Budget bill is changed again in Italy

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Instead of the previous 5% tax to be levied on annual personal incomes higher than EUR90,000 (USD126,300),  now people have to pay 10% on annual incomes over EUR150,000, an additional rate of 3% will now be applied on all personal incomes over EUR300,000.

The government has reintroduced a ‘solidarity’ tax on incomes; details of this ‘super-tax’ will be delineated in a further decree from the Ministry of the Economy by October 30 this year.  It will be effective from January 1, 2011, to December 31, 2013. The government may further extend it until Italy’s budget reaches a balanced level.

The new version of the budget now includes a 1% rise in the rate of value added tax (VAT) in reserve. This rate will be effective in future to transactions made on or after the effective date of the budgetary legislation, and there has been no indication of a fixed termination date.

Some of the anti-tax evasion measures have also been detailed in this new version of budget. For example, the corporate tax rate on shell companies will be increased by 10.5% (from the normal 27.5% to 38%) for those established to hold assets that are still operated by their individual owners. The tax authorities will establish a presumed minimum income for such companies.

Italy: VAT rate increases

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The Italian Parliament has agreed to an emergency 1% rise of VAT from 17 September 2011. Though the rise was originally submitted in June 2011, and was scheduled for January 2014. But due to instability in the financial market, the government took the step immediately and raised it to 22%.

Double Taxation Convention Signed between UK and Hungary

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A new and comprehensive Double Taxation Convention was signed between the UK and the Republic of Hungary in Budapest on the 7 September 2011. The convention replaces the 1977 agreement by the general OECD Model Double Taxation Convention. The latest OECD provision on exchange of information is agreed.

Zero withholding rates for direct investment dividends and dividends paid to pension funds will be applied as per this agreement. A 10% rate for portfolio dividends and zero withholding tax on interest and royalties will also be applicable.

Mineral resources rent tax demanded by an Indian state

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Orissa has more than 35% of India’s iron ore reserves. Considering the potentially huge amount of money to be made not just benefitting a small group of private mining companies, the Chief Minister of Orissa has asked the Indian Prime Minister to impose a mineral resource rent tax on iron ore. According to his suggestion the levy should be fixed at 50% of the surplus rent.

The current high demand for iron ore by the steel industry induced increased pressure on the Indian Government to keep resources in the country. Thereby, to discourage the shipping of the product elsewhere the government has raised export taxes considerably. The State Government is keen to see natural resources being kept at home and suggested that India adopts a similar levy to the controversial Australian Mineral Resource Rent Tax of 30%, with effect from July 1, 2012.

Tax exemptions for oil and gas projects granted in China

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Both onshore and offshore oil and gas drilling projects have been granted import duty and value-added tax exemptions by the China’s Ministry of Finance. The exemptions have been granted to the importation, within established quotas, of equipment, instruments, spare parts and special tools that are unable to be manufactured in China, and are directly used in exploration and exploitation. The exemptions will be effective for five years from January 1 this year to December 31, 2015.

It has also been specified that the exemptions are available only for approved oil and gas projects on:

  1. Land in China’s deserts,
  2. Onshore and offshore exploration being undertaken on a joint venture basis between Chinese and foreign companies, and
  3. In other approved maritime and continental-shelf offshore blocks.

India signs DTA with Georgia

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The Indian government has signed an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital (DTA) with the government of Georgia.

The DTA ensures that business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment (PE) in the source state. Under the treaty, withholding tax rates on dividends, interest, royalties and fees for technical services will be set at 10%.

The agreement incorporates provisions for the effective exchange of information between the tax authorities of the two countries in line with international standards, including the exchange of banking information. It provides for the sharing of information to other agencies with the consent of the supplying state, and it incorporates anti-abuse (limitation of benefits) provisions to ensure that the benefits are availed of by genuine residents of the two countries.

It is hoped that the agreement will provide tax stability to the residents of India and Georgia and will facilitate mutual economic cooperation between the two countries.

Switzerland Amends Bond Withholding Tax

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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.