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 (4th edition)

Angola Small Flag Angola

Local companies are subject to a 30% Industrial Tax for profits obtained on a worldwide basis. Foreign companies operating in Angola through a Permanent Establishments – “PE” (such as a local branch) are subject to a 30% Industrial Tax on profits attributable to the PE located in the country.

Payment of any services by an Angolan based client to a national or foreign service provider are subject to 6.5% Industrial Tax withholding. Differently, sale of goods is not subject to withholding.

Additionally, there are specific taxes over certain categories of income, such as Urban Property Tax – “UPT” (rents) and Investment Income Tax – “IIT” (capital income).

Locally called “Imposto Predial Urbano”, UPT is levied on income deriving from urban property in Angola, either leased or not. Buildings that are not leased will be subject to a 0.5% UPT rate over the taxable value that exceeds AOA 5.000.000,00.

Regarding leased properties, all tenants required to keep accounting records (e.g., companies), will have to withhold UPT from rents received and deliver the tax withheld to the tax authorities (effective withholding tax rate of 15%).

Locally called “Imposto sobre a Aplicação de Capitais”, IIT is levied on capital income – e.g. interest, dividends, capital gains and royalties. As a rule, ITT is assessed through a withholding mechanism, being the final tax liability for the beneficiary provided that same has no PE in the country. Rates vary between 10% and 15% and IIT is due on capital income deemed obtained in Angola – i.e. either because the paying entity is resident therein or the beneficiary is a resident entity in the country. Please note that the lease of industrial equipment falls within the concept of royalties. The general withholding rates are as follows:

  • Interest – 10% / 15%
  • Royalties – 10%
  • Dividends – 10%
  • Capital gains – 10%

A new VAT Code has been published in Angola by means of Law 7/19 (“Law 7/19”). The entry into force of VAT in Angola, initially scheduled for 1 July, has been postponed and currently the new rules are expected to enter into force in October 2019. The new tax replaces Consumption Tax (a quasi-monophasic tax that has been applicable in Angola) and brings about a few adjustments to the Stamp Duty Code. Among the various rules, we highlight the following: Significantly broadening of the taxable base, when compared to Consumption Tax; Flat tax rate of 14%; Introduction of a deduction mechanism along with rules for VAT refunds; Creation of new reporting and registration obligations (including rules on electronic invoicing systems and submission of accountancy elements). VAT will apply to all entities that carry out a business activity, which have a turnover amount that exceeds USD 250,000.

Stamp Duty, locally called “Imposto do Selo”, is a tax levied on acts, contracts, agreements, receipts and financing operations entered into in Angolan territory. For contracts entered into outside Angola, Stamp Duty will still be due provided that the contract/agreement is submitted in Angola for any legal purpose (e.g. notarisation, foreign exchange licensing or enforcement). Until now, Angolan registered entities have been subject to a 1% Stamp Duty on payments received from its clients. This tax will no longer be applicable to entities covered by the scope of VAT.

A 2% Conveyance Tax (locally known as “SISA”) is levied on purchase of real estate in Angola calculated over the higher of the following amounts: (i) the declared purchase price or (ii) the tax value of the property as registered with the local tax office. The acquisition of shares/quotas in a company owning real estate is also subject to SISA whenever the acquirer becomes the owner of at least 50% of the issued share capital, and it may be deemed that such operation was driven with the main purpose of acquiring the properties held by the company in Angola.

A local employer or with a PE in Angola must withhold personal income tax on salaries paid to its Angolan and expatriate employees (maximum rate of 17%), plus 11% of social security charges (8% by the employer and 3% of which is withheld from salaries paid to employees).

Brazil Small Flag Brazil

The Brazilian tax system does not follow strictly the OECD model, despite many taxation rationales are applicable. As mentioned before Brazil has a high number of taxes in force charged in three different levels: i.e.; federal, state and municipal. The most common applicable taxes for companies are the following:

Charged at the federal level: Corporate Income Taxes (“IRPJ and CSLL”). Withholding Income Tax (“IRRF”), Social Contribution for Economic Intervention tax (“CIDE”), Corporate Revenue Taxes (“PIS and COFINS”), Excise Tax (“IPI”), Tax on Financial Transactions (“IOF”) and Import Duties (“II”).

Charged at the state level: VAT (“ICMS”).

Charged at the municipal level: Service Tax (“ISS”).

a) IRPJ/CSLL: Varying from 0% or low rates (e.g., exempted entities, income derived from Manaus Free Trade Zone, etc.) up to 40% (e.g., financial institutions). General rule is 34%. For some cases and situations, taxpayer could choose regimes where profitability has a presumed percentage fixed by legislation, which could be more beneficial than the traditional taxation system.

b) IRRF: Usually varying from 0% up to 35%. Some examples: 15-25% (e.g., remittance of services and interest abroad), 15%-22.5% (e.g., fixed income financial investments, capital gains, etc.), 0% (e.g., dividends, several remittances made by some foreign investors, etc.)

c) CIDE: Most common is the application of 10% to several sorts of remittances, as royalties, technical services, etc. In addition, there are other specific CIDE charges and regimes, as for the import of oil and oil derivatives.

d) PIS/COFINS: Rates may vary depending on several items and circumstances, but some traditional ones are: 0% (e.g., exemptions, as service and/or goods export), 3.65% (e.g., some technology related revenues, companies choosing the income taxation based on certain regimes, etc.), 4.65% (e.g., financial revenues) and 9.25% (regular regime).

e) IPI: Depend on the fiscal classification of the goods, but usually it varies from 0% to 25%.

f) ICMS: Rates may vary depending on several items and circumstances, but some traditional ones are: 0% (e.g., exemptions), 4% or 12% (e.g., interstate remittances), 17%-18% (e.g., internal remittances and imports) and 25% (e.g., telecom services, electricity, etc.).

g) ISS: Varying from 2%-5%.

g) IOF: Rates are very specific depending on some circumstances and nature of the transaction, and may be levied upon loans, gold resale, insurance, financial transactions, foreign remittances, etc. It´s worth mentioning that several remittances and investment made by foreign companies and individuals could be exempted from such tax.

h) II: Depend on the fiscal classification of the goods, but usually it varies from 0% to 35%.

Canada Small Flag Canada

Canada has a mature and rather complex tax system that generally follows the OECD Model. Under the Constitution Act 1867, the federal Parliament can enact laws for the purpose of levying direct and indirect taxes, from domestic and foreign sources. Provinces can enact laws for the purpose of levying direct taxes within the province only. The principal taxes are imposed on income and goods and services (value-added taxes). Specific taxes also apply to fuel, tobacco and land transfer duties.

As far as federal income tax is concerned, business profits, income from property (including rents, royalties, interest and dividends) are included in a corporation’s income. And individual can be taxed on the same sources of income, but can also generate taxable income from employment (unlike a corporation). Individuals can also contribute to tax savings accounts (e.g. RRSP and TFSA). In some cases, the contribution triggers a credit when it is made and the payment is taxable upon withdrawal. In other cases, the contribution and withdrawal are both tax neutral.

All Canadian taxpayers – corporations, individuals and trusts – must also include in income their taxable portion (50%) of capital dividends generated in a given taxation year.

Rates for Individuals

 

Interest

Capital Gains

Eligible Dividends

British Columbia

49.80%

24.90%

31.44%

Alberta

48.00

24.00

31.71

Saskatchewan

47.50

23.75

29.64

Manitoba

50.40

25.20

37.79

Ontario

53.53

26.76

39.34

Québec

53.31

26.65

40.00

New Brunswick

53.30

26.65

33.51

Nova Scotia

54.00

27.00

41.58

P.E.I.

51.37

25.69

34.23

Newfoundland & Lab.

