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 (3rd edition)

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:

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

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

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

The highest marginal tax rate varies significantly from canton to canton, such as:

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

In addition, there are filing status choices for individuals that allow individuals 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 reate 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 such distributions, unless an exemption applies (e.g. an exemption under an international tax treaty).

The withholding tax is levied at a flat rate of 35%. This rate may also be reduced for 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, 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 2018, 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 2018, 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 2018, 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 2018, the wage base limit is $128,400.
  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 2018, the Federal Unemployment Tax rate is 6.0 percent, subject to certain wage base limitations, which, for 2018, 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.

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 Royalty

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.

Canada Small Flag Canada

Individuals are taxed at graduated rates. The rates and income thresholds vary depending on the province of residence. The 2018 income tax rates on regular income for an individual residing in the province of Ontario are as follows.

Taxable Income

Rate

first $42,201

20.05%

over $42,201 up to $45,916

24.15%

over $45,916 up to $74,313

29.65%

over $74,313 up to $84,404

31.48%

over $84,404 up to $87,559

33.89%

over $87,559 up to $91,831

37.91%

over $91,831 up to $142,353

43.41%

over $142,353 up to $150,000

46.41%

over $150,000 up to $202,800

47.97%

over $202,800 up to $220,000

51.97%

over $220,000

53.53%

a) business profits

Corporations are subject to federal and provincial income tax on their business profits. The rates depend on whether the general corporate rate, manufacturing & processing rate or small business rate applies. The small business rate is only available to Canadian-controlled private corporations on up to $500,000 of active business income earned in Canada. The following table sets out the combined federal and provincial rates for 2018.

Province

General Rate

Small Business Rate up to $500,000

M&P Income

British Columbia

27.0%

12.0%

27.0%

Alberta

27.0%

12.0%

27.0%

Saskatchewan

27.0%

12.0%

25.0%

Manitoba

27.0%

10.0%

27.0%

Ontario

26.5%

13.5%

25.0%

Quebec

26.7%

18.0%

26.7%

New Brunswick

29.0%

12.5%

29.0%

Nova Scotia

31.0%

13.0%

31.0%

Prince Edward Island

31.0%

14.5%

31.0%

Newfoundland

30.0%

13.0%

30.0%

b) employment income and pensions

Employment income and pensions are taxed as regular income.

c) VAT (or other indirect tax)

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

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

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

d) savings income and royalties

Savings income and royalties are taxed as regular income.

e) income from land

Income from land is taxed as regular income.

f) capital gains

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

g) stamp and/or capital duties

None.

Austria Small Flag Austria

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

  1. 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).

  2. 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.
  3. 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).
  4. 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%.
  5. 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 nonresident 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).

  6. 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 (i.g. for shops) are still subject to stamp duty.

    Capital duty on equity contributions to companies was abolished from 31.12.2015.

France Small Flag France

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

a. Taxation of business profits

The standard rate of corporate income tax (CIT) is 28% for a taxable profit up to EUR 500,000 and 33.33% beyond EUR 500,000.

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

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

The Finance Act for 2018 provides for a progressive decrease of the standard corporate tax rate: from 33.33% to 25% in 2022 (the 3.3% social contribution will remain applicable so the effective tax rate will be decreased from 34.43% to 25.825%).

This progressive decrease will first apply to SMEs which will benefit from a progressive CIT rate on their 2017 taxable profits: (i) 15% up to EUR 38,120 (ii); 28% between EUR 38,120 and EUR 500,000 and (iii) 33.33% over EUR 500,000.

For fiscal years starting as of 1st January 2019, all French companies will benefit from a 28% CIT rate on their 2018 taxable profits up to EUR 500,000 (the standard 33.33% CIT rate will remain applicable to taxable profits in excess of EUR 500,000).

For fiscal years starting as of 1st January 2018, the 28% CIT rate will fully apply to all French companies which annual turnover does not exceed EUR 1 billion (this limit will be determined on a consolidated basis for tax consolidated groups). As from 1st January 2019, the 28% rate will apply for all French companies up to EUR 500,000 and a 31% rate to taxable profit over EUR 500,000.

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

  • for fiscal years starting from 2020, the 28% CIT rate will become the standard rate as it will apply to all French companies to their overall taxable profit;
  • for fiscal years starting on or after 1 January 2021, a 26.5% CIT rate would apply for all entities.
  • for fiscal years starting on or after 1 January 2022, the 25% CIT rate would apply for all entities.

b. Taxation of employment income and pensions

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

  • the 'contribution sociale généralisée' (CSG - generalised social contribution ) applied at a 9.2% rate; and
  • the 'contribution au remboursement de la dette sociale' (CRDS - social security debt contribution) applied at a 0.5% rate.

