INPACT. E-Tax Bulletin. Summary. Issue n. 33 June Pag. 2 - Austria. Pag. 2 - Brazil. Pag. 4 - Denmark. Pag. 5 - France. Pag.

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1 INPACT Summary Pag. 2 - Austria Pag. 2 - Brazil Pag. 4 - Denmark Pag. 5 - France Pag. 7 - Greece Pag. 8 - Ireland Pag Netherlands Pag Switzerland Pag United Kingdom Note from the Editor Fellow INPACT Members Welcome to the latest edition of the INPACT. This time we have a very European focused edition with contributions from 10 member firms together with an article from our new Brazilian member. Can I take this opportunity to continue to thank all those who do contribute and without whose effort this publication would not be possible. However, The E-Tax bulletin strives to be a global tax publication and therefore we very much welcome future contributions from our friends in both the Americas and Asia-Pacific. I do hope this issue is of interest. I am now pleased to announce two important developments. Firstly, the INPACT International Tax Committee (ITC) has a new member, Maria Regina Branco from NK Assessoria Contabil e Fiscal Ltda in Sao Paulo, Brazil. You will find more information about this appointment in this issue. But on behalf of the ITC can I take this opportunity to welcome Maria on board. Secondly, the ITC have recently agreed a strategic partnership with Washington DC based International tax publishers, Tax Analysts. This will provide INPACT members with the opportunity to subscribe to their international tax publications, resources, analysis and news service for a substantial discount. We at the ITC are very excited about this new partnership and a formal announcement will be ed to you all soon. Enjoy your summer. Mark Moore, Editor Rayner Essex LLP Chairman INPACT International Tax Committee mark.moore@rayneressex.com INPACT International Tax Committee

2 Maria Regina Branco Join s INPACT s International Tax Committee The INPACT International Tax Committee (ITC) are delighted to announce their newest Committee member, Maria Regina Branco from NK Assessoria Contábil e Fiscal Ltda who only recently joined INPACT as a member firm. Branco was formally accepted onto the ITC on 24th April Bolstering the Burgeoning Skillset of INPACT s International Tax Committee Branco is very keen to impart her knowledge of international tax resources prepare articles which she plans to bring to the attention of the other members, and she has also committed to attending several of the international conferences each year where she will contribute to ITC meetings, discussions and training sessions. Branco is excited with the opportunity to foster her interest in tax law and collaborate with others who continually strive to improve the literature and practices regarding international taxes. In an , Branco stated that she was especially intrigued by the opportunity to discuss International tax themes with renowned colleagues, gather empirical knowledge on international tax planning, and consequently benefit our clients with this experience. Coming from Brazil, Branco is in an exceptional position to provide an in-depth look into the current tax laws within that country and clarify the new tax legislation that has been making headlines in Brazil. As a result of her involvement with the ITC, Branco hopes to participate in building tax planning resources and portfolios to improve the international tax process for clients across countries. Providing Reliable Tax Information to Member Firms in Countries across the World ITC is a group of tax experts dedicated to compiling and providing the best practices for international tax issues for the benefit of all INPACT members. The following members currently comprise the ITC: Mark Moore (Rayner Essex, United Kingdom), Gianfranco Peracin (Cortellazo & Soatto, Italy), Reinhard Haeckl (Häckl Treuhand GmbH, Germany), Renald Micallef (Busutill & Micallef, Malta), Claudia Stadler (cst causa, Austria), Jean Pierre van Duppen (RSW Accountants & Tax Advisors, The Netherlands) and the newest member, Maria Regina Branco (NK Assessoria Contábil e Fiscal Ltda, Brazil.). INPACT International E - Tax Bulletin - Issue 33 2

3 AUSTRIA The Austrian government has published details of the planned Tax Reform 2015 / It entails a general reduction in tax rates, with a maximum tax rate of 55% being introduced at the same time. The new Tax Reform is to become effective as of 1 January Details regarding the planned changes are set to emerge within the next few months. The main items of the Tax Reform are: Tax rate reform The minimum tax rate is to be lowered to 25%. In turn, a new maximum tax rate of 55% will be introduced. In future, there are to be six as opposed to the current three tax rate levels. The table below shows the difference between current and future regulations. Gross income current rate Rate as from ,000 to 18, % 25% 18,000 to 31, % 35% 31,000 to 60, % 42% 60,000 to 90,000 50% 48% 90,000 to 1m 50% 55% The new maximum tax rate is to be limited to five years (for the time being). The tax credit for low income earners (below 1,100) will be more than tripled from 110 to 375. This tax credit is to be granted via social security contributions Retirees are to receive an annual tax credit of up to approx. 100 if they receive less than 1,100 per month. Tax credits for children are to be increased to 440 Reciprocal financing measures The withholding tax is to be raised from 25% to 27.5%, although no changes will be made with respect to the withholding tax on savings interest. The withholding tax on interest remains at 25%. It is to be expected that this increase is to affect all other capital income as well (e.g. dividends and similar income from the provision of capital, capital gains on disposal, profit from derivatives and distributions from private foundations). The increase in the withholding tax means that the total tax burden on distributed profits from corporations (after deduction of the corporate tax of 25%) is raised from the current rate of 43.75% to % The withholding tax must not exceed half the maximum tax rate. Since the maximum tax rate will be increased from 50% to 55%, the withholding tax may in turn be raised from 25% to 27.5%. Since this new maximum tax rate is to be limited to five years, this time limit will also apply to the withholding tax increase to 27.5% as well. There is another issue which needs to be considered when increasing the withholding tax: According to the Austrian Final Taxation Act, the withholding tax rate must be a uniform rate. Should different tax rates be introduced, this would require an amendment to the Austrian Final Taxation Act. Since this Act is a constitutional act, however, any amendment requires a majority of two thirds in Parliament. Furthermore, constitutional experts consider a differentiation between savings account deposits and other capital income to be problematic in light of the principle of equal treatment. Even more serious concerns arise when the currently existing loss compensation limits on capital income are applied by analogy. Real estate capital gains tax is also to be raised. At present, capital gains from disposal of real estate are taxed at a rate of 25%. In future, the tax rate will be 30%. The sale of primary residences is to continue to be exempt from such taxation. Real estate transfer tax is to be increased as well. In future, this tax is to be calculated on the basis of the market value and not the more favorable standard value of a property even when such property is transferred within the family. This in fact constitutes the introduction of inheritance tax through the back door. Until now, 2% of the triple standard value was charged for transfers of real estate and land plots within the family, irrespective of whether this property was sold, passed on as a gift or bequeathed. In future, this tax is to be based on the market value, as is already the case with non-family transfers The rate for intra-family transfers without compensation is to be subject to different levels in the future. It is to be 0.5% with property market values below 250,000, 2% up to 400,000 and 3.5% over 400,000 (this percentage also applies in case of non-family transfers). The transfer of business real estate properties (individual enterprise) is subject to a tax allowance of 900,000. Real estate transfer tax of 3.5% is only applicable above this amount. Agricultural land is also to be taxed on the basis of the standard. Agricultural standard values were reassessed only as recently as 1 January 2015, with the assessment notifications being sent out no later than the first half of In the event of intra-family transfers without compensation, the tax rate INPACT International E - Tax Bulletin - Issue 33 3

