Summary: 1. India: Vanenburg Facilities case + Hyderabad Income Tax Appellate Tribunal + Dutch company sells 100% of the shares in an Indian company to a Singaporean company + Indian company owns and operates an industrial park in India + Issue: how to apply Article 13 of India / Netherlands treaty? + Article 13(4) (land-rich provision) does not apply, because of exclusion for immovable property in which the business of the company is carried on + Article 13(1) (immovable property situated in India) - "Immovable property" takes its meaning under Indian law - Tribunal: under the general meaning of "immovable property" under Indian law, shares in a company which owns immovable property are not included - Thus, Article 13(1) does not apply + Article 13(5) (residual provision): applies +Thus, Dutch company is exempt from Indian tax 2. India: Right Florists case + Kolkata Income Tax Appellate Tribunal + Were payments made to Google Ireland and Yahoo U.S., for online advertising, subject to Indian withholding tax? + Key facts - Online advertising operated by way of complex software and algorithms - No computer servers in India + Decision based on Indian domestic tax law + No "deemed source" in India, because the payments were not "fees for technical services" (which requires significant human involvement - not present here) + Was there an "actual source" in India? + Based on case law, there would be an "actual source" in India only if Google Ireland and Yahoo U.S. have a "permanent establishment" (PE) in India (in accordance with the double tax treaty meaning of "PE" + Applying OECD Commentary on Article 5 - A website is not a PE - A server (located in the source country) can be a PE + Tribunal: OECD Commentary is generally relevant in interpreting a double tax treaty + But Indian Government has made a relevant reservation on the OECD Commentary: "a website may consitute a PE in certain circumstances" + Tribunal - A reservation, if relevant at all, is only relevant to treaties signed after the reservation was made - This reservation is "vague and ambiguous" and thus "cannot have any practical impact on a website being treated as a PE" + Thus, no "actual source" in India + Thus, payments were not subject to withholding tax 3. Australia: ATS Pacific case + Federal Court + Concerns an issue which is common to most VAT / GST systems in Asia Pacific - Service provider in country A provides a service directly to contractual party (X) in country B - Through one or more other contractual links, a benefit is obtained by another party in country A - Should the invoice issued to X be zero-rated or standard-rated? 4. China + China State Administration of Taxation (SAT) has published Circular 82, which describes a significant "Circular 698 / indirect share transfer" case + The case concerns Walmart's indirect share acquisition of a 65% interest in Trust-mart of China 5. Tax audits + Korea - Korea's National Tax Service (NTS) announced last week that large businesses should expect tougher tax audits - "Large business" = Sales of more than 50 billion won (US$44 million) - Duration of tax audits expected to increase to 6 - 8 months (from the current 3 - 4 months) + India: Excise duty for motor vehicle manufacturers - Tax authorities are investigating motor vehicle manufacturers to determine whether they are under-paying excise duty - Follows last year's Supreme Court case concerning Fiat 6. Indonesia + New regulation permits certain mining companies to use the current withholding tax rate for services payments, instead of the higher rate which is stated in their Production Sharing Contract or Contract of Work