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

  • 14% from EUR 9,807 up to EUR 27,086;
  • 30% from EUR 27,086 up to EUR 72,617;
  • 41% from EUR 72,617 up to EUR 153,783; and
  • 45% over EUR 153,783.

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

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

c. VAT (or other indirect tax)

The standard VAT rate is 20%. However, the FTC provides for two reduced rates applied to specifically listed goods and services:

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

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

d. Taxation of savings income and royalties

Regarding companies, savings or investment income and royalties are in principle taxed at the standard 28% and 33.33% CIT rate. However, royalties from the license of patents or patentable inventions may be taxed at a 15% reduced rate (French IP box regime).

Regarding individuals, investment income and royalties are taxed according to the above-mentioned progressive schedule. Investment income (i.e. interests or dividends) is subject to a compulsory 12.8% withholding tax as an advance payment of income tax assessed under the progressive system (tax withheld in excess comes as a reduction of final income tax).

Social contributions are to be added at a global 17.2% rate. In conclusion, investment income is subject to a 30% flat tax on the gross amount (consisting of 12.8% of income tax and 17.2% of CSG/CRDS). If it is more favorable, the taxpayers with the lowest incomes could therefore opt for taxation with the progressive system (with the application of the 40% rebate for dividends). The option will be applicable to all the taxpayers' investment income or capital gains on shares earned during the year under which the option is made.

Savings income and royalties are also liable to the additional 3% and 4% 'contribution sur les hauts revenus' (as described above).

e. Taxation of income from land

Property is subject to taxation according to the income tax progressive schedule as far as individuals are concerned, and at the standard CIT rate as for companies (except the REITs which benefit from 0% taxation).

Income from land is also liable to the additional 3% and 4% 'contribution sur les hauts revenus' (as described above).

f. Taxation of capital gains

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

Yet, please note that long-term capital gains on the sale of shares in real estate companies are taxed at the standard CIT rate plus the additional contributions.

Regarding individuals, capital gains for shares are taxed according at the '30% flat tax' (personal income tax at 12.8% + social contributions at a global rate of 17.2%) on the gross amount (without any rebate).

For shares acquired before 1st January 2018, individuals can opt for the application of the progressive system (as described above) of income tax. The option will be applicable to all the taxpayers' investment income or capital gains on shares earned during the year under which the option is made. In case of option for the progressive system, rebates apply to capital gains on shares depending on the time elapsed since the assets were acquired:

  • 50 % rebate after 2 years of holding; and
  • 65 % after 8 years.

For immovable property, capital gains made by Individuals are subject to a fixed rate of 19%. A rebate applies after 5 years of holding which leads to an exemption after 22 years for income tax and 30 years for social contributions. The capital gain deriving from the sale of the individual's main residence is exempt from income tax.

Capital gains are also liable to the additional 3% and 4% 'contribution sur les hauts revenus' (as described above).

g. Stamp and/or Capital duties

Some goods and deeds are subject to stamp duties.

  • the sale of a business ('fonds de commerce') - tangible and intangible assets included - is taxed according to progressive rates applied on the price paid: •3% from EUR 23,000 up to EUR 200,000; and
  • 5% over EUR 200,000.
  • with respect to the acquisition of real properties, it also triggers the payment of stamp duty where the construction has been completed for more than 5 years at the time of the acquisition. Stamp duty is assessed on the purchase price agreed upon by the parties, increased by any charge or liability of the seller transferred to or assumed by the buyer at the global rate of 5.80%. An additional tax of 0.6% applies in case of acquisition of commercial premises located in the Parisian area. The land registrar's contribution of 0.1% brings the overall taxation at 6.51% in Paris area.

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

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

In any case, notary fees at a 0.814% (excluding VAT) rate will apply to the transaction.

Duties related to a transfer of a non-quoted company shares ('société anonyme', 'société en commandite par actions' or 'société par actions simplifiée') are subject to a single 0.1% rate;

The transfer of shares of a company in which the capital is not divided into shares of stock ('sociétés à responsabilité limitée', 'société civile', 'société en nom collectif') is subject to a 3% registration duty; and

The sale of shares in a real estate company – i.e. a company whose main assets are immovable property or property rights (50% or more) – gives rise to a 5% registration duty.

