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 (2nd Edition)

Romania Small Flag Romania

Despite the fact that Romania is not an OECD member, our domestic legislation is in line with the OECD guidelines and recommendation. All the above mentioned areas of the taxation are covered. Worth mentioning is that the capital gains are not taxed in an unitary matter but are subject to business profits / personal taxation rules, depending on the taxpayer obtaining that capital gain.

Romania has a flat tax on 16% for business profits and personal income, except for dividends which are subject to 5% tax (if they are not exempted, subject to certain conditions). A special 1-3% tax on revenue is applicable for small incorporated businesses, having an annual turnover of less than EUR 500,000.

Australia Small Flag Australia

Australia has entered into an extensive network of tax treaties which broadly follow the OECD Model Convention.

Business profits
Companies are subject to a flat rate of tax of 30% on their taxable income (broadly, gross income less allowable deductions).

Employment income and pensions
Employment income is taxed in the hands of the employee as part of an individual’s taxable income at progressive marginal rates.

The current income tax rates for the 2017/18 income year applicable to Australian tax resident individuals are:

Taxable income

Tax on this income

$0 – $18,200

Nil

$18,201 – $37,000

19c for each $1 over $18,200

$37,001 – $87,000

$3,572 plus 32.5c for each $1 over $37,000

$87,001 – $180,000

$19,822 plus 37c for each $1 over $87,000

$180,001 and over

$54,232 plus 45c for each $1 over $180,000

In addition to the headline tax rates above, additional levies, such as the “Medicare levy” of 2% can also apply.

Subject to the operation of a double tax agreement, individuals who are not tax resident in Australia, are subject to the following rates of income tax for the 2017/18 income year:

Taxable income

Tax on this income

$0 – $87,000

32.5c for each $1

$87,001 – $180,000

$28,275 plus 37c for each $1 over $87,000

$180,001 and over

$62,685 plus 45c for each $1 over $180,000

The income tax treatment of retirement income will depend on the particular type of payment received. Government pensions and private / self-funded superannuation are generally afforded concessional income tax treatment.

Further, benefits paid or provided to employees or their associates in lieu of a portion of the employees’ salary or wages (e.g. the provision of a motor vehicle, entertainment, interest free loans, etc) attract fringe benefits tax (FBT) (subject to certain exemptions) at a rate of tax equivalent to the top individual marginal rate of tax plus the Medicare levy (i.e. currently 47%). FBT is imposed on employers rather than on the employees or associates who receive the benefits.

VAT (or other indirect tax)
Australia’s value added tax is known as the “Goods and Services Tax” and is imposed at a rate of 10% of the value of goods and services which are not characterised as input taxed (i.e. exempt) supplies or GST-free (i.e. zero-rated) supplies.

There are also other more specific indirect taxes which can apply at both the Commonwealth and State and Territory levels. These include, but are not limited to, excises and tariffs on specific goods and services such as alcohol, tobacco, luxury cars and fuel.

Savings income and royalties
Income derived from savings is included in the calculation of a person’s taxable income and subject to income tax accordingly.

Whilst not a tax on savings per se, from 1 July 2017 a new “Major Bank Levy” of 0.015% of prescribed liabilities per quarter applies to authorised deposit taking institutions which have total liabilities of more than AU$100 billion.

Royalty income received by an Australian tax resident will be included in the calculation of that person’s or entity’s assessable income and subject to tax accordingly.

Subject to the operation of a double taxation agreement (and any specific exemptions which may apply), interest, dividends and royalties with an Australian source received by a non-resident will be subject to income tax. However, such payments will generally be subject to a final withholding tax imposed at the following rates (again, subject to the operation of any applicable double taxation agreement):

  • Interest – 10%
  • Dividends – 30%
  • Royalties – 30%

Income from land
Income from the use of Australian land, such as rent, would ordinarily be included within the calculation of taxable income as assessable income and subject to income tax at the tax rates ordinarily applicable to the taxpayer.

Capital gains from the disposal of Australian land will also usually be included within the calculation of taxable income and subject to income tax. However, some taxpayers that have held the land in question for at least 12 months may be entitled to a discount which can potentially reduce the taxable gain by up to 50%. Further, there are exceptions to the taxation of capital gains, including for gains made on a taxpayer’s principal place of residence.

In certain circumstances, purchasers of a direct or indirect interest in Australian land from a non-resident may be required to withhold from the non-resident 12.5% of (broadly) the purchase price. This is not a final withholding tax for the vendor.

Capital gains
Capital gains or losses arise on the happening of “CGT events” to capital gains tax assets. There are numerous potential CGT events that might happen, including a sale or other disposal of an asset held on capital account. The net capital gain which a taxpayer derives in an income year is taken into account in the calculation of that taxpayer’s taxable income and taxed at the taxpayer’s applicable income tax rate.

A taxpayer’s net capital gain for an income year is, broadly, the sum of each of its capital gains less any capital losses for that income year less any available prior year capital losses. As noted in relation to capital gains arising from the disposal of land, some taxpayers may be entitled to have a capital gain included in the calculation of the taxpayer’s net capital gain discounted by as much as 50%.

Australia’s capital gains tax regime also includes a participation exemption for Australian tax resident companies. Under this exemption, an Australian tax resident company which holds a non-portfolio interest (broadly, an interest of 10% or more) in a foreign company which carries on an active business may be entitled to disregard (in part or in full) the capital gain it makes from disposing of its interests in that foreign company.

Non-resident taxpayers are generally exempt from income tax on capital gains unless the asset to which the capital gain relates is Taxable Australian Property (TAP). Broadly, TAP includes:

  • real property (including leases) in Australia;
  • mining, quarrying or prospecting rights in respect of resources situated in Australia;
  • an indirect Australian real property interest, which, very broadly, is a share (or other types of membership interest) the value of which is principally derived from Australian real property; and
  • assets used to carry on business at an Australian permanent establishment.

Stamp and/or capital duties
Stamp duties are imposed by each Australian State and Territory on transactions or property which exhibit the relevant nexus with that State or Territory. The types of transactions or property which are subject to duty vary between the jurisdictions and can include the transfer of intellectual property or business assets.