4 thus remains at 2% of the single rateable value in this field. As a result of the particularly severe burdens on the tourism sector, an adjustment has already been announced in this area Further measures: The research premium is to be increased to 12%. The financing options for businesses are to be improved by introducing new crowd funding regulations for the costefficient financing of projects. With respect to the depreciation of buildings, a single depreciation rate is to become applicable irrespective of the use of the building (previously 2% to 3% depreciation based on the use). For atypical silent partnerships (partnerships without individual partners) any offsetting of losses is to be limited to the partnership contribution. Both employers and employees are to benefit from the increase of the tax-free employee participation in companies, which is to be raised from 1,460 to 3,000 per year. Incidental wage costs are to be lowered as from The remuneration in kind for company cars with CO2 emissions of 120g/km or more is to be raised from 1.5% to 2% of acquisition costs (from 720 to 960). The maximum assessment base for social security contributions is to be raised to 4,840 per month. The reduced VAT rate is to be increased from 10% to 13%. This applies to animals, seeds and plants, cultural services, museums, zoos, film screenings, wood, ex-vineyard sales of wines, air travel, public pools, youth care and guest accommodation (the VAT for the latter is to be increased only from 1 April 2016). Anti-fraud measures: The mandatory introduction of cash registers and a central register of accounts as well as the lifting of banking secrecy (particularly within the context of company tax audits) can be seen as measures against tax fraud. For further information please contact: Claudia Stadtler cst causa Steuerberatungs GmbH Vienna, Austria c.stadler@cst-causa.at BRAZIL LABOUR AND SOCIAL SECURITY Payroll Tax Relief The payroll tax relief program was implemented by the Brazilian Government in August 2011, and, since then, new economic sectors have been included and legislation has been improved. The program consists of calculating the employer social security contribution on the gross revenue, at a tax rate of 1% or 2%, depending on the economic sector, instead of calculating it on the payroll salaries (at the former rate of 20%). Currently, IT, call center, transportation, journalism, retail, and construction industries are the sectors covered, as well as hotels and industries that manufacture some specific products. Recently, the Brazilian internal revenue service enacted a ruling that determined: (i) additional revenues that may be excluded from CPRB (the Social Contribution on the Gross Revenue) calculation basis; (ii) legal entities that are not eligible to the CPRB and; (iii) additional requirements regarding CPRB withholding on work force assignment. In addition to that, on February 2015, the Government enacted a provisional measure which intends to raise the rates of 1% and 2% above mentioned, respectively, to 4,5% to 2,5%. According to the provisional measure, these rate changes should be in force as from June 1st, It is important to mention, however, that provisional measures are enacted by the President aiming at regulating urgent situations and have an initial term of effectiveness of 60 days, extendable for another 60 days, to be converted into law, during which they must be voted by the National Congress. If not approved, provisional measures lose their effectiveness, then, having the National Congress to regulate the legal acts practiced during the voting period. If the National Congress does not issue a Federal Decree ruling such legal acts, they are considered, then, ruled according to the provisions in the provisional measure. Accordingly, initially, the CPRB rate increase to 4,5% and 2,5% should be effective as from June 1st, 2015, but the process of conversion into law should be accompanied by taxpayers, given the possibility of rejection by the National Congress and consequent need of regulation of the operations conducted during the voting period. The Integrated Labor and Social Security Return (e-social) E-Social is the new integrated labour and social security return, which aims at unifying labour and social security-related information submitted to the Brazilian Internal Revenue Service. The purpose is to assure labour and social security rights to individuals, rationalize and simplify the fulfillment of ancillary obligations, eliminate redundancies between information submitted by individuals and information submitted by legal entities (employers), improve the quality INPACT International E - Tax Bulletin - Issue 33 4

5 of information in labour, social security and tax relations, and grant differentiated treatment to small businesses. A new manual with instructions for the filing of information within e-social has been recently published. Deadlines for the delivery of events and the mandatory schedule are still to be enacted by the Steering Committee and are expected to be publicized soon. CORPORATE INCOME TAXES Tax Regulation of the Effects of Law 11,638 Law 11,638/2007 introduced IFRS within Brazilian corporate law. The implementation of the IFRS concepts resulted in the need of adjusting accounting balances, which, consequently, had to be ruled regarding their tax treatment. Given the absence of legal tax provisions at the time of the implementation of IFRS in Brazil, in 2008 the Transitional Tax Regime (RTT) was created, determining that any adjustments resulting from the adoption of IFRS standards should not impact the calculation of Brazilian corporate income taxes (IRPJ and CSLL) and turnover taxes (PIS and COFINS). In May 2014, Law 12,973 was publicized and tax legislation was renewed as to implement the tax treatment applicable to the accounting adjustments. Law 12,973 establishes that the Brazilian internal revenue service enact rulings as to thoroughly describe the tax treatment applicable to each IFRS adjustment, however, only the following accounting adjustments have been ruled so far: (i) fair value; (ii) present value adjustment; (iii) goodwill; (iv) intangible amortization; (v) impairment; (vi) stock options and; (vii) leasing operations. The New Corporate Income Tax Return (ECF) From the 2014 tax year, a new corporate income tax return will be due, named ECF (Escrituração Contábil Fiscal). ECF must be submitted to the internal revenue service by September 30th, 2015 and fines for the non-submission or submission with errors, which may add up to BRL 5 million, have focused the attention of tax executives. This new model of return consists of the full integration between legal entities balance sheets, whose submission to fiscal authorities through a special electronic format (under the so-called Public System of Digital Bookkeeping - SPED), has been required since 2008, and their corporate income tax calculation basis, now to be submitted under ECF. This way, the corporate income tax calculation basis must be fully linked with the balance sheet submitted under SPED. Consequently, this new system highlights accounts that have not been taxed, and automatically prevents tax evasion, since all analytical accounts become more visible to tax authorities. Deductibility of Bad Debt Losses Expenses resulting from bad debt losses are deductible from IRPJ and CSLL (the Brazilian corporate income taxes) calculation bases, providing the requirements regarding the aging of the credit and the collection procedures are met. Recently, such requirements have changed as to reduce bureaucracy on the deductibility of bad debts. The table below demonstrates the new deductibility range. Sort of bad debt Credits where the debtor has been declared insolvent through court decision Unsecured credits, up to BRL 15,000, overdue for more than 6 months Unsecured credits, higher than BRL 15,000 and lower than BRL 100,000, overdue for more than 1 year Unsecured credits, higher than BRL 100,000, overdue for more than 1 year Secured credits, up to BRL 50,000, overdue for more than 2 years Secured credits, higher than BRL 50,000, overdue for more than 2 years Credits where the debtor has been declared bankrupt or the legal entity is under concordat or judicial recovery processes, relatively to the portion which exceeds the amount the debtor has undertaken to pay TAX ON FINANCIAL TRANSACTIONS Requirement - - Administrative collection procedures maintained Judicial collection procedures maintained - Judicial collection or collateral arrest procedures maintained - Tax Rate Increase on Loans Granted to Individuals The Tax on Financial Transactions (IOF) is levied on credit, exchange, insurance, securities, and on operations regarding gold, financial assets and exchange instruments. Since January 21st, 2015, the daily tax rate on loan operations contracted by individuals was increased to 0,0082%. In spite of this rate increase, the additional tax rate of 0,38% was maintained in force. VALUE-ADDED TAXES Increase of PIS and COFINS rates on import operations On January 30th, 2015 a provisional measure was enacted determining the increase of PIS and COFINS rates on import operations. The previous rates of 1,65% (PIS) and 7,6% were raised to 2,1% (PIS) and 9,65% (COFINS) and are applicable to all importation of goods. Regarding the import of services, rates remain 1,65% and 7,6%. The rates applicable to some specific products have also changed, according to the table INPACT International E - Tax Bulletin - Issue 33 5

