WTA Newsletter

Argentina

Withholding taxes due-According to General Resolution (AFIP) 3674 of 12 September 2014, tax must be withheld by the payer at the time of making the payment. In the case of payments made to foreign recipients, if the payer does not withhold the tax this must be withheld by the intermediary or administrator.

Canada
Sanctions for tax evasion-From 1 October 2014 the rate of interest on corporate tax overpayments is 1%.

Colombia       

Main corporate tax rates-Domestic companies and branches of foreign companies are subject to a tax rate of 25% (previously 33% up to 2012). They are also liable to a tax known as the CREE which is a contribution to employees, employment creation and social investment. The CREE is charged on a different tax base at a rate of 9% for the tax years 2013 to 2015 and at 8% from 2016, capped at 3% of the net equity on the last day of the previous tax period.  Companies in free trade zones may be exempt from the CREE. The tax base for the CREE is generally gross income and gains, less costs and deductible expenses, but excluding tax losses brought forward and certain expenses such as donations.

Latvia

Others Withholding Tax rates-A 2% withholding tax applies to the disposal of real estate in Latvia by a nonresident. However from 1 January 2014 a tax resident of an EU member state or a treaty partner state may recalculate the tax payable based on 15% of the profit from the transaction and adjusts the tax payment accordingly.

France

Main corporate tax rates-The tax rate is 33.33% and there is a social surcharge of 3.3% if the tax due exceeds EUR 763,000. For companies with profits above EUR 250 million there is a temporary surcharge of 10.7% from 1 January 2014 (previously 5% for the year to 31 December 2013). With effect from 1 January 2013 a new temporary tax applies to companies who pay high gross remuneration to their employees in excess of EUR 1 million. The tax is charged at 50% of the amount of remuneration paid that exceeds EUR 1 million, but is capped at 5% of turnover. This tax is deductible from the corporate income tax paid by the company but is not deductible in computing the surcharge. Under proposals announced in April 2014 the corporate tax surcharge would be abolished from 2016 and the main corporate tax rate would be reduced in two stages from 33 1/3% to 28% by 2020.

Ecuador        

Others Withholding Tax rates-Under the Resolution no NAC-DGERCGC14-00787 SRI of 2 October 2014, a withholding tax applies to certain local payments. A 0% rate applies to certain interest paid to banks and entities subject to the supervision of the Superintendence of Banks and the People’s Solidarity Economy; a 1% rate applies to interest on credit transactions between banks and other entities; services of private passenger transport or private freight, electricity, purchase of certain movable property, construction activities and building materials, insurance and reinsurance, commercial leasing by Ecuadorian companies and services provided by media and advertising agencies. A 2% withholding tax rate applies to certain services of manual labor provided by individuals; provision of credit facilities by card issuers; certain interest, discounts and other financial returns on loans, term deposits or investment certificates issued by Ecuadorian companies;  or interest paid to individuals by a public sector entity. An 8% rate applies to certain payments for intellectual services by individuals that are not related to a professional qualification; payments to individuals or corporations that are resident or have a permanent establishment in Ecuador for the ownership, use or exploitation of intellectual property rights; rental of real property; payments for athletes, coaches etc who are not employees; fees for activities of foreign artists in Ecuador; and fees paid to resident individuals for teaching. A 10% withholding tax rate applies to fees paid to resident individuals for professional services; or fees paid to artists and athletes, resident and non-resident, for use of their image or reputation.

Egypt

PE rules-A branch profits tax of 10% applies from 2014. The after-tax profits of the branch are deemed to be distributed within 60 days after the financial year end of the branch.

Non-resident companies’ tax rates- Subject to the same rates as resident companies but are taxed only on Egyptian source income, subject to the provisions of double tax treaties. Nonresident companies are subject to a tax of 10% on the gain on a disposal of shares in resident companies. A 10% branch profits tax applies from 2014.

Taxability of other income (Dividends)–A participation exemption regime has been introduced for resident parent and holding companies. Under this provision 90% of the dividends received by the parent company from resident and nonresident shareholders are exempt from taxation if the parent company holds at least 25% of the shares or voting rights in the distributing entity and the participation has been held for at least two years. If the shares have not been held for two years the parent company can obtain the exemption if it gives a commitment to retain the minimum level of participation for two years.