The rates of duty will vary as between jurisdictions and the type of transaction on which duty is being imposed.

France Small Flag France

The French tax system does follow the recognised 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. 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 Act 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%). The 2018 tax bill plans to reduce the rate to 25% in 2022.

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 1st January 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 1st January 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). The 2018 Finance Bill plans to apply the 28% rate for all French companies up to EUR 500,000 and a 31% rate to taxable profit over EUR 500,000.

The tax bill for 2018 provides for another reduction of the CIT rate:

  • for fiscal years starting from 2020, the 28% CIT rate will become the standard rate as it will apply to all French companies to their overall taxable profit;
  • for fiscal years starting from 2021, the 2018 Finance Bill plans to apply a 26.5% rate for all French companies to their overall taxable profit;
  • for fiscal years starting from 2022, the 2018 Finance Bill plans to apply a 25% CIT rate for all French companies to their overall taxable profit.

b. Taxation of employment income and pensions
French residents are taxed on a worldwide basis. Gross income from employment and pensions are subject to two specific social contributions:

  • the 'contribution sociale généralisée' (CSG - generalised social contribution ) applied at a 7.5% rate; and
  • the 'contribution au remboursement de la dette sociale' (CRDS - social security debt contribution) applied at a 0.5% rate.

The 2018 Social Security Financing Bill plans to increase the CSG rate by 1.7% (which will reach a global social rate of 9.7%).

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.

The 2018 Finance Bill plans to increase this scale by 1% (based on the consumer price index excluding tobacco).

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

  • 3% from EUR 250,000 up to EUR 500,000 (for single taxpayers) or EUR 500,000 up to EUR 1 million (for married taxpayers or taxpayers under a civil partnership); and
  • 4% over EUR 500,000 (for single taxpayers) or EUR 1 million (for married taxpayers or taxpayers under a civil partnership).

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; and
  • 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% (interests) or 21% (dividends) 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. 2018 Social Security Financing Bill plans to increase the CSG by 1.7%; the global rate would therefore be 17.2%.

2018 Finance Bill contemplates to implement a 30% tax (personal income tax at 12.8% + social contributions at a global rate of 17.2%) on dividends and interests earned by individuals instead of the progressive scale of the personal income tax. The taxpayers with the lowest incomes could therefore opt for taxation with the progressive system if it is more favourable.

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 (except the REITs which benefit from 0% taxation).

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 65 % 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.

2018 Finance Bill plans to implement a '30% flat tax' (personal income tax at 12.8% + social contributions at a global rate of 17.2%) on capital gains for shares sold by individuals. In that case, the rebate for holding period would no longer be applicable (except in certain circumstances and provided that the capital gain will be subject to the progressive scale).

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. The land registrar's contribution of 0.1% brings the overall taxation at 6.51% in Paris area.

By exception, a reduced rate of 0.715% applies to (i) acquisition of 'terrains à bâtir' (building lots), (ii) acquisitions of new buildings (i.e., completed or renovated within the last five years), (iii) acquisitions through 'vente en l'état futur d'achèvement' (VEFA - buildings before completion). 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 EUR 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, notary fees at a 0.814% (excluding VAT) 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; and
  • The sale of shares in a real estate company – i.e. a company whose main assets are immovable property or property rights (50% or more) – gives rise to a 5% registration duty.

Belgium Small Flag Belgium

Yes, the Belgian tax system broadly follows the recognized OECD Model.

a) Taxation of business profits
Business profits are taxed at a rate of 33,99% (ie 33% plus a 3% crisis surcharge). A company may benefit from progressive rates if its taxable profit does not exceed 322,500 EUR and if certain other conditions are met.

As a result of the July Agreement, the corporate tax rate should decrease to 29,58% (incl. crisis surcharge) in 2018 and 25% in 2020. A separate rate of 20,40% (incl. crisis surcharge) should be introduced for SMEs on a first income band of 100,000 EUR in 2018. The crisis surcharge should be abolished in 2020.

Business profits and proceeds derived from a liberal profession are taxed at progressive rates, with a top rate of 50% applicable as from 38,830 EUR (assessment year 2018).

b) Taxation of employment income and pensions
Income derived from employment is taxed at progressive rates. This category of income encompasses the entire consideration that an employee receives by way of his/her employment. Taxation of employment is generally levied through employer wage tax withholding.

c) VAT
VAT is applicable on the supply of goods and service. A standard VAT rate of 21% applies, whereas certain supplies may be taxed at a reduced rate of 12% or 6%.

d) Taxation of savings income and royalties
Interest income and royalties gathered by individuals from assets that are not used for a professional activity, usually fall in the category of movable income. If sourced in Belgium, movable income is in principle subject to a 30% withholding tax. The said tax may be final for individuals. If no withholding tax is applied, the 30% will be due by means of an assessment.

The 30% withholding tax also applies to interest income and royalties that are sourced in Belgium and gathered by corporations. Depending on the corporate income tax due and provided that certain conditions are met, a credit or reimbursement can be obtained upon assessment.

e) Taxation on income from land
Individual
The tax regime of income derived by an individual from immovable property that is not used for professional purposes, will depend on the use that is made from the property.

The individual will be taxed on a deemed annual rental income if the property is not leased, or if it is leased to a private individual who does not use it professionally. This deemed income is usually lower than the market lease value. The applicable rate will vary somewhere between 30% to 50% depending on the location of the property. The individual will be taxed on the actual rental income (at progressive income tax rates) if the property is leased to a company or an individual who uses the property professionally.

Corporation
Income from land gathered by a corporation is subject to corporate income tax at the normal rate. Corporations are however also subject to the aforementioned separate tax on the deemed annual rental income. The said tax is deductible for corporate income tax purposes.

Capital gains realized on land are treated infra under f).

f) Taxation of capital gains
Individual
Capital gains realized by individuals on assets that are not held for professional purposes are taxed at a rate of 33%. Such gains are however exempt if these result from the normal management of one's private estate. Capital gains on real estate assets may however still be taxed at a rate of 16,5% or 33% depending on the time span between the acquisition and sale of the asset.
Corporation

Capital gains realized by companies are in principle taxed at the normal corporate income tax rate.