51.30

25.65

42.62

Northwest Territories

47.05

23.53

28.33

Nunavut

44.50

22.25

33.08

Yukon

48.00

24.00

28.92

Rates for General Corporations

 

Active Business Income

Investment Income

Federal Rates

 

 

General corporate rate

38.0%

38.0%

Federal abatement

(10.0)

(10.0)

 

28.0

28.0

Rate reduction

(13.0)

(13.0)

 

15.0

15.0

Provincial/territorial rates

 

 

British Columbia

12.0%

12.0%

Alberta

12.0

12.0

Saskatchewan

12.0

12.0

Manitoba

12.0

12.0

Ontario

11.5

11.5

Québec

11.7/11.6

11.7/11.6

New Brunswick

14.0

14.0

Nova Scotia

16.0

16.0

Prince Edward Island

16.0

16.0

Newfoundland & Labrador

15.0

15.0

Northwest Territories

11.5

11.5

Nunavut

12.0

12.0

Yukon

12.0

12.0

Colombia Small Flag Colombia

Colombia has been gradually adopting OECD standards for tax purposes, and its membership in the OECD implies a stronger convergence to its model.

Colombia taxes income, consumption and capital, either with national and/or subnational taxes.

Income Tax is levied, as a general rule, on general income, income from immovable property, business profits, services (including income from private and government employment), dividends, interest, royalties, capital gains, and pensions. As a rule, tax withholdings apply. The general corporate Income Tax rate is 33% for FV 2019, 32% for FY 2020. 31% for FY 2021, and 30% for FY 2022 and onwards. A 20% Income Tax rate applies in free-trade zones. A special Income Surtax shall for financial entities during FY 2019, 2020 and 2021.

VAT is levied on sales, provision of services, imports, transfer of intangibles related to industrial property, and gambling. The general VAT rate is 19%.

Stamp Tax is levied on written documents, securities included, executed in Colombia or abroad, but producing their effects inside Colombia, whereby obligations are created, modified, assigned, extended or terminated, whenever their value exceeds certain threshold. Please not that the current Stamp Tax rate is 0%.

Industry and commerce tax (sub-national tax) is levied on the performance of industrial, commercial or service activities within a municipal jurisdiction, at rates that usually range from 0,3% to 1%. Specific rules may vary depending on the municipal jurisdiction.

Real estate tax (sub-national tax) is levied at rates that vary from 0,5% to 1% of the cadastral value of the given property. Specific rules may vary depending on the municipal jurisdiction.

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 of companies, adjusted for various disallowances and exemptions, are subject to tax at 12.5%. Notional interest deduction can reduce the tax to 2,5% if certain criteria apply. The intellectual property box regime gives greatly reduced rates of tax on income and gains from qualifying assets.

b. For individuals, the first EUR19,500 of annual taxable income (which includes business profits, income from employment and pensions) after deducting the allowance 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 from employment in the initial years of residence which can go up to 50% for 10 years. 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. Passive 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 from another Cyprus-resident company (and those received from overseas - see 23 below) 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 after deducting capital allowances and any other attributable expenses to the income such as interest expense for the acquisition of the asset. A further 20% allowance is given on the gross rent received by individuals. Rent received by companies, and by individuals who are both resident and domiciled in Cyprus, are subject to SDC tax at an effective rate of 2.25%.

f. The only gains subject to capital gains tax are gains on disposal of immovable property 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 immovable property 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. As of 18th December 2018 the obligation to pay capital duty of 0.6% of the authorized capital or on any subsequent increase on in the share capital, has been abolished Also, a notional interest deduction against profits for corporate income tax purposes is available for new capital introduced into Cyprus companies and permanent establishments which can reduce the tax liability of the Cyprus company by up to 80%.

h. Inheritance tax is not taxable

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 tax-able 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 (Teileinkünfteverfahren).

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 nondeductible.

g) Stamp and/or Capital duties

Germany does not levy stamp or capital duties.

Gibraltar Small Flag Gibraltar

Gibraltar has its own tax system however, it was placed on the OECD white list of territories that has substantially implemented the internationally agreed standard on tax information exchange.

Furthermore, the OECD’s Global Forum on transparency and exchange of Information for tax purposes issued its Phase II report on Gibraltar, with an overall rating of ‘Largely Compliant’ – the same rating as Germany, the UK and the US.

Companies

Gibraltar taxes on profits that are accrued and derived in Gibraltar as a result of activities or services carried out from Gibraltar. It applies a corporate rate of tax of 10%.

Individuals

Income tax is charged on income accruing in or derived from Gibraltar. Income tax is also charged on certain income accruing in, deriving from, or received in any place other than Gibraltar by any person ordinarily resident in Gibraltar.

Tax payers may opt to be taxed under the Gross Income Based System (“GIBS”) or the Allowance Based System (“ABS”). The Commissioner of Income Tax will calculate the final assessment on the basis of the system that is most beneficial for the taxpayer, irrespective of the system that is chosen by the taxpayer at the beginning of the tax year.

GIBS Rates (currently in force 2019/2020)

The income bands and tax rates for income up to £25,000 are:

 

The income bands and tax rates for income above £25,000 are:

 

First £10,000

6%

First £17,000

16%

£10,001 - £17,000

20%

£17,001 - £25,000

19%

Balance

28%

£25,001 - £40,000

25%

 

 

£40,001 - £105,000

28%

 

 

£105,001 - £500,000

25%

 

 

£500,001 - £700,000

18%

 

 

Balance

5%

ABS Rates (currently in force 2019/2020)

Taxable Income bands

Rate %

Tax on band

£0 - £4,000

14

£560

£4,001 - £16,000

17

£2,040

Over £16,000

39

 

The allowances and reliefs that apply under each system differ.

Pension income from an approved pension will not suffer tax in Gibraltar.

Gibraltar does not levy any VAT.

Passive income is not taxable in Gibraltar.

Royalties income is subject to tax at 10%.

Gibraltar has no capital gains tax.

Gibraltar has no inheritance tax.

Gibraltar has no wealth tax.

Stamp duty is only applied on the transfer of property (or transfer of shares where the company holds Gibraltar property) at the following rates:

First and second-time buyers

 

First £260,000

Nil

Balance above £260,000 to £350,000

5.5%

Balance above £350,000

3.5%

Other buyers

 

Where purchase price does not exceed £200,000

Nil

Purchase price of between £200,001 and £350,00

2% on first £250,000 and 5.5% on balance

Purchase price of over £350,000

3% on first £350,000 and 3.5% on balance

Greece Small Flag Greece

Overall, the main principles of the Greek tax system are not materially different to what can be found in the other OECD jurisdictions.

  • Income tax applicable to legal persons and entities is imposed at a flat rate of 28%. This rate is currently set to be gradually reduced over the next three years to 25% (in respect of the fiscal year 2022 onwards), by one point per year whereas the newly elected government has announced a greater reduction.
  • The gradual tax scale applicable to employment income and business income earned by individuals (salaries and pensions) is the following:

    Income bracket (Euro)

    Tax rate (%)

    Up to 20,000

    22

    20,001 - 30,000

    29

    30,001 - 40,000

    37

    Excess

    45

    A special solidarity contribution is also imposed on the actual and imputed reported income of individuals. The relevant contribution is imposed on net salaries or any other type of income, pursuant to the following scale:

    Income bracket (Euro)

    Tax rate (%)

    12,000

    0

    20,000

    2.2

    30,000

    5

    40,000

    6.5

    65,000

    7.5

    220,000

    9

    Excess

    10

  • VAT is set at a flat rate of 24%, although some goods or services are subject to a reduced rate.
  • Individuals are taxed in respect of interest income at a flat rate of 15%, in respect of income from royalties at a flat rate of 20% and in respect of income from dividends at a flat rate of 10%.

    Income from real estate property is taxable at a gradual scale as follows:

    Income (Euro)

    Tax rate (%)

    Up to 12,000

    15

    12,001 to 35,000

    35

    35,001 and more

    45

  • Capital gains are taxable at a flat rate of 15% for individuals.
  • Stamp duty is levied on specific documents and transactions, including loan agreements, at a 2.4% or 3.6% rate. Capital accumulation tax is imposed upon specific acts mainly relevant to share subscription at a 1.1% rate.
  • Taxes in relation to the holding and transferring real estate are also applicable, namely real estate transfer tax, unified real estate tax and special tax on real estate.

India Small Flag India

India tax system comprises of direct and indirect taxes. While direct taxes are levied by the Central Government, some of the indirect taxes are levied by the States. Direct tax is on income which is to be categorized as (a) Business profits (b) employment income (c) House Property Income (d) Capital Gains and (d) Other Income.