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%. 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) 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. The first EUR19,500 per year of Cyprus-source widow’s or widower’s pension is free of tax and tax is payable on the balance at 20%. The first EUR3,420 per year of foreign-source pension income is free of tax and tax is payable on the balance at 5%. The taxpayer may opt from year to year to be taxed on the standard basis if this is beneficial.

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

d. Interest and dividends received by individuals who are both resident and domiciled in Cyprus are subject to SDC tax at rates of 30% and 17% respectively. Individuals who are resident but not domiciled in Cyprus are exempt from SDC tax on interest and dividends. Passive interest received by Cyprus-resident companies is subject to SDC tax at 30%. Dividends received by Cyprus-resident companies 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. A 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 0f 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. On incorporation of a Cyprus registered company, capital duty of EUR105 plus 0.6% of the authorised capital is payable. Any subsequent increase in share capital is liable to capital duty at 0.6%. On the other hand, a notional interest deduction against profits for corporate income tax purposes is available for new capital introduced into Cyprus companies and permanent establishments.

Brazil Small Flag Brazil

Brazil follows the principal aspects of the OECD Model Convention, with certain peculiarities.
Resident companies are subject to corporate income tax at the cumulative rate of approximately 34%. IRPJ is calculated and paid at 15% rate, plus a surtax of 10% on taxable income exceeding R$ 20,000 per month or R$ 240,000 per year. The CSLL current tax rate is 9%.

Brazilian Companies are also subject to gross revenues (PIS and COFINS) taxes levied at 7,65% (non-cumulative regime) or 3,65% (cumulative regime).

Tax losses carried forwards can be used only up to 30% of taxable income of a given year.

Tax losses carried forwards do not expire.

Employment income and pensions are also subject to personal income tax at progressive rates, varying from 0% to 27,5%, depending on the value of the income.

The State VAT is levied on import of goods into Brazil, on any sale or transfer of goods within Brazil, and on certain communication and transportation services, even if the import, sale or transfer of goods or rendering of services initiate abroad. It does not apply to transactions with products or services destined to the exportation. The State VAT paid in a determined transaction may be offset against future transactions involving the sale of goods or rendering of the services above mentioned. The State VAT rate varies depending on the type of good or service, and also depending on the State the transaction takes place. As a general rule, transactions within a same State vary from 17% to 18%. Interstate transactions involving remittances to the South and Southeast regions are subject to 12% State VAT rate. On the other hand, interstate transactions involving remittances to the North or Northeast, Mid-West regions and the State of Espírito Santo are subject to State VAT at 7% rate.

Federal VAT (IPI): is a federal tax levied at each production stage of manufactured products and on the import of manufactured products. The Federal VAT is generally applied on an ad valorem basis. It does not apply to products destined to the exportation. As a general rule, the Federal VAT paid on the acquisition or importation of raw materials can offset the tax due on subsequent transfers. The Federal VAT rate depends on the goods’ tax classification code under the Harmonized System of Classification of Goods. Tax rates vary according to the type of product, from 0% to 365.6% (luxury goods).

Services Taxes (ISS): the ISS is a municipal tax levied on the rendering of specific services set forth in the law, according to previously defined rates by each municipality. As a general rule, ISS rates vary from 2% to 5%, depending on each specific municipality. Please note that ISS is also levied upon the import of services into Brazil.

PIS/Import and COFINS/Import are also federal taxes also levied upon the importation of goods and services into the country at the rates of 1.65% and 7.6%, respectively.

Savings income and royalties received by an individual may be subject to personal income tax at progressive rates, varying from 0% to 27,5%, depending on the income’s amount. On the other hand, savings income and royalties received by companies are computed on the basis for calculating the company’s corporate income tax due.

Rental income paid to individuals is subject to personal income tax at progressive rates, varying from 0% to 27,5%, depending on the value of the income. On the other hand, rental income received by companies is computed on the basis for calculating the company’s corporate income tax due.

Capital gains realized by individuals and nonresidents that dispose of assets located in Brazil are subject to progressive income tax rates, which varies from 15% to 22,5%, depending on the capital gain value. On the other hand, capital gains realized by companies are computed on the basis for calculating the company’s corporate income tax due.

Stamp Duty: Brazil does not impose tax on stamp duty.

Capital Duty:Brazil does not impose tax on capital duty.

