Does the tax system broadly follow the recognised OECD Model?

Does it have taxation of; a) business profits, b) employment income and pensions, c) VAT (or other indirect tax), d) savings income and royalties, e) income from land, f) capital gains, g) stamp and/or capital duties.

If so, what are the current rates and are they flat or graduated?

Tax

Cyprus Small Flag Cyprus

The Cyprus tax system is fully compliant with OECD and EU norms. As regards the various categories of income:

a. Business profits, adjusted for various disallowances and exemptions, are subject to tax at 12.5%.

b. The first EUR19,500 of annual employment income and domestic pension income is free of tax; the next EUR8,500 is subject to tax at 20%; the next EUR8,300 at 25%; the next EUR23,700 at 30% and any amount above EUR60,000 at 35%. Exemptions are available in the initial years of residence. The first EUR19,500 per year of Cyprus-source widow’s or widower’s pension is free of tax and tax is payable on the balance at 20%. The first EUR3,420 per year of foreign-source pension income is free of tax and tax is payable on the balance at 5%. The taxpayer may opt to be taxed on the standard basis if this is beneficial.

c. The standard rate of VAT is 19%. Reduced rates of 5% and 9% apply to certain supplies.

d. Interest and dividends received by individuals who are both resident and domiciled in Cyprus are subject to SDC tax at rates of 30% and 17% respectively. Passive interest received by Cyprus-resident companies is subject to SDC tax at 30%. Dividends received by Cyprus-resident companies are not subject to income tax or SDC tax. Royalties are treated as trading income. The intellectual property box regime gives greatly reduced rates for participants who joined the scheme before 30 June 2016.

e. Rent is treated as trading income for income tax purposes. A 20% allowance is given on the gross rent received. Rent received by companies, and by individuals who are both resident and domiciled in Cyprus, are subject to SDC tax at an effective rate 0f 2.25%.

f. The only gains subject to capital gains tax are gains on disposal of land which is located in Cyprus and on disposal of shares in unlisted companies to the extent that those shares directly or indirectly derive their value from land located in Cyprus. All other gains are exempt.

g. Stamp duty is payable on contracts relating to property or business in Cyprus. For transactions with a consideration up to EUR5,000, no stamp duty is payable; for transactions with a consideration between EUR5,000 and EUR170,000, stamp duty is EUR1.50 for every EUR1,000 and for transactions with a consideration in excess of EUR170,000, stamp duty is EUR2 for every EUR1,000. The maximum stamp duty payable on a contract is capped at EUR20,000. On incorporation of a Cyprus registered company, capital duty of €105 plus 0.6% of the authorised capital is payable. Any subsequent increase in share capital is liable to capital duty at 0.6%. On the other hand, a notional interest deduction against profits for corporate income tax purposes is available for new capital introduced into Cyprus companies and permanent establishments.

Greece Small Flag Greece

The Greek tax system broadly follows the recognised OECD Model.

The following apply:

a) Business profits: 29%; 13% (for agricultural cooperative and producer groups); flat.

b) Employment income and pensions: 0 -20.000 at 22%; 20.001 -30.000 at 29%; 30.001 – 40.000 at 37%; 40.001 - ... at 45%; graduated.

c) VAT (or other indirect tax); 24%; flat.

d) Savings income: 15%; flat.

e) Royalties: 20%; flat.

f) Income from land: 0 -12.000 at 15%; 12.001 -35.000 at 35%; 35.001 - ... at 45%; graduated.

g) Capital gains: The Greek capital tax includes dividends, savings income, royalties, and income from land. Dividends at 15%.

h) Stamp duties: Contracts and documents at 3%; Commercial acts and documents at 2%; flat.

i) Capital duty (special solidarity levy): 0 -12.000 at 0%; 12.001 -20.000 at 2,20%; 20.001 – 30.000 at 5%; 30.001 – 40.000 at 6,5%; 40.001 – 65.000 at 7,5%; 65.001 – 220.000 at 9%; >220.000 at 10%; graduated.

Turkey Small Flag Turkey

a. Taxation of business profits, YES, 20% corporate income tax
b. Taxation of employment income and pensions, YES, 15-35% Income withholding tax on salaries
c. VAT (or other indirect tax), YES, 1%, 8%, 18% applies depending on the type of good and service
d. Taxation of savings income and royalties, YES, 0%-15% over interest and 20% over royalties through withholding tax
e. Taxation of income from land, YES, 15-35% Income Tax, 20% Corporate Income Tax (certain exemptions exist)
f. Taxation of capital gains, YES, 15-35% Income Tax, 20% Corporate Income Tax (certain exemptions exist)
g. Stamp and/or Capital duties, In general, stamp tax is calculated at the rate of %0,948 over the monetary amounts written in certain documents.

United Kingdom Small Flag United Kingdom

The UK does broadly follow the recognised OECD model of taxation. The current rates are as follows:

a. Corporation tax is at a flat rate of 20%. The corporation tax rate is planned to go down to 19% by 2017 and 17% by 2020 although there has been a change in government since those forecasts were made.

b. Personal income and pensions are taxed on a gradated basis – each band of income is taxed at a different rate:

  • Personal allowance up to £11,000 – 0%
  • Basic rate between £11,001 to £43,000 – 20%
  • Higher rate between £43,001 to £150,000 – 40%
  • Additional rate over £150,000 – 45%

c. VAT is set at a flat rate of 20%, although some goods are subject to a reduced of 5% or a zero rate (such as children’s car seats or children’s clothes)

d. If your total taxable income is £17,000 or less, no tax is paid on savings income. Otherwise the tax free allowance on savings depends on the tax bracket into which the taxpayer falls. Domestic UK law imposes a 20% royalty withholding tax on limited types of payment and on specific categories of intellectual property.

e. Income from land will generally be added to an individual’s overall taxable income in a given year and is therefore taxed on the same basis as income from other sources (see b above).

f. The tax free allowance on capital gains is £11,100. Higher and additional rate taxpayers pay 28% on gains from residential property and 20% on gains from other chargeable assets. Basic rate taxpayers generally pay at a lower rate, but this depends on the size of the capital gain.

g. Stamp Duty Land Tax is a tax on the purchase of a property. The first £125,000 for the purchase price of the property is tax free and following bands of the purchase price are taxed rates of 2%, 5%, 10% and 12%. Stamp Duty Reserve Tax (SDRT) is a tax on the purchase of shares. The SDRT rate is 0.5% and is automatically imposed where shares are purchased electronically and imposed on transactions over £1,000 were purchased using a stock transfer form.

Mexico Small Flag Mexico

In general terms, Mexican tax laws adhere to the recognised OECD Model, even to the extent that in some cases the content of local laws is given by the OECD guidelines.
With respect to the taxes listed in question 10, the following are regulated by the Mexican tax system:

a. Taxation of business profits. Legal entities deemed as Mexican residents for tax purposes are subject to income tax on a worldwide basis. That is, any and all income perceived by such entities would be subject to taxation in Mexico.

Concerning foreign residents, in cases where they have a permanent establishment within national territory all income attributable thereto could be subject to taxation. Likewise, income perceived by foreign residents that is deemed to have its source in Mexico could be subject to taxation.

The current corporate tax rate is of 30 per cent.

b. Taxation of employment and pensions. In pursuance of the Mexican Income Tax Law, employers are required to withhold income tax due over the salary or wages of their employees. The applicable withholding rate varies depending on the relevant employee’s income, ranging from 1.92 up to 35 per cent.

In general terms, social security pensions and state workers’ social security pensions are not subject to taxation.