Tax rates applicable are as under:

Type of income

Tax rate (exclusive of surcharge and cess)

Business profits

Domestic companies - 30% / 25% (if turnover is upto INR 400 crores in FY 2017-18)

Non-resident companies: 40%

Employment income

Taxed on progressive basis as per slab rates*:

Income                          Tax rate

Upto INR 2.5 lakhs              NIL

INR 2.5 lakhs- 5lakhs          5%

INR 5lakh- 10lakh              20%

More than INR 10lakhs      30%         

*-slabs to vary for individuals more than 60years of age and upto 80years of age, and more than 80years of age.

Capital Gains

Rate varies based on residency of the taxpayer, nature of the asset and period of holding. For Indian residents, tax rate ranges from 10% to 30% and for non-residents, from 10% to 40%.

House Property and Other Income

Taxed as per normal rates as applicable for business income/employment income.

Minimum Alternate Tax (“MAT”)

Companies are liable to pay MAT at 18.5% on adjusted accounting profits if the tax payable under normal provisions is lower than the amount of MAT

Alternative Minimum Tax (“AMT”)

For taxpayers other than companies, AMT is applicable at 18.5% on adjusted total income instead of MAT at 18.5% as mentioned above

Royalty / fees for technical services

Taxable for non-residents at 10%

\Indirect tax: Goods and Service tax

GST @ 5%, 12%, 18% and 28% on various goods/services.

 

Stamp duties

Varies from state to state

Ireland Small Flag Ireland

The Irish tax system broadly follows the OECD Model. It is a worldwide system of taxation for Irish residents with a credit for foreign taxes paid. Non-resident are subject to tax on Irish source income or income derived from an Irish branch or agency.

For companies, business profits are taxed at 12.5% where they are derived from a trade in Ireland. Passive income is taxed at 25%. Dividends received by an Irish company may also be taxed at 12.5% or 25% with a credit for foreign withholding and underlying taxes. Start-up companies may be able to avail of an exemption from corporation tax for up to three years.

Marginal income tax rates for employees or pensioners are highly progressive rising on a graduated scale from 20% up to 52% (including 4% employee social insurance contribution).

VAT may apply to supplies of goods and services. The standard rate of VAT is 23%. There are reduced rates of 13.5% (broadly construction, tourism industry and related activities, and certain other services), 9% (broadly newspapers and periodicals) and 0% (broadly food etc.). Certain other services are exempt (mostly finance related).

The rate of tax on deposit interest for individuals is 35% and for companies it is typically regarded as passive income taxable at 25%. There is no separate tax rate for royalties.

Rental income for companies is taxable as passive income at 25% and individuals are taxed at their marginal income tax rate.

The standard rate of capital gains tax is 33% though there is an Entrepreneur Relief which provides for a reduced 10% capital gains tax rate in certain circumstances up to a lifetime limit of €1 million.

There is stamp duty on certain legal documents executed in Ireland or related to Irish property. The applicable rate of stamp duty on the transfer of Irish shares is 1%, on residential property is 2% (or 1% up to €1 million) and on non-residential property is 6%. There is no capital duty in Ireland.

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 and ratified the MLI.

General tax rates:

The general corporate income tax rate is 23%. 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 (roughly, US $180,000). 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, 23%).

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, under certain conditions, capital gains from the sale of non-substantial participation (i.e., up to 2%) in resident companies whose shares are listed are not subject to income tax.

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.

Austria Small Flag Austria

Austria committed itself to the international standards of the OECD Model.

a) Resident corporations in Austria are subject to corporate income tax of 25% with their total income regardless of the source (e.g. business income, savings income and royalties, income from land) unless it is exempt from taxation. The most important items of exempt income are dividends and, under certain conditions, capital gains generated from the sale or other disposition of foreign shareholdings. According to the government program the corporate tax burden shall be reduced in the near future.

The business profits of individuals are subject to personal income tax at a progressive rate starting at 25% (for net income above EUR 11,000) and going up to a maximum rate of 50% (for net income above EUR 90,000) and of 55% (for net income above EUR 1,000,000).

b) Employment income and pensions are also subject to personal income tax at the progressive rate (see above at point a)). The employer has to withhold the income taxes levied on employment income.

c) VAT is generally levied on the sale of goods and supply of services. The standard rate is 20%. Certain goods and services, however, are subject to a reduced tax rate of 10% (e.g. food, books) or 13% (e.g. plants, hotel accommodation).

d) Ordinary capital income (dividends, interest payments) of individuals is subject to a flat-rate tax of 27.5%, with the exception of certain savings income, where a flat-rate tax of 25% applies. Savings income and royalties of corporations are subject to corporate income tax of 25%.

e) Rental income of individuals is also subject to personal income tax at the progressive rate (see above at point a)). Income derived by individuals from the disposal of real estate is subject to flat-tax rate of 30%. Income of corporations from land is subject to corporate income tax of 25%. Private capital gains relating to shares in a corporation or other financial instruments are generally subject to a flat-tax rate of 27.5%. Income derived by individuals from the disposal of real estate is subject to flat-tax rate of 30%. Capital gains of corporations are generally subject at the standard tax rate of 25%. However, gains from the sale of an international participation (i.e. the non-resident subsidiary is comparable to an Austrian company or is listed in the EU parent-subsidiary directive, the parent company holds at least 10% of the capital of the subsidiary for at least one year).

f) Stamp duties are due on numerous legal transactions concluded in written form. The rates vary between 0.8% and 2%. Residential lease agreements are exempt from stamp duty since November 2017. However, business lease agreements (e.g. for shops) are still subject to stamp duty. Capital duty on equity contributions to companies was abolished from 31.12.2015.

Japan Small Flag Japan

Yes, the Japanese tax system broadly follows the recognized OECD model. Especially in the area of international taxation, Japan enters into tax treaties essentially based on the OECD model tax treaty and amends the tax law based on the BEPS recommendations.

A. Taxation of Business Profits

Under the Income Tax Act, business profits earned by Japanese resident individuals are subject to (i) income tax at the progressive tax rate, which is 45% at the maximum, (ii) special reconstruction tax at the rate of 2.1% of the amount of income tax, (iii) local residence tax at the rate of 10%, and (iv) local business tax, the tax rate of which depends on the type of business.

Under the Corporation Tax Act, business profits earned by Japanese domestic corporations are subject to (i) corporate tax, (ii) local corporate tax, (iii) local residence tax, and (iv) local enterprise tax. The effective tax rate applied to Japanese domestic corporations for the business years starting on or after October 1, 2019, will be approximately 30.62%, if such corporations are located in Tokyo and their paid-in capital exceeds JPY 100 million.

Non-resident individuals and foreign corporations shall be subject to such Japanese tax only on business profits attributable to their permanent establishment in Japan.

B. Taxation of Employment Income and Pensions

Under the Income Tax Act, employment income is usually classified as salary income and is subject to the (i) income tax, (ii) special reconstruction tax, and (iii) local residence tax at the tax rate mentioned above. If employment income is categorized as retirement income, a more favorable tax treatment will be applied.

Pensions are usually classified as miscellaneous income and subject to the above taxes (i), (ii), and (iii).

Employment income paid to non-resident individuals for their work in Japan and pensions are subject to the withholding tax at the rate of 20.42%.

C. VAT (or other indirect tax)

Business operators who engage in selling products, renting assets, or providing services in exchange for consideration as a business in Japan (“Taxable Sales”) are obliged to pay the consumption taxes on the Taxable Sales in general. Business operators whose Taxable Sales during the base year (i.e. the business year that is second preceding business year of the relevant year ) and during the first 6 months of the preceding business year is respectively JPY 10 million or less are not required to pay the consumption tax for the relevant business year.

The tax rate is currently 8%, but it will increase to 10% on October 1, 2019.

D. Taxation of Savings Income and Royalties

Under the Income Tax Act, savings income is usually classified into interest income. Japanese resident individuals are subject to the withholding tax on interest income at the flat tax rate of 20.315%, separately from other income. Royalties are generally classified into business income or miscellaneous income and subject to taxation in substantially the same way as business profits.

Under the Corporation Tax Act, Japanese domestic corporations are subject to savings income and royalties taxation in substantially the same way as business profits.

Non-resident individuals and foreign corporations without a permanent establishment in Japan are subject to the withholding tax at the rate of 15.315% on savings income and 20.42% on the royalties for intellectual property, if they are sourced in Japan, unless such taxation is exempt or reduced under the applicable tax treaty.

