Summary: 1. India + Circular No.3 / 2013 − In what circumstances would a contract R&D unit be accepted as bearing insignificant risk? − All of 5 conditions must be satisfied: i. Foreign principal performs most of the significant functions involved in the R&D cycle ii. Foreign principal provides the funds or capital and significant assets iii. Indian contract R&D unit works under the direct supervision of foreign principal – which has the capability to, and actually does, control or supervise the R&D activities iv. Indian contract R&D unit does not bear or control significant risks. Rebuttable presumption: Foreign principal located in a low or no tax jurisdiction does not control risks v.Indian contract R&D unit has no legal or economic ownership right in the outcome of the R&D effort + Circular No.2 / 2013 − Relevant if you conclude that Indian contract R&D unit does bear economically significant risks − Should the profit split method be applied? − Depends on the availability, coverage and reliability of data − To apply the profit split method, you need information about the Indian entity and the foreign principal − Indian entity is expected to have the information or to have a “good and sufficient reason” for not having it − If you can’t apply the profit split method (due to unavailability of information), then you should seek to apply TNMM or CUP methods by: • Selecting comparables • Making “upward adjustments” for location savings and location specific advantages + Nokia − Tax demand to pay USD368 million by end of March − “Stay” order issued by Delhi High Court on 22 March 2. Australia + Discussion Paper on improving tax transparency − Rules would apply to corporate tax entities (companies, corporate limited partnerships, corporate unit trusts, and public trading trusts) with gross revenue of AUD100 million or more − Government will publish: • Corporate tax entity’s name and Australian business number • Its gross revenue • Its taxable income • Its Australian income tax payable − No specific indication how a tax consolidated group will be treated − Effective income year commencing on 1 July 2013 − Public comments requested by 24 April − For more information: • Peter Madden (Sydney) pmadden@deloitte.com.au • David Watkins (New York) davwatkins@deloitte.com 3. Treaties + Mongolia / Italy − Recently entered into force − Will apply from 1 January 2014 − Dividends: 5% (if at least 10% shareholding held for 12 months); 15% (otherwise) − Interest: 10% − Royalties: 5% + Japan / UK − Protocol agreed “in principle” − Lower interest and dividend withholding tax rates − Arbitration 4. Taiwan − Taiwanese Government considering two new rules: • CFC regime • “Place of effective management” test of corporate residence