A roll-over regime is however available under certain conditions for capital gains realized on fixed assets, provided that the proceeds of the sale are entirely re-invested within three years (five years if the re-investment is made in a buildings) in depreciable assets located in the EEA.

An exemption is available for capital gains realized on shares by a corporation that qualifies as a SME if (i) the shares pertain to a corporation that meets the subject-to-tax test under the participation exemption regime and (ii) the vendor has held the shares in full ownership for at least one year. There is no minimum participation threshold.

Failure to comply with these two conditions will trigger taxation of the capital gain at the normal corporate income tax rate (if the first condition is not met) or 25.75% (if the first condition is met and the second condition is not met). Corporations that do not qualify as a SME but meet these two conditions, will have their capital gain on shares taxed at a rate of 0,412%. It has been announced in the July Agreement that this 0,412% tax should be abolished as from 2018.

g) Stamp and/or Capital duties
No capital or stamp duties are due upon the formation or the increase of capital of a company or on the transfer of shares.

Bulgaria Small Flag Bulgaria

Yes, the Bulgarian tax system broadly follows 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.

Yes, all the above mentioned income is subject to tax (excluding pensions).
If so, what are the current rates and are they flat or graduated?

Incorporated businesses are subject to a flat corporate tax rate of 10 %. Certain exemptions apply to some collective investment schemes or special investment vehicles. There are also special tax regimes regarding taxation of commercial maritime shipping companies and gambling businesses.

Individuals are subject to a flat personal income tax rate of 10 % for their employment income.

Transactions are subject to the following VAT rates:

  • 20% regular tax rate;
  • 9% reduced rate for hotel accommodation; and
  • 0% for exports and certain other exempt activities such as: Deliveries, connected with healthcare; Deliveries, connected with social care and insuring; Deliveries, connected with education, sport and physical training; Deliveries, connected with culture; Deliveries, connected with religions; Deliveries of a non-economic nature; some Deliveries, related to land and buildings; Deliveries of financial services; Deliveries of insurance services; Gambling; and some others.

Royalties and interest are subject to 10% withholding tax when distributed to non-residents.
Royalties and interest accrued to EU and EEA resident entities are exempt under certain conditions, in compliance with the Interest and Royalties Directive.

Income from land is included in the taxable profit of the company, ie they are considered as income from a company’s regular business activity, and are subject to adjustments in accordance with the applicable fiscal and accounting rules. The applicable tax rate is the standard corporate rate of 10 %.

Income from land received by individuals who are not professionally engaged in commercial activities is exempt from tax.

Capital gains are included in the taxable profit of the company, ie they are considered as income from a company’s regular business activity, and are subject to adjustments in accordance with the applicable fiscal and accounting rules. The applicable tax rate is the standard corporate rate of 10 %. Some capital gains are exempt, ie capital gains on publicly traded shares on the Bulgarian Stock Exchange or on a stock exchange under Directive 2004/39/EC.

There are certain stamp duties collected for services provided by state or municipal authorities which depend on the costs for the cervices.

United States Small Flag United States

a. Taxation of business profits
Corporations are taxed at graduated rates. The corporate tax brackets are indexed to inflation. The following rates are for the 2017 tax year.

Income Bracket

Rate

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 brackets are gradually phased out. The first and second brackets phase out by an additional tax of 5 percent on income between $100,000 and $335,000. The third bracket phases out by an additional 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 2017 tax year.

Tax Rate

Single

Married filing Jointly

Married Filing Separately

Head of Household

10%

$0—$9,325

$0—$18,650

$0—$9,325

$0—$13,350

15%

$9,325—$37,950

$18,651—$75,900

$9,326—$37,950

 

$13,351—$50,800

25%

$37,951—$91,900

$75,901—$153,100

$37,951—$76,550

 

$50,801—$131,200

28%

$91,901—$191,650

$153,101—$233,350

 

$76,551—$116,675

$131,201—$212,500

33%

$191,651—$416,700

$233,351—$416,700

 

$116,676—$208,350

$210,801—$413,350

35%

$416,701— $418,400

$416,701—$470,700

 

$208,351—$235,350

$416,701—$444,550

39.6%

$418,401 or more

$470,701 or more

$235,351 or more

$444,501 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 – paid by the employer only at a rate of 6% applied to the first $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 $200,000 ($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 United States. 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 13f.
In addition, the net investment tax described in 13a may apply.

e. Taxation of income from land
Income from land is taxed either as capital gain or ordinary income determined by purpose for which 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 13a.

f. Taxation of capital gains
For individual taxpayers, the capital gains rate varies based on a taxpayer’s tax bracket (See 13b): 0% on income in the 10% or 15% brackets; 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 13a.

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.

Canada Small Flag Canada

Individuals are taxed at graduated rates. The rates and income thresholds vary depending on the province of residence. The 2017 income tax rates on regular income for an individual residing in the province of Ontario are as follows.

Taxable Income

Rate

first $42,201

20.05%

over $42,201 up to $45,916

24.15%

over $45,916 up to $74,313

29.65%

over $74,313 up to $84,404

31.48%

over $84,404 up to $87,559

33.89%

over $87,559 up to $91,831

37.91%

over $91,831 up to $142,353

43.41%

over $142,353 up to $150,000

46.41%

over $150,000 up to $202,800

47.97%

over $202,800 up to $220,000

51.97%

over $220,000

53.53%

a) business profits
Corporations are subject to federal and provincial income tax on their business profits. The rates depend on whether the general corporate rate, manufacturing & processing rate or small business rate applies. The small business rate is only available to Canadian-controlled private corporations on up to $500,000 of active business income earned in Canada. The following table sets out the combined federal and provincial rates for 2017.