E. Taxation of Income from Land

a Rents

Under the Income Tax Act, rents from land will be usually categorized as business income or real estate income and taxed at the progressive tax rate. Japanese domestic corporations will be taxed on such income in substantially the same way as business profits.

Non-resident individuals and foreign corporations are subject to the withholding tax at the rate of 20.42% on such income in general, if it is sourced in Japan, unless such taxation is exempt or reduced under the applicable tax treaty.

b Capital Gains

Individuals are subject to income tax on capital gains from the transfer of land separately from income at a flat rate. If the individual has owned the land for 5 years or more until January 1 of the year during which the land is transferred, the tax rate will be 20.315%, while, in other cases, the tax rate will be 39.63%. Please note that, if a non-resident individual without a permanent establishment in Japan transfers land in Japan, a withholding tax will be imposed on the purchase price for the land at the rate of 10.21% in general.

Corporations are subject to taxation on capital gains in substantially the same way as business profits, while a withholding tax will be imposed on the purchase price paid to foreign corporations at the above rate.

F. Taxation of Capital Gains

Japanese resident individuals will be subject to the tax on capital gains from the transfer of securities separately from other income at the flat rate of 20.315%. Japanese corporations are subject to taxation on capital gains in substantially the same way as business profits.

Non-resident individuals and foreign corporations without a permanent establishment in Japan are subject to the tax on capital gains of shares of a Japanese corporation only when (i) they owned 25% or more of the shares of the corporation sometime during the three-year period before the end of the business year and have sold 5% or more of the shares during the business year or (ii) such Japanese corporation is a real estate-holding corporation, unless such taxation is exempted under the applicable tax treaty.

G. Stamp and/or Capital Duties

Japan has a stamp tax that is imposed on certain types of documents (e.g. loan agreements) executed in Japan. The tax rate depends on the type of documents and the amount of the object of the agreement.

Japan does not have capital duties, although a registration tax will be imposed on the amount of paid-in capital registered on the commercial registry at the flat rate of 0.7%.

Luxembourg Small Flag Luxembourg

The Luxembourg tax system follows mainly the OECD Model.

The LITL provides for eight categories of income that are taken into account for the determination of the taxable net income: income from commercial activities, income from independent activities (including directors’ fees), income from agricultural/forestry activities, employment income, pension income, investment (dividend and interest) income, rental and royalty income and miscellaneous income (including capital gains).

a) Business profit / capital companies taxation

Luxembourg levies corporate income tax (“CIT”) on the annual net worldwide profits of Luxembourg resident companies and on source-based profits of non-resident companies. Profits and charges are accounted for on an accrual basis.

As from the tax year 2019, income exceeding EUR 200,000 is taxed at a rate of 17%. In addition a 7% solidarity surcharge for the employment fund and a 6.75% municipal business tax (“MBT”) for companies registered in Luxembourg City are levied. For companies located outside of the Luxembourg City a different rate of MBT may apply.

The above amounts to an aggregate tax rate for Luxembourg-City domiciled companies of 24.94%.

Since 1 January 2019, two intermediary CIT rates have been introduced:

  • 15% for taxable income up to EUR 175,000, and
  • EUR 26,250 plus 31% of the tax base above EUR 175,000, for taxable income between EUR 175,000 and EUR 200,000.

b) Employment income and pensions / individuals

Individuals tax resident in Luxembourg are taxable on their worldwide income (unless an applicable treaty determines otherwise). The calculation of Luxembourg income taxes depends on the taxable income and the individual’s family status.

With regard to employment income not exceeding EUR 200,004, it is subject to progressive tax rates ranging from 0% to 45.78% (the threshold is of EUR 400,008 for couples taxed jointly). The income in excess is subject to 45.78%.

Pension income is subject to a specific tax regime where 50% of the life annuities is tax exempt. Lump-sum payments in the framework of pension may be paid tax free or are only taxable at 50% of the average tax rate, depending on the kind of the premiums paid.

c) VAT

Supply of goods and services are subject to VAT in Luxembourg. Currently four rates are applicable: 17% standard rate; an intermediary rate of 14%; a reduced rate of 8%; and a super-reduced rate of 3%.

Annexes A, B and C of the law of 12 February 1979 as amended (the “VAT Law”) provide for a detailed list of services and goods that are subject to the reduced rates. Such Annexes are to be interpreted strictly.

There are also custom and excise duties applicable for certain goods.

d) Savings income and royalties

Under Luxembourg general tax laws currently in force and subject to the law of 23 December 2005, as amended (the “Relibi Law”) mentioned below, there is no withholding tax on payments of interest made to Luxembourg residents.

Under the Relibi Law payments of interest or similar income made or ascribed by a paying agent established in Luxembourg to an individual beneficial owner who is a resident of Luxembourg will be subject to a withholding tax of 20%. Such withholding tax will be in full discharge of income tax if the beneficial owner is an individual acting in the course of the management of his/her private wealth. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent.

An individual beneficial owner of interest or similar income who is a resident of Luxembourg and acts in the course of the management of his private wealth may opt for a final withholding tax of 20% when he/she receives or is deemed to receive such interest or similar income from a paying agent established in another EU Member State (other than Luxembourg) or in a State of the European Economic Area (which is not an EU Member State).

Royalties are taxed as income following the rules as mentioned above.

e) Income from land

Rental income is subject to taxation at the normal tax rates mentioned above (for companies or individuals).

f) Capital gains

For Luxembourg resident companies, in principle capital gains arising from the sale of assets are treated as ordinary income and taxed as such, unless participation exemption applies.

Capital gains exemption is available if, at the time the capital gains are realised:

  • the Luxembourg company has held a direct participation representing at least 10% of the nominal paid-up share capital of its subsidiary (or if below 10%, a direct participation having an acquisition price of at least EUR 6 million);
  • it has held such qualifying participation for an uninterrupted period of at least 12 months; and
  • the subsidiary entity is (i) a Luxembourg resident entity fully subject to Luxembourg income taxes, or (ii) a non-resident capital company liable for an income tax in its country of residence comparable to the Luxembourg CIT, or (iii) an entity resident in a Member State of the European Union (as defined in Article 2 of the EU Parent-Subsidiary Directive 2011/96, as amended (the “PSD”)).

It is important to note that the GAAR does not apply to capital gains deriving from qualifying subsidiaries benefitting from the Luxembourg participation exemption, regardless of their location.

With regard to individuals, non-speculative gains on the sale of shares (if no important participation of 10% or more), are not taxable.

g) Stamp and/ or capital duties

Under Luxembourg law, certain acts such as official acts, acts of estate agents and transfer of ownership of certain goods are required to be registered with the Luxembourg AED. Registration duties are fixed or proportional, depending on the nature of the acts and transfers that are subject to them.

Capital duty has been abolished in Luxembourg since 2008. Since then, a fixed registration fee of EUR 75 is due in some specific cases determined by law such as but not limited to: upon incorporation or subsequent capital increase and migration of a company to Luxembourg.

Malaysia Small Flag Malaysia

Whilst Malaysia is not an OECD member country, Malaysia’s territorial tax system broadly follows the recognised OECD Double Taxation Agreement (“DTA”) Model, save that under Malaysian laws, other than gains from disposal of real property or from sale of shares in a real property company, capital gains are not subject to income tax.

Under the Malaysian tax laws, taxes are imposed as follows:

 

Rates

Flat/Graduated

 

Business profits

24% (standard corporate tax)

For companies resident and incorporated in Malaysia which has a paid-up capital in respect of ordinary shares of RM 2.5 million and less at the beginning of the basis period for a year of assessment:

 

17% on first RM  500,000 and balance taxed at 24%

 

Flat

Employment income

0-28%

Graduated

 

Sales Tax tax

5%, 10% or at a specific rate

 

Flat

Service Tax tax

6%

Flat

 

Customs duty/tariff rates

 

0%-50%

Flat

Tourism tax

 

RM 10/room per night

Flat

Royalty

 

 

 

Regular tax rates (subject to qualified exemptions under Schedule 6 of the ITA)

 

10% withholding tax on payments to non-residents falling under Section 4A of the ITA

 

Flat

Income from land

Regular tax rates

Flat

 

Capital gains

 

5%-30% (Only for gains from disposal of real property or from sale of shares in a real property company)

 

Flat

Stamp duty

 

 

Varies (See First Schedule of the Stamp Act 1989)

 

-

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 that fall under the characterisation of business profits could indeed be subject to taxation.