In cases where a foreign resident perceives a salary or wage as consideration for subordinate personal services, the source of income would be deemed to be located in Mexico when the foreign resident services are rendered in national territory. Should this be the case, depending on the amount of the remuneration, the foreign resident could be exempted (for the first $125,900 Mexican pesos perceived during the corresponding calendar year), or subject to a tax rate of 15 per cent (when the remuneration is somewhere in between $125,900 and $1’000,000 Mexican pesos) or a tax rate of 30 per cent (when the remuneration exceeds the amount of $1’000,000 Mexican pesos).

Concerning pensions received by foreign residents, their source of income would be deed to be located in Mexico whenever the party that makes the corresponding payments is a Mexican resident for tax purposes or a foreign resident with a permanent establishment in Mexico, or whenever the contributions to the relevant pension are linked to a subordinate personal service rendered by the foreign resident within national territory. Income tax due would be calculated based on the same parameter as in the case of salaries or wages perceived by foreign residents.

It should be noted that aside from income tax, employers could be subject to a state tax on payrolls. Depending on the relevant state, the corresponding tax rate could range from an approximate of 1.90 to 3 per cent.

c. Value added tax. Both individuals and legal entities that, within national territory, sell goods, render independent services, lease goods or import goods or services, would be subject to value added tax in Mexico. The general tax rate is of 16 per cent.

Nonetheless, depending on the nature of the goods or services that are being sold, rendered or imported, the relevant operation could be exempted from value added tax or subject to a tax rate of cero per cent.

It is of paramount importance to distinguish between goods or services exempted from value added tax and those subject to a tax rate of cero per cent, given that only the latter could be credited by taxpayers.

d. Taxation of savings income and royalties. Income perceived by Mexican individuals by means of savings funds could be exempted from income tax as long as they meet the requirements set for by the Mexican Income Tax Law in order to be deemed as deductible. Additionally, interests paid to them by financial institutions or cooperatives over chequing accounts, accounts for the deposit of pensions, retirement or savings could be exempted from income tax as long as the average daily balance of the investment does not exceed an amount equivalent to five minimal wages to the year (approximately $26,659.6 Mexican pesos).

In cases where the aforesaid conditioned are not met, the Mexican individual should pay income tax at the corresponding tax rate (ranging from 1.92 to 35 per cent).

Concerning royalty payments made to a foreign tax resident, the applicable tax rate could range from 5 to 35 per cent, depending on the concept for which royalties are being paid.

e. Taxation on income from land. Two state taxes should be considered on the subject. Depending on the state, the acquisition of land could trigger taxation. The applicable tax rates could range from an approximate of 1 to 5 per cent. Additionally, land could be subject to a state property tax.

It is worth mentioning that both taxes should be paid to the corresponding local treasuries instead of the Tax Administration Service.

On a federal scale, income perceived by taxpayers as consequence of the exploitation of land could trigger income tax. Likewise, the transfer of land is generally considered as exempted from value added tax.

f. Taxation of capital gains. Generally speaking, Mexican tax residents (individuals and legal entities) are required to pay income tax on a worldwide basis. In this sense, capital gains ought to be added to their accruable income for the relevant fiscal year.

Income resulting from the disposal of stock issued by a Mexican resident company could be subject to taxation at a rate of 25 per cent over the gross amount of the corresponding consideration, when in the hands of a foreign tax resident seller.

Nonetheless, provided that certain requirements are met, foreign tax residents could opt to calculate income tax due at a rate of 35 per cent over the capital gain in question (with the possibility to deduct the cost of the shares).

It is important to point out that in order for the latter alternative to be available, foreign tax residents are required to designate a representative in the country in charge of complying with several obligations, such as remitting the corresponding tax.

Additionally, the disposal of stock listed on the Mexican Stock Exchange, as well as other recognised markets, could be subject to a 10 per cent tax rate.

g. Stamp and/or capital duties. The Mexican tax system does not foresee any stamp or capital duties.

Gibraltar Small Flag Gibraltar

a. Taxation of business profits. Yes, currently 10% of all income accrued in or derived from Gibraltar.

b. Taxation of employment income and pensions. Yes, income is taxed on either the Gross Income Based System or the Allowance Based System. Income bands and tax rates are provided for from time to time under the ITA.

c. VAT (or other indirect tax). There is no VAT in Gibraltar, or other indirect tax.

d. Taxation of savings income and royalties. Income of a passive nature is not liable to tax. Royalties are subject to tax at the rate of 10%.

e. Taxation of income from land. Yes, rental income is taxable, either at the corporate tax rate of 10% or at the scaled bands rates for individuals.

f. Taxation of capital gains. There are no capital gains taxes in Gibraltar.

g. Stamp and/or Capital duties. Stamp duty (payable at rates depending on the passing consideration) is payable only on Gibraltar real estate transactions. Capital duty is a nominal figure of GBP 10 on the initial share capital, and any subsequent increases.

Japan Small Flag Japan

The tax system in Japan broadly follows the recognised OECD Model, and is largely similar to the tax system commonly employed by advanced Western countries.

a. Taxation of business profits
Japanese corporations are subject to corporate taxation comprised of (i) national corporate tax as well as (ii) local inhabitants tax and (iii) local enterprise tax. The effective marginal corporate tax rate, taking into consideration the foregoing taxes, applicable to Japanese corporations is, in general, around 29.97% for the fiscal year beginning on or after April 1, 2016 and 29.34% for the fiscal years beginning on or after April 1, 2018 (each assuming Japanese corporations headquartered in the central Tokyo metropolitan area and having stated capital of more than 100 million yen).

Japanese resident individuals are taxed at regular progressive rates. The marginal tax rate of individual income taxation is 55.945% (comprised of 45% national individual income tax, 0.945% special reconstruction income surtax and 10% local inhabitants tax) for calendar years from 2015 through 2037. The marginal rate generally applies to the portion of the taxable income of an individual exceeding 40 million yen.

Foreign corporations and non-resident individuals are taxed in substantially the same manner as above, to the extent that they have a permanent establishment in Japan and the relevant business profits are attributable to that permanent establishment in Japan. Otherwise, business profits sourced from Japan are not taxable in Japan for foreign corporations and non-resident individuals.

b.Taxation of employment income and pensions
These are taxed on Japanese resident individuals at the regular progressive rates, where the marginal tax rate is 55.945% as mentioned above. Retirement income generally receives preferential tax treatments and is effectively taxed at a very low rate. For non-resident individuals, employment income derived from a Japanese source is subject to 20.42% withholding tax, unless exempted by an applicable tax treaty.

c.VAT (or other indirect tax)
VAT applies in Japan as consumption taxes. Consumption taxes (national and local) are payable by individual or corporate taxpayers engaged in sale of goods or provision of services that are taxable for consumption tax purposes, i.e., sale of goods or provision of services conducted in Japan (unless specifically designated as nontaxable). The tax rate is currently 8%, and will be raised to 10% from October 2019.

Consumption taxes are charged to the recipient or purchaser of the goods or services (i.e., the recipient or purchaser will pay to the provider or seller the applicable consumption tax amount (8% or 10%) in addition to the purchaser price), and (i) the seller or the provider will report and pay the consumption taxes to the Japanese government by filing a tax return and (ii) the recipient or purchaser may be eligible to take input tax credit as to the consumption tax amount so paid to offset against its own consumption tax liability.

Foreign individual or corporate taxpayers are also subject to the consumption taxes, regardless of whether or not they have a permanent establishment in Japan for income or corporate tax purposes, so long as they engage in sale of goods or provision of services conducted in Japan that is taxable for consumption tax purposes. However, foreign taxpayers may be exempt from the consumption tax liability because of a small business exemption, if, in general, the total taxable sale from the sale of goods or provision of services conducted in Japan in the fiscal year two years prior to the relevant fiscal year did not exceed 10 million yen. There are, however, many other detailed rules that limit this exemption.

d.Taxation of savings income and royalties
Japanese corporations are taxed on interest arising from deposits and royalties arising from intellectual property in the same manner as business profits mentioned above. Japanese resident individuals are taxed on interest arising from deposits at a flat rate of 20.315% by way of withholding separately from other income, but are taxed on royalties arising from intellectual property substantially in the same manner as business profits mentioned above.