Province

General Rate

Small Business Rate up to $500,000

M&P Income

British Columbia

26.0%

12.5%

26.0%

Alberta

27.0%

12.5%

27.0%

Saskatchewan

26.5%

12.5%

24.5%

Manitoba

27.0%

10.5%

27.0%

Ontario

26.5%

15.0%

25.0%

Quebec

26.8%

18.5%

26.8%

New Brunswick

29.0%

13.5%

29.0%

Nova Scotia

31.0%

13.5%

31.0%

Prince Edward Island

31.0%

15.0%

31.0%

Newfoundland

30.0%

13.5%

30.0%

 

b) employment income and pensions
Employment income and pensions are taxed as regular income.

c) VAT (or other indirect tax)
Canada imposes a federal VAT (known as the goods and services tax (GST)) on the supply of most goods and services at rate of 5%. Certain provinces have harmonized their provincial sale taxes to the GST and impose an additional tax on top of the federal tax, namely Ontario (8%), Nova Scotia (10%), New Brunswick (10%), Prince Edward Island (10%) and Newfoundland (10%). The province of Quebec imposes its own VAT (known as QST) on the supply of most goods and services at a rate of 9.975%.

The provinces of British Columbia (7%), Saskatchewan (5%) and Manitoba (8%) impose a sales tax on the supply of goods.

The province of Alberta does not impose a provincial sales tax.

d) savings income and royalties
Savings income and royalties are taxed as regular income.

e) income from land
Income from land is taxed as regular income.

f) capital gains
Capital gains are taxed at half the rate of regular income.

g) stamp and/or capital duties
None.

Ukraine Small Flag Ukraine

Ukraine does broadly follow the recognized OECD model of taxation.

Business profits are subject to taxation by profit tax. As a general rule, profit tax is a flat rate of 18%. However, in cases established by the Tax Code of Ukraine, the profit tax rate may differ. For example, for taxation of income under insurance agreements, the profit tax rate may be increased depending on the type of insurance agreement.

Employment income and pensions are subject to personal income tax. Employment income is taxed at flat rate of 18%. Pensions are subject to taxation only if their amount exceeds ten subsistence minimums for disabled persons, (in a month) established on January 1 of the reporting tax year. In this case, part of such excess is taxed at a flat rate of 18% unless otherwise established by the law.

Savings income, royalties, and capital gains are also taxed at flat rate of 18%.

It should be noted, that the currently aforementioned personal income is also subject to taxation by a temporary military contribution at flat rate of 1.5%.

The VAT is set at a flat rate of 20%. However, in cases established by the Tax Code of Ukraine, it may be set at rates of 7% (for example, for the supply of medicinal products authorized for production and use in Ukraine, and entered into the State Register of Medicinal Products) or 0% (for example for the export of goods). Therewith, certain supplies are not subject to VAT or exempt from taxation.

The land tax is a kind of property tax. Rates of land tax are set by local governments within the limits established by the Tax Code of Ukraine. Therewith, land tax rates depend on the type, location, and land appraisal - if it was made. If there was no appraisal of land, tax rates depend on the land area.

Ukraine does not impose stamp and/or capital duties.

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%. The intellectual property box regime gives greatly reduced rates of tax on income and gains from qualifying assets.

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 on earnings 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 from year to year 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. Individuals who are resident but not domiciled in Cyprus are exempt from SDC tax on interest and dividends. 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.

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 EUR105 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.

Ecuador Small Flag Ecuador

Corporations are subject to a flat tax rate of 22% on all income from domestic and foreign sources (including business income, passive income -rents, royalties, dividends, interests-, and capital gains). If 50% or more of the capital of the entity is owned by shareholders domiciled in a tax haven jurisdiction, the income tax rate is 25%. If less than 50% of the capital of the entity is owned by shareholders domiciled in a tax have jurisdiction, the 25% income tax rate only applies to the income attributable to such shareholders. The remaining profits are taxed at 22% rate. The corporate income tax rate may be reduced by 10 points if profits are reinvested for specific purposes provided in the law.

Individuals are subject to progressive tax rates. Taxable income includes domestic and foreign sources, be it business income, employment income, professional fees, passive income -rents, royalties, dividends, interests-, and capital gains). Income tax rates applicable for 2017 are listed below.

Año 2017 - En dólares

Fracción Básica

Exceso Hasta

Impuesto Fracción Básica

Impuesto Fracción Excedente

0

11.290

0

0%

11.290

14.390

0

5%

14.390

17.990

155

10%

17.990

21.600

515

12%

21.600

43.190

948

15%

43.190

64.770

4.187

20%

64.770

86.370

8.503

25%

86.370

115.140

13.903

30%

115.140

En adelante

 22.534

35%

Gains from the sale of real estate are tax exempt provided the taxpayer is not engaged in the business of buying/selling real estate.

Gibraltar Small Flag Gibraltar

Gibraltar does charge tax on business profits at the flat rate of 10% on profits accrued in or derived from Gibraltar. Tax is also charged on employment income on a graduated scale which averages out at around 25%. Despite being part of the European Union, Gibraltar enjoys a derogation from the VAT regime, and no VAT or other indirect taxes are charged. Interest income over GBP 100,000 per annum received or receivable by a Gibraltar company is charged at a flat rate of 10%, which is also the rate of taxation for royalty income. Income from land is taxable in Gibraltar at the relevant corporate or personal rates, but there are no capital gains taxes in Gibraltar. Stamp duty is payable on Gibraltar real estate at a graduated scale at 5.5% for a band between £260,000 and £350,000 and 3.5% on the balance over £350,000 for first and second time buyers. Other buyers are exempted from stamp duty if the purchase price is below £200,000. Where the purchase price falls between £200,001 and £350,000, 2% is paid on the first £250,000 and 5.5% on the balance. On a purchase price of over £350,000, 3% is paid on the first £350,000 and 3.5% on the balance. Capital duty on share capital is a nominal £10 on creation and subsequent increases.

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, consolidated income tax rates (i.e. including federal, cantonal and communal income tax) vary from one canton to another, for example:

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

The tax is levied on the basis of the company’s 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 highest marginal 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 choices for individuals that allow to reduce the rates. Generally speaking, the level of tax deduction is quite the same in all cantons.

Employment income is subject to social security contributions levied at the rate of approximately 15% (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 one 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%. Basic commodities are subject to VAT at the rate of 2.5%. Lodging services are subject to VAT at the rate of 3.8%.
Following the dismissal of the pension reform project “Prévoyance 2020” by Swiss voters on September 24, 2017, VAT rates will decrease starting from January 1, 2018. The standard rate will drop to 7.7%, and the lodging services rate to 3.7%. The reduced rate will remain unchanged, at 2.5%.

d. Taxation of savings income and royalties
Both savings income and royalties are taxed as ordinary income.
Interest and royalties (as well as dividends) paid to non-residents are taxable if the source of such income is in Switzerland. To ensure the collection of those taxes, Switzerland levies a withholding tax on such distributions, unless an exemption applies (e.g. 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 an international tax treaty.