With respect to the double taxation agreements entered 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’s 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 deemed 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 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 0 per cent tax rate. Moreover, it should be noted that the exportation of goods or services are subject to a 0 per cent tax rate 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 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 $187,390 Mexican pesos).

In cases where the aforesaid conditions 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 this 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 in 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.

The Netherlands Small Flag The Netherlands

The Netherlands, as a member of the OECD, follows the recognized OECD Model. The Netherlands has:

  • Corporate income tax: levied at rates of 19% (taxable profits up to EUR 200,000) and 25% (taxable profits in excess of EUR 200,000) which is based on business profits and includes capital gains (capital gains on the sale of shares may be exempt under the Dutch participation exemption).
  • Value added tax: based on the EU VAT system and levied at 9% (lower rate) or 21% (higher rate) with a number of exemptions and 0% rates.
  • Personal income tax: divided into three 'boxes':
    • Box 1: Income from labor, which includes business profits, employment income, pensions and other income from labor (where there is no material business enterprise and no employment);
      • Levied at a progressive rate of up to 51.75%.
    • Box 2: Income from significant shareholdings (generally 5% or more of (a class of) shares of a company), which includes dividends and capital gains.
      • Levied at a rate of 25%.
    • Box 3: Deemed income from return on investment, which includes all the assets, including land (minus liabilities) not attributable to boxes 1 and 2.
      • Levied at a rate of 30% on a deemed return of up to 5.60% depending on the net worth of the individual, with an exemption for the first EUR 30,360.

The Netherlands does not have capital or stamp duties and does not have specific taxes on savings income, royalties and land (other than within the context of the above framework).

Peru Small Flag Peru

Peru follows in most of their aspects the OECD Model, but in some respects, it follows the recommendations from the UN such as in the case of royalties.

Business profits obtained by persons resident in Peru are levied with a 29.5% corporate tax rate, and distribution of dividends is levied with a 5% tax rate. Branches and other permanent establishments of foreign corporations are levied at the same rates on their business profits, with the particularity that they shall pay the 5% dividends tax at the time of making good of the annual corporate tax, regardless that those dividends have not been distributed at all.

Salaries and wages paid to residents in Peru are levied at progressive rates ranging from 8% to 30%, and those paid to non-residents are levied at a flat 30% rate. Pensions are tax exempt.

VAT is imposed with an effective rate of 18%, which results from adding to the VAT rate (16%) the 2% rate corresponding to the Municipal Promotion Tax (applicable under the same VAT rules). VAT levies all sales of goods (other than real estate) performed in the country, imports of goods and services, provision of services and construction contracts. Exceptionally, the first sale of real estate made by the builder is levied with this tax, but in any event the sale of the land wherein the property is located is tax exempt.

Savings income obtained by individuals (either resident or not) are temporally tax exempt, while royalties are levied at 5% (for resident individuals other than sole proprietors), 29.5% (for sole proprietorships and corporations) and 30% (for non-residents).

Income from land is taxed at 5% (in case of individuals), 29.5% (for sole proprietors and corporations) and 30% (for non-resident sole proprietors and corporations).

Capital gains are taxed at 5% (in case of resident individuals), 29.5% (in case of resident entities) and 30% (for non-residents). There are some exceptions to this rule depending on the mechanism used to carry out the sale (for instance, certain sale of stock and securities through the Lima Stock Exchange can be exempt or subject to a 5% tax).

There are neither stamp taxes nor capital duties in our country.

Philippines Small Flag Philippines

The Philippines tax system broadly follows the recognized OECD Model. Business profits, employment income and pensions are subject to tax. Passive income such as dividends, interest and royalties are likewise subject to tax. Ordinary and capital gains from real property, as well as capital gains from other capital assets are subject to tax. The tax system also has a VAT regime and imposes stamp duties.

Resident citizens are taxed on income derived from sources within and outside the Philippines, while non-resident citizens, resident aliens and non-resident aliens engaged in trade or business in the Philippines are taxed only on Philippine-sourced income.

The taxable income of resident citizens, non-resident citizens, resident aliens and non-resident aliens engaged in trade or business in the Philippines are subject to the following regular income tax rates:

(a) Effective January 1, 2018 until December 31, 2022:

Not over P250,000

0%

Over P250,000 but not over P400,000

20% of the excess over P250,000

Over P400,000 but not over P800,000

P30,000 + 25% of the excess over P400,000

Over P800,000 but not over P2,000,000

P130,000 + 30% of the excess over P800,000

Over P2,000,000 but not over P8,000,000

P490,000 + 32% of the excess over P2,000,000

Over P8,000,000

P2,410,000 + 35% of the excess over P8,000,000

(b) Effective January 1, 2023:

Not over P250,000

0%

Over P250,000 but not over P400,000

15% of the excess over P250,000

Over P400,000 but not over P800,000

P22,500 + 20% of the excess over P400,000

Over P800,000 but not over P2,000,000

P102,500 + 25% of the excess over P800,000

Over P2,000,000 but not over P8,000,000

P402,500 + 30% of the excess over P2,000,000

Over P8,000,000

P2,202,500 + 35% of the excess over P8,000,000

Individual citizens, resident aliens, and non-resident aliens engaged in trade or business in the Philippines are subject to a 20% final tax on interest and royalties. Dividends received by individual citizens and resident aliens are subject to 10% final tax, while those received by non-resident aliens engaged in trade or business in the Philippines are subject to 20% final tax. Capital gains derived from the disposition of real property classified as capital assets are subject to a 6% final tax. Income from the sale of real property classified as ordinary assets, on the other hand, is subject to the regular income tax rates. Capital gains from the sale of shares of stock not traded in the stock exchange are subject to a 15% final tax.

Non-resident alien individuals not engaged in trade or business in the Philippines are subject to 25% tax on gross income received from all sources within the Philippines (including interest, royalties and dividends). Capital gains derived from the disposition of real property classified as capital assets are subject to a 6% final tax. Capital gains from the sale of shares of stock not traded in the stock exchange are subject to a 15% final tax.

Domestic corporations are taxed on taxable income derived from all sources within and outside the Philippines. Foreign corporations are taxed only on income derived from Philippine sources.

Domestic corporations and resident foreign corporations are subject to a 30% income tax based on taxable income. Royalties and interest from deposits and deposit substitutes are subject to 20% final tax. Capital gains derived from the sale of stock not traded in the stock exchange are subject to 15% final tax for domestic corporations, and 5%/10% final tax for resident foreign corporations. Dividends received by domestic corporations and resident foreign corporations from another domestic corporation are exempt from income tax.

Profits remitted by a branch office of a foreign corporation to its head office are subject to a 15% tax, based on the total profits applied or earmarked for remittance, without any deduction for the tax component thereof.

Non-resident foreign corporations are subject to a 30% income tax on income from all sources within the Philippines, including interest, royalties, dividends and capital gains, except capital gains derived from the sale of stock not traded in the stock exchange, which is subject to 5%/10% final tax. The 30% tax on dividends may be reduced to 15% subject to compliance with the requirements for tax sparing credit.

A 12% VAT is imposed on the sale, exchange, lease and importation of goods, as well as on services rendered in the ordinary course of business.

The Philippine Tax Code also imposes stamp duties on several types of transactions, including (1) original issuance of shares of stock (1% of the total par value); (2) subsequent transfers of shares of stock (0.75% of the total par value); (3) debt instruments (0.75% of the issue price); and (4) transfers of real property (1.5% of the consideration or fair market value, whichever is higher).