Transfer Tax (ITBI): The ITBI is levied on the onerous transfers of real estate properties and rights in rem related to real estate properties. The ITBI is levied at the rate of 3%, according to the actual value of the transaction or the appraised value of the property.
Municipal Tax on Urban Real Estate Property (IPTU): The IPTU is a municipal tax annually levied on the estimated value of the urban real estate. It is imposed over the market value of the real estate, at progressive rates, according to each the municipality.Tax on Transfer of Real Properties by Donation or Causa Mortis (ITCMD): The ITCMS is a State tax levied on transfer of the ownership or use of real estate properties by donation or inheritance. As a general rule, the ITCMD tax is levied at 4%, but may vary according to each specific State.

Vehicle Tax (IPVA): Annual tax levied on ownership of vehicles and its tax rates depend on the type and legal classification of the vehicle.

Import Taxes: upon the importation of goods into Brazil, the following taxes will apply:

Import Duty (II): the II is a federal tax levied on the customs value of the imported product and its rates may vary according to the product’s tariff code in the Common Harmonized Nomenclature of Mercosur (“NCM”). The I.I. is payable upon customs clearance of the imported goods and does not give raise to tax credits.

  • Federal VAT(mentioned above)

  • State VAT (mentioned above)

  • PIS and COFINS on import: (mentioned above)

Tax on Financial Transactions (IOF): The IOF applies to various types of transactions, such as insurance, loans, currency exchange, among others. The IOF on currency exchange is levied at 0.38% tax rate. Foreign loan transactions are subject to 6% IOF rate if the minimum average maturity period of 180 days is not accomplished.

Germany Small Flag Germany

a) Taxation of business profits

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

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

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

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

b) Taxation of employment income and pensions

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

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

c) VAT (or other indirect tax)

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

d) Taxation of savings income and royalties

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

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

e) Taxation of income from land

Income from leasing land gained by individuals is also subject to income tax and taxed by a rate up to 45% plus solidarity surcharge of 5.5% on the income tax owed and church tax, if applicable, of up to 9% on the income tax owed.

f) Taxation of capital gains

There is no specific capital gains tax in Germany. Capital gains are treated as current income, but are subject to a distinct treatment in case of a capital gain derived from the disposal of shares or other financial instruments or if certain time periods have elapsed.

Private capital gains and capital gains from business assets of an individual

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

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

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

Capital gains of a corporation

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

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

g) Stamp and/or Capital duties

Germany does not levy stamp or capital duties.

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 and certain other services), 9% (broadly tourism industry and related activities) and 0% (broadly food etc.). Certain other services are exempt (mostly finance related).

The rate of tax on deposit interest for individuals is 37% 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 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. 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.

Malaysia Small Flag Malaysia

Whilst Malaysia is not an OECD member country, Malaysia’s territorial tax system broadly follows the recognised OECD 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 two million five hundred thousand ringgit and less at the beginning of the basis period for a year of assessment:

18% on first RM500k and balanced taxed at 24%

Flat

Employment income

0-28%

Graduated

Sales Tax

5% or 10%

Flat

Service 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)

 

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

0%- 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, the Mexican tax system follows the recognized OECD Model; however, there are some particular provisions that also follow the UN Model.

a) Taxation of Business profits.

Pursuant to the Mexican Income Tax Law, Mexican resident corporations are subject to corporate income tax at a 30% flat rate on their worldwide income, regardless of the source. Foreign residents may be taxed in Mexico if they have a permanent establishment in country on the income attributable to such establishment or if they derive Mexican source income.
b) Taxation of employment income and pensions
Individuals are generally taxed at a graduated rate that goes from 0% to 35%. Employers are required to withhold the corresponding taxes upon salary payments.

Salaries paid to foreign residents shall be considered to be sourced in Mexico to the extent that the employment is exercised in Mexico. There is an exemption in case salaries are paid by foreign residents with no PE in Mexico, or when having one, the employment activity is not thereto related, to the extent that employees stay in Mexico for less than 183 days. However, such exemption is not available when the foreign employer has an establishment in Mexico in respect of which the service is related.

Social security pensions received by Mexican individuals are not subject to tax for up to certain amounts; any excess thereof is taxed as ordinary income. Pensions sourced in Mexico and derived by foreign residents are: (i) exempt when they do not exceed MXN$125,900; (ii) subject to a 15% withholding tax rate if they exceed such amount but do not exceed MXN$1,000,000; and (iii) subject to a 30% withholding tax rate when they exceed MXN$1,000,000.

c) Value added tax.