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

f. Taxation of capital gains
For an individual, the capital gain realised on the sale of controlling or non-controlling interest 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 all its profits, including capital gains). This applies in all cantons.

The capital gains realised by a corporation are taxed at the same rates as ordinary income if no exception applies (e.g. the so-called ‘participation reduction’).

g. Stamp and/or capital duties.
In Switzerland, the FTA levies stamp duties on certain transfers of instruments such as shares, bonds, notes and similar equity and debt securities against valuable consideration, when a so-called ‘Swiss securities dealer’ participates in the transaction either as a party or as an intermediary or broker. Generally, the full transfer tax rate amounts to 0.15% of the consideration in the case of Swiss securities, and to 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 a flat rate of 1% of the fair market value of the transferred assets, with an exemption regarding the first CHF 1 million of the share capital of the company. Moreover, a multitude of transactions qualify for an issuance stamp tax exemption.

Israel Small Flag Israel

Yes, it generally does. Israel is party to over 50 double tax treaties that are in force which, with the exception of a few older treaties, generally follow the OECD Model Convention. As noted, Israel has also signed the MLI.

General tax rates:
The general corporate income tax rate is 24%, expected to be reduced to 23% in 2018. There are preferential corporate tax rates that may be applicable subject to meeting certain conditions (see more below).

Employment income of individuals is subject to graduated tax rates up to a 47% marginal tax rate, and an additional 3% surcharge applicable to taxpayers with annual income over a given threshold. There are several pension fund plans, contributions to which may benefit from tax exemptions. Employers and employees are required to pay NII fees as well.

VAT is charged on transactions in Israel and on the importation of goods into Israel, currently imposed at a rate of 17%. Certain transactions may qualify for a zero-rate VAT.

Royalties, capital gains and income from real estate of Israeli corporate taxpayers are generally subject to the corporate income tax rate (currently, 24%).

There are no stamp or duty taxes in Israel.

Italy Small Flag Italy

Income realized by companies tax resident of Italy is always qualified as business income and subject to corporate income tax at the rate of 24%. Furthermore, Italian resident companies are subject to IRAP (Tax on Regional Productive Activities) at a rate of 3.9% which may be increased up to 4.2% (higher rates apply to insurance, banking and holding companies).

Non resident companies are taxed on their income from Italian sources as follows. Business profits if realized through an Italian permanent establishment are subject to corporate income tax and IRAP at the same rates applicable to resident companies.

Employment income and pensions received by individuals tax resident of Italy are subject to personal income tax. Employment income paid to non-resident individuals is subject to personal income tax in Italy if realized through an employment activity carried out in Italy. Pensions paid to non-resident individuals are taxed in Italy if paid by a resident person or by any body of the Italian State. Personal income tax is levied at progressive tax rates up to 43% on income exceeding 75,000 Euro.

Outbound interest and dividend payments are subject to withholding tax in Italy at 26% rate if paid by companies tax resident of Italy.

Non-residents owning Italian real estate are subject to tax on (usually) 95% of the rents. If the property is not rented, no income tax is due.

Capital gains realized by non resident persons are taxed in Italy if stemming from the sale of assets located in Italy as well as from participations in companies resident of Italy. Some capital gains are not subject to tax in Italy when realized by non-resident. Particularly, capital gains from the sale of non-substantial participation (i.e., up to 2%) in resident companies whose shares are listed.

Registration tax is due in relation to contracts and other legal proceedings brought for registration in Italy. The tax is typically due on the purchase of Italian real estate.

VAT is applied according to the European Directives.

Portugal Small Flag Portugal

The OECD Model is broadly followed by the Portuguese Tax System. The Corporate Income Tax Code and Personal Income Tax Code provide the specific domestic rules regarding taxation of business profits, employment income and pensions, savings income and royalties, income from land and capital gains. Such legislation is complemented by secondary legislation that deals with specific regimes (e.g. special tax regime for debt securities), as well as the 74 Double Tax Treaties signed by Portugal and currently in force.

The tax rates differ depending on the type of income and its beneficiary (individual or legal entity).

As a rule, the total income received by resident individuals (except certain passive income as dividends and interests, and capital gains derived from the sale of securities) is aggregated and subject to taxation at progressive rates, which start at a minimum of 14.5% to taxable income above EUR 7,091 and goes up to 48% for income above EUR 80,640. These rates are currently increased by a general “extraordinary surtax” which will be due for the tax year of 2017 as follows:

(i) 0% for taxable income up to EUR 20,261.00;

(ii) 0.88% for taxable income exceeding EUR 20,261.00 up to EUR40,522.00;

(iii) 2.75% for taxable income exceeding EUR 40,522.00 up to EUR80,640.00;

(iv) 3.21% for taxable income exceeding EUR 80,640.

If the taxable income exceeds EUR80.000, another “solidarity surtax” applies, which has a rate of 2.5% (between EUR80.000 and EUR250.000) and of 5% (to the taxable income exceeding EUR250.000).

Interest, dividends and capital gains derived from the sale of securities, received by individuals are, as a rule, subject to a definitive withholding tax at a rate of 28%, although the aggregation is possible.

As per legal entities, a flat CIT rate of 21% applies on the global amount of taxable income realized by tax resident companies. The following surtaxes may also apply:

  • A local surtax (“Derrama”) of up to 1.5% of taxable income, prior to the deduction of any available carry forward tax losses, is levied in certain municipalities:
  • A state surtax (“Derrama Estadual”) applies (prior to the deduction of any available carry forward tax losses) at the following rates: (i) 3% applicable to the taxable profit exceeding EUR 1.5 million and up to EUR 7.5 million; (ii) 5% applicable to the taxable profit exceeding EUR 7.5 million and up to EUR 35 million; (iii) 7% applicable to the taxable profit exceeding EUR 35 million.