Poland Small Flag Poland

The Polish tax system follows the recognized OECD Model and provides for the taxation of the following:

a) Business profits

Companies with their registered office or management board in Poland are obliged to pay CIT on all their income. Companies without their registered office or management board in Poland are obliged to pay CIT on income they earn in Poland. The flat CIT rate is 19 per cent.
The reduced 9 per cent CIT tax rate is applicable to incomes other than from capital gains (if the revenues earned by the taxpayers in a tax year did not exceed an amount denominated in zlotys being the equivalent of EUR 1,200,000 and:

  • taxpayers have a status of a small taxpayer (i.e. taxpayer whose value of sales revenue – including the amount of VAT due – did not exceed in the previous fiscal year, the amount corresponding to the equivalent of EUR 1.2 million, expressed in zlotys); or
  • taxpayers start their business activity, however, the foundation of the company cannot result from the transformation or merger.

It should be noted that 9 per cent tax rate does not apply to tax capital groups and companies under division. Additionally, the 9 per cent CIT tax rate cannot be applied also to taxpayers contributing in the form of an enterprise, its organized part or its assets, if their value exceeds the equivalent of EUR 10,000, as well as in a situation where the contribution concerns assets acquired by a taxpayer in connection with the liquidation of entities in which it held shares.

b) Employment income and pensions

  • Polish tax residents

    When the residents work under an employment contract for the Polish company and perform the work in the territory of Poland, the employer as a tax remitter withholds PIT at progressive tax rates of 18 per cent (it should be noted the Polish legislator intends to lower the PIT rate from 18 per cent to 17 per cent) or 32 per cent of the taxable base. These tax rates are applicable when the employee’s remuneration exceeds the respective PIT threshold. The employer should paid the PIT advances to the tax office by the 20th of the month following the month in which the tax was withheld. Residents are obliged to tax their worldwide income in the annual tax return. It should be noted that there are specific detailed provisions concerning the joint taxation of married taxpayers.

    In case when the employee renders work for foreign employer (non-Polish company) in the territory of Poland, such employer does not act as tax remitter and does not have a withholding tax obligation and the employee himself should pay the tax advances to the tax office.

  • Non tax residents

    Non-residents may be subject to Polish tax on income for work performed in Poland. However, the pertinent double tax treaty may decide otherwise.

c) VAT (or other indirect tax)

Polish regulation on Value Added Tax (VAT) are based on the EU legislation. It means that principles of VAT taxation in Poland are in many cases the same as in other EU member states.

The basic VAT rate applicable to most goods and services is 23 per cent.

The rate of 8 per cent applies to pharmaceuticals and medical products, most foodstuffs, restaurants and hotel services, magazines and newspapers as well as transportation services and residential housing.

The rate of 5 per cent applies to supplies of certain foodstuffs (e.g. bread, dairy products, meats), certain kinds of printed books.

A zero VAT rate applies to the intra-Community supply of goods, exports of goods, some international transportation services and related services.

d) Savings income and royalties

Interest and royalties are subject to standard 19 per cent CIT rate at payee level and are generally deductible for the payer. Payments of interest and royalties – as indicated in answer to question 20 are generally subject to 20 per cent withholding tax unless a double tax treaty provides otherwise. Interest and royalties paid by a Polish company to companies established in Poland, EEA countries or Switzerland may be exempt from withholding tax when the conditions set out in the Interest and Royalties Directive are met (described in details in answer to question 20).

e) Income from land

Earnings from the sale of real estate are subject to 19-per cent CIT in accordance with general principles (income from other sources of revenues).

  • Real estate clause

    Income from the sale of shares, all rights and obligations in partnerships, shares in investment funds as well as receivables being a consequence of holding shares in these entities if at least 50% of the value of assets of these entities comes from real properties located in Poland is taxable in Poland at 19%.

  • CIT on commercial real estate

    This tax relates to commercial real estate which is classified (according to the Classification of Fixed Assets) as office facilities, shopping centres, department stores, independent stores and boutiques, and other commercial and service facilities with the initial value exceeding 10 million zlotys.

    The taxable base is the revenues corresponding to the initial value of the fixed asset determined on the first day of each month resulting from the records maintained less the amount of 10 million zlotys.

    The tax amount to 0.0035% of the taxable base for each month. It is calculated and paid for each month by the 20th day of the following month. It is deducted from CIT advance payments and annual CIT.

f) Capital gains

Capital gains generally are treated as regular income and are subject to the standard 19% CIT. Exemptions may apply under double tax treaties.

g) Stamp duties

Stamp duty is imposed on certain activities undertaken by public administration such as: the issuance of certificates, submission of power of attorneys, permissions and other documents issued by the central and local authorities. The amount of stamp duty and the fixed fee vary for each activity and there are stipulated in the pertinent regulation.

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 2019 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 EUR 80.000, 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) 9% 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: 0,128% (depending on whether the period is less than one year or nod determined), 1,6% or 1,6% (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.

South Africa Small Flag South Africa

South Africa's tax system is largely based on the OECD Model. South Africa is not a member state of the OECD, but obtained observer status in 1998 and is greatly influenced by its policies. South Africa is, for example, a key partner of the OECD and contributes to the OECD's work on policy issues, debt management and fiscal policy amongst others.

South Africa is an associate in six OECD Bodies and Projects and a participant in 15. It currently adheres to 19 OECD instruments.

On 11 January 2019, the OECD, SARS and National Treasury also signed a memorandum of co-operation agreeing to continue working together in the area of taxation, which is in place until December 2023.

South Africa has various direct and indirect taxes.

Residents of South Africa are directly taxed on their worldwide income earned in a particular year of assessment, excluding receipts of a capital nature. Non-residents will be taxed on income from a source within South Africa. Practically, business profits, employment income (and pensions), savings income, income from land are taxed.

Capital gains are also taxed in South Africa. Capital gains in residents' hands are taxed at a lower effective rate than equivalent income receipts. Non-residents will not incur South African capital gains tax on the disposal of assets in South Africa subject to certain provisos. The first proviso is that the asset must not be held as part of or by a permanent establishment of that non-resident in South Africa. The second proviso is that the asset should not comprise immovable property or an interest in a "land-rich" company. A land-rich company is one where 80% or more of the market value of those equity shares, ownership or the right to ownership or those shares is either directly or indirectly attributable to immovable property in South Africa and that non-resident, either alone or together with any connected party, holds at least 20% of the shares in that particular company.

South Africa has the following primary indirect taxes:

  • Value-added tax (currently levied at a rate of 15%); and
  • Customs and excise duties.

South Africa does not impose stamp duty, but does impose securities transfer tax on the transfer of securities.

Corporate income tax is a tax imposed on juristic persons, including listed and unlisted public companies and private companies, collective investments schemes, body corporates, share block companies and close corporations, which are tax resident in South Africa. Juristic persons which are tax resident in South Africa may be incorporated under the laws of South Africa or effectively managed in South Africa. Non-resident juristic persons operating through a branch or having a permanent establishment in South Africa will be subject to corporate income tax all income derived from a source within South Africa. Corporate income tax is levied a flat rate of 28%.

Turnover tax for small business is taxed at a progressive rate ranging from zero tax paid on annual turnover below R335,000, up to a payment of R6,650 on turnover above R750,000, plus 3 percent of any amount above R750,000.

Income earned by employees is taxed in South Africa on a sliding scale from 18%, if taxable income is R195 850 or less, up to 45% where taxable income exceeds R1 500 000.

Pension income (i.e. taxable income from lump-sum benefits or severance benefits) is taxed differently to normal income and is taxed on a sliding scale from 0% where the amount paid out does not exceed R500 000 and 36% on amounts exceeding R1 050 000.

VAT must be levied and paid on the supply of goods and services by a vendor in carrying on an enterprise. VAT is levied at a flat rate, which is currently 15%. VAT is also levied at a rate of 0% on certain taxable supplies, including on basic food stuffs, fuel levy goods, the supply of an enterprise, and the supply of certain services to non-residents. Input tax may still be deducted on the VAT incurred to make zero-rated supplies. By contrast, exempt supplies are supplies of goods or services where no VAT is levied and input tax on the VAT incurred to make exempt supplies is denied. Examples of exempt supplies include financial services, passenger transport in South Africa by taxi, bus or train, educational services provided by recognised educational institutions and childcare services provided at crèches or after-school care centres.

Customs and excise duties are payable at different rates, depending of the applicable tariff code that the goods are imported into South Africa.

Securities transfer tax is taxed at a flat rate of 0.25% on the higher of the market value or consideration received on the transfer of securities.

Transfer duty is a progressive tax levied on the value of any immovable property acquired. The rate ranges from 0% on property valued at R900 000 or less to 13% on property valued above R10 000 000.