The general VAT rate is 16% (a 0% rate applies in certain cases) and is determined on a cash flow basis. VAT applies to most sales of goods, rendering of services, leasing of goods and imports of goods or services in Mexico, as defined under the Mexican VAT Law.

d) Savings income and royalties

Interest income is subject to taxation as ordinary income (some exceptions apply for individuals). Interest payments made by Mexican residents to other Mexican residents are subject to withholding taxes only to the extent that they are made by entities that are considered to be part of the Mexican financial system, at a 0.46%. Interest payments made by Mexican residents to foreign residents or interest paid in respect to a loan, the capital of which is invested in Mexico, are subject to withholding taxes at rates that range from 0% to 35%.

Royalties are also taxed as ordinary income (some exceptions for individuals may apply). Royalty payments made from Mexican residents to other Mexican residents are not subject to withholding taxes. Royalty payments made by Mexican residents to foreign residents are subject to withholding taxes at a rate that may range between 5% and 35%.

f). Taxation on income from land.

Income from land is generally taxed as ordinary income for income tax purposes. In addition, it is important to mention that the acquisition of land generally triggers State taxes which range between 1% and 5%.

From a VAT perspective, the sale of land is generally exempt.

Income derived by foreign residents from the sale of land that is located in Mexico is subject to a 25% withholding rate applied to the gross income. Alternatively, to the extent that certain requirements are met such as appointing a legal representative in Mexico, a 35% rate on the net gain may be applied.

g) Taxation of capital gains.

Capital gains derived by Mexican residents are taxed as ordinary income.

Capital gains derived by foreign residents from the sale of shares that are issued by a Mexican resident or that derive their accounting value in more than 50% from immovable property located in Mexico are subject to at a 25% withholding rate applied to the gross income. Alternatively, to the extent that certain requirements are met such as appointing a legal representative in Mexico, a 35% rate on the net gain may be applied.

Mexican individuals and foreign residents are subject to tax at a 10% withholding tax rate upon the sale of Mexican shares that are regularly traded in recognized stock markets.

h) Stamp and/or capital duties.

There are no stamp or capital duties in Mexico.

Norway Small Flag Norway

The Norwegian tax system does generally follow the recognised OECD Model.

a) Business profits

Net taxable income are as of 2018 taxable at a flat rate of 23%.

Special tax regimes do however apply to income from the exploration of petroleum resources, with special tax rates of up to 55% additional to the flat rate, making the total rate 78%.

In the financial sector, a tax rate of 25 % is applicable, and in addition, a special tax of 5% is applied to total salary costs paid by employers in the sector.

A tonnage tax regime is available for qualifying shipping companies exempting them from corporate income tax on operating income and instead paying a small tax based on the net tonnage of ships owned by the company.

In addition to the ordinary income tax of 23 %, hydro-electric power plants are subject to a 35,7 % natural recourse rent tax, so that that the total tax rate amounts to 58,7 %. An amount equal to the normal rate of return on the investment is shielded against the additional tax. In addition, the hydro-electric power plants are subject to a municipal natural resource extraction tax of NOK 0.013 per produced kwh.

Taxable business profits are calculated as the difference between earnings and expenses recognized for tax purposes.

b) Employment income and pensions

Net income is primarily taxed at 23%, further employment income will be taxed at the following progressive rates:

  • 1,4% for any income exceeding NOK 169,000
  • 3,3% for any income exceeding NOK 237,900
  • 12,4% for any income exceeding NOK 598,050
  • 15,4% for income exceeding NOK 962,050

In addition a social security contribution of 8,2% of gross income is payable, resulting in a marginal tax of 46,6%.

The social security contribution for pensions (and other types of personal income other than employment income) is 5,1%.

Various deductions are available, including a standard deduction from ordinary income for incidental personal expenses and unlimited deduction for interests paid on debt.

c) VAT (or other indirect tax)

The supply of goods and services is generally subject to VAT, unless exemptions applies. Financial services, healthcare and education are examples of exempt services. The Norwegian VAT is a multi-stage, non-cumulative general tax. Norway applies a net consumption VAT, calculated according to the indirect subtraction method. The suppliers of goods and/or services are entitled to deduct from the amount of VAT due on their supplies (output VAT) the amount of VAT incurred on their purchases (input VAT).

All companies with an annual turnover that exceeds a threshold of NOK 50,000 must register with the Norwegian VAT register. Taxable entities/ persons with no place of business or residence in Norway must register via a representative who resides or has its place of business in Norway.

Taxpayers must pay the net amount of VAT (balance of output and input tax for the tax period) to the tax authorities, or if input tax exceeds output tax for the period reclaim the balance.

