Summary: 1. India: Budget – Tax rates: • Level of surcharge imposed on basic income tax rates increased • Withholding tax on royalties and technical service fees increased from 10% to 25% (subject, thank goodness, to treaty limitations) – Share buybacks by unlisted companies: 20% “dividend distribution tax” will apply to profits so distributed – Deferral of GAAR (to income year commencing 1 April 2015) confirmed – 15% investment allowance – Existing 15% concessional tax on foreign dividend income extended for one year – No retrospective legislation! – Tax residency certificate: necessary, but not sufficient, condition to claim treaty benefits – GST: still on the way 2. Singapore: Budget – Corporate income tax rebate (S$30,000 cap) – Tax incentive programs extended for 5 years – Population: tightening of supply of foreign workers 3. Hong Kong: Budget – Profits tax reduction (HK$10,000 cap) – Offshore fund exemption regime: will now apply to transactions in private companies which are not incorporated in Hong Kong ( and don’t own property or carry on business in Hong Kong) – Captive insurance company tax incentive: 50% reduction in profits tax rate 4. Treaties (i) Hong Kong / Mexico – Effective: • Mexico: 1 January 2014 • Hong Kong: 1 April 2014 – Dividends: 0% • Interest: 4.9% (banks) / 10% (otherwise) • Royalties: 10% (ii) China / UK – Protocol which amends pending 2011 treaty – Removal of “or indirectly” from dividends article – Thus, to obtain 5% dividend withholding tax rate, a UK company must hold directly at least 25% shareholding in China company 5. Case – India: Sanofi • Indirect share transfer • Sales of 100% of shares in French company (Shan H), by two French groups, to another French company (Sanofi) • Shan H holds 90% of the shares in Indian company • Application of Vodafone “look at” approach: Shan H was not established as a tax avoidance scheme or a sham • Thus, legal form should be respected • Last year’s retrospective amendments to section 9 (1)(i) “trumped” by capital gains article in India / France treaty