Capital gains in a company's hands are taxed at an effective rate of 22.4%, whereas capital gains in an ordinary trust's hands are taxed at an effective rate of 36%. Capital gains in an individual's hands are taxed at a maximum effective rate of 18%.

Spain Small Flag Spain

The Spanish tax system follows the OECD Model.

a. Taxation of business profits

The taxable profit is the company’s gross income for the tax period, less certain deductions. Its determination comes up from the annual financial statements prepared under Spanish Generally Accepted Accounting Principles (SGAAP), as adjusted under certain statutory tax provisions.

It must be taken into account that Tax Authorities are legally authorized to modify accounting results in order to determinate tax results if they consider that accounting results have not been calculated as defined in the SGAAP.

All necessary expenses and costs connected to producing income may be deducted from gross income to arrive to taxable income determination. Additionally, Spanish CIT Law provides for certain items that are never deductible (permanent differences) or are deductible in a different year (timing differences).

As said, standard tax rate is 25%, though different rates may apply depending on activity and legal form (e.g. 30% for banks).

b. Taxation of employment income and pensions

Spanish tax residents are taxed on a worldwide basis.

Income are subject to Personal Income Tax (PIT) on the basis of a progressive tariffs that depends on the region whether the taxpayer is resident, ranging from 19.5% to 48%.

Social security contributions are mostly paid by employer and a minimum part by the Insured person. Contributions are determine on the basis of a maximum monthly earnings that would operate as a maximum limit to the social security contribution.

Insured person

Social insurance: 4.7% of covered earnings.

The insured's contributions also finance sickness, maternity, paternity, and work injury benefits.

The minimum monthly earnings used to calculate contributions are €1,050; the minimum daily earnings used to calculate contributions are €35.

The maximum monthly earnings used to calculate contributions are €4,070.10; the maximum daily earnings used to calculate contributions for certain occupational classes are €135.67.

Employer

Social insurance: 23.6% of covered earnings.

The employer's contributions also finance sickness, maternity, paternity, and work injury benefits.

The minimum monthly earnings used to calculate contributions are €1,050; the minimum daily earnings used to calculate contributions are €35.

The maximum monthly earnings used to calculate contributions are €4,070.10; the maximum daily earnings used to calculate contributions for certain occupational classes are €135.67.

VAT (or other indirect tax)

The standard VAT rate is 21%. However, the Spanish VAT Law provides for two reduced rates 10% and 4% applicable to specifically listed goods and services.

Spanish VAT is an implementation of the European VAT Directives.

Taxation of capital gains

Capital gains are normally considered as ordinary income taxable at the standard CIT rate (generally 25%) in the tax period they arise.

g. Stamp and/or Capital duties

Operations carried out by non-entrepreneur are usually subject to transfer tax at a tax rate between 1% to 11% (depending on the Spanish Region).

Stamp duties also applies over public documents that might be registered at a Public Registry. The tax rate amounts from 0.1% to 2,5% of the operation value.

Capital tax applies to certain corporate operations and the rate of 1%

Switzerland Small Flag Switzerland

Tax treaties negotiated by Switzerland 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 (highest marginal tax rate):

  • Ticino: 20.67% -> At the moment 20.95%, expected rate 17.01%
  • Zurich: 21.15% -> At the moment 21.96% expected rate 18.19%
  • Zug: 14.60% -> At the moment 15.19%, expected rate 12.30%
  • Vaud: 22.09% -> 13.79% as of January 1st 2019
  • Geneva: 24.16% -> At the moment 24.39%, expected rate 13.99%

Tax is levied on the company’s net income, i.e. gross income minus all commercially justified expenses.

It should be kept in mind that the soon implementation of TRAF will change these significantly.

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 companies and permanent establishment abroad ). 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% -> 41.5%
  • Zug: 23.70%
  • Vaud: 41.50%
  • Geneva: 46.00%

In addition, there are different filing status for individuals that allow them to reduce the tax rate. Generally speaking, the deduction level is the same in all the 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 that rate may vary from one canton to another.

c. VAT (or other indirect tax)

Following Swiss voters’ rejection of the pension reform bill ‘Prévoyance 2020’ on 24 September 2017, VAT rates decreased (as of 1 January 2018) from 8% to 7.7%. VAT on accommodation decreased from 3.8% to 3.7%. The reduced rate charged on basic commodities remains 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 these 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 specific 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 real estate capital gains depends on how long the asset has been owned and varies from one canton to another.

f. Taxation of capital gains

For individuals, the capital gain realised on the sale of a 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 subject to ordinary corporate income tax on all profits, including capital gains). This applies in all cantons.

Capital gains realised by a company 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 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 for the first CHF one million of company share capital. Moreover, many transactions qualify for an issuance stamp tax exemption.

United States Small Flag United States

The US federal tax system is principally comprised of an income tax on individuals and corporations, payroll tax on wages and other items of compensation, and a gift and estate tax.

a) Taxation of Business Profits

US corporations are generally subject to tax on their worldwide taxable income at a flat 21 percent. However, US corporations are effectively taxed at a lower rate of 13.125 percent on their foreign-derived intangible income, which, for taxable years through 2025, is achieved by a 37.5 percent deduction. Finally, as mentioned, certain US corporations may be subject to a base erosion minimum tax that is payable in addition to any other tax liability. The base erosion minimum tax amount is generally the excess, if any, of 10 percent (five percent in the case of taxable years beginning in calendar year 2018) of the corporation’s modified taxable income over an amount equal to its regular tax liability reduced by certain tax credits.

b) Taxation of Employment Income and Pensions

  1. Income Taxes. US individuals are generally subject to tax on their worldwide taxable income, including wages and other items of compensation. Graduated tax rates are then applied to the individual’s taxable income to determine his or her individual income tax liability. Unlike the taxation of corporations, an individual may be subject to additional taxation if the alternative minimum tax applies. For 2019, income of a US individual may be subject to tax at the following graduated tax rates, depending on the taxpayer’s applicable tax bracket: 10, 12, 22, 24, 32, 35, and 37 percent. Finally, US individuals may offset their taxable income by certain tax credits.
  2. Self-Employment Taxes. US individuals who are self-employed must pay self-employment taxes consisting of Social Security and Medicare taxes. For 2019, the self-employment tax rate is 15.3 percent (12.4 percent for Social Security and 2.9 percent for Medicare). Furthermore, an additional Medicare tax of 0.9 percent applies to wages, compensation, and self-employment income above a threshold amount. Self-employed US individuals may be entitled to deduct the employer portion of the self-employment taxes.
  3. Social Security Taxes. Wages and other items of compensation paid to US individuals that are not self-employed are likewise subject to Social Security taxes. For 2019, the tax rate for Social Security is 12.4 percent, 6.2 percent of which is borne by the employer and 6.2 percent of which is borne by the employee. Social Security taxes are subject to a wage base limit. For 2019, the wage base limit is $132,900.
  4. Unemployment Compensation Taxes. Federal Unemployment Taxes provides for payments of unemployment compensation to unemployed workers. Federal Unemployment Taxes are not deducted from the employee’s wages, but are instead borne solely by the employer. For 2019, the Federal Unemployment Tax rate is 6.0 percent, subject to certain wage base limitations, which, for 2019, is $7,000 per employee.
  5. Medicare Taxes. Wages and other items of compensation paid to US individuals who are not self-employed is likewise subject to Medicare taxes. The current rate for Medicare is 1.45 percent for the employer and 1.45 percent for the employee, or 2.9 percent in total. Again, an additional Medicare tax of 0.9 percent applies to wages and other items of compensation above a threshold amount.
  6. c) VAT (or Other Indirect Tax)

    The US does not impose a VAT, nor is there currently a US federal sales or use tax. However, the majority of US states have enacted sales or use taxes.

    d) Savings Income and Royalties

    US corporations are generally subject to tax on portfolio income, such as interest, dividends, and royalties, at a flat 21 percent tax rate, as described in 13.a, above. Unlike US individuals, however, no preferential tax rates apply to dividends received by US corporations, although, under certain circumstances, a US corporation that receives a dividend may be entitled to a dividends received deduction, as discussed below in 22.