6 below. The provisional measure has also established that the tax credit to which companies subject to the non-cumulative regime are entitled should be calculated on the customs value added by the Excise Tax (IPI), when IPI has been integrated with the acquisition cost. According to the provisional measure, the rate changes and tax credit rule mentioned herein should be in force from May 1st, It is important to mention, however, that provisional measures are enacted by the President aiming at regulating urgent situations and have an initial term of effectiveness of 60 days, extendable for another 60 days, to be converted into law, during which they must be voted by the National Congress. If not approved, provisional measures lose their effectiveness, then, having the National Congress to regulate the legal acts practiced during the voting period. If the National Congress does not issue a Federal Decree ruling such legal acts, they are considered, then, ruled according to the provisions in the provisional measure itself. This way, initially, the provisions mentioned herein should be effective as from May 1st, 2015, but the process of conversion into law should be accompanied by taxpayers, given the possibility of rejection by the National Congress and consequent need of regulation of the operations conducted during the voting period. Product* Previous rate Current rate Pharmaceuticals 2,1% (PIS) 9,9% (COFINS) Perfumery and personal hygiene Machinery and vehicles Rubber tires and tubes 2,2% (PIS) 10,3% (COFINS) 2% (PIS) 9,6% (COFINS) 2% (PIS) 9,5% (COFINS) Auto parts 2,3% (PIS) 10,8% (COFINS) Paper exempt to taxes destined to print journals 0,8% (PIS) 3,2% (COFINS) 2,76% (PIS) 13,03% (COFINS) 3,52% (PIS) 16,48% (COFINS) 2,62% (PIS) 12,57% (COFINS) 2,88% (PIS) 13,68% (COFINS) 2,62% (PIS) 12,57% (COFINS) 0,95% (PIS) 3,81% (COFINS) *Not all species of these genders of products are covered by the rate changes. Please contact us should you need further information on specific products. If your require further information please contact: Mrs. Maria Regina Branco NK Consultoria Tributária e Assessoria Empresarial Ltda. Sao Paulo, Brazil mariaregina.branco@nkconsultoria.com.br DENMARK Denmark eases salary requirement for particular gross tax for foreign key employees The normal tax in Denmark for employees If you as a foreigner are considering applying for a job in Denmark, you may have noticed that the top tax rate is relatively high. In Denmark we have two tax brackets: Income kr. 42 % Over kr. 56 % Tax rate (approximately) The top-bracket starts, as shown by the table above, at an income of more than 500,000 kr. Of the last earned krone you pay 56 percent in taxes. For an income below 500,000 kr. the tax is 42 percent. Under normal rules you have 2 standard deductions: Personal deduction in kr. Employment deduction in kr. In addition, you can deduct expenses for union and unemployment fund payments and travel expenses to the extent that your daily commute to and from work exceeds 24 kilometers. The standard fare for travel allowance is 2.05 kr. per. kilometer. The personal deduction, the employment deduction and other allowance have a tax value of approximately 29 percent in 2015, as these deductions can only be deducted from municipal and health contributions. Denmark has introduced a special gross tax for foreign scientist and highly paid employees to attract skilled foreign workers. If you as a foreigner get a job in Denmark, you may choose the particular gross tax, where you only pay percent in taxes. Since this is a gross tax, you cannot claim any deductions. You can use the special gross tax for 5 years in total. You can interrupt your job in Denmark and come back later and use the gross tax, as long as your working periods in total do not exceed 5 years. The salary demand is reduced for 2015 If you are not a scientist, your gross salary must amount to at least 61,500 kr. per month in 2015, to be included in the gross INPACT International E - Tax Bulletin - Issue 33 6

7 tax of percent. Note, that the requirement for minimum wage has just been reduced by parliament with effect from In 2014 the salary requirement was 70,600 kr. Parliament has thus reduced the salary requirement by approximately 10,000 kr. per. month. Objective conditions you must meet Anyone who meets the following objective criteria may use the gross tax for 5 years. No. Requirements Description 1 Salary per. month 2 Tax liability by starting the job 3 No previous tax liability Minimum 61,500 kr. At the time when you start working, you must enter full or limited tax liability in Denmark. You cannot within the last 10 years have been fully or partially taxable in Denmark of salary or income from self-employment. 4 Danish employer Employers must be fully taxable in Denmark or have a permanent establishment in Denmark 5 Not-owner of enterprise 6 Limited work abroad If your require further information please contact: Lennart Gutfelt GUTFELT Revisionsfirmaet Kastrup, Denmark lg@gutfelt.com You may not within the last five years before appointment have controlled the business. Control exists if you have owned 25% of the shares in the company or been in charge of more than 50 per cent of the votes. You may be a director of the company. Work must generally be carried out in Denmark, but you may well carry out part of the work abroad as long as the work abroad does not exceed 183 days per. year. FRANCE INCOME TAX RETURN FOR 2014 The deadline to file in the 2014 income tax return has been changed this year for non-residents. The deadline for paper declarations is the same for residents and non-residents, 19 th May Non-residents must pay attention not to be late this year! Online declarations can be filed from the 15th April 2015, deadlines are the following: Tuesday, 26 May 2015 for residents living in the French départments 01 to 19, Tuesday, 2 June 2014 for residents living in the French départments 20 to 49, Tuesday, 9 June 2014 for residents living in the French départments 50 to 974/976 and for non-residents whatever the country. The first threshold ( rate about 5,5%) has been abolished. The first tax band starts for 2014 at and the discount that is applied to those who are liable for only a small amount of income tax is to be increased. Income tax bands are as follows : Income Tax 2014 (one person) Tax Band Up to % to % to % to % From % Rate The employment allowance ( prime pour l emploi ) will be paid this year for the last time, it should be replaced next year by another measure. Tax reductions for 2014: The reductions for child s education remain the same as last year : - 61 for a child at collège, for a child at lycée, for a child at university. The tax advantage gained under the system of quotient familial is about for each half part. The crédit d impôt développement durable has been INPACT International E - Tax Bulletin - Issue 33 7

8 renamed credit d impôt sur la transition énergétique and simplified. The tax reduction is about 30 % for all energy saving works (for houses finished since 2 years minimum) and the bouquet de travaux (bunch of work) has been cancelled. The tax reduction for expenses made to improve the principal house for old and handicapped people has been extended to 31st December If your require further information please contact: Jean-Philippe Gioanni GIOANNI INTERNATIONAL Cannes, France cannes@gioanni.com GREECE The government is preparing a taxation overhaul that will provide for one set of rates for all taxable incomes regardless of source. It is also planning to implement a large property tax (LPT) that will concern not only real estate but also large bank deposits, works of art and other investments, with a tax-free threshold of 300,000 euros. That way, besides strengthening revenues, the government expects to respond to criticism from its European peers that the rich have not been taxed in Greece. The plan foresees an increase in the income tax-free threshold to 16,000 euros per annum for households with two dependent children and 19,000 for families with three children. For single taxpayers the threshold will stand at 12,000 euros and increase depending on the number of children. The single set of income tax rates will have more brackets than the existing legislation so as to be fairer on people with lower incomes, while the top brackets will have a higher tax rate than today. A number of tax exemptions will be granted based on each taxpayer s income. For example, there will be a tax discount of 20 percent on rent payments for those with an annual income of 15,000 euros, but not for those with an income over 80,000 euros. There is also a plan for a consumption tax on luxury goods, such as spending on very powerful or expensive vehicles, yachts, aircraft, helicopters, swimming pools etc. All tax exemptions, incentives and special tax statuses will be revised. There are currently 700 tax exemptions that cost the annual budget about 3.6 billion euros. Special consumption taxes will also go back to the drawing board. The sum of each taxpayer s assets will be used for the calculation of the LPT, which will replace the single property tax (or ENFIA, which is only for real estate). It will concern those with assets of 300,000 euros or more and be separate from income tax, while it will be levied regardless of the taxpayer s income, which means that it will also impactthe unemployed who may have inherited a large property or valuable artwork. Taxpayers will have to pay the LPT for the sum of apartments, buildings, land, artworks, bank deposits, investment products, stocks etc that are in Greece, according to the Property Register ( Periousiologio ), as well as for any assets abroad declared in Greek tax statements (and not taxed in another country). There will be progressive tax rates for the LPT and the target for annual revenues will amount to at least the European Union average in property taxation takings. For the calculation of real estate values, the tax authorities will use updated objective rates that will be annually adjusted to market prices. As far as indirect taxation is concerned, the Finance Ministry s plan provides for a reduction in the top value-added tax bracket from the current 23 percent and a low VAT rate for basic food commodities such as bread, milk, pasta etc, as well as catering, children s food, personal hygiene commodities for the disabled, cultural and knowledge products, and renewable energy sources. The aim is for the draft laws that reach Parliament to be significantly simpler, and the changes to basic legislation will be uploaded on the Finance Ministry s website three days after each bill has been voted on. Uniform Tax on the Ownership of Real Estate Property (ENFIA) Up until 2013, real estate property held in Greece was subject to Annual Real Estate Tax and a Special Real Estate Duty. However, from 2014 onwards, the ownership of real estate property/property rights in Greece is subject to the ENFIA, which consists of a principal tax imposed on each real estate property and a supplementary tax imposed on the total value of the property rights on real estate property of the taxpayer subject to tax. INPACT International E - Tax Bulletin - Issue 33 8