The standard rate of VAT is 25%. For certain goods and services reduced rates are applicable, i.a. a reduced rate of 15% applies to food items and a reduced rate of 12% applies to passenger transport, hotels and accommodation services and various activities such as cinemas, museums and sport events. Zero-rated suppliers, for example exports and suppliers to offshore industries, have the right to deduct input VAT although their output VAT is zero.

Norway offers a refund scheme allowing foreign entities not obligated to register for VAT in Norway to recover input VAT incurred. Refund is limited to business that would have been subject to Norwegian VAT if conducted in Norway, and subject to formal requirements.

d) Savings income and royalties
Royalties and savings income are included in taxable income and taxed at a flat rate of 23%. Norway does not levy withholding tax on royalty payments to nonresidents.

e) Income from land
Income from land is taxed at flat rate of 23%.

f) Capital gains

Capital gains are generally included in income for corporate tax purposes and taxed at a flat rate of 23%. There is a corresponding right to deductions for losses.

Capital gains on shares are tax exempt for all corporate shareholders under the participation exemption. Capital gains on shares in companies resident in the EEA (excluding low-tax jurisdictions) are tax exempt irrespective of participation and holding period. For companies resident in a low-tax jurisdiction within the EEA the substantial business test applies. Capital gains in companies resident outside the EEA, but not in low-tax jurisdictions, are also tax exempt if the shareholder has held at least 10% of the shares and capital for a period of two years.

Capital gains on partnership interests will for a corporate partner be tax exempt if 90% of the partnership investments in shares in companies are tax exempt according to the rules outlined above. Gains will not be tax exempt if the value of shares that are not tax exempt at any time during a two-year period exceeds 10% of the total value of shares. Losses on the partnerships interest will, for a corporate partner, only be deductible if the partnerships non-qualifying shares have exceeded 10% of the total value of shares during the previous two years. For this reason tax rules regarding gains and losses on partnerships interests are asymmetrical. For corporate partners resident in Norway this applies irrespective of where the partnership is registered.

For private tax payers capital gains from the sale of real property used as permanent residence are taxable only if the taxpayer owned the property less than one year (five years for vacation home).

g) Stamp and/or capital duties

A stamp duty on real estate transactions of 2,5% of marked value applies. Norway does not levy capital duties.

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

Business profits are taxed at the flat rate of 25% on the net taxable income.

Corporate taxpayers whose incomes exceed one million five hundred thousand Balboas (B/.1,500,000.00), their tax will be calculated using two methods the first based on net income and the second based on gross taxable income. Because taxable income, under this second method, is calculated on a gross basis, it adversely affects corporations with losses or profit margins below 4.67%.

Taxpayer will have the option to request the non-application of the second method, if this amount is higher, when it has net operating losses or the effective tax rate is higher than the nominal 25% rate.

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.

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).

Portugal Small Flag Portugal

The Portuguese tax system is based on the OECD Model.

Thus, Portuguese resident taxpayers are subject to taxation on their worldwide income whereas non-resident taxpayers are subject to taxation only on income deemed to be obtained in Portugal.

PIT has 6 categories of income: (i) employment income; (ii) business and professional income; (iii) capital income; (iv) pensions; (v) rental income; and (vi) capital gains.

Progressive rates apply to income obtained by resident taxpayers and vary between 14.5% and 48% (for annual taxable income exceeding € 80,640). There is an additional solidarity progressive surcharge applicable to taxable income exceeding € 80,000 which varies between 2.5% (for taxable income exceeding € 80,000 up to € 250,000) and 5% (for taxable income exceeding € 250,000). Capital gains, dividends, interests and rental income may be subject to a flat rate of 28%, and tax resident taxpayers are able to choose whether such income should be aggregated to the remaining income and subject to the general progressive rates. Several deductions are available.

The normal CIT rate is 21% (for mainland as well as the Autonomous Region of Madeira, but of 16.8% in the Autonomous Region of Azores), although resident taxpayers certified as small or medium companies may benefit from a reduced 17% rate (16% in the Autonomous Region of Madeira and 13.6% in the Autonomous Region of Azores) for the first €15,000 of taxable income. A municipal surcharge of up to 1.5% of the taxable income also applies. A state surcharge applies varying between 3% (for taxable profit exceeding € 1.5 M and up to € 7.5 M), 5% (for taxable profit exceeding € 7.5 M and up to € 35 M) and 9% (for taxable profit exceeding € 35 M).

