On 29 August 2011 it was reported that changes in withholding tax should allow Swiss companies to issue their bonds under competitive conditions in Switzerland, according to the Swiss federal government, which said that the changes would also apply to the newly created contingent convertible bonds.
Under new proposals announced on August 24, 2011 Switzerland will switch from the ‘debtor principle’ to the ‘paying agent principle’ in the case of withholding tax on interest from bonds and money market paper. This means that in future, the Swiss paying agent and not the issuer should levy the tax. In addition, only interest payments to natural persons domiciled in Switzerland will be subject to the Swiss withholding tax, including interest derived from foreign bonds. Domestic and foreign investors who are not subject to income tax in Switzerland may be exempted from withholding tax.
The legislative amendments could come into force on January 1, 2013 at the earliest.
Despite sluggish economic growth, as part of a package of fiscal measures to meet its ambitious deficit reduction targets, the French Prime Minister has introduced an exceptional tax of 3% imposed on the annual income of the top earners in France. The government also plans a 1.2% increase in the social levies imposed on income from capital.
Other key fiscal measures outlined by the Prime Minister include the following plans:
- To increase the social levy imposed on interest, participation and savings
- To modify the taxation of capital gains derived from real estate and the taxation of overtime, and
- To increase the tax on tobacco (by 6%) and alcohol.
The French Prime Minister announced some budget and tax measures that aim to reduce France’s deficit, on 24 August 2011 at a press conference.
The French Cabinet will examine some of these proposed measures on 31 August and include in the draft of the second Amended Finance Bill for 2011 to be considered by Parliament starting on 6 September. Rest of the measures will be included in the draft Finance Bill for 2012 and the draft Social Security Financing Bill for 2012.
On 26 August 2011 the Hong Kong government announced the coming into effect of the Protocol to the bilateral agreement for the avoidance of double taxation with Luxembourg signed in November 2010.
The Protocol had been ratified by Hong Kong on July 8, 2011. The Hong Kong government was notified by Luxembourg’s authorities on August 17, 2011, that they too had completed their internal ratification procedures.
The agreement will become effective in Hong Kong for tax years commenceing on or after April 1, 2012; and in Luxembourg from January 1, 2012.
The tax information exchange agreement (TIEA) between Guernsey and the People’s Republic of China entered into force on August 17, 2011. Incorporating the internationally-agreed Organization for Economic Cooperation and Development (OECD) standard for the exchange of information upon request, the agreement will give the tax authorities of both countries a greater ability to exchange taxpayer information.
Under the terms of the TIEA, the signatories will be able, on request, to exchange bank and other information relating to tax matters. The agreement was originally signed in October last year during the visit of a Chinese delegation headed by Xiao Jie, the Commissioner of the State Administration of Taxation. Speaking during his visit, Xiao Jie confirmed China’s wish to strengthen its economic and trading relationship with Guernsey.
In recent times, Guernsey’s government has said that the completion of TIEAs underlines Guernsey’s on-going commitment to the international standards of wider transparency and exchange of information in tax matters, and that 26 countries have now signed TIEAs with Guernsey.
The Spanish government has announced to reduce the rate at which the sales tax is applied to the sale of new housing. The intention behind this reduction is to stimulate the country’s stagnant housing market and support the construction industry.
According to the most recent statistics, new house sales have declined by 26% year-on-year, with less than 25,000 homes sold during June 2011. To ensure that the industry does not go into a further decline, the government proposed the value-added tax (VAT) rate to be cut to 4%, from 8%, on the sale of newly developed housing.
According to a government spokesperson the measure are ‘temporary and exceptional’. The government has recently announced a number of rigorous measures and is expected to announce further tax changes on August 26 to encourage employment. To provide a short-term boost to the government’s cash flow, the Spanish authorities planned to bring forward corporate tax payments by large enterprises, until 2013. On the other hand, to compensate firms, it has increased the maximum number of years that tax credits can be carried forward to offset future losses from 15 years to 18 years.
The Finance Ministry of South Korea agreed to the government’s long-standing plan to reduce corporate taxes from next year. The government is expected to lower the rate of corporate tax on businesses from the current 22% to 20% for a taxable income greater than KRW200m from 2012.