9 More specifically, said tax is no longer imposed on the basis of the objective value of real estate property, but will be determined on the basis of various factors, according to the final registration of the property at the land registry or ownership title. The principal tax on buildings is calculated by multiplying the square meters of the building by the principal tax ranging from 2 to 13 euros (EUR) per square meter and other coefficients affecting the value of the property (e.g. location, use). The principal tax on land is calculated by multiplying the square meters of the land by the principal tax ranging from EUR to 9 per square meter and other coefficients affecting the value of the property (e.g. location, use). The supplementary tax is imposed on the total value of the rights to property at a rate 5, with the exception of property that is self-used by the legal entity. Real estate transfer tax Each transfer of real estate, which is not subject to VAT, is subject to real estate transfer tax. From 1 January 2014 onwards, the real estate transfer tax is imposed at a rate of 3% on the taxable value of the property. Stamp taxes Rentals of non-residential properties are subject to 3.6% stamp duty (with the exception of shopping centers and logistics centers subject to VAT). In general, loans and interest may be subject to a 2.4% stamp duty. However, there are a number of exemptions, the main one covering bank loans and bond issues. Other stamp duties may apply, in certain limited cases. Contribution tax on capital accumulation following incorporation A 1% contribution tax is imposed on capital accumulation (share capital increase) by: Business companies and joint ventures Associations of all degrees and any other form of company, legal entity, or union of persons or society aiming to make profits, and Branches of foreign companies (unless of EU origin). For Greek Societe Anonyme (SA) companies, an additional 0.1% duty is payable on capital to the competition committee. The capital concentration tax is on longer imposed upon the incorporation/ establishment of legal entities. Branch income Profits of branches of foreign companies are subject to CIT at a rate of 26%. Capital gains In general, capital gains are included in the taxable profits of Greek companies. The income derived from the goodwill arising upon the transfer of Greek government bonds or Greek treasury bills that are acquired by legal entities that do not qualify as Greek tax residents and do not maintain a PE in Greece is tax exempt. Capital gains tax on sale of listed shares Capital gains derived from the sale of listed and non-listed shares are considered business income taxable at the CIT rate of 26%. The sale of listed shares is also subject to a transaction duty at a rate of 0.2%. Shipping companies The Greek tonnage tax regime model intends to tax shipping activity and applies to Greek or foreign ship-owning companies with vessels flying a Greek flag and foreign ship-owning companies with vessels flying a foreign flag that maintain a ship management company in Greece that is exclusively engaged in ship management activities. The Greek tonnage tax regime applies to vessels of A and B category that are either flying a Greek or foreign flag. In the case of vessels flying a foreign flag, the foreign ship-owning company should maintain a ship management office in Greece. Category A vessels include cargo vessels, tankers, steel hull vessels for dry or liquid cargo that ply/ to between foreign ports, passenger vessels, drilling platforms, etc. Category B vessels include small boats and any other motor vessels not listed under category A. The gross tonnage is calculated by multiplying coefficient rates by each scale of gross registered tonnage. This taxable tonnage is then multiplied by an age corrected rate. Various exemptions/reductions of the tonnage tax apply, such as: Vessels built in shipyards in Greece, under a Greek flag, are exempt from tax for the first six years. 50% reduction for vessels operating regular routes between Greek/foreign ports or solely between foreign ports. The tonnage tax exhausts the tax liability of the owner, and, if the owner is a company, this extends to its shareholders. Tonnage tax also exhausts the tax liability in relation to operating profits INPACT International E - Tax Bulletin - Issue 33 9

10 and capital gains arising out of the sale of the vessel flying the Greek flag. Tonnage tax also exhausts the tax liability of the foreign owner ship company flying a vessel under a foreign flag managed by a ship management company in Greece, as well as of the shareholders thereof. No CIT or dividend withholding tax (WHT) is levied on shipping profits. This tax burdens the ship owners or ship-owning companies, while the ship management companies are jointly and severally liable for the payment. An obligation of the liable parties for submitting before the Ministry of Mercantile Marine an annual statement indicating the name, flag, total tonnage, and age of the vessel under the foreign flag is established. A credit for the tonnage tax paid abroad is provided. For further information please refer to: Nikolaos Samaras Next Step Consulting Ltd Piraeus, Greece nsam@nextstep.net.gr which are foreseeably relevant to tax administration and collection in those other Member States, are set out in a new Tax and Duty Manual. egaming Services egaming services are exempt without deductibility in some Member States but are taxable in Ireland at the standard rate, currently 23%. From 1 January 2015, the tax treatment of egaming Services to consumers is determined by the place where the consumer is established, has a permanent address or usually resides. Mini One Stop Shop (MOSS) egaming businesses can avail of the new special scheme known as the Mini One Stop Shop (MOSS) which will allow suppliers of B2C e-services to submit returns and pay the relevant VAT due to all Member States through the web portal of one Member State. MOSS simplifies a supplier s obligations by removing the requirement to register and submit returns in several Member States. INCOME TAX The following are details of the Budget Statement of 14 October 2014, as made by the Minister for Finance. Tax Rates and Tax Bands The tax rates and bands have changed as follows: IRELAND Personal Circumstances Arrangements for implementing spontaneous exchange of information of Revenue opinions on crossborder transactions or situations - Council Directive EU Council Directive 2011/16/EU on administrative cooperation in the field of taxation provides for the exchange of information between the tax authorities of EU Member States. The Directive applies to all taxes other than value-added tax, EU excise duties and customs duties. It was transposed into Irish law by the European Union (Administrative Cooperation in the Field of Taxation) Regulations Under Regulation 4 of the Regulations, the Revenue Commissioners are the competent authority for Ireland for the purposes of the Directive. Arrangements for implementing the Directive, insofar as it requires the communication to other Member States of information in respect of Revenue opinions Single or Widowed or Surviving Civil Partner, without dependent children Single or Widowed or Surviving Civil Partner, qualifying for Single Person Child Carer Credit Married or in a Civil Partnership, one Spouse or Civil Partner with Income Married or in a Civil Partnership, both Spouses or Civil Partners with Income 20% 41% 20% 41% 20% 41% 20% with increase of 23,800 max. 41% 20% 40% 20% 40% 20% 40% 20% with increase of 24,800 max. 40% INPACT International E - Tax Bulletin - Issue 33 10

