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Below you will find extracts from our latest monthly newsletters. The complete newsletters are distributed to our clients every month together with the Comtax® System update.
Germany
Draft 2010 Tax Act
The Ministry of Finance published a draft 2010 Tax Act on 1 April 2010. The Federal Cabinet is yet to approve the draft bill. The bill will enter into force once approved by the Federal Council, which is expected in December 2010 at the latest. Inter alia, the draft provides for numerous smaller changes of the Income Tax Law as well as the controlled foreign company (CFC) rules.
Under the current legislation the withholding tax on dividends received by foreign corporate entities shall generally be reduced from 25% to 15%. The provision intends to adjust the withholding tax rate to the corporate tax rate of 15%. The amendment provided in the draft act expands the reduction also to withholding tax (if any) on interests.
Currently, a low rate of taxation in terms of the CFC rules exists if the income of the foreign company is subject to a tax rate of less than 25%. According to the draft bill a low rate of taxation shall also exist if from a consolidated point of view the tax rate is less than 25%. The draft's explanatory statement explicitly holds that so called Malta schemes will fall under the low rate of taxation in terms of Germany CFC-rules.
New Zealand
Budget 2010/11
The Minister of Finance presented the budget for 2010/11 to Parliament on 20 May 2010. Among other proposals, the corporate income tax rate will be reduced from the current rate of 30% to 28%, effective from the 2011/12 income year. Further, the safe harbour threshold under the thin capitalisation rules will be reduced from the current rate of 75% to 60%, effective from the 2011/12 income year. However, the 110% worldwide group debt percentage threshold remains unchanged. 
Chile
Tax amendments
The Government has proposed amendments to various tax laws. The Bill will be sent to the Congress for approval.
Among others, the corporate income tax rate is proposed to be increased from the current rate of 17%. The tax will be levied at the rate of 20% for tax year 2011 and at the rate of 18.5% for tax year 2012.
However, from tax year 2013 the tax will be levied at the rate of 17% again.
India
Budget 2010/2011
On 8 May 2010, the Budget for 2010/11 received the assent of the President and became Finance Act 2010. As a consequence, the surcharge levied on domestic corporate income is reduced from 10% to 7.5%.
Luxembourg
Budget 2011
The Government submitted the budget for 2011 to the Parliament on 5 May 2010. Among other proposals, the surcharge for the employment fund will be increased from the current rate of 4% to 5%. The total effective tax rate for the city of Luxembourg will then increase from 28.59% to 28.8%. If approved, the budget will apply from 1 January 2011.
 France
Finance Amendment Bill 2009
As reported in the Comtax Update News November 2009, France will introduce retaliatory measures against non-cooperative tax jurisdictions. However, the bill will not become effective until 2011 and not in 2010 as previously reported. Further, the list of jurisdictions classified as non-cooperative has been released. The list, which will be updated on an annual basis, includes the following states: Anguilla, Belize, Brunei, Costa Rica, Dominica, Grenada, Guatemala, Cook Islands, Marshall Islands, Liberia, Montserrat, Nauru, Niue, Panama, Philippines, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines.
Ireland
Finance Act 2010
On 3 April 2010, the President signed the Finance Act 2010 into law. According to the act, amendments to the unilateral credit relief are enacted. Effective 1 January 2010, the unilateral credit relief granted to withholding tax incurred on royalties is extended to residents in non-treaty countries. Previously, the credit was only granted in relation to countries with which Ireland had an effective income tax treaty.
Serbia
Corporate income tax amendments
Amendments to the Corporate Income Tax Law were adopted by the Parliament on 23 March 2010. The amendments were published in the Official Gazette No. 18/2010, of 26 March 2010 and came into force on 27 March 2010.
Among others, the carry forward of tax losses has been reduced to five years from the previous ten years. This means that tax losses generated in 2010 may be carried forward until 2015.
Further, the thin capitalisation rules have been amended. Interest and related expenses towards related entities are deductible up to four times the value of the taxpayer's equity, for banks the limit is now set as ten times the bank's equity. In addition, the non-deductible amount of interest expense may not be carried forward any longer and therefore represents a permanent difference.
 El Salvador
Tax reform introduced
In December 2009, several decrees were published in the Official Gazette introducing a substantial tax reform in El Salvador effective as of 1 January 2010.
