Deloitte Asia Pacific Dbriefs Bytes

1. OECD / G20: BEPS and other tax projects

• G20 Finance Ministers meeting

- "Welcome the significant progress"

- To access all of the tax documents from the G20 meeting: visit www.deloitte.com/ap/dbriefs/bytes

• Tension points

• Secondary BEPS agenda

• Next steps

2. UN

• Conference: "Tax Base Protection for Developing Countries"

- To obtain copies of the conference papers: visit www.deloitte.com/ap/dbriefs/bytes

• Tax Experts Committee meeting

- To obtain a copy of the draft agenda: visit www.deloitte.com/ap/dbriefs/bytes

3. Cases

• India: CGI

- Karnataka High Court

- "Royalty" definition

- "Cost sharing agreement" in regard to intranet portal

• India: Kothari Food and Fragrances

- Lucknow Income Tax Appellate Tribunal

- Exporter gives discounts for advance and early payments

- Subject to interest withholding tax?

• For information:

N.C. Hegde (Mumbai): [email protected]

K.R. Sekar (Bangalore): [email protected]

4. China's views on BEPS

• SAT conference on 24 September 2014

• For information:

Vicky Wang (Shanghai): [email protected]

Ye Hong (Shanghai): [email protected]

Julie Zhang (Beijing): [email protected]

5. In brief

• Treaties

- Japan / Sweden protocol: entry into force

- Singapore / Czech Republic protocol: entry into force

- India / Bhutan treaty: entry into force

- New Zealand / Canada: protocol signed

• Philippines: bill for corporate tax rate changes

• Thailand: corporate tax rate

• New Zealand: election promise

• Inversions

- To obtain a copy of Notice 2014-52: visit www.deloitte.com/ap/dbriefs/bytes

- To obtain a copy of our Tax Alert: visit www.deloitte.com/ap/dbriefs/bytes

• Switzerland: tax reform

- To obtain a copy of our Tax Alert: visit www.deloitte.com/ap/dbriefs/bytes

      

1. BEPS 2014 deliverables and related documents

• 780 pages issued by OECD on 16 September 2014

• To access all of the documents, visit www.deloiite.com/ap/dbriefs/bepscentral

2. Action 6: Prevent Treaty Abuse

• LOB and PPT: three options

• Draft Commentary

• Further work

3. Action 15: Developing a Multilateral Instrument

• Feasible

• January 2015: mandate for international conference

4. Action 13: Transfer Pricing Documentation

• Three-tier approach

• Template for country-by-country reports

• Filing process

• To access our Global TP Alert, visit www.deloiite.com/ap/dbriefs/bepscentral

5. Action 8: Transfer Pricing Aspects of Intangibles

• Large parts are draft text

• Examples of "special measures"

• To access our Global TP Alert, visit www.deloiite.com/ap/dbriefs/bepscentral

6. Action 2: Hybrid Mismatch Arrangements

• 12 recommendations for domestic tax law changes

• Further work

7. Action 5: Harmful Tax Practices

• Interim report

• Substantial activity: "nexus approach"?

• Compulsory, spontaneous exchange of information on rulings

8. Action 1: Digital Economy

• Source vs. residence country

• Plan to evaluate potential tax options

      

1. Motorola case

• Delhi Income Tax Appellate Tribunal

• "Excessive" advertising, marketing, and promotional (AMP) expenditure

• "Transaction-by-transaction" approach vs. "Combined" approach

• For information:

Anis Chakravarty (Mumbai): [email protected]

Rakesh Alshi (Mumbai): [email protected]

2. Japanese cases

• Honda Motor Company: transfer pricing

• Denso Corporation: CFC rules

• For information:

Jun Takahara (Tokyo): [email protected]

3. China

• Bulletin 49: VAT exemption on exported services

• Bulletin 50: business tax treatment of bond trading by financial institutions

• Bulletin 54: tax authorities to notify taxpayers of "special tax adjustment" risks

• To obtain a copy of Bulletins 49, 50, and 54 (Chinese language)