Foreign corporations and non-resident individuals having no permanent establishment in Japan are subject to Japanese taxation by way of withholding only, where the withholding tax rate is 15.315% for interest arising from deposits made in Japan and 20.42% for royalties arising from certain prescribed types of intellectual property (patents, design rights, copyrights, etc.) registered or otherwise sourced in Japan. These withholding taxes may be exempted or reduced by an applicable tax treaty.

e.Taxation of income from land
Japanese corporations are taxed on rents and capital gains arising from land and buildings in the same manner as business profits mentioned above. Japanese resident individuals are taxed on rents arising from land and buildings substantially in the same manner as business profits mentioned above, but are taxed on capital gains generally at the flat rate of 20.315% (if the holding period is more than 5 years) or 39.63% (if the holding period is 5 years or less).

Foreign corporations and non-resident individuals having no permanent establishment in Japan are subject to Japanese taxation on rents and capital gains arising from land and buildings located in Japan, by way of both withholding and reporting by filing a tax return, as a general matter. The withholding tax rate is 10.21% for capital gains and 20.42% for rents. Then, by filing a tax return, foreign corporations are subject to the national corporation tax (but not local taxes) at the rate of 23.4% for the fiscal year beginning on or after April 1, 2016 and 23.2% for the fiscal years beginning on or after April 1, 2018, and non-resident individuals are subject to income tax generally at the flat rate of 15.315% (if the holding period is more than 5 years) or 30.63% (if the holding period is 5 years or less). The withholding tax properly withheld will be credited against the tax payable by the tax return.

Note there are some transactional, rather than income, taxes applicable to land and/or buildings.

f.Taxation of capital gains
Japanese corporations are taxed on capital gains arising from sale of securities (bonds, shares, etc.) in the same manner as business profits mentioned above. Japanese resident individuals are taxed on capital gains arising from sale of securities (bonds, shares, etc.) at the flat rate of 20.315%, unless exempted by the individual savings accounts regime (commonly referred to as NISA).

Foreign corporations and non-resident individuals having no permanent establishment in Japan are subject to Japanese taxation on capital gains arising from sale of shares of a Japanese corporation, only if such foreign corporation or non-resident individual, together with certain related persons (its affiliates and related parties, etc.) as defined in Japanese tax laws and partnerships in which it is directly or indirectly a partner: (i) owns or owned 25 % or more of the total shares of the Japanese corporation at any time during a period of three years on or before the end of the fiscal year of the foreign corporation (or the calendar year for non-resident individuals) in which the sale of such shares took place, and (ii) sells 5 % or more of the total shares of the Japanese corporation in that fiscal year or calendar year. This exceptional rule is commonly referred to as the ‘25/5 rule’ in practice. If this applies, foreign corporations are subject to the national corporation tax (but not local taxes) at the rate of 23.4% for the fiscal year beginning on or after April 1, 2016 and 23.2% for the fiscal years beginning on or after April 1, 2018, and non-resident individuals are subject to income tax at the flat rate of 15.315%. No Japanese taxation will apply to foreign corporations and non-resident individuals having no permanent establishment in Japan except for the ‘25/5 rule’ mentioned above.

g.Stamp and/or Capital duties.
Stamp duty is imposed on certain limited category of documents, such as sale and purchase agreement of real property and loan agreements, per one executed original copy. The rate differs depending upon the amount at stake as recorded on the document. The maximum rate of stamp duty applicable to loan agreements, for example, is 600,000 yen (where the principal of the loan exceeds 5 billion yen). Stamp duty is imposed only on an executed original; so facsimile or pdf copies are not dutiable.

Japan does not have capital duties; however, as a similar charge, registration and license tax is imposed on various kinds of commercial registration concerning companies. For example, if a Japanese corporation files for a commercial registration of increase of its stated capital, registration and license tax is imposed at the rate of 0.7% of the increased amount of the stated capital. In addition, as part of local enterprise tax mentioned above (which is essentially income taxation), corporations having stated capital of more than 100 million yen are subject to business scale-based taxation regime, where the amount of stated capital and capital reserves for tax purposes is one of the tax bases (in Tokyo, 0.525% of that amount will be taxed as local enterprise tax).

Hong Kong Small Flag Hong Kong

Hong Kong’s tax system is schedular and territorial where income can be subject only to profits tax, salaries tax or property tax and only to the extent that such profits arise in or are derived from Hong Kong.

a. Taxation of business profits
Business profits arising in or derived from Hong Kong are subject to tax pursuant to Profits Tax at a basic rate 16.5%. Whether or not profits arise in or derive from Hong Kong can be quite controversial and has been the topic of many reported cases.

b. Taxation of employment income and pensions
Employment remuneration (including pensions) is taxed pursuant to Salaries Tax at the lower of (i) 15% of net chargeable income or (ii) a graduated rate schedule ranging from 2% to 17% of the net chargeable income.

c. VAT (or other indirect tax)
There is no VAT or other indirect tax in Hong Kong. There are echoes from time to time of introducing some form of VAT but there are currently no plans to do so.

d.Taxation of savings income and royalties
Bank interest is usually exempt from tax while royalty arising in or derived from Hong Kong may be taxable when received in the form of business income subject to tax pursuant to Profits Tax. Of note is that payments made to a non-resident for the use of right to use in Hong Kong various forms of intellectual properties can be subject to withholding tax, the only instance of withholding tax in Hong Kong.

e. Taxation of income from land
Income from real property can be subject to Property Tax at a rate of 15% or 16.5% depending on the taxpayer (the lower rate applies to individuals).

f. Taxation of capital gains
Hong Kong does not tax capital gains.

g. Stamp and/or Capital duties:
Stamp duties apply at various rates on real property as well as on Hong Kong shares. Stamp duty on real property has been a focus of attention in recent years with significantly higher stamp duty applying to what are perceived to be speculative transactions (such as purchases by non residents or purchases of flats for purposes other than self residence). The measures have so far had little effect on price increases of properties in Hong Kong. There is no capital duty in Hong Kong.

United States Small Flag United States

a. Taxation of business profits

Corporations are taxed at a graduated rates. The corporate tax brackets are indexed to inflation. The following rates are for the 2016 tax year.

  • Income up to $50,000 - 15%
  • $50,000 to $75,000 - 25%
  • $75,000 to $10M - 34%
  • $10M and above - 35%

Although corporations are taxed at a graduated rates, the first two brackets are gradually phased out. The first bracket phases out by a tax of 5 percent on income between $100,000 and $335,000. The second bracket phases out by a tax of 3% on income between $15,000,000 and $18,333,333.

b. Taxation of employment income and pensions

There are four filing statuses and seven brackets for individual federal income tax. The rates are graduated and the brackets are indexed to inflation. The following table is for the 2016 tax year.

Tax Rate Single Married filing Jointly Married Filing Separately Head of Household
10% $0 -$9,275 $0-$18,550 $0 -$9,275 $0-$13,50
15% $9,275 to $37,650 $18,551—$75,300

$9,276—$37,650

$13,251—$50,400
25% $37,651—$91,150 $75,301—$151,900

$37,651—$75,950

$50,401—$130,150
28% $91,151—$190,150

$151,901—$231,450

$75,951—$115,725 $130,151—$210,800
33% $190,151—$ 413,350

$231,451—$413,350

$115,726—$206,675 $210,801—$413,350
35% $413,351—$415,050

$413,351—$466,950

$206,676—$233,475 $413,351—$441,000
39.6% $415,051 or more $466,951 or more $233,476 or more $441,001 or more

Individuals are also subject to employment taxes, at the rates below.

