Are there any special taxation regimes, such as enterprise zones or favourable tax regimes for financial services or co-ordination centres, etc?
The Merchant Shipping (Fees and Taxing Provisions) Law of 2010, commonly known as the Tonnage Tax Law, gives qualifying Cyprus-resident shipping and ship management companies the option to be taxed on the basis of the tonnage of the vessels they operate, simplifying and reducing the tax burden. It widens the range of exempt gains to include profits on the disposal of vessels, interest earned on funds and dividends paid directly or indirectly from shipping-related profits, in addition to profits from shipping operations.
Pursuant to VAT Code (Law 2859/2000), there are the following special VAT taxation regimes:
a. Tax warehouses (Article 26)
b. Small enterprises (Article 39)
c. Farmers (Articles 41,42)
d. Travel agents (Article 43)
e. Manufactured tobacco (Article 44)
f. Reselling of artistic goods or those with collectible or archaeological value (Article 45)
g. Auction sales (Article 46)
h. Investment gold (Article 47)
i. Telecommunication, radio, television and online services (Article 47a, 47b, 47c).
No, corporate taxation regime is standard but there are several tax incentives and exemptions for certain transactions. For instance, there are free trade zones. the entities licensed to operate in free trade zones are granted with some exemptions; such as customs tax and VAT.
Perhaps the most innovative special tax regime in the UK in recent times was the introduction of enterprise zones. Established in 2012, enterprise zones are designated areas across England that provide tax breaks and government support. Examples of the benefits that may be available to businesses located in an enterprise zone are 100% enhanced capital allowances, government support to ensure superfast broadband throughout the zone and up to 100% business rate discount worth up to £275,000 per business over a 5-year period. The aims of the regime are to attract foreign investment into the country and to deliver long-term, sustainable growth across England. After early success, more enterprise zones are planned to be in place by April 2017.
Up until the tax reform that came into force as of January 1, 2014, Mexican border regions could benefit from a reduced value added tax rate of 11 per cent. Nonetheless, said benefit was repealed.
Notwithstanding the foregoing, Mexican tax laws do provide a favourable tax regime relating to financial institutions. In this sense, interest payments deriving from loans between said institutions could be exempted from value added tax. Moreover, financial institutions could be subject to reduced income tax rates.
A few special tax and other incentives have been established in order to attract R&D activities and/or investments into Japan by foreign multinational enterprises. For example, the Tokyo metropolitan government, in cooperation with the Japanese national government, provides a regime called the Asian headquarters special region. There, if a qualifying foreign multinational enterprise establishes a Japanese corporation as a subsidiary based upon an approval of the Tokyo metropolitan government for the purpose of conducting R&D activities in Japan or establishing an Asian regional headquarters in Japan (i.e., as an intermediate holding company), that Japanese subsidiary can enjoy, among other benefits, special tax credit or special accelerated depreciation deduction for the investments made in machinery and buildings, along with total exemption of local transactional taxes such as real property acquisition tax, fixed property tax and city planning tax.
In addition, as special taxation regimes that are equally applicable to Japanese businesses, there are, among others, (i) special taxation regime for promoting capital expenditures, where taxpayers can enjoy special accelerated depreciation deduction of 50% or special tax credit of 4% of the acquisition cost of certain qualifying machinery and equipment (applicable until the end of March 2017) and (ii) special taxation regime for promoting increase of salary payments to employees, where taxpayers can enjoy tax credit of 10% of the increased amount of the total deductible salary payments to their employees as compared to past (applicable for fiscal years beginning by the end of March 2018). These measures reflect the economic policy referred to as “Abenomics” of the incumbent Prime Minister and his ruling party.
There are no special federal tax zones in the United States. The U.S. does have recognize special rules for certain entities, such as Regulated Investment Companies, Real Estate Investment Trusts, Domestic International Sales Corporations, Real Estate Mortgage Investment Conduits and S Corporations.
Generally, Hong Kong is of the view that its low rate, simple tax system is incentive enough for businesses to want to settle in Hong Kong. However, in recent years, it has introduced amendments targeting specific activities. The offshore fund profits tax exemption, the profits tax offshore private equity funds and the corporate treasury centres incentive are examples of special regimes that have found their way to the tax legislation in recent years.
Under Spanish legislation there is no specific tax regime applicable to enterprises zones as a whole, but only applicable to investments made and businesses carried out in specific regions (i.e. Canary Islands, Ceuta, Melilla) which the legislator intends to protect and to encourage.
Generally speaking, Germany does not have specific enterprise zones or favourable tax regimes for financial services enterprises or co-ordination centres. However, German tax law foresees a number of special rules for financial institutions, e.g. with view to VAT, withholding taxes and the availability of the participation exemption. Moreover, when investing in Germany, the trade tax rate may play a role as to the question where to establish the business. Trade tax is levied by the local municipality, where the business is located. Some municipalities have trade tax rates, which are below 10% (minimum is 7%). There is no maximum rate, but virtually no municipality has a trade tax rate higher than 17.5%. In terms of indirect taxes, Helgoland and Büsingen are zones where VAT and duty free shopping is possible.
Generally-speaking, Belgium does not have specific enterprise zones or specific favourable tax regimes.
However, many favourable tax measures are available for SMEs. A corporation is deemed to be an ‘SME’ if it does not exceed more than one of the following thresholds for two consecutive book years: 50 full-time equivalent workers; an annual turnover (excluding VAT) of EUR 9,000,000.00; a total balance sheet of EUR 4,500,000.00.
It should be noted that a specific tax regime was recently enacted for the diamond sector.