- Bulletin 49: visit www.deloitte.com/ap/dbriefs/bytes

- Bulletin 50: visit www.deloitte.com/ap/dbriefs/bytes

- Bulletin 54: visit www.deloitte.com/ap/dbriefs/bytes

• SAT investigation of dividend withholding tax avoidance

• Shanghai Pilot Free Trade Zone: customs non-compliance voluntary disclosure. To obtain a copy of our Tax Newsflash: visit www.deloitte.com/ap/dbriefs/bytes

• For information:

Vicky Wang (Shanghai): [email protected]

Ye Hong (Shanghai): [email protected]

4. In brief

• Malaysia: rulings on non-resident fund management company. To obtain a copy of the two rulings

- Public Ruling No. 2/2014: visit www.deloitte.com/ap/dbriefs/bytes

- Public Ruling No. 6/2014: visit www.deloitte.com/ap/dbriefs/bytes

- For information:

Tan Hooi Beng (Kuala Lumpur): [email protected]

• India: new guidelines for selection of cases for transfer pricing audit. To obtain a copy of the new guidelines, visit www.deloitte.com/ap/dbriefs/bytes

• Australia: repeal of tax loss carryback rules

- For information:

David Watkins (Sydney): [email protected]

• Inversions: Standard & Poor's report on credit ratings of inverted companies. To obtain a copy of the report, visit www.deloitte.com/ap/dbriefs/bytes; and to obtain a copy of the press release, visit www.deloitte.com/ap/dbriefs/bytes

• BEPS: 7 OECD reports, press briefing, and technical webcast: all on 16 September 2014; U.S. Dbriefs webcast on 17 September 2014. For details, visit www.deloitte.com/ap/dbriefs/bepscentral

      

1. Cases

• China: indirect share transfer case (Qidong)

- For information:

Vicky Wang (Shanghai): [email protected]

Ye Hong (Shanghai): [email protected]

• India: Copal revisited

- Contrast between indirect share transfer rules of China and India

2. India

• New committee on retrospective indirect share transfer cases

• For information:

N.C. Hegde (Mumbai): [email protected]

K.R. Sekar (Bangalore): [email protected]

• To obtain a copy of the order which established the committee, visit www.deloitte.com/ap/dbriefs/bytes

3. BEPS

• G20 International Tax Symposium (May 2014): report

• "Dutch banks and tax avoidance": research paper (Profunda)

• "Global tax avoidance and its effects on Australia's economic prosperity": Mark Konza (Australian Taxation Office)

• Draft guidance on transfer pricing documentation: Singapore tax authorities

• To obtain a copy of the above 4 documents, visit http://www.deloitte.com/ap/dbriefs/bepscentral

4. In brief

• Treaties: India / Colombia and Indonesia / Papua New Guinea treaties enter into force

• Shanghai Pilot Free Trade Zone

- For information:

Vicky Wang (Shanghai): [email protected]

Ye Hong (Shanghai): [email protected]

• Japan: second stage increase in consumption tax rate

- For information:

Jun Takahara (Tokyo): [email protected]

• Australia: repeal of minerals resource rent tax

- For information:

David Watkins (Sydney): [email protected]

• New Zealand: updated guidance on transfer pricing aspects of loans

- For information:

Teresa Farac (Auckland): [email protected]

- To obtain a copy of the guidance, visit www.deloitte.com/ap/dbriefs/bytes

• OECD: 2014 edition of model treaty and commentary

      

1. Indian case: Copal

• Delhi High Court

• Indirect share transfer: meaning of "substantially" in section 9(1)(i) Explanation 5

• For information:

Rajesh Gandhi (Mumbai): [email protected]

N.C. Hegde (Mumbai): [email protected]

K.R. Sekar (Bangalore): [email protected]

2. Hong Kong case: Director’s fees

• Board of Review

• Source of director’s fees depends on residence (central management and control) of company

• Foreign-incorporated company, with shares listed on Hong Kong stock exchange, held to be resident in Hong Kong

• For information:

Anthony Lau (Hong Kong): [email protected]