Withholding rates for Dividends-A 10% withholding tax is being introduced on gross distributions of dividends to resident and non-resident corporate entities. This withholding tax also applies to entities incorporated in Special Economic Zones but does not apply to entities created under the Free Zone regimes. The dividend tax rate is reduced to 5% if the entity owns 25% of the distributing entity and has held the shares for at least two years.

Korea

Thin capitalization rules-Debt-to-equity ratio (6:1 for financial companies), under the 2015 Tax Revision Proposal this would be changed to a 2:1 debt-to-equity ratio.

Relief from double taxation-Under the 2015 Tax Revision Proposal an indirect tax credit would only be available where the domestic company has a 25% shareholding in the foreign company (currently 10%). Indirect shareholders would no longer be able to claim the credit.

Reduced tax rate-Under the 2015 Tax Revision Proposal a reduced tax rate would be available where the wages paid by a company have increased compared to the average for the previous three years. There would be a 10% deduction in tax liability (5% for conglomerates) relating to the amount of the increase in wages.

Surcharge-Also, under the 2015 Tax Revision Proposal further tax would be payable by a company with capital of KRW 50 billion or more that does not spend an appropriate amount of its current retained earnings on wage increases, investments or dividend payments.

Statute of limitations on tax audit: – For tax evasion relating to an international transaction this is currently extended to ten years, and under the 2015 Tax Revision Proposal this would be further extended to fifteen years.

Nigeria

Late payments of tax due-A rate of 15% interest applies to overdue tax payments for the year 2014.

Tanzania

Tax incentives in relation to infrastructure-Development are available in Special Economic Zones. Increased incentives are available for strategic investors. These are investors whose investment is above USD 50 million and where the project brings benefits such as local employment, new technology or capacity to manufacture for export.

Small business– A presumptive tax applies at 4% of turnover to businesses that have a turnover between TZS 4 million and TZS 7.5 million and keep accounting records. A flat tax rate ranging from TZS 100,000 to TZS 200,000 applies to businesses that do not keep records.

Vietnam

Technical service fees-Under Circular 103 FCWT applies to foreign entities distributing or supplying goods in Vietnam under international contract terms providing for the seller to bear the risk of deliver of goods within Vietnam; entities distributing goods or rendering services in Vietnam where they remain the owners of goods supplied to Vietnamese entities or bear distribution, marketing and advertising costs, or are responsible for the quality of goods or services, and have the authority to establish tech selling price; foreign entities concluding contracts in their name via authorized Vietnamese entities or individuals; or foreign entities exercising import and export rights, distribution activities in Vietnam, purchase goods for export, and sell goods to Vietnamese merchants under the relevant commerce law. Foreign entities exempt from FCWT include entities using bonded warehouses and inland ports as storage to support activities of international transport or storage of goods for processing by other enterprises; and foreign entities providing goods to Vietnamese entities or individuals without the associated services performed in Vietnam, including where the delivery involves warranty terms as part of the seller’s responsibilities (but without services).

Incentives on Industry/manufacturing-A preferential tax rate of 20% for a period of 10 years and 10% for a period of 15 years depending on certain criteria. Incentives apply to new projects involving products listed as prioritized for development. These projects are eligible for a preferential tax rate of 10% for fifteen years, four years of tax exemption and nine years of a 50% tax reduction. Investment projects with a capital of at least VND 12 million (fully contributed within five years) are also entitled to a preferential 10% tax rate for fifteen years, four years of exemption and a 50% reduction in tax for nine years.

Others Incentive-Decree 91 and Circular 151 of 1 October 2014 provide, for an expanded list of industrial zones in which entities are eligible for tax relief. Income from investment offshore is entitled to a Corporate Income Tax reduction or exemption when it is brought back to Vietnam.

Tax payment procedures-Under Circular 103, If the total provisional tax payments are less than 80% of the final tax liability the shortfall in excess of 20% is subject to interest on overdue tax. This interest runs from 31 December of the tax year until the date of the overdue tax payment.