  • Social Security– 6.2% paid by both the employer and employee up to a cap of $127,200 for 2017. Self employed individuals are responsible for the total 12.4%.
  • Medicare - 1.45% paid by both the employer and employee. An additional 0.9% Medicare tax is imposed on wages in excess of $200,000 ($250,000 if married filing jointly). Self employed individuals are responsible for the total 2.9%.
  • Federal Unemployment Tax – only paid by the employer at a rate of 6% up to $7,000 paid to each employee.

In addition, a net investment tax of 3.8 percent applies to the lesser of income from interest, dividends, certain capital gains, rental and royalty income and non qualified annuities, and the amount a person’s modified adjusted gross income exceeds $200,00 ($250,000 if married filing jointly).

Most states impose a state income tax in addition to the federal tax above.

c. VAT (or other indirect tax)

There is no VAT tax in the U.S. A sales tax applies in most states.

d. Taxation of savings income and royalties

Interest, royalties, and ordinary dividends are taxed as ordinary income. Qualified dividends are taxed at the same rate as capital gains. See 10f.

In addition the net investment tax described in 10a may apply.

e. Taxation of income from land

Income from land is taxed either as a capital gain or ordinary income depending on why the land was held. For example, gain from the sale of land that was held primarily for sale to customers in a trade or business will be ordinary income.

The disposition of a U.S. real property interest by a foreign person is generally subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) . FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests as income effectively connected to a U.S. trade or business and taxed under the ordinary tax rates in 10a.

f. Taxation of capital gains

For individual taxpayers, the capital gains rate varies based on which tax bracket the taxpayer is in (See 10b): 0% on income in the 10% or 15% bracket; 15% on income in the 25%, 28%, 33%, or 35% brackets; and 20% on income in the 39.6% bracket.

Special rates apply for specific categories of capital gains. For example, gain from the sale of collectibles is taxed at a 28% rate, and part of the gain from the sale of certain real property (generally, the gain that is due to depreciation) is taxed at a 25% rate.

A corporation’s capital gains are taxed at the same rates as ordinary income. See 10.A.
Capital losses can only offset capital gains and may be carried back three years and forward five years to offset capital gains.

g. Stamp and/or Capital duties.

None.

Spain Small Flag Spain

Yes, it does. The rates are as follows:

a. Corporate Income Tax is levied at the standard rate of 25%. Credit entities are subject to an increased rate of 30%.

b. Employment income is taxable under Personal Income Tax at the rates derived from a sliding scale. The applicable rates vary among the different Spanish regions. In general terms, between 19% and 45%.

c. The general VAT rate is 21%. There is also a reduced rate of 10% for certain goods.

d. Savings income (interest, dividends and capital gains from moveable assets) and royalties are taxable at privileged rates under Personal Income Tax. The applicable flat rate is 19% on the first €6,000, 21% for taxable income between €6,001 and €50,000, and 23% for taxable income exceeding €50,000.

e. There is not a separate tax for income on land. Any income derived from such source would be taxable under Personal Income Tax or Corporate Income Tax, as applicable.

f. Capital gains obtained by individuals are taxable under the same principles as savings income at the above rates. In the case of companies, they will be taxed as any other ordinary profit unless an exemption applies (e.g. in the case of certain qualifying participations).

g. This is a tax transferred to the Autonomous Communities (regions) and each one has the right to establish its own rates. As a general principle, Stamp Duty is payable on any transaction documented in a Notary deed having access to a Spanish Public Registry, the rates ranging between 1% and 2.5%. Capital duty is no longer applicable to the incorporation of companies or their capital increase (either monetary or non monetary) but certain exceptions apply in the event of share capital reductions or liquidation of a company.

Austria Small Flag Austria

Taxation of corporations
Austrian resident corporations are subject to corporate income tax at a flat rate of 25% on worldwide income. A corporation is resident if it is incorporated in Austria or managed and controlled in Austria.

Taxation of personal income and pensions
Personal income tax generally is taxed at a progressive tax rate between 25% and 55%. Tax on employment income and pensions is withheld by the employer or the pension payer. Certain types of investment income are not included in the computation of the taxpayer's income but are subject to a special withholding tax of 25% or 27.5%. Other income is self-assessed and has to be reported in annual tax returns.

VAT (or other indirect tax)
VAT is levied on the sale of goods and the provision of services. The standard rate is 20%. A lower rate of 13% (introduced as from 1 January 2016) applies to – among others – accommodations (as from 1 May 2016) and cultural services (as from 1 May 2016); a 10% rate generally applies to foodstuffs, pharmaceuticals, agricultural products, rent for residential purposes and entertainment. Banking transactions are exempt, and a VAT exemption applies to exports.

Taxation of savings income and royalties
For personal savings income see taxation of personal income. Royalties are subject ot a 20% withholding tax, but the rate may be reduced under a tax treaty or the EU interest and royalties directive.

Taxation of income from land
Personal income from land has to be included in the annual tax return and is taxed at the progressive tax rate. Income from land derived by corporations is subject to corporate income tax.

Taxation of capital gains
Capital gains generally are taxed at the same rate as ordinary income for corporations. For individuals capital gains from investment assets are taxed at s special rate of 27.5% and capital gains derived from the disposal of real estate are taxed at a special rate of 30%. Various exemptions apply.

Stamp and/or Capital duties
Stamp duties are levied at a rate ranging from 0.8% to 2% on special transactions (important are the assignment of receivables, and rent and lease contracts) if the transactions are evidenced in a stamp duty relevant deed in Austria. Loan/credit contracts are not subject to stamp duty (nor are securities for such loans). The capital duty was abolished recently.

Germany Small Flag Germany

a. Taxation of business profits
Business profits derived by a corporation are subject to corporate income tax at a rate of 15% plus solidarity surcharge of 5.5% on the corporate income tax owed. In addition, trade tax is levied on business profits of a corporation. The trade tax rate depends on the municipality in which the business is located and is typically between 7% and 17.5%.

Business profits derived by individuals are subject to personal income tax at a progressive rate going up to a maximum rate of 45% plus solidarity surcharge of 5.5% on the income tax owed and church tax, if applicable, of up to 9% on the income tax owed. Trade tax only applies, if the taxpayer maintains a permanent establishment in Germany through which the trade or business is carried on in Germany. For individual taxpayers (a part of) the trade tax can be credited against the personal income tax liability.

b. Taxation of employment income and pensions
Employment income is taxed at progressive rates going up to 45% plus solidarity surcharge of 5.5% on the income tax owed and church tax, if applicable, of up to 9% on the income tax owed. Pension income is subject to the same rates but may benefit from a partial tax exemption. Income tax on employment income is levied through employer wage tax withholding.

c. VAT (or other indirect tax)
Supplies of goods and services are generally subject to VAT. The standard German VAT rate is 19%. For some goods and services, reduced rates of 7% or exemptions may apply.

d. Taxation of savings income and royalties
Income from capital investments, such as interest income, earned by private individuals is taxed at a flat rate of 25% plus solidarity surcharge of 5.5% on the income tax owed and church tax, if applicable, of up to 9% on the income tax owed. If favourable, the taxpayer may opt for applying the individual rate also to income from capital investments. The flat tax on the capital investment income is typically collected by way of withholding at source.