3. China

• Circular 146

• Focus on outbound payments of service fees and royalties

• To access Dbriefs Bytes 6 June (6 tests for deduction of outbound service fees), visit www.deloitte.com/ap/dbriefs/bytes

• To access Dbriefs Bytes 11 July (Chengdu royalties case), visit www.deloitte.com/ap/dbriefs/bytes

• For information:

Vicky Wang (Shanghai): [email protected]

Ye Hong (Shanghai): [email protected]

4. In brief

• Singapore / Rwanda treaty signed

• Inversions

i. Burger King / Tim Hortons

ii. What's Chinese for inversions?

      

1. Cases

• Korean Supreme Court (26 June 2014)

- Application of Korea / U.S. treaty to U.S. LLC

• Korean Supreme Court (10 July 2014)

- Interposed Dutch holding company held to be beneficial owner, for Korean purposes

• Korean National Tax Tribunal (29 May 2014)

- "Substantial shareholder" dividend tax rate: do the shares need to be directly owned?

• For information:

Gyung Ho Kim (Seoul): [email protected]

2. BEPS

• C20 paper

• Unilateral changes: France and the Netherlands

• OECD's part 1 report: tax incentives and indirect share transfers

• For a copy of the C20 paper and the OECD part 1 report, visit www.deloitte.com/ap/dbriefs/bepscentral

3. Australia

• Dividend washing compliance program

• Bitcoin transactions: draft public rulings

• For information:

David Watkins (Sydney): [email protected]

4. In brief

• India / Fiji and Japan / Oman treaties enter into force

• Vietnam: Circular 103

- For information:

Tom McClelland (Ho Chi Minh): [email protected]

- For a copy of our Tax Alert: visit www.deloitte.com/ap/dbriefs/bytes

• Thailand: inheritance tax and property tax

      

1. Korea

• Tax rate increase to encourage large Korean companies to reduce their cash balances by spending on investment, increased wages, dividends, etc.

• Two calculation methods

• For a copy of 6 August 2014 government press release, visit www.deloitte.com/ap/dbriefs/bytes

• For a copy of July 2014 government document on economic policies, visit www.deloitte.com/ap/dbriefs/bytes

• For information:

Gyung Ho Kim (Seoul): [email protected]

2. Cases

• India

- Zaheer: characterization of profit made on the sale of debentures: “interest” or “capital gain”?

- LG: does Korean parent have a PE in India (at the premises of Indian subsidiary)?

- Reuters: definition of “royalties” in India / UK treaty

- For information:

N.C. Hegde (Mumbai): [email protected]

K.R. Sekar (Bangalore): [email protected]

• Finland

- Hybrid loan case

- For information:

Tomi Pitkanen (Helsinki): [email protected]

3. Inversions

• Biggest international tax story of 2014?

• Why are there many more inversions now?

4. China

• Circular 318: enforcement of capital gains tax on share transfers

• Draft GAAR guidelines: comments from Tax Executive Institute (TEI)

- For a copy of TEI’s comments, visit www.deloitte.com/ap/dbriefs/bytes

• For information:

Vicky Wang (Shanghai): [email protected]

Ye Hong (Shanghai): [email protected]

5. In brief

• Treaties: Korea / Colombia and China / Netherlands treaties enter into force

• OECD

- Request for public comments on BEPS Action 11: for a copy, visit www.deloitte.com/ap/dbriefs/bepscentral

- Part 1 of report on the impact of BEPS on low-income countries: for a copy, visit www.deloitte.com/ap/dbriefs/bepscentral

- Global Forum’s latest batch of peer reviews and compliance ratings, in regard to transparency and exchange of information

• For a copy of Indonesia’s report, visit www.deloitte.com/ap/dbriefs/bytes

• New Zealand: tax authority’s description of recent changes to thin cap rules

- For a copy, visit www.deloitte.com/ap/dbriefs/bytes

- For information:

Teresa Farac (Auckland): [email protected]

• Whistleblowers

      