11 Exemption Limits The exemption limits for persons aged 65 years and over remain unchanged: The above exemption limits are increased by 575 for each of the first two dependent children and by 830 for the third and subsequent children. Marginal Relief may apply, subject to an income limit of twice the relevant exemption limit. DIRT First time buyers DIRT relief Relief from DIRT on savings used by first time buyers toward the deposit on a home is being introduced from 15 October Employment and Investment Incentive (EII) and Seed Capital Scheme A number of extensions have been announced to the EII scheme. They include increasing the required holding period for shares from 3 to 4 years, the amount of finance that can be raised by a company under the EII will be increased to 5m annually subject to a lifetime maximum of 15m, the scheme will include Medium sized enterprises in nonassisted areas and internationally traded financial services subject to Enterprise Ireland certification. The inclusion of hotels, guest houses and self-catering accommodation in the scheme will be extended by a further three years and the management and operation of Nursing Homes for three years will also be included. These extensions are subject to EU state-aid approval and a commencement order. 3% Surcharge (non-paye income) The surcharge of 3% on individuals who have non-paye income that exceeds 100,000 in a year remains unchanged. There is no change to the tax provisions in the Seed Capital Scheme which will be re-launched in the coming months. Foreign Earnings Deduction (FED) FED was introduced in 2012 for the tax years 2012 to 2014 in respect of income earned whilst working in Brazil, Russia, India, China or South Africa. With effect from 1 January 2013, the number of states was extended to include Algeria, Democratic Republic of Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania. FED has now been extended up to the tax year 2017 and, with effect from 1 January 2015, the number of states will be extended to include Japan, Singapore, South Korea, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Mexico, and Malaysia. The qualifying conditions will be eased by deeming time spent travelling to a relevant state, or from a relevant state to Ireland or to another relevant state, to be time spent in a relevant state. Also, from 1 January 2015, the number of whole days of continuous presence requirement in a relevant state will be reduced from 4 to 3 and the number of qualifying days requirement in a continuous period of 12 months will be reduced from 60 to 40. VAT Increase in the Farmer s Flat-Rate Addition from 5% to 5.2% The flat-rate scheme compensates unregistered farmers for VAT incurred on their farming inputs. The farmer s flat-rate addition will be increased from 5% to 5.2% with effect from 1 January Retention of the 9% reduced VAT rate The 9% reduced VAT rate, which was introduced in 2011 as part of the Government Jobs Initiative for tourism related services, is being retained. CORPORATION TAX Company Residence Finance Bill 2014 will amend Ireland s company tax residence rules to provide that all companies that are incorporated in Ireland will be tax resident here, unless regarded as resident in a territory other than the State for the purposes of a tax treaty. The change will come into effect for new companies from 1 January 2015 while a transition period will apply until the end of 2020 for existing companies. This change will bring Ireland s rules into line with the rest of the OECD. Research & Development (R&D) Tax Credit The R&D Tax Credit regime provides for a 25% tax credit for the amount of qualifying R&D expenditure incurred by a company in a given year that is in excess of the amount spent in 2003, which is known as the base year for the regime. As recommended in the 2013 Review of Ireland s R&D Tax Credit regime, the base year restriction is now being removed, effective from 1 January Year Relief for Start-up Companies INPACT International E - Tax Bulletin - Issue 33 11

12 This scheme provides relief from corporation tax on trading income (and certain capital gains) for new start-up companies in the first 3 years of trading. The value of the relief is linked to the amount of Employers PRSI paid by a company in respect of its employees, subject to a maximum of 5,000 per employee and an overall limit of 40,000 in any year. This relief was due to expire at the end of 2014 and is being extended to companies commencing a qualifying trade in Intangible Assets The current regime for intangible assets provides capital allowances for expenditure incurred on the provision of certain intangible assets for use in an Irish trade. This measure is being enhanced: The use of such allowances in any accounting period is currently restricted to a maximum of 80% of the income from the relevant trade in which the acquired assets are used with any excess carried forward for offset against trading income in subsequent accounting periods. Any related interest expense deduction which may be allowed for borrowings incurred on such an acquisition is similarly restricted. This restriction on aggregate allowances (and related interest) will be removed. The definition of specified intangible asset contained in this provision will also be amended to include customer lists. Further details will follow in the Finance Bill. Accelerated Capital Allowances for Energy-efficient Equipment This is a measure to incentivise companies to invest in energyefficient equipment. It allows them to deduct 100% of capital expenditure incurred on eligible equipment (that meets specified energy-efficiency criteria) from trading profits in the year of purchase rather than over the usual 8 year period for plant and machinery. This measure was due to expire at the end of 2014 and following a review by the Department of Communications, Energy and Natural Resources is being extended to the end of CAPITAL GAINS TAX (CGT) Property Incentive (Finished) The incentive relief from CGT (in respect of the first 7 years of ownership) for properties purchased between 7 December 2011 and 31 December 2014 was not extended beyond 31 December Windfall Tax (Finished) Windfall tax provisions introduced in 2009 which apply an 80% rate of tax to gains from disposals of land, where those gains are attributable to a relevant planning decision by a planning authority, are being abolished in the case of disposals made on or after 1 January This will mean that chargeable gains arising from disposals of land made on or after 1 January 2015 subject to these planning decisions will be subject to capital gains tax at the standard rate of 33% in common with other disposals of land while individuals or companies engaged in the trade of dealing in or developing land will be subject to income tax or corporation tax on their income or profits, as appropriate, at the normal rates attributable to those activities. Retirement Relief CGT retirement relief is being amended so that, subject to other conditions, land that has been leased for up to 25 years in total (increased from 15) ending with disposal will qualify for the relief. Amendments are also being made to provide (in the case of land disposals outside the family) that land currently let under conacre arrangements which end with disposal on or before 31 December 2016 or which (before 31 December 2016) is instead leased out for minimum periods of 5 years to a maximum of 25 years ending with disposal will, subject to other conditions, also qualify for CGT retirement relief. CGT farm restructuring relief The capital gains tax relief for farm restructuring (e.g. sale, purchase or exchange of land) is to be amended so that the deadline for completion of the first restructuring transaction is extended to 31 December Full details will be included in the forthcoming Finance Bill. CAPITAL ACQUISITIONS TAX (CAT) Agricultural relief CAT relief is available in respect of gifts and inheritances of agricultural property including land, subject to certain conditions. At present, individuals are entitled to the relief based on a definition of farmers that is related to asset values. A change is being introduced to target the relief at active farmers to ensure productive use of agricultural property. From 1 January 2015, and subject to other conditions, the relief will be available only in respect of agricultural property gifted to or inherited by an individual who subsequently uses the property for agricultural purposes for a period of not less than six years or who leases out the agricultural property for not less than six years for agricultural use. To qualify for the relief the beneficiary or lessee must spend not less than 50 per cent of his or her normal working time farming agricultural property (including the agricultural property comprised in the gift or inheritance) on a commercial basis and with a view to INPACT International E - Tax Bulletin - Issue 33 12

13 the realisation of profits from that agricultural property. The amendment applies in relation to gifts or inheritances taken on or after 1 January EXCISES Alcohol Products Tax (APT) Relief for microbreweries From 1 January 2015, the special relief reducing the standard rate of Alcohol Products Tax by 50% on beers produced in microbreweries which produce not more than 20,000 hectolitres per annum is being extended to apply to microbreweries which produce not more than 30,000 hectolitres per annum with a corresponding increase in the volume of beer eligible for relief. Tobacco Products Tax (TPT) TPT rates are increased with effect from 15 October The increase amounts to 40 cent, inclusive of VAT, on a packet of 20 cigarettes in the most popular price category, with pro rata increases on other tobacco products. An additional 20 cent, inclusive of VAT, is being added to the price of a 25g pack of roll-your-own tobacco. The minimum TPT rate on cigarettes is also increased. STAMP DUTIES Consanguinity relief applies a rate of stamp duty equal to ½ the normal rate of ad valorem stamp duty on certain conveyances or transfers on sale of non-residential land between certain closely related persons. The relief was due to expire on 31 December The Minister announced that the relief is being extended for a further three years to apply to transfers or conveyances executed prior to 1 January The relief will be confined to a conveyance or transfer of land by a person who is less than 66 years of age. The transferee must be a farmer who will, from the date of the transfer or conveyance, spend not less than 50 per cent of his or her normal working time farming with a view to the realisation of profits from the land. Relief on Leasing of Certain Lands Relief from stamp duties is being provided in relation to a lease of land for a term not less than 5 years and not exceeding 35 years where the land is used exclusively for farming carried on by the lessee on a commercial basis and with a view to the realisation of profits. The lessee must, from the date on which the lease is executed, farm the land for not less than 50 per cent of his or her normal working time. The relief will be recoverable by assessment if any of the conditions governing the relief (other than as a result of the death or permanent incapacity of the lessee) cease to be complied with within the first 5 years of the lease. VEHICLE REGISTRATION TAX (VRT) Extension of VRT Reliefs for Electric, Plug-in Hybrid Electric and Hybrid Electric vehicles The period of VRT relief for Electric, Plug-in Hybrid Electric, Hybrid Electric vehicles, and for Electric motorcycles, has been extended until December The rates of each of the reliefs remain unchanged. For further information please refer to: Gillian Rafferty FLC Frank Lynch & Co. Dublin, Ireland Gillian.rafferty@flc.ie NETHERLANDS Cross border Dutch fiscal unity Summary The Dutch fiscal unity regime allows groups of companies to file one single tax return and to compute Dutch corporate income tax on a consolidated basis. Initially the fiscal unity could only be formed by Dutch resident companies. On June 12, 2014 the European Court of Justice gave a preliminary ruling regarding the Dutch Fiscal Unity. According to the CJEU it was against EU law to allow a fiscal unity to include only Dutch resident companies. December 17, 2014 the Dutch Minister of Finance announced the amendment of fiscal unity rules in order to be compliant with EU law. The legislative proposal is expected to be launched in the first half of Until that time, an administrative decree is in place. This decree allows Dutch companies, linked through companies based in other EU Member States, to opt for the Dutch fiscal unity regime. Background Under the old Dutch fiscal unity rules, a Netherlands parent INPACT International E - Tax Bulletin - Issue 33 13

