Summary: 1. Treaties • China / Netherlands − Signed on 31 May 2013 − Dividends + 5% (shareholder is company with 25% of share capital) + 10% − Interest + 0% (interest on loans guaranteed or insured by government agencies) + 10% − Royalties + 6% (equipment rentals) + 10% (other royalties) 2. 5 cases in 5 minutes • China: Xi’an case − Article 13, China / Barbados treaty (prior to 2010 protocol) − Barbados company, 100% subsidiary of U.S. company − “Disregarded entity” election under U.S. check-the-box (CTB) rules − Chinese tax authorities + Apply GAAR to deny benefit of Article 13, asserting treaty shopping + Use the CTB election as evidence supporting treaty shopping • India: Vijai Electricals − Hyderabad Income Tax Appellate Tribunal − Indian company subscribed for new share capital in foreign subsidiaries − Tax authorities’ attempt to apply transfer pricing provisions rejected by tribunal − Commentators: provides strong support for Shell and other groups which have received large assessments for issuing shares to their 100% parent companies • India: cost sharing agreement − Delhi Income Tax Appellate Tribunal − Cost sharing agreement: 40/60 split, between Indian subsidiary and Korean parent company, for sharing of sponsorship costs for international cricket tournaments − Held: 40/60 split was a fair reflection of expected benefits, viewed from the time at which the cost sharing agreement was entered into • India: Abacus International − Mumbai Income Tax Appellate Tribunal − Interest withholding tax: 20% under domestic law, limited to 15% under India / Singapore treaty − Article 24 (limitation of relief): Singapore company not entitled to treaty benefits unless interest is remitted to Singapore − Onus on Singapore company to positively prove remittance to Singapore • India: General Atlantic − Mumbai Income Tax Appellate Tribunal − Indian subsidiary is a captive service company for U.S. parent − Indian subsidiary argued that it has a lower risk profile (compared to comparable company), due to the fact that its only customer is its parent company − Tribunal + Disagreed + Having a single client has its own risks + Assertion that Indian subsidiary has lower risk profile must be proven by a full risk analysis 3. India: Nokia • March: $350 million tax assessment for withholding tax on software payments • April: Nokia requests Finland to commence MAP discussions • Currently: India’s commissioner of income tax (appeals) rejects Nokia’s appeal 4. BEPS • OECD’s draft amendments to Commentary on Article 5 put “on hold”, pending BEPS • OECD’s intangibles project is becoming enmeshed in BEPS initiative 5. In brief • Japan − Prime Minister Abe’s “third arrow” speech − Short on details • Indonesia − New investment regulation (Reg. 5/2013) • Australia − ATO draft determination on “dividend access shares” and GAAR − Australian Treasury: discussion paper on “dividend washing” arrangements • Vietnam − Dramatic reduction in corporate income tax rates discussed by Parliament • India: Vodafone − Indian government will try to resolve Vodafone “indirect share transfer” tax dispute by non-binding conciliation