Autonomous taxation applies at different rates on certain expenses incurred by entities subject to CIT. All the rates of autonomous taxation are increased by 10% if the taxpayer has tax losses in the tax year in which the expenses are incurred.

The Portuguese tax system also comprises stamp duty. Stamp duty is due on acts, contracts, documents, titles, books, papers and other facts foreseen on the General Table, which occur in Portugal and are not subject or exempt from VAT.

The facts subject to Stamp Duty in Portugal are as follows, according to the respective rates:

  • Acquisition for consideration or donation of property: 0,8%;
  • Free acquisition of goods by individuals (Inheritance and gifts): 10%;
  • Letting or subletting (applied on the amount of a month of rent): 10%;
  • Guarantees (except when materially related to contracts already taxed in Stamp Duty): 0,04%, 0,5% or 0,6%, depending on whether the period is less than one year, more than one year or more than five years;
  • Bet on games not subject to the special taxation regime: 25% (Mutual betting and other betting’s);
  • Bingo prizes: 25%;
  • Other prizes: 35%;
  • Social State Games (included in the bet price): 4,5%;
  • Social State Games (on the amount of the debt price that exceeds € 5.000): 20%
  • Use of credit: 0,04% (depending on whether the period is less than one year or nod determined), 0,5% or 0,6% (for period more than one year or more than five years, respectively);
  • Consumer’s credit: 0,07% (depending on whether the period is less than one year or nod determined), 0,5% or 0,6% (for period more than one year or more than five years, respectively);
  • Operations of/with financial institutions: 4% - interest and commission for financial services, including fees related to card-based payment operations; 3% - commission for guarantees; 2% - commission for insurance brokers.
  • Bills and notes of hand: 0,5%;
  • Sale of business: 5%;
  • Net asset value of the collective investment vehicles: 0,0025% (for collective investment vehicles investing exclusively in money market instruments and deposits – assessed quarterly); 0,0125% (Other collective investment vehicles – assessed quarterly).

We also note that, in Portugal it does not exist neither wealth tax nor inheritance tax. Further to that, donations between parents/sons/spouses are exempt from Stamp Duty.

Kenya Small Flag Kenya

Kenya’s tax system follows the recognized OECD Model, as further described below.

Business profits
Income tax is chargeable on all income arising or accruing from Kenya which includes business profits (including royalties and interest).

Resident corporate entities are taxed at the rate of 30% while non-resident entities are taxed at the rate of 37.5%.

Employment income
Resident individuals are taxed on their worldwide employment income while non-residents are only taxed on employment income from an employer who is resident in Kenya or has a permanent establishment in Kenya. Employment income is taxed on a graduated scale.

The table below sets out the current graduated scale and the graduate scale with effect from 1 January 2018:

Rate of tax

Current monthly taxable pay

(KES)

Monthly taxable pay with effect from 1 January 2018 (KES)

10%

1-11,180

1-12,298

15%

11,181-21,714

12,2999-23,885

20%

21,715-32,248

23,886-35,472

25%

32,249-42,781

35,473-47,059

30%

Excess of 42,781

Excess of 47,059

Indirect taxes
Value added tax (VAT) is charged pursuant to the provisions of the Value Added Tax Act (No. 35 of 2013) on taxable supplies made by a registered person at either the rate of 16% or 0% for zero rated supplies. Supplies which are exempted from VAT are set out under the Second Schedule.

Excise duty is charged pursuant to the provisions of the Excise Duty Act, 2015. The Excise Duty Act sets out specific rates of excise duty for excisable goods, which mostly include luxury items such as alcohol and cigarettes. Excisable services include mobile cellular phone services, fees charged for money transfer services and other fees charged by financial institutions.

Capital gains tax (CGT)
CGT was reintroduced in 2015 after having been suspended in 1985. CGT is chargeable as a final tax at the rate of 5% on gains derived on the sale or transfer of property by an individual or company carried out on or after 1 January 2015. Gains arising from transfer of securities which are listed at the Nairobi Securities Exchange are not subject to CGT.

Income from immovable property
Residential income tax is chargeable on income accrued in or derived from the use or occupation of residential property at the rate of 10% on the gross turnover.

Stamp duty
Stamp duty is charged pursuant to the provisions of the Stamp Duty Act (Chapter 480, Laws of Kenya). Stamp Duty is chargeable on every instrument set specified in the Stamp Duty Act which relates to property situated in Kenya or to any matter or thing done or to be done in Kenya. The Schedule to the Stamp Duty Act sets out the specific rate on the various chargeable instruments. For example, stamp duty on an instrument transferring immovable property is 4% if the immovable property is within a municipal area or 2% if the immovable property is not within a municipal area. Stamp duty on transfer of shares is 1% of higher of the transfer value and the market value of the shares.

Poland Small Flag Poland

In general, the Polish tax system follows the recognized OECD Model. This model stipulates several types of taxes and rules specific to the taxation of income derived from specific sources.

a) Taxation of business profits
Business profits derived by corporations are subject to Corporate Income Tax at the 19% rate. Business profits include the overall income from business activities also including any interest, royalties, capital gains, or others.

Business profits derived by individuals are generally taxed either at the 19% fixed rate or at the progressive rates of 18% and 32%. Certain specific types of business conducted by individuals can also be taxed at fixed rates varying from 2% to 20% in which case the tax is calculated on the amount of revenue without the deduction of tax costs.

b) Taxation of employment income and pensions
Income from employment and pensions is taxed at the progressive tax rate of 18% and 32%. The 32% rate applies to an annual income exceeding 85,528 PLN.

c) VAT
The Polish VAT system is compliant with the EU VAT Directives. Supplies of goods and services are generally subject to VAT at the standard rate which currently stands at 23%. For certian goods and services the reduced VAT rates of 8%, 5%, 4% or 0% apply. Certain goods and services are exempt from VAT.

d) Taxation of savings income, and royalties
Income from interest obtained by individuals not conducting business activity is taxed at the fixed rate of 19%, whereas royalties are taxed at the progressive rate of 18% and 32%.

e) Income from land
Income derived by private individuals from the letting of immovable property is taxed either at the progressive rates of 18% and 32% (in this case the tax is calculated on the income after the tax costs deductions), or at the fixed rate of 8.5% (calculated on the revenue without any cost deduction).

f) Capital gains
Capital gains derived by private individuals are taxed at the fixed 19% tax rate.

g) Stamp duty/Capital duties
Stamp duty is imposed on various documents or permits obtained from authorities. Most often, a stamp duty of 17.00 PLN is paid on powers of attorney presented at authorities.