    US individuals are likewise generally subject to tax on interest and royalties at the tax rates set forth in 13.b.1, above. However, provided certain requirements are met, qualified dividends may be subject to preferential tax rates similar to capital gains, as discussed below in 13.f. Moreover, US individuals are generally subject to an additional 3.8 percent net investment income tax on portfolio income.

    e) Income from Land

    US corporations are generally subject to tax on income from real property (rents and gain from the sale of the property) at a flat 21 percent tax rate. A US corporation’s ability to utilize losses on a sale or other taxable disposition of real property that is treated as a capital asset for US federal income tax purposes may be limited.

    US individuals are likewise generally subject to tax on income from real property at the statutory rates described above in 13.b.1. However, to the extent the real property is treated as a capital asset for US federal income tax purposes, gains from the sale or other taxable disposition of real property may be subject to preferential rates; losses from a capital asset are generally limited. Moreover, a US individual may be subject to an additional net investment income tax of 3.8 percent on rents and capital gains from the sale of real property.

    Finally, an additional withholding tax of 15 percent may apply to the gross proceeds from the sale or other taxable disposition of US real property (including stock of a US corporation, if at least 50% by value of the corporation’s assets is comprised of US real property) by a non-US individual or entity.

    f) Capital Gains

    The sale or other taxable disposition of property characterized as a capital asset for US federal income tax purposes is subject to special rules. Generally, a capital asset is any asset other than inventory, depreciable property, real property used in a trade or business, and accounts receivable.

    In general, US corporations are taxed at the regular income tax rate of 21 percent on the sale or other taxable disposition of a capital asset. A corporation may not deduct capital losses in excess of capital gains for the taxable year; disallowed losses may be carried back and forward, however.

    By contrast, US individuals who have held a capital asset for more than one year before selling it may be eligible for reduced tax rates. Losses from the sale or disposition of a capital asset may be limited. US individuals may also be subject to an additional net investment income tax of 3.8 percent on any gains from the sale of a capital asset.

    g) Stamp and/or Capital Duties.

    The US does not impose any stamp taxes or capital duties.

Zambia Small Flag Zambia

Yes, they generally follow the OECD Model especially with regard to OECD BEPs programme base erosion and profit shifting.

TAX RATES

  1. Rates for business profits/corporate – 35%
  2. Employment Income/Pay As You Earn(PAYE) – 37.5%(upper limit);
  3. Pension/Gratuity – 0%
  4. VAT – 16%;
  5. Withholding Tax on Dividends by a local Company – 20%;
  6. Withholding Tax on Royalties by a local Company to a Non-Resident – 20%; and
  7. Withholding Tax on interest by a local Company to a Non-Resident – 20%.

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 19%. The corporation tax rate is planned to go down to 17% by 2020.

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 £12,500 – 0%
  • Basic rate between £12,501 to £50,000 – 20%
  • Higher rate between £50,001 to £150,000 – 40%
  • Additional rate over £150,000 – 45%

When an individual taxpayer has income of over £100,000 they lose their personal allowance at a rate of £1 for every £2 of income over £100,000. This has the effect of charging additional tax at the 40% higher rate band.

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. The amount of tax paid on savings income will depend on a person’s total taxable income. Firstly, if one has not claimed the full personal allowance from other income, one can use the remainder of the allowance to earn interest tax-free. Secondly, if one’s other income is less than £17,500, one may also claim up to £5,000 of interest tax-free. Thirdly, one may be eligible for up to £1,000 of interest tax-free depending on which income tax band one is in. 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 annual tax-free allowance for capital gains is £12,000 generally and £6,000 for trusts. 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. Normally, the first £125,000 of the purchase price of a residential property is tax-free. This is also true for the first £150,000 paid for non-residential land and properties. Following bands of the purchase price are taxed rates of 2%, 5%, 10% and 12%. There are different rules if the purchaser (and anyone they are purchasing with) is buying their first home on or after 22 November 2017 and the purchase price is £500,000 or less (“The Help to Buy Scheme”). Where The Help to Buy Scheme applies, up to 100% tax relief can apply.

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 where purchased using a stock transfer form.

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.

Panama Small Flag Panama

Panama adopted mostly the OECD model for Double Taxation Treaties signed. In addition Transfer Pricing Rules incorporate the OECD guides as part of our local regulation for Transfer Pricing matters.

a) Business Profits

A real estate tax is levied on Panamanian-situs real property at rates ranging from 0.60% to 1.00%. Real estates that are registered as family heritage or the principal home of an individual, will be exempt of paying this tax for the first US$120,000.00 of the register value of the property, in case the value is higher than US$120,000.00, then the excess will pay property tax ranging from 0.50% to 0.70%.

b) Employment income and pensions

Individuals are taxed at the following rates:

If the net taxable income is:

Tax will be:

Up to B/.11,000.00

0%

Over B/.11,000.00 up to B/.50,000.00

15% for income exceeding B/.11,000.000 up to B/.50,000.00

Over B/.50,000.00

Will pay B/.5,850.00 for the first B/.50,000.00 and a 25% on excess of B/.50,000.00

Employers are legally required to withhold from employees’ compensation their portion of social security contribution, income tax and educational tax. These amounts are paid on a monthly basis to the Social Security Administration, along with the corresponding employers’ contributions.

Employees pay 9.00% of their salaries for social security and 1.25% for educational tax. Employers contribute 12.00% of the salaries paid to the employees and 1.50% for educational tax.

c) VAT

The tax is levied at the flat rate of 7% (10% in the case of alcoholic beverages and hotel services; a further 15% rate is levied for tobacco related products) on the invoice value of the sale, lease (except as described above) or transfer of any good or services with the exception of intangibles. Foodstuffs, medicines and medical services, crude oil and its by-products, negotiable instruments, and other goods are specifically exempted from this tax.

The tax is paid at the moment the goods or services are invoiced or delivered / rendered, whatever happens first. As every other VAT it is withheld by the seller, lessor or transferor, who must remit the net amounts between what was paid by him (input VAT) and what has been collected by him (output VAT) on a monthly basis. Imported goods pay this tax at the moment of clearing customs.

d) Royalty Payments

Royalty payments are subject to a flat rate of 12.5% if done to non-residents in Panama. In case of residents will be subject to tax at the general flat rate of 25%.

There is no saving incomes as these kind of incomes are exempt of taxes in Panama.

e) Property Tax

A real estate tax is levied on Panamanian-situs real property at rates ranging from 1.75% to 2.1%. As from January 2019, real estate tax rates will be reduce to 0.60% to 1.00%.

f) Capital Gain Tax

Capital gains derived from the sale of securities and negotiable instruments are subject to a 10% tax. The purchaser must withhold 5% of the sales price as an advance payment of income tax and remit that amount to the tax authorities.

Gains from the sale or transfer of real property are considered capital gains. If the transaction giving rise to the gains is part of the taxpayer’s ordinary business, the gains are subject to the specific corporate tax rates; if the transaction is not part of the taxpayer’s ordinary business activities, the gains are taxed at a reduced rate of 10%. However, in the latter case, the seller must paid a 3% of the higher of the purchase price or the rateable value of the property as an advance payment of tax.

g) Stamp Duties

Any document evidencing the transfer of goods to Panama or rendering of services in Panama not subject to VAT are oblige to pay the stamp tax. In addition any contract through which a transaction that generates taxable income in Panama, will be subject to stamp tax also. As a rule of thumb, this tax amounts to 10 cents for each US$100 or fraction documented in the transaction. However, revenue transaction evidencing export and re-export of goods is not subject to stamp tax. Contracts or transactions that are consummated abroad will be exempt of stamp tax unless the document will be presented before a Panamanian Court, in which case the tax must be pay.

h) Commercial License Tax

The tax is a flat rate of 2% apply to the net worth of the business, with a minimum CAP of US$100 and up to a maximum CAP of US$60,000. Companies in special regimes will pay a flat rate of 0.5% apply to the net worth with a maximum CAP of US$50,000.

For the computation of net worth, the amounts due to foreign affiliates may not be considered in the liabilities of the business. Assets not used for activities requiring an Operation Notice are not included in this taxable base. Operation Notice taxes (formerly known as commercial and industrial license taxes) are deductible expenses for income tax purposes.

Updated: October 25, 2019