14 company needed to directly or indirectly hold at least 95% of the shares of each group member and all group members should be resident in the Netherlands or have a Dutch permanent establishment. What is more, when considering an indirectly held company (subsubsidiary), the intermediate (link) company or companies should also be members of the Dutch group. This means that a subsidiary, although itself resident in the Netherlands and under 95% indirect ownership of the parent, may not be a member of the group if any of the link companies through which the parent s ownership is derived are not resident in the Netherlands. In a simple case, therefore, if Company A (resident in the Netherlands) holds 100% of Company B, which holds 100% of Company C (resident in the Netherlands), Company C cannot be a member of Company A s group if Company B is resident elsewhere. The case The case concerned three cases relating to the Dutch fiscal unity regime, involving different group structures, but with one common feature: some companies in the group were established in other EU member states. There were two primary fact patterns, namely: A Dutch resident company held 100% of the shares of another EU company, which, in turn, held 100% of the shares in a second Dutch resident company; and Two Dutch resident sister companies were held by a joint parent company, resident in another EU member state. In all of the cases, the fiscal unity request was limited to the Dutch resident companies the connecting EU companies and the nonresident parent company were not included. A case with similar pattern was the Papillon case, which involved France s tax consolidation regime. Following the Papillon decision, the European Commission commenced an infringement procedure against the Netherlands, for not changing the Dutch legislation, after the Papillon case. When the joined cases appealed to the Tax Court of Amsterdam, the Court referred the cases to the CJEU in order to determine whether the denial of a fiscal unity violated EU law. The CJEU followed the general rule of Papillon, concluding that the Dutch fiscal unity rules are in violation of EU law. The Dutch authorities rejected the applications for the fiscal unity purely because the connecting companies were not based in the Netherlands. The CJEU considered this a restriction of the freedom of establishment. The risk of double loss relief and coherence of the tax system was not seen as a justification for this restriction. Limitation tax deduction pension plans Effective 1 January 2015, employee pension plans must comply with certain additional conditions for the premiums to be exempt from the levy of wage tax. This particularly relates to the following: a retirement age of 67 years, the maximum accrual percentage under a final pay plan will be 1.657% per year of service and 1.875% per year of service under an average salary plan. the maximum pensionable salary for employee pensions will be capped at EUR 100,000 (less the state pension discount). Pension plans which do not meet the new conditions will lose their tax facilitated status and the tax relief already obtained for the accrued pension rights may be reversed (which could result in additional wage tax levy of 72% over built up pension rights, including 20% interest). Optional scheme for non-resident taxpayers abolished Until 1 January 2015 a non-resident taxpayer could opt for Dutch residence status for the levy of Dutch income tax (making him/her eligible for certain tax deductions, tax credits and tax allowances). As from 1 January 2015 this is no longer possible. For residents of EU Member States, the European Economic Area (EEA), Switzerland or the BES islands who earn 90% or more of their income in the Netherlands can still qualify as non-resident taxpayers. For further information please refer to: P.H.J.T. van Duppen (Jean-Pierre) RSW Accountants & Tax advisors Helmond, Netherlands jeanpierre.van.duppen@rsw.nl SWITZERLAND End of 2014 Swiss voters rejected with a clear majority a proposal to abolish lump-sum taxation. This means that Switzerland will be retaining that expense-based form of taxation. Background Lump-sum taxation is a simplified method for determining the basis of assessing the tax payable by foreign nationals who are resident in Switzerland but do not engage in any gainful INPACT International E - Tax Bulletin - Issue 33 14

15 employment in the country. Over years this type of taxation has come under pressure in Switzerland. In autumn 2012 parlia-ment approved measures to tighten lump-sum taxation, which will now be implemented as planned on the basis of the results of the vote. More stringent requirements As before, lump-sum taxation will be assessed on the basis of the taxpayers living expenses. However, the minimum expense is now assumed to be equal to seven times the annual resident expense (currently five times) or three times the cost of meals and accommodation in a hotel. A minimum threshold on CHF has been set as the assessment base at the federal level. The cantons must also determine a freely selectable minimum assessment base (the canton of Zug has set a minimum of CHF whereas the minimum in the cantons of Luzern and Schwyz is CHF ). The more stringent requirements were incorporated in the Tax Harmonization Act (StHG) effective 1 January 2014, while the cantons have a further two years to modify their laws accordingly. Outlook ith the voters rejecting the proposal to abolish lump-sum taxation Switzerland will remain a serious contender in international competition with other countries such as Belgium, Mona-co, Andorra, Gibraltar, the UK and Malta. Together with the other advantages the county offers (such as quality of life, in-frastructure, political security etc.) Switzerland will continue to remain attractive to wealthy foreigners. If your require further information please contact: Christian Lingg Caminada Treuhand AG Zug Baar, Switzerland c.lingg@caminada.com Switzerland and Italy reach agreement in principle on tax issues Switzerland and Italy have reached an agreement in principle on future cooperation in tax matters. The two governments have prepared a Protocol of Amendment to the double taxation agreement, as well as a roadmap with parameters. Both documents were signed on 23 February. The agreement will improve relations between Switzerland and Italy with regard to financial and tax matters after years of controversy and simplify the regularisation of untaxed assets before the automatic exchange of information is introduced. The agreement between Switzerland and Italy was initialled on 19 December At present in Switzerland, the cantons and business associations are being heard as prescribed by law before the signing, which should take place by the end of February. It was possible for the following objectives to be achieved during the negotiations: Orderly transition to the future automatic exchange of information, i.e. simplified regularisation of Italian bank clients assets without massive outflows of capital and reduced risks arising from legal proceedings for banks and their employees Removal of Switzerland from Italian black lists as soon as possible Improvement of the double taxation agreement between Switzerland and Italy, transfer to the OECD standard for the exchange of information upon request Improvement in the cross-border commuters agreement Improvement in market access for financial service providers The double taxation agreement (DTA) between Switzerland and Italy is to be supplemented by a protocol that makes provision for the OECD standard for the exchange of information upon request. After it has been brought into force, it should apply for circumstances from the date of signing - as is the case with several agreements with other countries. Aside from the Protocol of Amendment to the DTA, the negotiations have enabled a roadmap to be concluded. This contains a clear political commitment to several aspects of bilateral relations in the area of taxation and finance. The roadmap will be published at the time of the signing of the Protocol of Amendment to the DTA. It contains the following in particular: Automatic exchange of information: The OECD standard is to be introduced between Switzerland and Italy in the future with a new legal basis. Regularisation of the past: Italian taxpayers with an account in Switzerland can take part in the Italian voluntary disclosure programme (VDP) under the same conditions as those in INPACT International E - Tax Bulletin - Issue 33 15