Italian tax legislation does not provide any special/favourable tax regime applicable to enterprises zones as a whole for financial services or co-ordination centres. However, certain investments carried out in specific areas (i.e. Campania, Puglia, Basilicata, Calabria, Sicilia, Molise, Sardegna, Abruzzo) can benefit from a tax credit for both individual and corporate income tax purposes aimed at encouraging the economic growth of such areas.
Yes. Among others, investments in the Northern Corridor Economic Region (NCER), East Coast Economic Region (ECER), Sabah Development Corridor, Sarawak Corridor of Renewable Energy (SCORE) and Iskandar Malaysia enjoy various forms of tax incentives.
Ireland's tax code provides for a number of favourable tax regimes for different investments. For example, Ireland operates a regime which provides for accelerated capital allowances for investment in energy efficient equipment.
Ireland offers a tax neutral securitisation (finance company) through what is known as the "Section 110" regime. This broadly allows securitisation of all financial assets, plant and machinery with minimal tax leakage.
The FTC provides for several specific taxation regimes covering various fields such as research and development or starting businesses. However, the FTC does not provide for specific provisions regarding financial services.
Here is an overview of some of these specific regimes:
- Headquarters and centers of logistics of multinational companies: under prior agreement with the FTA, headquarters may determine their taxable profits according to their profit margin computed as follows: profit margin ratio applied to ordinary operating expenses;
- Regime of starting businesses: under certain conditions, such a business may enjoy a total exemption of CIT for the first 23 months following the month it was set up and, for the next three 12-month periods, only 75% (1st period), 50% (2nd period) and 25% (3rd period) of profits will be taxed;
- Young innovative business: SMEs engaged in significant research and development activities may be fully CIT exempted the first profitable year and, the following year or next profitable year, only half of the profits will be taxed; a tax credit for research and development may be granted which amounts to 30% of research and development expenses within the limit of EUR 100 million and 5% over this threshold.
None of the listed examples are provided under the Australian taxation system. However, Australia does have some special tax regimes to foster foreign investment in Australia. Of particular relevance are the managed investment trust (MIT), the investment management regime (IMR) and offshore banking unit regime (OBU). These objects and mechanics are briefly outlined below.
A MIT is an Australian trust that affords concessional tax treatment to foreign investors in respect of passive (non-trading) investment.
The IMR is provides tax exemptions in relation to gains made by foreign funds in respect of certain qualifying investments. Broadly, funds that are eligible for the IMR concession will not be taxed in relation to gains made on the disposal of shares, loan or derivative securities, although exceptions exist (particularly in relation to non-portfolio indirect taxable Australian real property).
Offshore banks are offered concessional tax treatment in order to encourage those taxpayers to conduct their banking activities through Australia. Generally, offshore banks will be taxed at an effective rate of 10% for their banking activities in Australia.
Currently, Swiss tax law provides for several different special taxation regimes. However, Switzerland has formally made a commitment towards the European Union to abolish the special taxation regimes currently in place and described below. The abolishment of these special taxation regimes along with a series of replacement measures were part of a proposed Federal corporate income tax reform that was however rejected in a popular vote on February 12, 2017. The Swiss Federal parliament will most likely resolve on a revised corporate tax reform that is however unlikely to come into effect before 2020. Accordingly, we expect that the below described tax treatment will stay in force for so long.
For cantonal corporate income tax purposes only, the following special taxation regimes are currently in place:
- Holding Company: Generally, a company qualifies as a Holding Company if its purpose is the ongoing management of investments in other companies and the company itself does not conduct any business activities in Switzerland. Additionally, either two thirds of its assets are participations or two thirds of its investments revenues stem from participations. Holding Companies are tax exempt from cantonal corporate income tax and only pay federal corporate income tax at an effective rate of 7.8%.
- Domicile Company: If a company merely has its statutory place of domicile in Switzerland (without having offices/employees of its own) it may qualify as Domicile Company. Similarly as with Mixed Companies (cf. below), only a percentage of a domicile company's foreign sourced income is included in its Swiss tax base for cantonal tax purposes. Depending on the canton, the effective tax rate of a Domicile Company is around 8% – 10%.
- Mixed Company: Companies may qualify as mixed companies if there business activity is primarily related to business abroad (i.e. typically 80% of gross profit and expenses are foreign sourced) and thus any business activity in Switzerland itself is of a secondary nature. For cantonal tax purposes, Swiss sourced income is fully taxed, whereas foreign sourced income is only partially included in the taxable base for Swiss income purposes (depending on the extent of the business activities in Switzerland). The effective tax rate of mixed companies is (depending on the canton) between 9% - 12%.
Furthermore, both at level of federal and cantonal tax law, Swiss administrative tax practice provides for the following special taxation regimes:
- Principal Company: A company may qualify as Principal Company if it meets certain substance and margin requirements. The profit of a Principal Company is partially allocated abroad (depending on the nature of its activity) hence only including a portion of the overall profit in its tax base for corporate income tax purposes.
- Swiss Finance Branch: A Swiss permanent establishment of a foreign company may qualify as a Swiss Finance Branch if it's annual average balance sheet amounts to at least CHF 100m, at least 75% of the average total asset amount and gross income concern finance services and the amount of loans/advances to Swiss group companies does not exceed 10% of the total assets. Swiss Finance Branches may deduct deemed interest expenses from their Swiss federal/cantonal corporate income tax base.
Furthermore, the Swiss Federal Law of Regional Development provides for tax incentives for creating/preserving jobs in certain regions of Switzerland. Following a recent reform, such tax relief is limited to an annual amount of CHF 95'000 per job created or CHF 47'500 per job preserved for a maximum of ten years. The companies profiting from such tax relief and the number of jobs to be created/preserved are made public. In addition, most Swiss Cantons may provide for full or partial tax holiday for up to ten years from Cantonal and communal corporate income tax for newly established businesses creating a certain amount of work-places.