Income from leasing and letting, including royalty income from licensing out rights, earned by private individuals is taxed at the progressive individual tax rate going up to 45% plus solidarity surcharge of 5.5% on the income tax owed and church tax, if applicable, of up to 9% on the income tax owed.

e. Taxation of income from land
Income from leasing and letting of immovable property earned by private individuals is taxed at the progressive individual tax rate going up to 45% plus solidarity surcharge of 5.5% on the income tax owed and church tax, if applicable, of up to 9% on the income tax owed.

f. Taxation of capital gains
Capital gains derived by private individuals from the sale of shares or other financial instruments generally qualify as income from capital investments and are taxed at a flat rate of 25% plus solidarity surcharge and, if applicable, church tax. If the individual holds or has held at any time within the last five years 1% or more in the share capital of the corporation the shares of which are sold or has held the shares disposed of as business assets, 60% of the capital gain is generally subject to personal income tax at the progressive rate going up to 45%. Capital gains derived by private individuals from the disposal of immovable property are generally only taxable if the time period between acquisition of the property and its disposal is not longer than 10 years.

Capital gains derived by corporations qualify as business income taxed at ordinary corporate income tax and trade tax rates. Capital gains from the disposal of shares by corporate shareholders are, however, generally exempt under the German participation exemption. 5% of such capital gain are, however, treated as non-deductible business expenses, effectively reducing the participation exemption to a 95% exemption. Exceptions from the participation exemption apply in certain situations for banks, other financial institutions, insurance companies and pension funds as shareholders. Capital losses from the disposal of shares by a corporate shareholder are, in general, non-deductible.

g. Stamp and/or Capital duties.
Currently, Germany does not levy stamp or capital duties.

Belgium Small Flag Belgium

Belgium broadly follows the recognised OECD Model.

Income derived by a corporation is taxable as business income for the whole (see infra). Consequently, the following distinction made between different categories of income is irrelevant for corporate taxpayers.

On the contrary, personal income tax (hereafter ‘PIT’) is levied on four different income categories: (i) income from real estate; (ii) income from movable property (including dividends, interest and royalties); (iii) income from professional activities (including business profits, proceeds from a liberal profession, employment income and pension income); and (iv) miscellaneous income. The total taxable income equals the total income from all four categories. Yet, particular rules apply to each category and its components both for the computation of taxable income and for the calculation of the tax itself.

a. Taxation of business profits
Business profits derived by a corporation are subject to corporate income tax at a flat rate of 33.99% (i.e. 33% with an additional ‘crisis’ surcharge of 3%). Progressive rates can be applied when the taxable profit does not exceed 322,500.00 EUR and provided some conditions are met.

Business profits and proceeds from a liberal profession derived by individuals are subject to PIT at progressive rates. The top marginal rate of 50% starts at 38.080,00 EUR (assessment year 2017). In such a case, the PIT is also subject to advance payments.

b. Taxation of employment income and pensions
Employment income is taxed at the ordinary progressive rates. Income from employment is broadly defined as “all remuneration resulting from the employee’s activities in the service of the employer”. Therefore, it includes the total amount of the employee’s remuneration earned “by reason or at the occasion of” his or her employment, regardless of the debtor, the nature of the remuneration or the way in which this remuneration is determined and paid. Consequently, salary payments as well as benefits-in-kind, tips, termination payments, etc. are, in principle, subject to the same taxation regime. As a general rule, PIT on employment income is levied through employer wage tax withholding.

In principle, pension income, annuities and other related income are also taxable as (deferred) employment income and are therefore subject to the same rates. However, pension income may be taxed at a favourable tax rate provided some conditions are met. In general, either the employer is granted a tax benefit relating to the contributions, either the payment at the end of the contract is tax free or taxed at a favourable tax rate in the hands of the beneficiary.

Any income derived from immovable or movable property that is used for the professional activity of the beneficiary of the income qualifies as professional income (and no longer as income from movable or immovable property).

c. VAT (or other indirect tax)
Supply of goods and services are generally subject to VAT. The standard Belgian VAT rate is 21%. For some goods and services, reduced rates of 12%, 6% or exemptions may apply.

d. Taxation of savings income and royalties
Savings income and royalties from assets not used by the taxpayer for the exercise of his or her professional activity usually falls within the category of income from movable property.

As a general rule, income from movable property is subject to withholding tax if sourced in Belgium. The withholding tax is final for private individuals, meaning that the income is no longer to be declared by the taxpayer in his/her tax return. If no withholding tax is levied, then a tax equal to the withholding tax will be levied following the assessment. Expenses related to such income and financing costs are normally not deductible. Income from movable property is subject to a 30% flat tax rate from January 1st, 2017.

Although there is no specific regime for royalties (contrary to the patent box available for the corporate income tax or ‘CIT’, see infra), a favourable regime applies to copyright. Copyright payments, whether or not from a professional activity, are subject to the withholding tax on movable property. However, copyright from a professional activity is taxed as income from movable property at the rate of 30% for the first 57,270.00 EUR group. The part of gross copyright exceeding 57,270 EUR is taxable as professional income at the ordinary progressive rates. A special lump-sum cost deduction applies to copyright that is fairly favourable. All income from copyright must be declared in the personal income tax return, even when withholding tax has been levied.

e. Taxation of income from land
The tax regime of income derived by a private person from immovable property that is not used for the purpose of his/her professional activity mainly depends on the use that is made from the immovable property.

In the case where the property is not rented out (even when the property does not produce any income at all), or in case the property is rented out to an individual not using it for his or her business (i.e. the rent is not deducted as a business expense), the taxable net income is based on a notional income, called the “cadastral income”. The cadastral income is the deemed ‘normal’ annual net income valued in accordance with the rental value at January 1st, 1975, of a property (and its immovable equipment). The cadastral income is determined in the first instance by the Land Registry Department and is indexed annually. It is not uncommon that the cadastral income is lower than the actual rental income resulting in a favourable treatment of income from immovable property.

On the opposite side, immovable property rented out to a party using it for business purposes is normally taxable on the actual rental income (subject to adjustment).

Sums received for the granting or assignment of long leases or a right to build are also treated as income from immovable property. If payments relate to a lease contract and the property will pass at the end of the contract, then capital repayments are tax-exempt.

The expenses relating to immovable property are computed on a flat basis depending on whether the property is built upon or not (i.e. a deduction of 40% or 10%, respectively). From this adjusted gross income, interest on loans specifically contracted for acquiring or maintaining the immovable property, may be deducted. A loss resulting from this deduction may not be set off against other income and may not be ‘carried forward’ or ‘back’.

Income from immovable property located abroad is normally determined according to similar rules. Such income will likely be exempted in the event of an applicable Tax treaty but will have to be declared in Belgium to determine the progressive rate applying to the income taxable in Belgium.

Capital gains from built real property and from land may be taxed as miscellaneous income provided certain conditions are met (Art. 90(1)8° and 10° of the ITC and see infra, capital gains).

f. Taxation of capital gains
The taxation of capital gains may be broadly addressed depending on two factors: who realised the capital gain and on which asset is the capital gain realised?

A. Private persons
Capital gains realised by a private person outside the scope of his/her professional activity qualify as miscellaneous income and are taxed at a flat rate of 33%. However, gains resulting from the normal management of one’s private estate consisting of real estate, a portfolio, shares, or movable property are not taxable. Advanced rulings may be sought to obtain confirmation whether a transaction qualifies as “normal management of one’s private estate”. Regarding real estate, capital gains derived by private individuals from the disposal of immovable property (except their own private dwelling) are generally only taxable if the time period between the acquisition of the property and its disposal is no longer than 8 years for the disposal of land and 5 years for buildings. If taxable, then such gains are normally subject to a flat rate of 16.5%.

B. Corporations
Capital gains are regarded as ordinary business income and taxed accordingly; capital losses may be set-off against ordinary business income. In principle, tax is only levied on realised capital gains but may, in certain situations, also be levied on unrealised gains.