Autonomous taxation applies at different rates on certain expenses incurred by corporate taxpayers and deemed not to be totally or partially connected to their activity or deemed to be in reality an informal fringe benefit for the employees.

The VAT standard rate is 23% (22% in the Autonomous Region of Madeira and 18% in the Autonomous Region of Azores), being the intermediate rate of 13% (12% in the Autonomous Region of Madeira and 9% in the Autonomous Region of Azores), and the reduced rate of 6% (5% in the Autonomous Region of Madeira and 4% in the Autonomous Region of Azores).
Apart from Municipal Property Tax and Municipal Tax on Onerous Property Transactions, there is also stamp duty which applies, amongst others acts (such as rental agreements, bank guarantees and loans), to the free transfers of assets (either through donation or succession) at a 10% rate, although an exemption applies when the beneficiary is the spouse, partner, descendant or ascendant of the transferor.

Although Portugal does not have a wealth tax, an Additional Municipal Property Tax applies to the sum of the tax registered value of all the urban properties (excluding those classified as serving "trade, industry, or services" purposes and "others") held by each corporate or individual taxpayer on the 1st of January of each year. Individual taxpayers benefit from a deduction of € 600,000 to the taxable base (or of € 1,200,000 in case of married or unmarried couples) and are subject to a rate of 0.7% or 1% applicable to the amount of the taxable base exceeding € 1,000,000.00 (or than € 2000.000 in case of married or unmarried couples). Corporate taxpayers are subject to a 0.4% rate, however urban properties owned for the personal use of the company’s shareholders, members of the board or of any administrative bodies, management or supervision, are subject to a rate of 0.7% (and to a rate of 1% for the part of the taxable amount exceeding € 1,000,000).

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.

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.

Turkey Small Flag Turkey

Turkey has long committed to complying with OECD principles, hence double taxation regulations in particular are mostly in line with the OECD model.

While it has not been officially ratified yet, Turkey also declared in June 2017 that it will implement the provisions of the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.

a) Business profits:

Corporate profits are subject to a 20% corporate tax. However, a provisional clause increased the rate to 22% for FYs 18, 19 and 20.

b) Employment income and pensions:

Salaries are subject to progressive income tax at rates of from 15% to 35%.

c) VAT (and other indirect taxes):

The general VAT rate is currently 18%, while reduced rates of 1% and 8% apply to some goods and services.

The importation and domestic production of certain goods are also subject to special consumption tax (SCT) at various rates based on a tariff which is charged at a single stage. There are other customs taxes and levies under various names collected for imports. VAT is charged on top of SCT and other indirect taxes.

d) Savings income, royalties and capital gains:

As a rule, all types of dividends, savings account interest, capital gains and other types of income generated from securities are subject to income tax, but they are taxed in different ways and sometimes the applicable rate is set to zero. For instance, while domestic savings account interest is taxed only by withholding and is not declared individually, dividends in excess of TRY 34k shall be separately declared by fully registered taxpayers. Withholding rates for interest earnings on domestic savings accounts vary between 10% and 18%, and the rate for dividends is 15%. Capital gains on different types of securities are subject to withholding tax of between 0% and 15%.

Royalties are also subject to income tax but are treated as a different segment of income similar to income from immovable property. The applicable withholding rate is 20%.

e) Income from land:

Gains from letting property is subject to income tax. It is either declared by the landlord and taxed at progressive rates of between 15% and 35%, or is withheld by the tenant at the rate of 20%, depending on the nature of the tenancy.

f) Stamp and capital duties:

Certain types of transactions are subject to stamp tax. The most common rate is 0.948% of the value stated on the document.

Japan Small Flag Japan

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

a. Taxation of business profits

Japanese corporations are subject to corporate taxation comprised of (i) national corporate tax as well as (ii) local inhabitants tax and (iii) local enterprise tax. The effective marginal corporate tax rate, taking into consideration the foregoing taxes, applicable to Japanese corporations is, in general, around29.74% for the fiscal years beginning on or after April 1, 2018 (assuming Japanese corporations having stated capital of more than 100 million yen).