16 other countries that are not on a black list. Both countries can make group requests to identify persons who wish to conceal untaxed assets. The OECD standard applies in this respect; fishing expeditions are not permitted. Prosecution of taxpayers as well as financial institutions and their employees: Taxpayers who participate in the VDP get a reduced penalty. Financial institutions and their employees are not responsible for the tax offences of their clients in principle. Financial institutions cooperative behaviour with the regularisation of their clients will be looked upon favourably. recently adopted by Italy s parliament and will considerably increase legal certainty for Italian taxpayers who have an account in Switzerland. If your require further information please contact: Massimo Tognola Studi Fiduciari e Amministrativi Chiasso, Switzerland admin@fidam.ch Further amendment of the DTA between Switzerland and Italy: In a second stage, it will be sought to reduce the tax rates on dividends and interest payments, amend the abuse provision and include an arbitration clause. Taxation of cross-border commuters: In the future, crossborder commuters should be subject to reduced taxation in the state where they work as well as regular taxation in their country of domicile. The proportion in the state of work will be a maximum of 70% of the total withholding tax. The total tax burden of cross-border commuters will not be lower than at present with these new regulations, and initially it will not be higher either. The new taxation of cross-border commuters should be the subject of an agreement to be negotiated in the first half of Both sides have undertaken to ensure swift negotiations. Italian black lists: With the entry into force of the Protocol of Amendment to the DTA, Switzerland will be removed from lists that are based solely on the absence of the exchange of information. The special regimes for corporate taxation that are currently on Italian black lists will be removed from these lists once they have been abolished or adjusted to bring them into line with international standards. Financial market access: Both sides confirmed their intention to seek ways of enhancing cross-border cooperation and financial market access. Technical discussions in this regard will commence soon. Campione d Italia: The competent authorities will pursue the discussions in order to find pragmatic solutions for individual aspects of indirect taxes in the short term, as well as to find solutions for the other tax and non-tax issues in the longer term. After years of controversy, this agreement between Switzerland and Italy is laying new foundations that will make it possible to strengthen cooperation, improve relations between the two countries and develop bilateral economic relations in a constructive atmosphere. The agreement will facilitate the processing of the Italian voluntary disclosure programme Corporate Tax Reform III Following the recurring criticisms of the European Union and the OECD regarding the corporate tax system exercised by Switzerland at international level, the Swiss Federal Council has decided to propose concrete measures to restore international acceptance of the Swiss tax system. In September 2014, a consultation was opened on the third reform of corporate taxation (RIE III). We will examine the main tax measures below. If accepted, the reform would enter into force by the year 2018 or To satisfy both Switzerland and the European Union, the reform has three goals: keep corporate taxes at a competitive level, regain international acceptance and safeguard the financial yield of corporate income taxes. These three goals may seem contradictory, as they require both a decrease and an increase in tax rates, but the goal is to eliminate undertaxation and superimposition to simplify the tax system. Tax revenue losses will therefore be compensated by other concrete measures. The problem is that Switzerland taxes foreign profits at a lower rate than those of a Swiss source or do not tax at all. That does not appeal to European countries which accuse Switzerland of promoting harmful tax competition and regularly threaten to add it to the list of tax havens. However, nearly 150,000 jobs depend in Switzerland on the presence of international companies, we cannot therefore afford to let them go. The removal of cantonal tax status should therefore be replaced by equally interesting measures for companies, otherwise the third corporate tax reform would be meaningless. Objective 1: The main measures to achieve the first goal, namely to keep corporate taxes at a competitive level are: INPACT International E - Tax Bulletin - Issue 33 16

17 Introduction of license box : At cantonal level, the income of certain intellectual property rights would be taxed at a reduced rate, this would however be limited to patents. This would be interesting for Switzerland, because the international rates are relatively high in the area. Introduction of the step-up : This measure would allow companies to declare their hidden assets and amortize them over a period of ten years, in order to reduce the tax burden. This would encourage companies to settle in Switzerland. Decrease in income taxes at cantonal and communal level: If the reform is approved, the cantons and towns would decrease their tax rate on earnings. This would certainly cause a decrease in tax revenues but would balance the system by increasing the attractiveness of Switzerland on an international level. Objective 2: To regain international acceptance, the main aspect of the third reform of corporate taxation is the suppression of the cantonal tax status of holding companies, domiciliary and mixed companies. This would allow Switzerland to adapt to the requirements of the European Union. Objective 3: To finance the loss of tax revenues, various measures would be taken. For example the increase of the tax rate for dividend income for individuals and increasing the number of tax inspectors. For now, the reform is still at the planning stage. In April 2015 it was announced that it would result in a shortfall of 1.1 billion francs for the Confederacy. According to the Finance Minister of Switzerland, this reform is not a gift for companies, but the least expensive solution to face international pressure. Changes could still intervene, Switzerland will now have to determine whether the adaptations to adopt and how to transcribe this reform into law. By, the Swiss Federal Council will issue a proclamation and the project will be sent to Parliament. If your require further information please contact: Stéphanie Bugris Fiduciaire Saugy S.A. Lausanne Baar, Switzerland stephanie.bugris@fiduciairesaugy.ch UNITED KINGDOM The UK Chancellor of the Exchequer, George Osborne, delivered his final budget speech of this parliament on 18 March A summary can be found below of the main points. Because of the forthcoming General Election in the UK, The Finance Act 2015 was rushed through Parliament and received Royal Assent on 26 March 2015 when it became the Finance Act PERSONAL TAX The personal allowance for 2015/16 For those born after 5 April 1938 the personal allowance will be increased to 10,600. For those born before 6 April 1938 the personal allowance remains at 10,660. Tax bands and rates for 2015/16 The basic rate of tax is currently 20%. The band of income taxable at this rate is being decreased from 31,865 to 31,785 so that the threshold at which the 40% band applies will rise from 41,865 to 42,385 for those who are entitled to the full basic personal allowance. The additional rate of tax of 45% is payable on taxable income above 150,000. Dividend income is taxed at 10% where it falls within the basic rate band and 32.5% where liable at the higher rate of tax. Where income exceeds 150,000, dividends are taxed at 37.5%. Starting rate of tax for savings income From 6 April 2015, the maximum amount of an eligible individual s savings income that can qualify for the starting rate of tax for savings will be increased from 2,880 to 5,000, and this starting rate will be reduced from 10% to 0%.These rates are not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit. Transferable Tax Allowance From 6 April 2015 married couples and civil partners may be eligible for a new Transferable Tax Allowance. The Transferable Tax Allowance will enable spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse. The option to transfer is not available to unmarried couples. The option to transfer will be available to couples where neither INPACT International E - Tax Bulletin - Issue 33 17

18 pays tax at the higher or additional rate. If eligible, one partner will be able to transfer 10% of their personal allowance to the other partner which means 1,060 for the 2015/16 tax year. Personal Savings Allowance The Chancellor announced that legislation will be introduced in a future Finance Bill to apply a Personal Savings Allowance to income such as bank and building society interest from 6 April The Personal Savings Allowance will apply for up to 1,000 of a basic rate taxpayer s savings income, and up to 500 of a higher rate taxpayer s savings income each year. The Personal Savings Allowance will not be available for additional rate taxpayers. These changes will have effect from 6 April 2016 and the Personal Savings Allowance will be in addition to the tax advantages currently available to savers from Individual Savings Accounts. The end of tax deduction at source on interest Due to the changes to the starting rate for savings and the introduction of a Personal Savings Allowance, many individuals will no longer need to pay tax on their savings income. Currently, 20% income tax is automatically deducted from most interest on savings excluding ISAs. From April 2016, the automatic deduction of 20% income tax by banks and building societies on non-isa savings will cease. Individual Savings Accounts (ISAs) On 1 July 2014 ISAs were reformed and the overall annual subscription limit for these accounts was increased to 15,000 for 2014/15. From 6 April 2015 the overall ISA savings limit will be increased to 15,240. The Chancellor announced in the Autumn Statement an additional ISA allowance for spouses or civil partners when an ISA saver dies. The additional ISA allowance will be equal to the value of a deceased person s savings at the time of their death and will be in addition to the normal ISA subscription limit. Regulations will set out the time period within which the additional allowance will be used. In certain circumstances an individual will be able to transfer to their own ISA noncash assets such as stocks and shares previously held by their spouse. Comment This measure applies for deaths from 3 December 2014 and takes effect from 6 April As announced at Budget 2015, regulations will be introduced to extend the list of qualifying investments for ISAs and Child Trust Funds to include listed bonds issued by Co-operative Societies and Community Benefit Societies and SME securities that are admitted to trading on a recognised stock exchange, with effect from 1 July The government will also consult during summer 2015 on further extending this list of qualifying investments to include debt securities and equity securities offered via crowd funding platforms. It was announced at Budget 2015 that regulations will be introduced in autumn 2015, following consultation on technical detail, to enable ISA savers to withdraw and replace money from their cash ISA without it counting towards their annual ISA subscription limit for that year. At Budget 2014, the Chancellor announced that peer-topeer loans would be eligible for inclusion within ISAs. The government has consulted on the options for changes to the ISA rules to allow peer-to-peer loans to be held within them. No start date has been announced. Help to Buy ISA The government has announced the introduction of a new type of ISA, the Help to Buy ISA, which will provide a tax free savings account for first time buyers wishing to save for a home. The scheme will provide a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every 200 a first time buyer saves, the government will provide a 50 bonus up to a maximum bonus of 3,000 on 12,000 of savings. Help to Buy ISAs will be subject to eligibility rules and limits: An individual will only be eligible for one account throughout the lifetime of the scheme and it is only available to first time buyers. Interest received on the account will be tax free. Savings will be limited to a monthly maximum of 200 with an opportunity to deposit an additional 1,000 when the account is first opened. The government will provide a 25% bonus on the total amount saved including interest, capped at a maximum of 3,000 which is tax free. The bonus will be paid when the first home is purchased. The bonus can only be put towards a first home located in the UK with a purchase value of 450,000 or less in London and 250,000 or less in the rest of the UK. INPACT International E - Tax Bulletin - Issue 33 18