Taxable gains and losses are computed as the sales price of the asset less the acquisition or manufacturing cost, which may be reduced by earlier underlying capital losses and depreciation(s). The tax treatment is in line with the general accounting principles.

However significant exceptions exist, two of them are discussed below: the deferral payment on capital gains realised on fixed assets and capital gains on shares.

1) Tax deferral for capital gains on fixed assets
Under certain conditions, deferred taxation (‘roll-over relief’) is available for: involuntarily realised capital gains from damages, expropriation or similar events relating to tangible or intangible fixed assets; and non-exempt capital gains realised on the transfer of tangible or intangible fixed assets that are held within a company for more than 5 years prior to the transfer if the proceeds of the realisation are invested in depreciable assets.

The reinvestment must: (i) take place within 3 years of the realisation of the capital gains, and (ii) be made for depreciable, tangible or intangible, fixed assets (iii) that are located in EEA countries.

After reinvestment, deferred capital gains are taxed in proportion to the depreciation costs incurred on the reinvested assets.

This deferred taxation applies only to the extent that the gains are (and remain) included in one or more separate accounts on the liabilities’ side of the balance sheet, and that they are not used for the calculation of the annual contribution to the legal reserve, nor for any kind of reward or bonus. If those conditions are no longer fulfilled during a taxable period, then the capital gains are considered as profits in that taxable period.

2) Capital gains on shares
Capital gains on shares and participations are exempt from corporate income tax (i) if the company, whose shares on which the capital gains are realised, complies with the taxation requirement applying to the participation exemption (i.e. that the underlying company is subject to corporate tax or a similar tax abroad, see infra) and (ii) if the shares and participations have been held in full ownership for an uninterrupted period of at least 12 months. There is no participation threshold to be fulfilled.

Capital gains on shares fulfilling the taxation requirement but not the minimum holding requirement are taxable at 25.75%. The normal rate (33.99%) continues to apply for the taxation of capital gains on shares that are already taxable to the extent that their income does not allow a deduction for participation exemption.

A separate tax of 0.412% has been introduced on capital gains on shares held for longer than one year and realised by companies that do not qualify as an SME (see infra, point 15). This non-deductible separate tax cannot be set-off by tax deductions or losses.

g. Stamp and/or Capital duties
There is no capital duty or similar duty on the formation and expansion of capital of companies.

Italy Small Flag Italy

  1. Taxation of business profits
    Business profits derived by a corporation are subject to corporate income tax at a rate of 24% (banks and financial institutions are also subject to a surcharge at 3.5%) and to regional tax on productive activities, normally levied at 3.9% (subject to variations depending on the region in which the business is located and on the nature of the activity performed, e.g. insurance and banking business are subject to a higher tax rate).

    Business profits derived by individuals are subject to personal income tax at a progressive rate going up to a maximum rate of 43% (plus regional and municipal surcharges for an overall rate ranging approx. between 2% and 4%, depending on the region and municipality of residence), plus regional tax on productive activities.

  2. Taxation of employment income and pensions
    Employment and pension income is taxed at progressive rates going up to 43% (plus regional and municipal surcharges for an overall rate ranging approx. between 2% and 4%, depending on the region and municipality of residence). Tax deduction are (within certain limits) available for both employment and pension income in different amounts. Income tax is in both cases levied through withholding tax applied by respectively the employer or the pension entity.
  3. VAT (or other indirect tax)
    Supplies of goods and services are generally subject to VAT. The standard Italian VAT rate is 22%. Reduced rates of 10% or 4% apply to specific goods and services.
  4. Taxation of savings income and royalties
    Income from capital investments having a financial nature, such as interest income, earned by private individuals is normally taxed at a flat rate of 26% which is typically collected by way of withholding at source. However, (direct/indirect) investment in government bonds and similar securities is subject to a reduced rate of 12.5%.
    Interest paid by an Italian withholding agent to not resident recipient is subject to withholding tax at the basic rate of 26%, which can however be reduced/zeroed by either domestic taxation, the applicable Tax Treaty or the Directive 2003/49/EC of 3 June 2003 provided that the conditions set out by the relevant legislations are met.
    Royalties paid to a non-resident by an Italian withholding agent are subject to withholding tax at 30% on 75% of the royalties paid out (triggering a final withholding tax at 22.5%). Such domestic rate may be reduced/zeroed under the applicable Tax Treaty or under the Directive 2003/49/EC of 3 June 2003.
  5. Taxation of income from land
    Real estate properties located in Italy are subject to a property tax (IMU) levied at the basic rate of 0.76% which can be increased by the relevant Municipality where the property is located. Such tax is not due on the primary abode of the owner. The ownership of real estate property also triggers the duty to pay a service tax (TASI) and a waste tax (TARI).

    If the real estate property is held by a private individual and is not leased no further income tax is due on the same. Conversely, if the property is leased, progressive individual income taxes are due on the highest between: (i) the cadastral income of the property and (ii) 95% of the rentals referring to the relevant tax period (even if not actually collected, save for limited exceptions) - no deduction of specific expenses related to the property is granted, but a 5% flat reduction. However, individuals can opt for the payment of a fixed tax (normally at 21%) to be applied to rented real estate located in Italy (so-called cedolare secca).

    If the real estate property is held by a corporate entity, the relevant income forms part of the business income.

  6. Taxation of capital gains
    Capital gains derived by private individuals from the sale of shares are taxed as follows. If the shares sold or transferred:

    1. do not exceed (1) 2% of voting rights or 5% of share capital in the case of listed shares (so-called qualified shareholding) or (2) 20% of voting rights or 25% of share capital in case of other participations (so called non-qualified shareholding), capital gains are taxed at a flat rate of 26%;
    2. are qualified shareholding as they exceed the above mentioned thresholds, individual income tax progressive rates apply on 49.72% of realised gain.
      Capital gains derived by private individuals from the sale of real estate is taxed at progressive tax rates. However, no capital gain tax applied if the real estate were owned for more than five years at the date of sale or, even if the sale occurs before the elapsing of the 5-year term, if it has been used as primary abode of the seller for most of the period of ownership.

    Capital gain arising from the sale of a shareholding by a corporate taxpayer is exempt from corporate tax limitedly to 95% of the capital gain realised (so-called "participation exemption" regime), whilst the remaining 5% is subject to the ordinary corporate income tax rate of 24% (which therefore triggers an actual tax burden on the full capital gain equal to 1.2%), provided that the relevant requirements are. If they are not met, capital gains arising in favour of an Italian company or branch resulting from the sale of its shareholding (whether in an Italian or foreign company) will be included in its taxable income and be subject to normal income tax.

    Capital losses relating to shareholdings which would have qualified for the capital gain exemption, as well as expenses directly linked to them, are not deductible for corporate tax purposes. Conversely, capital losses from the sale of shares which do not meet the requirements of the "participation exemption" regime are deductible, subject to certain limits such as capital losses not being tax-deductible up to the amount of the tax-exempt dividends (or advanced dividends) received in the 36 months preceding the sale and realisation of the capital loss.

  7. Stamp and/or Capital duties.
    As a general principle, Italian registration tax applies at rates ranging between €200 and 9% on the economic content of any deed/agreement formed and executed in Italy (in the form of a notarial deed or of a private deed), unless the deed/agreement falls entirely within the scope of VAT or certain other exceptions apply. Registration tax is also due on capital contributions in Italian companies at the same rates, depending on the nature of the asset contributed.