Capital duty (Tax on Civil Law Transactions) is payable on various transactions undertaken under civil law in cases where these transactions were not taxed with VAT. For example, the sale of goods or property rights exercisable in Poland is subject to a TCLT at the rate of 2% or 1% respectively. Granting a loan is subject to a 2% TCLT.

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 (a) 29.97% for the fiscal year beginning on or after April 1, 2016 and (b) 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 bracket 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 (i) during a fiscal year two years preceding the relevant fiscal year (e.g., 2016 for the consumption tax liability in 2018) and (ii) during the first six months’ period of the fiscal year immediately preceding the relevant fiscal year (e.g., January through June of 2017 for the consumption tax liability in 2018) did not exceed 10 million yen.

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) or39.63% (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 (a) 23.4% for the fiscal year beginning on or after April 1, 2016 and (b) 23.2% for the fiscal years beginning on or after April 1, 2018, and non-resident individuals are subject to income tax on the capital gains 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 (certain specified 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 (a) 23.4% for the fiscal year beginning on or after April 1, 2016 and (b) 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 and except where the subject Japanese corporation is a certain “real estate holding corporation”.

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).

The Netherlands Small Flag The Netherlands

The Dutch tax system is in line with the tax systems of most industrialised countries.

a) Business profits generated by corporate taxpayers are subject to corporate income tax at a rate of 20% for profits up to €200,000 and at a rate of 25% over profits exceeding that amount. As of 2018, the 20% rate threshold of €200,000 will be increased to €250,000. Business profits generated by an individual are taxed with income tax at progressive rates with a maximum rate of 52% for net profits exceeding €67,071 (2017).

b) Employment income and pensions are subject to income tax and social security levies at progressive rates of 36.55% for income up to €19,981, 40.8% for income between €19,982 and €67,071 and 52% over the excess.

c) Supply of goods and services are generally subject to VAT at a rate of 21%, while for some goods and services reduced rates of 0% and 6% may apply.

d) Savings income of individuals is not subject to income tax over the actual income received and capital gains realized, but is subject to income tax at a rate of 30% on the basis of a fictional return calculated over the individual's yield basis at the beginning of each year. The yield basis is the amount of assets less liabilities. The return is calculated on a gradated scale, whereby net assets up to €75,000 are deemed to generate a yield of 2.871%, net assets between €75,000 and €975,000 a yield of 4.6% and net assets exceeding €975,000 a yield of 5.39%.

e) Income of individuals from land is included in taxable income as business profits (see under a)) or as savings income (see under d)) depending on the fact whether it qualifies as active or passive income.

f) Capital gains realized by a corporate tax payer are treated similarly as business profits (see under a)). However, capital gains (and dividends) derived from qualifying shareholdings are exempt under the so-called participation exemption. For individuals capital gains are either subject to tax as business profits (see under a)), as savings income (see under d)) or as substantial interest income if the capital gain is realized on the sale of shares when the tax payer holds an interest of 5% or more in the share capital of a company.

g) The Netherlands does not levy stamp and/or capital duties, except real estate transfer tax (2% for residential properties and 6% for the rest) which is due upon the acquisition of real estate or an interest of 1/3 or more in a company directly or indirectly holding Dutch real estate.

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 statutes is given by the OECD guidelines.

With respect to the taxes included in the Mexican taxation system, the following should be noted:

a. Taxation of business profits. Legal entities deemed as Mexican tax residents are liable for income tax on a worldwide basis. That is, all income received by such entities could be subject to taxation in Mexico irrespective of their source. Since Mexican resident companies are liable for income tax in Mexico on a worldwide basis, income items recognised by them as business profits would need to be added to the rest of their accruable income for the current tax year for purposes of determining the corresponding taxable basis. The current corporate tax rate is of 30 per cent.

In the case of foreign residents that generate business profits in Mexico, the applicable tax treatment would vary depending on whether such income is attributable to a permanent establishment or else, considered as a Mexican-sourced income (that is not attributable to a permanent establishment, in the event that the relevant foreign resident had one).

Foreign residents with a permanent establishment would trigger income tax on business profits they derive (attributable to the permanent establishment) and income tax thereupon would be levied on a similar basis as if the relevant foreign resident were a Mexican legal entity (subject to the corporate tax rate of 30 per cent).

Lastly, income tax on business profits obtained by a foreign resident without a permanent establishment (or to which said income item cannot be attributed), would be triggered depending on the nature of the activities from which such income is derived. That is, whilst certain business profits could be considered not to be Mexican-sourced (as such, not subject to income tax in Mexico), other income items fall under the characterisation of business profits could indeed be subject to taxation.

With respect to the double taxation agreements concluded by Mexico, it is worth noting that an ample debate exists on which type of business profits (income items) can be characterised as business profits in terms of article 7 of the Model Tax Convention (and the respective DTAs).

b. Taxation of employment and pensions. In pursuance of the 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 0 (minimum wage) 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 receives 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 within 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, could 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 cero per cent tax rate. Moreover, it should be noted that the exportation of goods or services are subject to a cero per cent tax rent in terms of the value-added tax law.

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

d. Taxation of savings income and royalties. Income received by Mexican individuals by means of savings funds could be exempted from income tax in so far as they meet the requirements set forth by the 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 provided that 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 would be required to 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. It is worth mentioning that the transfer of land is generally considered as exempted from value added tax.

f. Taxation of capital gains. Generally speaking, Mexican tax residents 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.

Furthermore, more beneficial tax treatments could be achieved by means of double taxation agreements, provided that certain formal requirements are met.

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.

