INDIA ANNOUNCES FUNDAMENTAL CHANGES
TO THE INDIA-MAURITIUS DOUBLE TAX TREATY
By Marc Hein and Johanne Hague*
The Government of India has announced that Mauritius and India have signed a protocol amending the agreement for avoidance of double taxation with Mauritius.
The signature of this protocol is likely to have a significant impact on inbound investment in India and raise major concerns among stakeholders across the global business industry.
Find out more.
US TREASURY’S PROPOSED §385 REGULATIONS UNDER SCRUTINY
ON CAPITOL HILL, IN CORPORATE TAX DEPARTMENTS: TOP POINTS
By Evan Migdail and Maruti Narayan
As part of its ongoing effort to try to curb inversion transactions, the US Treasury Department has issued proposed regulations under section 385. Section 385(a) authorizes the Treasury Department to issue regulations that may be necessary or appropriate to determine whether an interest in a corporation is treated as stock or indebtedness for US federal income tax purposes.
The new proposed regulations, issued in April, are extremely broad and affect a vast range of transactions between related parties, whether domestic or foreign.
The proposed regulations go far beyond the stated purpose of targeting inversions and earnings stripping and may potentially recharacterize as equity routine intercompany debt transactions that arise in the domestic and intercompany context.
Find out more.
JAPAN: DOES REDUCTION IN CORPORATE EFFECTIVE TAX RATE MEAN
ACTUAL REDUCTION OF TAX BURDEN?
By Makiko Kawamura and Kayo Ishikawa
Japan’s amended Corporation Tax Act is now in force.
Pursuant to the act, the corporate tax rate has been reduced from 23.9 percent to 23.4 percent, with effect from the business year commencing on and after 1 April 2016, and the amended Local Tax Act also came into force on the same day. As a result, the effective corporate tax rate applicable to large enterprises has fallen below 30 percent.
However, a reduction of tax rate does not necessarily mean an actual reduction of tax burden.
Find out more.
UK FINANCE BILL 2016 EXPANDS ROYALTY WITHHOLDING TAX
By Paul Rutherford, Mark Burgess,
David Thompson, Richard Woolich and Neville Wright
Domestic UK law imposes a 20 percent royalty withholding tax on limited types of payment and on specific categories of intellectual property. This year’s Finance Bill expands the scope of intellectual property royalties that are subject to UK royalty withholding tax.
UK businesses should review their intellectual property licensing agreements to determine the impact of these changes and may need to make tax treaty claims to reduce or eliminate withholding where applicable.
Find out more.
POLAND: TAX EXEMPTION FOR VENTURE CAPITAL FUNDS
AIMS TO FOSTER INNOVATION
By Aleksandra Kozłowska and Marcelina Szwed
It is becoming increasingly clear that the legislature is striving to make Poland a technological and digital oasis. One of the tools intended to achieve this goal is a tax exemption applicable to venture capital funds.
This year, the government announced its Responsible Development Plan, a set of tools aiming to boost innovation and improve Polish competitiveness on the international stage, as well as Start in Poland, a program to involve state-owned companies in financing Polish startups and promote Polish tech innovation.
These are all signs of a strong pro-innovation trend, underpinned by the Act of 25 September 2015 on the Amendment to Certain Acts in relation to the Support of Innovation. Under this Act, a number of tax relief measures concerning research and development activities have been introduced, among them a tax exemption for venture funds.
Find out more.
AUSTRALIA: NEW BUDGET INTRODUCES DIVERTED PROFITS
TAX TARGETING MULTINATIONALS
By Jock McCormack, James Newnham and Matthew Cridland
The Australian Government is continuing its attack on multinational tax avoidance with the release of its 2016-2017 federal budget.
Central to its Budget initiatives is the introduction of a 40 percent diverted profits tax on large multinationals from 1 July, 2017, akin to the existing UK diverted profits tax.
Find out more about this and other initiatives in the new Australian budget.
MORE INTERNATIONAL TAX NEWS FROM DLA PIPER
A recent report published by the United Nations’ Economic Commission for
Latin America and the Caribbean calculates that Latin American countries have lost more than US$98 billion in tax revenues simply due to transfer pricing manipulation. Now countries across the region, such as Ecuador, are changing their local regulations or approaches to audits to redress these vast losses.
China is replacing its dual indirect-tax system, in which business tax and value-added tax coexist, with a purely VAT approach. Here, we write about this almost-completed reform. And in the latest issue of China Tax News, we cover a host of other developments, among them a look at the information that Chinese tax authorities could be disclosing to other states.
In Australia, companies subject to Goods and Service Tax may potentially face double taxation for transactions that involve the use of digital currencies. Australia’s government is working on a fix.
Failure to pay VAT on transactions involving sales from overseas to UK customers has created an enormous tax gap - estimated to have cost HMRC between £1 and £1.5 billion last year. The 2016 Budget aims to redress that.
Multinationals take note as the World Customs Organization’s Technical Committee on Customs Valuation approves a new instrument concerning the use of transfer pricing documentation in assessing customs values.
In France, litigation regarding constitutional issues around the 3 percent tax on distributions is in process, and we are suggesting that French subsidiaries of multinationals consider making a claim before the decision of the French Constitutional Court is handed down, in order to preserve their rights to a potential repayment.
PLEASE JOIN US IN LONDON
NEW RULES IN A NEW TAX WORLD
DPT AND MAAL IN PRACTICE
Please join us in London on June 1 for a breakfast roundtable featuring international tax QCs Philip Baker and David Bloom, who along with key DLA Piper lawyers will discuss practical aspects for multinationals of the Diverted Profits Tax and Multinational Anti-Avoidance Law in the UK and Australia.
Spaces are strictly limited for this interesting event. Please visit this page to learn more and to register.
*Marc Hein is chairman and Johanne Hein is head of the Tax practice of Jurisconsult Chambers, a member of DLA Piper Africa Group, an alliance of leading independent law firms working together in association with DLA Piper, both internationally and across Africa.