Summary: 1. Treaties (i) Japan / UAE − Treaty signed on 2 May, 2013 − Dividends : (i) 5% (if shareholder is a company which has owned at least 10% of the voting shares for the 6 months prior to dividend); (ii) 10% otherwise − Interest : (i) 0% (if paid to a Government institution, including a sovereign wealth fund); (ii) 10% otherwise − Royalties : 10% − Japan’s domestic tax law applies to a silent partner in a TK − “Main purpose” test, but no general LOB article − Treaty does not apply to exploration and exploitation of hydrocarbons For information: - Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp (ii) Treaties entering into force − Singapore / lsle of Man and Singapore / Jersey treaties recently entered into force − Their provisions will generally apply from 1 January, 2014 2. BEPS : Australia’s Issues Paper − Issues Paper published by Australian Treasury on 3 May, 2013 − Balanced and open-minded − Public comments requested by 31 May on 3 topics: (i) Should Australia care if tax is avoided in another country? (ii) Does “base erosion and profit shifting” exist in Australia? (iii) Should the key pressure areas identified by the OECD be the main priorities for action in the short term? − Treasury plans to publish its BEPS Scoping Paper in late June. The Scoping Paper will analyse a range of possible solutions to the BEPS issue − Australia will chair the G20 in 2014 For information: - Peter Madden (Sydney): pmadden@deloitte.com.au - David Watkins (New York): davwatkins@deloitte.com 3. Cases (i) India : KLM Royal Dutch Airlines − Delhi Income Tax Appellate Tribunal − Netherlands-resident company which operates aircraft in international traffic − Provides ground handling and technical services to other airlines at airports in India − Such services are covered by the by-laws of the International Airlines Technical Pool (IATP), of which KLM is a member − Tribunal held that the service fees are “profits from the participation in a pool”, and are therefore “profits from the operation of aircraft in international traffic” for the purposes of Article 8 of the India / Netherlands treaty − Thus, Article 8 provides exemption from Indian tax, despite the existence of a PE in India For information: - K.R. Sekar (Bangalore): krsekar@deloitte.com (ii) India : Vodafone − In January 2012 decision in Vodafone case, India’s Supreme Court articulated a new anti-avoidance doctrine: the “look at” approach − India’s Solicitor-General on 9 May : the Government will likely seek to have the Vodafone case reviewed by a larger bench of the Supreme Court For information: - K.R. Sekar (Bangalore): krsekar@deloitte.com 4. In Brief (i) China: Circular 165 and Announcement 19 − SAT has recently issued: • Circular 165 (beneficial ownership for the purpose of obtaining lower dividend withholding tax rate under China’s double tax arrangement with Hong Kong) • Announcement 19 (circumstances in which inbound secondment of employees could cause the foreign employer to have a PE in China) For information: - Vicky Wang (Shanghai): vicwang@deloitte.com.cn - Ye Hong (Shanghai): hoye@deloitte.com.cn (ii) India : Nokia − Nokia’s $368 million withholding tax dispute (regarding payments for software used in mobile phones) looks set to be dealt with under the MAP procedures of the India / Finland treaty