1. OECD Model Treaty and Commentary: 2014 Update: Share redemptions

• Source country treatment as "income from shares" requires that Article 10, not 13, applies

• Residence country must accept that treatment, for purposes of Articles 23A and 23B

2. OECD Model Treaty and Commentary: 2014 Update: Accrued interest

• Definition of "interest" in Article 11

• Amended Commentary: sale of security for price which reflects accrued interest, redemption premium, or original issue discount

3. OECD Model Treaty and Commentary: 2014 Update: "Look through" rule for conduit companies?

• Amendments to Model Treaty and Commentary in regard to "beneficial ownership" do not provide for an express "look through" rule for conduit companies

4. Cases

• India: MISC case

• Article 8 of India / Malaysia treaty

• Slot-chartering arrangement

• For information:

N.C. Hegde (Mumbai): [email protected]

K.R. Sekar (Bangalore): [email protected]

5. In brief

• Treaties

- Singapore / Liechtenstein enters into force

• Taiwan

- R&D tax credits and other incentives: now require compliance with environmental, labor, and food safety laws

- For information:

Cheli Liaw (Taipei): [email protected]

• India

- Cairn: moves its "indirect share transfer" case to new committee

- For information:

N.C. Hegde (Mumbai): [email protected]

K.R. Sekar (Bangalore): [email protected]

      

1. OECD Model Treaty and Commentary: 2014 Update

• Omitted: amendments to Commentary on Article 5

• Amendments to Commentary on meaning of “beneficial owner”

- “Dependent” test vs. “related” test

• For a copy of the 2014 Update, visit www.deloitte.com/ap/dbriefs/bytes

2. Cases

• Allcargo Global Logistics (India)

- Re-characterize transaction for transfer pricing purposes

- Tribunal: delayed allotment of shares cannot be re-characterized as a loan

- For information:

K.R. Sekar (Bangalore): [email protected]

3. Australia

• Carbon tax repealed

• Amendment bill: thin capitalization and participation exemption for non-portfolio foreign dividends

• Internal ATO report

• For information:

David Watkins (Sydney): [email protected]

4. BEPS

• Pascal Saint-Amans: testimony to U.S. Senate Committee on Finance

- For a copy of the testimony, visit www.deloitte.com/ap/dbriefs/bytes

• Michelle Levac: interesting comments on “special measures”

5. In brief

• Treaties

- Signed: Taiwan / Austria

- In force: India / Poland protocol

• OECD: new global standard for automatic exchange of information

- For a copy of the global standard, visit www.deloitte.com/ap/dbriefs/bytes

• Vietnam: Circular 78

- For information:

Tom McClelland (Ho Chi Minh): [email protected]

• Indonesia: new President

      

1. India’s Budget

• Retrospective operation of section 9(1)(i)

- No repeal of retrospectivity

- Special committee

• Transfer pricing: favorable changes

• Real Estate Investment Trusts and Infrastructure Investment Trusts

• GST

• For information:

K. R. Sekar (Bangalore): [email protected]

• For our India Budget Highlights: visit www.deloitte.com/ap/dbriefs/bytes

2. China

• Royalties case (Chengdu)

• GAAR public consultation

- For a copy of draft guidance (Chinese language): visit www.deloitte.com/ap/dbriefs/bytes

• Bulletin 38 (CFC rules)

- For a copy of Bulletin 38 (Chinese language): visit www.deloitte.com/ap/dbriefs/bytes

• For information:

Vicky Wang (Shanghai): [email protected]

Ye Hong (Shanghai): [email protected]

3. Cases

• Three PE cases from India

- Nortel (disregard separation of legal entities)

- GFA Anlagenbau (“at the disposal” test and supervisory activities)

- GE Energy Parts (LinkedIn profiles of employees)

4. Treaties

• Signed: Korea / Hong Kong, Vietnam / Turkey, Korea / Kenya, Singapore / Seychelles

• Entry into force: Sri Lanka / Bahrain

5. In brief

• IRS resignations

• Japan: consumption tax on inbound digital supplies

- For information:

Jun Takahara (Tokyo): [email protected]