Swiss Citizens are being asked in a national referendum next Sunday to approve reforms that would eliminate selective tax deals and introduce unified low rates for all companies.
Whom do the reforms apply to?
Under the proposed reforms international and domestic companies would pay the same rates. Supporters of the reforms point out that while multinational companies will face slightly higher tax rates, for ordinary companies tax will be much lower. That could stimulate investment and job creation.
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There are following changes with regard to taxes in Bulgaria in 2017:
- January 2017 – companies performing exclusively innovation, research and development activities as well as related activities are exempted from payment of profit tax in first 10 years of activity. This fiscal incentive could be applied only in case the state aid legislation is observed.
- February 2017 – companies whose revenues in the previous financial year do not exceed EUR 500.000 (exchange rate valid at 31 December) and fulfil the rest of the three criteria already applicable in microenterprises case, will be held liable for payment of tax on microenterprises. Microenterprise tax is 1% in case of companies having 1 or more employees and 3% in case of companies without employees. The microenterprise tax of 2% was repealed.
- Microenterprises which realize revenues exceeding EUR 500.000 or the percent of revenues obtained from consultancy and management activities exceeds 20% of their total revenues, will be held liable for payment of profit tax starting with the quarter when one of the above mentioned limits is exceeded.
The 30%-ruling is a tax facility provided in the Wage Tax Act for employees who have been seconded to the Netherlands or recruited from abroad to work in the Netherlands and who meet certain conditions. These employees are referred to as ‘extraterritorial employees’. If the facility is granted, the employer may pay the employee a – fixed – tax-free allowance of up to 30% of the employee’s employment income.
Conditions:
- The 30%-ruling is available to employees only.
- The employee must be seconded to the Netherlands or recruited from outside the Netherlands.
- the employee must have lived at a distance of more than 150 km from the Dutch border during more than 2/3 of the 24-month period preceding the start of the employment in the Netherlands.
- Employer (Dutch or non-Dutch) must be a Dutch wage tax withholding agent maintaining a payroll in the Netherlands.
- The employee must have specific expertise which is not or scarcely available on the Dutch labour market.
- Minimum salary level of € 36,889 (2016).
- For employees under the age of 30 with a qualifying Master’s degree, a minimum salary level of € 28,041 (2016) is applicable.
- The salary requirement which is adapted each year, must be met continuously.
A request for the application of the 30%-ruling will only be granted if the employee and the employer jointly file an application with the Tax Office.
The application for the 30%-ruling must be filed within four months from the start of the employee’s employment (first working day).
For the 30%-ruling to apply, the employer and employee must agree (in writing) that a separate tax-free allowance for extraterritorial expenses will be paid in addition to the gross salary, amounting to (at a maximum) 30% of the remuneration.
The ruling applies for a maximum period of eight years, as long as the employee meets the requirements of the 30%-ruling (which will be verified continually).
Russia and Hong Kong double tax treaty will apply from 1st January 2017 in Russia and from 1st April 2017 in Hong Kong.
Treaty Benefits and Tax Incentive
The treaty shall open new opportunities for Russian and foreign investors utilising treaty benefits and Russian tax incentives (participation exemption, Eurobond withholding tax exemption, CFC rules).
The treaty is applied with following conditions:
Interest – 0%
Dividends – 5% under the condition that the recipient of the dividends is a company (other than partnership), holds 15% of the capital; all other cases 10%
Royalties – 3%
Capital Gains – 0% as general rule; 20% – capital gains derived from alienation of immovable property, capital gains derived from alienation of shares of a company deriving more than 50% of its assets value directly or indirectly form immovable property , exemption applies in case of companies listed on the Stock Exchange.
In accordance with the OECD BEPS Action 5, Cyprus has abolished the existing IP box scheme, with effect from 30 June 2016, with transitional rules applying until 30 June 2021 for companies already using the old scheme (applicable with restrictions). The new Cyprus IP box scheme which has been introduced and is effective as from 1 July 2016 provides for a 80% deduction for profits from qualifying IP.
Effective tax of 12.5% on 20% of the qualifying profits as a result
This results in an effective tax of 12.5% (same as corporate tax rate in Cyprus) on 20% of the qualifying profits.
Qualifying IP types include intellectual property assets developed by a person as a result of research and development activities such as patents and copyrighted software. Marketing related IP such as trademarks, image rights and brand names do not qualify.
Currently all Polish investment funds – open-ended and closed-ended – as well as their equivalents from the EU and EEA have been fully exempt from Polish taxation on all types of profits derived in Poland.
The exemption covers income tax, capital gains tax and withholding tax. It is proposed that the exemption shall be cancelled. Instead it is proposed to exempt only certain types of profits derived by open-ended funds only or by their equivalents from the EU or the European Economic Area Member States. The exemption would cover only the following types of profits:
- interest
- dividends and dividend-like distributions
- capital gains from the sale of receivables, shares and stocks as well as other securities, including derivative financial instruments and foreign exchange gains
The new proposed legislation would fully exclude all closed-end investment funds from tax exemption. All profits of such funds derived from Poland would become subject to Polish taxation at the 19% rate.
It is proposed that the changes will come into force on 1 January 2017.
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Cyprus is well established as a favourable jurisdiction in Europe for business structuring and international tax planning. By ensuring proper long-term oriented tax planning and structuring are optimised of the Cyprus Company in the International Tax plan is in place that will provide tax optimisation and thus having a return on investment. Due to the fact, that Cyprus has a distinctive combination of advantages including a unique location, solid legislation and strong professional environment, these factors and more have resulted in Cyprus becoming one of the most attractive countries for the incorporation of International Business Companies (IBCs) in Europe over the last decade.
Management and Control
Principally, all Cyprus Tax Resident companies are taxed on the worldwide income accrued or derived from sources in Cyprus and abroad. A company is considered as a Resident Cyprus company if it is managed and controlled in Cyprus.
Corporate tax
The Corporation Tax in Cyprus is 12.5% which is uniform and it applies on trading profits, making it one of the lowest in Europe.
Taxable losses
If a company incurs a loss during a tax year, then this loss can be carried forward and used for tax relief of next year’s profit. Similarly, in case the company does not make profit then it can utilise the accumulated losses against the first available profits. The offset against the profit must arise during the next 5 years that the losses were created, otherwise this carry forward opportunity will be lost.
EU Directives
Cyprus having EU membership, and therefore use of EU Directives is also allows benefits to other Third countries. Application of some key EU directives are as follows:
1. Merger Directives –Resident and Non-Resident Companies have no taxation obstacles or consequences relating to reorganisation, mergers, divisions, transfer of assets and exchange of shares
2. Parent / Subsidiary Directive – Withholding tax is not paid on dividends and has immediate effect as long as there is 10% minimum shareholding and 2 years of holding. The tax is withheld abroad and the dividend is exempt in Cyprus (subject to conditions)
3. Interest / Royalty Directives – Withholding tax is not paid on the interest to Non–Residents and has immediate effect provided there is 25% minimum shareholding (only in case of royalties) Royalties are subject to corporation tax.