As part of the tax reform, a 25% final withholding tax is levied on any payment to residents of countries considered to be tax havens or territories with preferential tax regimes. The tax administration issued the list of countries on 24 February 2010 and will update it on a yearly basis.
Countries or territories where there is no income tax or there is a 0% income tax are listed as No-tax countries. Further, the corporate income tax rate in the foreign country is compared with the Salvadorian income tax rate of 25%. In countries where the income tax rate is lower than 80% of this tax, consequently lower than 20%, is listed as Low-tax countries. As provided by law, the tax administration also considered the classification of the OECD and the Financial Action Task Force on Money Laundering (FATF), listed as OECD-tax havens.
No-tax countries |
Low-tax countries |
OECD-tax havens |
Azores Islands |
Albania |
Andorra |
Bahrain |
Cyprus |
Anguilla |
Bermuda |
Delaware, USA |
Bahamas |
British Virgin Islands |
Hong Kong |
Belize |
Campione D'Italia, Italy |
Kuwait |
Cook Islands |
Cayman Islands |
Labuan, Malaysia |
Dominica |
Herm Qeshm |
Liechtenstein |
Granada |
Isle of Man |
Lebanon |
Liberia |
Maldives |
Macau |
Marshall Islands |
Monaco |
Mariana Islands |
Montserrat |
Nevada, USA |
Mauritius |
Nauru |
Norfolk Islands |
Micronesia |
Niue |
St. Helen and Tristan |
Ostrava, Czech Republic |
Panama |
Samoa |
Singapore |
St. Kitts and Nevis |
Seychelles |
Switzerland |
St. Vincent and the Grenadines |
Turks and Caicos Islands |
Tanger, Morocco |
St. Lucia |
United Arab Emirates |
Uruguay |
Vanuatu |
Wyoming, USA |
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Togo
Corporate income tax reduction
The Budget for 2010 was enacted on 18 December 2009 and is applicable from 1 January 2010. According to the budget, the corporate income tax rate has been reduced from 33% to 30% for standard companies and from 30% to 27% for industrial companies.
 Japan
Tax reform 2010
The tax reform proposals for 2010 were released by the Cabinet on 22 December 2009. The proposals will take effect on 1 April 2010 when passed by the parliament.
Among others, a corporate group taxation regime which will apply automatically have been proposed. Automatically means that the corporate group does not get to elect to apply the group taxation. Under the regime, a corporate group is defined as a domestic Japanese parent company and its 100% owned domestic Japanese subsidiaries.
Further, amendments to the controlled foreign corporation (CFC) legislation are proposed. The effective tax rate which forms the test for the application of the rules is to be reduced to 20% from the current rate of 25%. When a foreign subsidiary of a Japanese company is subject to tax at a rate lower than that prescribed in the CFC rules, the income of the foreign subsidiary is deemed to be CFC-income and included in the income of the Japanese company.
Additionally, some of the exceptions, under which low tax income will not be subject to CFC rules, will be expanded and also a new concept of tainted income will be introduced.
Panama
Tax reform
The Government released the draft of a new tax reform on 2 February 2010. In March 2010 this reform will be submitted to the Congress. Among others, the corporate income tax rate will be reduced from the current rate of 30% to 25%. The proposed rate reduction would be made gradually over 2 years for public services, and the telecommunications, insurance, and cement industries.
 Austria
Participation exemption amendments
Effective 1 January 2010, the shareholding and holding time requirement for the participation exemption is abolished in relation to EU Member States. Consequently, dividends and capital gains from companies resident in an EU Member State are tax exempt in Austria regardless of shareholding or holding period.
In addition, in relation to companies situated in the European Economic Area the same rules apply if an agreement on mutual assistance on the collection of taxes is applicable with Austria.
Lithuania
Budget 2010
Effective from 1 January 2010, the corporate income tax rate is reduced from 20% to 15%. In addition, the withholding tax rate on dividend payments is also reduced from 20% to 15%. Further, the withholding tax on interest payments to foreign companies is abolished when the recipient is resident in the European Economic Area or in a country with which Lithuania has an effective income tax treaty in force.
Montenegro
Withholding tax increase
On 27 June 2008, an amendment to the corporate income tax law was published and became effective on 27 June 2008. According to the amendment, the withholding tax rate on interest is increased from 5% to 9% from 1 January 2010.
The authors assume no responsibility whatsover for any damage in connection with actions, whether undertaken or not, relating to the information set forth herein.
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