Norway Small Flag Norway

Norway does broadly follow the recognised OECD model of taxation.

a) business profits
Corporations pay a flat rate of 24 % on net taxable income. The tax rate is planned to be reduced to 23 % by 2018.

b) employment income and pensions
In Norway, the income tax for individuals is calculated on two different bases. A flat tax rate of 24 % is paid on “ordinary income” less the personal allowance and certain special allowances. Ordinary income comprises all taxable income (including for instance employment income and pensions), less allowable deductions.

Secondly, employee’s social security contributions and surtax are paid on so-called «personal income», which comprises for instance gross wage income and pension income, without deductions of any kind. All members of the national social security system must pay a social security contribution at 8,2 % of salaries and 5,1 % on pensions. Surtax at progressive rates is levied on gross earned income above a certain level. The following rates of surtax apply:

0.93 % above NOK 164,100 to 230,950
2.41 % above NOK 230,950 to 580,650
11.52 % above NOK 580,650 to 934,050
14.52 % above NOK 934,500

c) VAT (or other indirect tax)
Most companies doing business in Norway will have to apply, and be registered, for VAT in Norway. As a main rule, this applies to all companies conducting activity in Norway that generates a turnover of at least NOK 50 000 in any twelve-month period.

Value Added Tax must be added to most goods and services sold in Norway. There are basically four VAT rates in Norway. 25% is the standard rate. The rate is 15 % on the supply of food and 10 % on e.g. passenger transport services, hotel rooms and cinema tickets. Some goods, such as books and newspapers, are subject to a zero rate.

d) savings income and royalties
Interests and royalties are included in taxable income and taxed at a flat rate of 24 %.

e) income from property
Rents and capital gains at disposal of real estate are generally taxed at a flat rate of 24 %. In most cases, there is no capital gains tax on profits from sale of a person’s principal home.

f) capital gains
Generally, capital gains are taxed at a flat rate of 24 %. Capital gains derived by a Norwegian limited company from the sale of shares in a Norwegian or EEA resident limited liability company are exempt from taxation.

g) stamp and/or capital duties
With some exceptions, stamp duty is levied on real estate transfers. The stamp duty is currently 2,5 % of the market value of the real estate. There are no other stamp duties in Norway. Norway does not levy capital duty.

Germany Small Flag Germany

a) Taxation of business profits
The taxable business profit is calculated as the difference between the earnings and the expenses recognized for tax purposes. There are certain expenses which are not recognized for tax purposes, e.g. under the interest barrier rule (see above 9.). An individual’s business profit is subject to personal income tax at a progressive rate starting by 14% and going up to a maximum rate of 45% plus solidarity surcharge of 5.5% on the income tax owed (resulting in a maximum tax burden of 47.48%) and church tax, if applicable, of 8% or 9% on the income tax owed.

The business profits of a corporation are determined on the basis of the German GAAP accounts and adjusted for tax purposes and taxed at a flat corporate income tax rate of 15% plus solidarity surcharge of 5.5% on the corporate income tax owed.

Furthermore, trade tax is levied on the taxable income of a corporation whereas the taxable income calculated for trade tax purposes slightly differs from the calculation of the taxable income for corporate tax purposes. The trade tax rate differs on each municipality where the business is carried out. It should be expected to range between 7% at the lowest and 17.5% at the maximum.

Trade tax only applies to an individual’s business profits if a permanent establishment is maintained in Germany through which the business is carried out. The trade tax can partly be credited against the personal income tax liability for a trade or business, but not against the corporate income tax.

b) Taxation of employment income and pensions
Employment income is also subject to personal income tax and therefore taxed at a progressive rate ranging between 14% and 45% plus solidarity surcharge of 5.5% on the income tax owed and, if applicable, church tax on the income tax owed at a tax rate of 8% or 9% as the case may be. Income tax on employment income is levied in accordance with the PAYE principle (Pay As You Earn) which means withholding tax is deducted by the employer from the employee’s pay.

Pension income is subject to the same rate but may be partly exempt from taxation depending on the retirement age.

c) VAT (or other indirect tax)
The supply of goods and services is generally subject to VAT, even though several exemptions apply. In some cases there is the possibility to opt for VAT which might be beneficial in case there is any VAT invoiced that may be reclaimed as input-VAT. The standard German VAT rate is 19%; for some goods and services a reduced rate of 7% is applicable.

d) Taxation of savings income and royalties
Income derived from savings by an individual, such as interest income, is taxed at a flat rate of 25% plus solidarity surcharge of 5.5% on the income tax owed and church tax, if applicable, up to 9% on the income tax owed. The taxpayer may opt for application of the individual rate, if favourable. The tax on interest income is typically charged as withholding tax. The same applies for income derived from other capital investments like dividends. However, various exceptions may apply.

Royalties for licensing out rights earned by private individuals are taxed at the individual progressive income tax rate up to 45% plus solidarity surcharge of 5.5% on the income tax owed and church tax, if applicable, of 8 or 9% on the income tax owed.

e) Taxation of income from land
Income from leasing land gained by individuals is also subject to income tax and taxed by a rate 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
There is no specific capital gains tax in Germany. Capital gains are treated as current income, but are subject to a distinct treatment in case of a capital gain derived from the disposal of shares or other financial instruments or if certain time periods have elapsed.

Private capital gains and capital gains from business assets of an individual
Private capital gains derived from the disposal of shares in a corporation or other financial instruments are generally taxed at a flat rate of 25% plus solidarity surcharge and, if applicable, church tax.

If an individual sells shares in a corporation and holds or has held at least 1% in the corporation’s share capital within the last 5 years or has held the shares as business assets, 40% of the capital gain is generally tax free, whereas 60% of the capital gain will be taxed as personal income of the individual with the applicable progressive tax rate.

Capital gains derived by individuals from the sale of privately held land and other assets are only taxable if the land has been held for less than 10 years and, respectively, the other assets have been held for less than 1 year.

Capital gains of a corporation
Capital gains of a corporation are subject to tax at standard tax rates. However, 95% of the capital gains derived from the disposal of shares in a corporation are effectively tax exempt and only 5% of the capital gain is treated as non-deductible business expense. This exemption does not apply under certain circumstances for banks, other financial institutions, insurance companies and pension funds as shareholders.

Capital losses from the sale of shares by a corporate shareholder are generally non-deductible.

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

Updated: October 18, 2017