19 The government bonus can be claimed at any time, subject to a minimum bonus amount of 400. The accounts are limited to one per person rather than one per home so those buying together can both receive a bonus. As is currently the case it will only be possible for an individual to subscribe to one cash ISA per year. It will not be possible for an account holder to subscribe to a Help to Buy ISA with one provider and another cash ISA with a different provider. Once an account is opened there is no limit on how long an individual can save into it and no time limit on when they can use their bonus. The government intends the Help to Buy ISA scheme to be available from autumn 2015 and investors will be able to open a Help to Buy ISA for a period of four years. Junior ISA and Child Trust Fund (CTF) The annual subscription limit for Junior ISA and Child Trust Fund accounts will increase from 4,000 to 4,080. The government has previously decided that a transfer of savings from a CTF to a Junior ISA should be permitted at the request of the registered contact for the CTF. The government has confirmed the measure will have effect from 6 April Bad debt relief on investments made on peer-to-peer lending The government will introduce a new relief to allow individuals lending through peer-to-peer platforms to offset any losses from loans which go bad against other peer-to-peer income. It will be effective from 6 April 2016 and, through self assessment, will allow individuals to make a claim for relief on losses incurred from 6 April Pensions saving There is an overall limit, known as the lifetime allowance, on the total amount of tax relieved pension savings that an individual can have over their lifetime. The Chancellor has now announced that for tax year 2016/17 onwards: The standard lifetime allowance will be reduced from 1.25 million to 1 million. Fixed and individual protection regimes will be introduced alongside the reduction in the lifetime allowance to protect savers who think they may be affected by this change. The lifetime allowance will be indexed annually in line with CPI from 6 April Pensions changes to access to pension funds The Taxation of Pensions Act has recently been enacted. It provides that individuals aged 55 or over can access their money purchase pension savings as they choose from 6 April In most cases access to the fund will be achieved in one of two ways: Allocation of a pension fund (or part of a pension fund) to a flexi-access drawdown account from which any amount can be taken over whatever period the person decides. Taking a single or series of lump sums from a pension fund (known as an uncrystallised funds pension lump sum ). When an allocation of funds to a flexi-access account is made the member typically will take the opportunity of taking a tax free lump sum from the fund (as under current rules). The person will then decide how much or how little to take from the flexi-access account. Any amounts that are taken will count as taxable income in the year of receipt. Access to some or all of a pension fund without first allocating to a flexi-access account can be achieved by taking an uncrystallised funds pension lump sum. The tax effect will be: 25% is tax free the remainder is taxable as income. An annuity can, of course, be purchased with some or all of the fund as currently. Pension freedoms to be extended to people with annuities The Chancellor announced just before the Budget a new flexibility for people who have already purchased an annuity. From April 2016, the government will remove the restrictions on buying and selling existing annuities to allow pensioners to sell the income they receive from their annuity for a capital sum. Individuals will then have the freedom to take that capital as a lump sum, or place it into drawdown to use the proceeds more gradually. Income tax at the individuals marginal rate will be payable in the year of access to the proceeds. The proposal will not give the annuity holder the right to sell their annuity back to their original provider. The government has begun a consultation on the measures that are needed to establish a market to buy and sell annuities and who should be permitted to purchase the annuity income. Taxation of resident non-domiciles INPACT International E - Tax Bulletin - Issue 33 19

20 There will be some changes in the annual charge paid by nondomiciled individuals resident in the UK who wish to retain access to the remittance basis of taxation. The charge paid by people who have been UK resident for seven out of the last nine years will remain at 30,000. The charge paid by people who have been UK resident for 12 out of the last 14 years will increase from 50,000 to 60,000. A new charge of 90,000 will be introduced for people who have been UK resident for 17 of the last 20 years. The changes apply for 2015/16. The government is consulting on making the election to pay the remittance basis charge apply for a minimum of three years. BUSINESS TAX Corporation tax rates From 1 April 2015 the main rate of corporation tax, currently 21%, will be reduced to 20%. As the small profits rate is already 20%, the need for this separate code of taxation disappears. The small profits rate will therefore be unified with the main rate. It is proposed that the rate of corporation tax will continue at 20% for the financial year beginning on 1 April Annual Investment Allowance (AIA) The AIA provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business up to an annual limit and is available to most businesses. Where businesses spend more than the annual limit, any additional qualifying expenditure generally attracts an annual writing down allowance of only 18% or 8% depending on the type of asset. The maximum annual amount of the AIA was increased to 500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December However it was due to return to 25,000 after this date. The Chancellor announced that following conversations with business groups this would be addressed in the Autumn Statement and would be set at a much more generous rate. Research and Development (R&D) tax credits As previously announced, the government will increase the rate of the above the line credit from 10% to 11% and will increase the rate of the SME scheme from 225% to 230% from 1 April It is proposed to restrict qualifying expenditure for R&D tax credits from 1 April 2015 so that the costs of consumable items incorporated in products that are sold are not eligible. Following consultation the restriction will not apply where the product of the R&D is transferred as waste, or where it is transferred but no consideration is received. A new voluntary advance assurance service lasting three years will be introduced for small companies making their first claim from autumn From 2016 the time taken to process a claim will be reduced. New guidance will be issued by HMRC aimed specifically at smaller companies, backed by a two year publicity strategy to raise awareness of R&D tax credits. HMRC will publish a document in the summer setting out a roadmap for further improvements to the scheme over the next two years. Construction Industry Scheme (CIS) improvements At Autumn Statement the government announced it would make a number of changes to the CIS. The aim of the changes is to reduce the administrative burden and related cost burden on construction businesses. The measures should result in more subcontracting businesses being able to achieve and maintain gross payment status, thus improving their cashflow. These changes are to be implemented in stages by the issue of Statutory Instruments. From 6 April 2015 amendments will be made to the system including: The requirement for a contractor to make a return to HMRC even if the contractor has not made any payments in a tax month is removed. The requirements for joint ventures to gain gross payment status will be relaxed where one member already has this status and where that firm or company has a right to at least 50% of the assets or the income or holds at least 50% of the shares or the voting power in the joint venture. From 6 April 2016 further changes are proposed: Mandatory online filing of CIS returns will be introduced with the offer of alternative filing arrangements for those unable to access an online channel by reason of age, disability, remote location or religious objection. The directors self assessment filing requirements will be removed from the initial and annual compliance tests. The threshold for the turnover test will be reduced to 100,000 in multiple directorship situations. From 6 April 2017 mandatory online verification of subcontractors will be introduced. INPACT International E - Tax Bulletin - Issue 33 20