 1 January to 25 April 2018, the transaction will be deemed to be controlled for the period the country was on the list if two conditions are satisfied: (i) the value of the transaction within the relevant period exceeds UAH 10 million; and (ii) the Ukraine taxpayer’s total annual revenue exceeds UAH 150 million. In this case, any transactions with an entity incorporated in Estonia, Georgia, Hungary, Latvia or Malta during the period from 1 January 2018 to 7 March 2018 (25 April 2018 for Bulgaria) will be deemed to be controlled and will be subject to the above restrictions.
Currently, 79 jurisdictions remain on Ukraine’s low tax jurisdiction list.

Source: Deloitte

Wednesday, 25 July 2018

Recent developments in PE concept in India

Two recent rulings issued by India’s Authority for Advance Rulings (AAR) have considered what constitutes a permanent establishment (PE) in India, while the Mumbai Income Tax Appellate tribunal (ITAT) has examined the criteria for a dependent agent permanent establishment (DAPE) to exist.

Indian subsidiary of foreign company is not a PE
The taxpayer in the first ruling, issued on 31 May 2018, is an exporter of crude oil from the Middle East. The taxpayer had established a subsidiary in India as a separate legal entity, to provide procurement-related support services under a service agreement and business/marketing support functions under a proposed addendum to the service agreement. The subsidiary received arm’s length compensation for its services. The taxpayer requested a ruling from the AAR on whether the subsidiary constituted a PE of the taxpayer in India.
The AAR held that the Indian subsidiary would not automatically constitute a PE of the taxpayer unless it could be demonstrated that:

  • The taxpayer proposes to carry out its main business either itself from an establishment in India, or through its employees and personnel; or
  • The Indian subsidiary can act as an agent of the parent company in India (i.e. it proposes to carry out activities that are mentioned specifically in the relevant tax treaty between India and the jurisdiction of residence of the taxpayer as constituting an agency PE).

Foreign-based global payment solution provider’s processor in India is a PE
The second AAR ruling, issued on 6 June 2018, concerned a Singapore-based company that is a member of a group of companies providing global payment solutions and is engaged in the business of processing electronic payments for transactions. The taxpayer provides its customers in India with interface processors, allowing automatic connection to the group’s network and processing centers. The taxpayer facilitates the authorization, clearing and settlement of payment transactions via the network and processing centers outside India. The taxpayer’s Indian subsidiary owns and maintains the interface processors at customers’ premises in India.
Relying on the decision of India’s Supreme Court in the Formula One World Championship case, the AAR considered the conditions set forth by the court to create a fixed place PE and ruled against the taxpayer, observing that:

  • The interface processors located in India constitute a PE of the taxpayer in India;
  • Services rendered with respect to the use of a global network and infrastructure to process card payment transactions for customers in India also constitute a PE of the taxpayer in India;
  • The payment of arm’s length remuneration to the PE on account of the Indian subsidiary for activities performed/to be performed in India does not absolve the taxpayer from any further attribution of its global profits in India because the functions, assets and risks of the Indian subsidiary do not reflect the functions and risks of the taxpayer performed or undertaken by the subsidiary;
  • A proportion of the fees received by the taxpayer from Indian customers (comprising transaction processing fees, assessment fees and miscellaneous transaction-related fees) would be classified as royalties under article 12 of the India-Singapore tax treaty. However, since the royalties are effectively connected to a PE, they would be taxed under article 7 (business profits), rather than article 12. Such fees cannot be classified as fees for technical services under article 12 since the services are standard services; and
  • Indian nonresident withholding tax at the appropriate rate should be applied to the full amount of all payments made to the taxpayer.

The following conclusions can be drawn from the AAR ruling:

  • Active equipment, a network or infrastructure in India through which business is conducted can constitute a fixed place PE depending on the facts and circumstances;
  • Payments for standardized services arguably would not be subject to withholding tax unless a PE is created; and
  • The long-accepted argument that the payment of arm’s length consideration to a PE extinguishes the risk of additional profit attribution is not necessarily valid and can be challenged. This is in line with similar observations in the commentary to the OECD model treaty.

Indian franchisee does not create DAPE of a franchise-owner in India
On 29 June 2018, the ITAT ruled in the case of a US franchise-owner that entered into a master franchise agreement (MFA) with an Indian company, under which the US company granted a franchise for its stores in India to the Indian company. Under the MFA, the Indian company was entitled to the ongoing use of the US company’s trademark and to use new technology, new product development and system improvement in consideration for store opening fees and payment of a fee equivalent to 3% of sales revenue. The Indian company also had the right to enter into sub-franchise agreements, on which the US company was entitled to receive store opening fees and 3% of sales revenue.
The US company maintained that the franchise income received from the Indian company should be treated as royalty income, taxable at 10% in India. The Indian tax authorities took the position that the Indian company constituted a DAPE of the US franchisor in India, with the result that the franchise income should be treated as business income, taxable at 40% in India.
The Mumbai ITAT disagreed with the tax authorities, holding that the Indian company did not satisfy any of the conditions to constitute a DAPE of the US company in India, as specified in article 5(4) (PE article) of the India-US tax treaty. As a result, the US company’s income from franchising in India could not be subject to tax as business income in India. The ITAT’s decision was based on the following facts and circumstances:

  • The Indian company did not in any manner act on behalf of the US company;
  • Although 3% of sales revenue was payable to the US company as consideration for the rights granted under the MFA, all the profits and losses from the stores belonged only to the Indian company and the sub-franchisees;
  • While certain clauses within the MFA entitled the US company to examine the accounts, approve suppliers and exercise some control over advertising, neither the Indian company nor the sub-franchisees retained any stock or goods on behalf of the US company;
  • The Indian company did not enter into sub-franchise agreements or other agreements on behalf of the US company; all agreements were independently negotiated, entered into and executed by the Indian company; and
  • The sales prices of products sold in the Indian retail outlets were determined by the Indian company, with only limited guidance from the US franchisor.

The ITAT also observed that certain restrictions provided in the MFA were only to safeguard the brand value of the franchisor and to ensure the correct receipt of royalty income.

Source: Deloitte

Tuesday, 24 July 2018

Chile's Tax reform bill will include measures on taxation of goods/services sold online

The Chilean government is working on a tax reform bill that would simplify and modernize the corporate income tax system, and on 21 June 2018 the president announced that the bill will include measures to tax e-commerce. (At the time this issue was going to press, additional announcements were expected on potential measures.)
On 11 March 2018, the new government led by President Piñera took office and, in the president’s inaugural speech, he pledged to make adjustments that would simplify the tax reform implemented by the previous government, to boost investment and economic growth.
Since then, the government has been holding meetings to set the course of the reform, which initially proposed gradually reducing the Chilean corporate income tax rate (27%) to the average for OECD countries (25%), in addition to simplifying the dual tax system.
Source & more info: Deloitte

Monday, 23 July 2018

Guidance reinforces requirements to establish beneficial ownership status in Russia

On 1 June 2018, Russia’s Federal Tax Service (FTS) made available a letter dated 28 April that it sent to the regional departments of the FTS and their tax offices and that functions as guidance to the local tax authorities on the application of the concept of beneficial ownership (BO). The letter clarifies the criteria that the tax authorities should consider when determining BO status, provides practical examples of when tax treaty benefits should be denied and summarizes tax controversy practice regarding the application of the concept. Although the guidance in the letter is not binding tax law, the tax authorities generally must follow guidance issued by the FTS. The guidance likely will make it more burdensome for foreign recipients of Russia-source income (e.g. foreign holding and treasury companies) to qualify for benefits under an applicable tax treaty and prove BO status.
Source & more info: Deloitte

Sunday, 22 July 2018

UK signs new tax treaties with Guernsey, Isle of Man and Jersey

On 2 July 2018, the UK signed new tax treaties with Guernsey, Isle of Man and Jersey to replace the 1952 treaties for Guernsey and Jersey and the 1955 treaty for Isle of Man. The provisions in the three new treaties with the Crown dependencies are similar and reflect some of the measures under the OECD BEPS project. When in effect, each treaty will provide for a 15% withholding tax rate on dividends paid out of income (including gains) derived directly or indirectly from certain immovable property by an investment vehicle resident in a contracting state whose income from such property is exempt from tax and that distributes most of that income annually (other than dividends paid to pension schemes, which will be exempt); otherwise, the rate will be 0%.
A 0% withholding tax rate will apply on interest and royalties paid to the following recipients (otherwise, the domestic rate will apply):

  • An individual;
  • A company whose principal class of shares is substantially and regularly traded on a recognized stock exchange; and
  • A company less than 25% of whose shares or other rights are owned, directly or indirectly, by persons who are not residents of the other contracting state.

A 0% rate also will apply on interest paid to a pension scheme, a bank or building society and any other financial institution unrelated to and dealing wholly independently with the payer.
In addition, each treaty will apply a 0% rate on interest and royalties paid to any other person provided the competent authority of the treaty partner that has to grant the benefits determines that the establishment, acquisition or maintenance of that person, or the conduct of its operations, does not have as its principal purpose or one of its principal purposes to secure the benefits of the 0% rate.
Each treaty will enter into force on the date as of which both treaty partners have notified the other that they have ratified the treaty. Each treaty will apply for withholding tax purposes to amounts paid or credited as from the first day of the second month following the date the treaty enters into force.

Source: Deloitte

Monday, 16 July 2018

CJEU finds that German Anti-Treaty/Directive Shopping Rules violate EU law

After finding that the previous version of the German Anti-Treaty/Directive Shopping Rules (the Rules) were not in line with EU law ( Deister Holding – C-504/16 and Juhler Holding – C 613/16), the Court of Justice of the European Union (CJEU) ruled that the current version of the Rules, effective from 2012, also does not comply with EU law.  Taxpayers should consider whether they can benefit from this decision, which was issued June 14, 2018 (C-440/17).
Source & more info: PwC