Malaysia Small Flag Malaysia

Unlike its double taxation agreements, the Malaysian domestic tax system is not modelled after the OECD Model. However, most of the aspects contained in the OECD Model are covered under the Malaysian domestic law. Current tax rates have both flat and graduated elements.

a. Taxation of business profits
Flat rate of 24%.

b. Taxation of employment income and pensions
Progressive rate ranging from 0% to 28%.

c. VAT (or other indirect tax)
6%.

d.Taxation of royalties
Flat rate of 24%.

e. Taxation of income from land
Flat rate of 24%.

f.Taxation of capital gains
There is no capital gains tax in Malaysia except for real property gains tax which ranges from 0% to 30%.

g.Stamp
Flat duty of RM10 or ad valorem rate depending on the instrument.

Ireland Small Flag Ireland

The Irish tax system generally follows the OECD Model which is based around a full taxation of income and gains providing for deductions only in the cases of actual payments in most cases.

(a) Ireland has two rates for taxing business profits; trading profits are taxed at 12.5% and passive income is taxed at 25%. Capital gains of companies are taxed at 33%. Surcharges can arise for closely held companies (companies held by five or fewer connected parties) on passive income that is not distributed to the shareholders.

(b) Tax rates can depend on an individual’s income and personal status. Ireland has two headline rates of income tax - 20% and 40%. The higher rate applies to income over €33,800. In addition to this, universal social charge is payable at rates of between 0.5% and 8% (rising to 11% for self –employed individuals with income over €100,000 in a year) as well as pay related social insurance which is at 4% for a majority of workers. In addition, employers pay employer PRSI at the rate of 10.75%.

(c) Ireland’s standard rate of VAT is 23%. Ireland also operates reduced rates of VAT at 13.5% and 9% for certain supplies.

(d) Deposit income retention tax (known as DIRT) applies at the rate of 41% to interest on deposits. DIRT is deducted at source by the deposit taker.

(e) For individuals, income for Irish land is taxed at the income tax rates outlined in paragraph (b) above. For companies, tax is levied at 25% on rental income.

(f) The current rate of capital gains tax is 33%.

(g) No capital duty is payable by Irish incorporated or established companies. Stamp duty arises at 1% on transfers of shares in Irish companies. Stamp duty on transfers of property arises at 2%, other than in respect of transfers of residential property where the first €1m is taxed at 1%.

France Small Flag France

The French tax system does follow the recognized OECD Model and provides for the taxation of the following:

a. Taxation of business profits
The standard rate of corporate income tax (“CIT”) is 33.1/3%.

Additional contributions may also be due: a 3.3% social contribution based on the income tax in excess of EUR 763,000 and a 3% additional social contribution. The effective corporate income tax rate is 34.43%.

SMEs are entitled to a 15% reduced rate up to EUR 38,120 taxable profits.

The Finance Bill for 2017 provides for a progressive decrease of the standard corporate tax rate: from 33.1/3% to 28% in 2020 (the 3.3% social contribution will remain applicable so the effective tax rate will be decreased from 34.43% to 28.924%).

This progressive decrease will first apply to SMEs which will benefit from a progressive CIT rate on their 2017 taxable profits:(i) 15% up to EUR 38,120 (ii); 28% between EUR 38,120 and EUR 75,000 and (iii) 33.1/3% over EUR 75,000.

For fiscal years starting as of January 1st, 2018, all French companies will benefit from a 28% CIT rate on their 2018 taxable profits up to EUR 500,000 (the standard 33.1/3% CIT rate will remain applicable to taxable profits in excess of EUR 500,000).

For fiscal years starting as of January 1st, 2019, the 28% CIT rate will fully apply to all French companies which annual turnover does not exceed EUR 1 billion (this limit will be determined on a consolidated basis for tax consolidated groups).

For fiscal years starting as of January 1st, 2020, the 28% CIT rate will become the standard rate as it will apply to all French companies without distinction.

b. Taxation of employment income and pensions
French residents are taxed on a worldwide basis. Gross income from employment and pensions is subject to two specific social contributions: the generalized social contribution (CSG - “contribution sociale généralisée”) applied at a 7.5% rate and the social security debt contribution (CRDS - “contribution au remboursement de la dette sociale”) applied at a 0.5% rate.

Regarding income tax, employment income and pensions are taxed on a net basis according to a progressive schedule:

  • 14% from EUR 9,710 up to EUR 26,818 ;
  • 30% from EUR 26,819 up to EUR 71,898;
  • 41% from EUR 71,898 up to EUR 152,260; and
  • 45% over EUR 152,260.

Individuals earning more than EUR 250,000 are liable to an additional progressive contribution (“contribution sur les hauts revenus”):

  • 3% from EUR 250,000 up to EUR 500,000 ; and
  • 4% over EUR 500,000.

c. VAT (or other indirect tax)
The standard VAT rate is 20%. However, the FTC provides for two reduced rates applied to specifically listed goods and services:

  • a 10% rate applied to, for instance, agricultural products, medicine and take-away food;
  • a 5.5% rate applied to, for instance, essential food items, gas, electricity and energy-saving equipment and materials.

Some transactions may also be zero rated or VAT exempted, such as exports.

d. Taxation of savings income and royalties
Regarding companies, savings or investment income and royalties are in principle taxed at the standard 33.1/3% CIT rate. However, royalties from the license of patents or patentable inventions may be taxed at a 15% reduced rate (French IP box regime).
Regarding individuals, investment income and royalties are taxed according to the above-mentioned progressive schedule. Investment income is subject to a compulsory 24% withholding tax as an advance payment of income tax assessed under the progressive system (tax withheld in excess comes as a reduction of final income tax). Social contributions are to be added at a global 15.5% rate.

e. Taxation of income from land
Property is subject to taxation according to the income tax progressive schedule as far as individuals are concerned, and at the standard CIT rate as for companies.

f. Taxation of capital gains
Regarding companies, capital gains are in principle taxed at the standard CIT rate plus the additional contributions. However, gains derived from the sale of shares may be considered as long-term capital gains, and therefore partially CIT exempted, if the company has owned at least 5% of the shares for at least 2 years. If so, only 12% of the gross capital gain is taxed at the standard CIT rate, resulting in a 4% effective tax rate.
Yet, please note that long-term capital gains on the sale of shares in real estate companies are taxed at the standard CIT rate plus the additional contributions.

Regarding individuals, capital gains are taxed according to the income tax progressive schedule. Social contributions are to be added at a global 15.5% rate. However, rebates apply to capital gains on shares and on immovable properties depending on the time elapsed since the assets were acquired:

  • For shares 50 % rebate after 2 years of holding and of 60 % after 8 years;
  • For immovable property, a rebate applies after 5 years of holding which leads to an exemption after 22 years for income tax and 30 years for social contributions.

g. Stamp and/or Capital duties.
Some goods and deeds are subject to stamp duties.

  • The sale of a business (“fonds de commerce”)- tangible and intangible assets included - is taxed according to progressive rates applied on the price paid:

    • 3% from EUR 23,000 up to EUR 200,000; and
    • 5% over EUR 200,000.
  • With respect to the acquisition of real properties, it also triggers the payment of stamp duty where the construction has been completed for more than 5 years at the time of the acquisition. Stamp duty is assessed on the purchase price agreed upon by the parties, increased by any charge or liability of the seller transferred to or assumed by the buyer at the global rate of 5.80%. An additional tax of 0.6% applies in case of acquisition of commercial premises located in the Parisian area.

    By exception, a reduced rate of 0.715% applies to (i) acquisition of building lots (terrains à bâtir), (ii) acquisitions of new buildings (i.e., completed or renovated within the last five years), (iii) acquisitions of new buildings purchased as part of an off-plan sale arrangement (vente en l'état futur d'achèvement - VEFA). In addition, the reduced rate also applies to acquisitions of property by a buyer liable to VAT who undertakes to re-sell the property within five years of the date of acquisition.

    Finally, a fixed duty of €125 is payable for the acquisition of a property by a buyer liable to VAT where it undertakes to carry out work on the property in order for it to qualify as a new building or work required to complete an incomplete building within four years of the date of acquisition.

    In any case, a real estate contribution (“contribution de sécurité immobilière”) at a 0.10% rate and notary fees at a 0.814% rate will apply to the transaction.

  • Duties related to a transfer of a non-quoted company shares (société anonyme, société en commandite par actions or société par actions simplifiée) are subject to a single 0.1% rate.
  • The transfer of shares of a company in which the capital is not divided into shares of stock (sociétés à responsabilité limitée, société civile, société en nom collectif) is subject to a 3% registration duty.
  • The sale of shares in a real estate company –i.e. a company the assets of which are mostly immovable property or immovable property rights (50% or more) – gives rise to a 5% registration duty.

Australia Small Flag Australia

The various tax treaties that Australia negotiates broadly follow the principles described in the OECD Model.

a. Taxation of business profits

The corporate tax rate in Australia is at a flat rate of 30%

b. Taxation of employment income and pensions

Taxation of employment income is administered by a withholding regime known as 'Pay-as-you-go' (PAYG). PAYG imposes an obligation on an employer to withhold and remit to the ATO, a portion of the salary and wages paid to employees at the each employee's marginal (personal) tax rate.

For the 2016/17 financial year, the marginal tax rates are:

Income Marginal Tax Rate
$0-$18,200 0%
$18,201-$37,000 19%
$37,201-87,000 32.5%
$87,001-$180,000 37%
above $180,000 47%

Please note that most taxpayers will be liable for a Medicare levy of 2% that is not reflected in the tax rates described above.

The taxation of pension income will depend on the nature of the pension. Generally, pension payments (including superannuation annuities) enjoy concessional tax treatment.

c. VAT (or other indirect tax):

GST (a broad based consumption tax) is levied at a flat rate of 10%.

d. Taxation of savings income and royalties:

Both royalties and interest form parts of a taxpayer's ordinary and statutory income and will be taxed at the relevant income tax rate (corporate or personal).

Interest and royalties (and dividends) are taxable to non-residents where those income streams have an Australian source. To ensure the collection of those taxes, Australia utilises withholding taxes that will apply to those types of payments unless an exemption applies (eg an exemption under an international tax treaty).

The rates of withholding tax as at the date of publication are:

  • interest - 10%;
  • royalties - 30%;
  • unfranked dividends - 30%

These rates may also be reduced for particular countries under the operation of an applicable tax treaty.

e. Taxation of income from land

Income from land normally comprises rent or operational proceeds or a capital gain on disposal. Both the income (rent/operational proceeds) and capital gains will be taxed at the relevant income tax rate applicable to the taxpayer. However, timing differences do exist with capital gains only becoming taxable, generally, on realisation of the capital asset (see below).

f. Taxation of capital gains

Capital gains form part of a taxpayer's statutory income and will be taxed at the same rate as income as it is ordinarily understood. The principle difference is that capital gains tax is not assessable as it accrues but rather only on the happening of a 'CGT event'. As a general guide, a CGT event occurs upon the realisation of the capital asset.

Resident individuals, trusts and certain superannuation entities and life insurance companies are eligible for a CGT discount in respect of assets that were acquired at least 12 months prior to the CGT event. Individuals and trusts are entitled to a 50% discount on the gain made. The discount for available to the relevant superannuation entities and life insurance companies is 331/3%. Companies are not entitled to any discount.

g. Stamp and/or Capital duties.

Stamp duty is imposed separately by each Australian State and Territory on certain transactions over certain types of property with sufficient territorial nexus to that State or Territory. Stamp duty is calculated by applying the relevant rate to the greater of the consideration paid for and the unencumbered value of the property. The rate of stamp duty varies between jurisdictions and generally is no more than 5.75%, although higher rates may apply to some specific transactions, including transactions involving non-residents..

Australia does not impose any capital duties.

Switzerland Small Flag Switzerland

The various tax treaties that Switzerland negotiates broadly follow the principles described in the OECD Model.

a. Taxation of business profits
In Switzerland, operating income consolidated tax rates (i.e. including Federal Direct Tax, Cantonal and Communal income tax) vary from a canton to another:

  • Ticino: 20.67%
  • Zurich: 21.15%
  • Zug: 14.60%
  • Vaud: 22.09%
  • Geneva: 24.16%

Operating income is taxed at rates varying between 24.17% (Geneva) and 14.6% (Zug).
The tax is levied on the basis of the net income, i.e. gross income minus all commercially justified expenses.

b. Taxation of employment income and pensions
Ordinary taxpayers are subject to Swiss income taxes on their worldwide income (except for income from real estate abroad and income from business enterprises undertaken directly by the taxpayer). The ordinary income tax rate applies to all types of income, such as employment income and pensions.

The top income tax rate varies significantly from canton to canton such as:

  • Ticino: 41.70%
  • Zurich: 41.90%
  • Zug: 23.70%
  • Vaud: 41.50%
  • Geneva: 46.00%

In addition, there are various filing status for individuals that permit to graduate the rates. Generally speaking, the level of tax deduction is quite the same in all cantons.

Employment income is subject to Swiss social security contributions levied at the rate of approximately 15% (where basically 50% of which is withheld from the person’s salary and the other 50% is borne by the employer), but please note that the rate of social contributions may vary from a canton to another.

c. VAT (or other indirect tax)
Proceeds of sales and services conducted in Switzerland are subject to VAT at the standard rate of 8%. Goods for basic needs are subject to VAT at the rate of 2.5%. These rates include a temporary increase that went into effect on 1 January 2011 and will remain applicable until 31 December 2017. On 1 January 2018, if no extension or change is enacted, the rates should decrease from 8% to 7.6%, and from 2.5% to 2.4%. Services in connection with the provision of lodging are subject to VAT at the rate of 3.8% (limited until 31 December 2017).

d. Taxation of savings income and royalties
Both savings income and royalties are taxed as ordinary income.

Interest and royalties (and dividends) are taxable to non-residents where those income streams have a Switzerland source. To ensure the collection of those taxes, Switzerland uses a withholding tax that will apply to those types of payments unless an exemption applies (eg an exemption under an international tax treaty).

The withholding tax is levied at a flat rate of 35%. This rate may also be reduced for particular countries under the operation of an applicable tax treaty.

e. Taxation of income from land
Income from land is taxed either as a capital gain on real estate or ordinary income. Capital gain on real estate depends on how long the asset is owned and also varies from a canton to another.

f. Taxation of capital gains
For an individual, the capital gain realized on the sale of controlling or non-controlling participation is exempt from all Swiss taxes provided that the seller qualifies as a “private investor” (as opposed to a professional securities dealer that is subject to ordinary corporate income tax on its profits (including capital gains). This applies in all cantons.

A corporation’s capital gains are taxed at the same rates as ordinary income if no exception applies (eg the so-called “participation reduction”).

g. Stamp and/or Capital duties.
In Switzerland, the federal tax administration levies stamp duties on certain transfers of certain taxable instruments, such as shares bond, notes and similar equity and debt securities, for valuable consideration, when a so-called “Swiss Securities dealer” participates in the transaction either as a party or as an intermediary/broker. Generally, the full transfer tax rate amounts to 0.15% of the consideration in the case of Swiss securities and 0.30% in the case of foreign securities.

A capital duty on the issuance and the increase of the equity of Swiss corporations is levied at the rate of 1% on the fair market value of the assets contributed, with an exemption on the first CHF 1 million of capital paid in, whether it is made in an initial or subsequent contribution. A multitude of transactions qualify for an issuance stamp tax exemption.

Updated: March 10, 2017