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

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

b. Taxation of employment income and pensions

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

c. VAT (or other indirect tax)

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

Consumption taxes are charged to the recipient or purchaser of the goods or services (i.e., the recipient or purchaser will pay to the provider or seller the applicable consumption tax amount (8% or 10%) in addition to the purchaser price), and (i) the seller or the provider will report and pay the consumption taxes to the Japanese government by filing a tax return and (ii) the recipient or purchaser may be eligible to take input tax credit as to the consumption tax amount so paid to offset against its own consumption tax liability. However, in the case of certain cross-border digital or electronic services transactions conducted by foreign enterprises that are classified as business-to-business (rather than business-to-consumer) transactions, the consumption tax liability vis-à-vis the Japanese government lies with the Japanese recipient of such services, under a so-called “reverse charge” mechanism.
Foreign individual or corporate taxpayers are also subject to the consumption taxes, regardless of whether or not they have a permanent establishment in Japan for income or corporate tax purposes, so long as they engage in sale of goods or provision of services conducted in Japan that is taxable for consumption tax purposes. However, foreign taxpayers may be exempt from the consumption tax liability because of a small business exemption, if, in general, the total taxable sale from the sale of goods or provision of services conducted in Japan (i) during a fiscal year two years preceding the relevant fiscal year (e.g., 2016 for the consumption tax liability in 2018) and (ii) during the first six months’ period of the fiscal year immediately preceding the relevant fiscal year (e.g., January through June of 2017 for the consumption tax liability in 2018) did not exceed 10 million yen.

d. Taxation of savings income and royalties

Japanese corporations are taxed on interest arising from deposits and royalties arising from intellectual property in the same manner as business profits mentioned above. Japanese resident individuals are taxed on interest arising from deposits at a flat rate of 20.315% by way of withholding separately from other income, but are taxed on royalties arising from intellectual property substantially in the same manner as business profits mentioned above.
Foreign corporations and non-resident individuals having no permanent establishment in Japan are subject to Japanese taxation by way of withholding only, where the withholding tax rate is 15.315% for interest arising from deposits made in Japan and 20.42% for royalties arising from certain prescribed types of intellectual property (patents, design rights, copyrights, etc.) registered or otherwise sourced in Japan. These withholding taxes may be exempted or reduced by an applicable tax treaty.

e. Taxation of income from land

Japanese corporations are taxed on rents and capital gains arising from land and buildings in the same manner as business profits mentioned above. Japanese resident individuals are taxed on rents arising from land and buildings substantially in the same manner as business profits mentioned above, but are taxed on capital gains generally at the flat rate of 20.315% (if the holding period is more than 5 years) or39.63% (if the holding period is 5 years or less).
Foreign corporations and non-resident individuals having no permanent establishment in Japan are subject to Japanese taxation on rents and capital gains arising from land and buildings located in Japan, by way of both withholding and reporting by filing a tax return, as a general matter. The withholding tax rate is 10.21% for capital gains and 20.42% for rents. Then, by filing a tax return, foreign corporations are subject to the national corporation taxes (but not local taxes) at the rate of (a) 24.22% for fiscal years beginning on or after April 1, 2018 or (b) 25.59% for fiscal years beginning on or after 1 October 2019, and non-resident individuals are subject to income tax on the capital gains generally at the flat rate of 15.315% (if the holding period is more than 5 years) or 30.63% (if the holding period is 5 years or less), while the rents are subject to general aggregate taxation where the marginal tax rate is 45.945%. The withholding tax properly withheld will be credited against the tax payable by the tax return.

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

f. Taxation of capital gains

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

Foreign corporations and non-resident individuals having no permanent establishment in Japan are subject to Japanese taxation on capital gains arising from sale of shares of a Japanese corporation, only if such foreign corporation or non-resident individual, together with certain related persons (its affiliates and related parties, etc.) as defined in Japanese tax laws and partnerships in which it is directly or indirectly a partner: (i) owns or owned 25 % or more of the total shares of the Japanese corporation at any time during a period of three years on or before the end of the fiscal year of the foreign corporation (or the calendar year for non-resident individuals) in which the sale of such shares took place, and (ii) sells 5 % or more of the total shares of the Japanese corporation in that fiscal year or calendar year. This exceptional rule is commonly referred to as the ‘25/5 rule’ in practice. If this applies, foreign corporations are subject to the national corporation tax (but not local taxes) at the rate of (a) 24.22% for fiscal years beginning on or after April 1, 2018 or (b) 25.59% for fiscal years beginning on or after 1 October 2019, and non-resident individuals are subject to income tax at the flat rate of 15.315%. No Japanese taxation will apply to foreign corporations and non-resident individuals having no permanent establishment in Japan except for the ‘25/5 rule’ mentioned above and except where the subject Japanese corporation is a certain “real estate holding corporation”.

g. Stamp and/or Capital duties

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

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

The Netherlands Small Flag The Netherlands

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

a) Business profits

Business profits of corporate taxpayers are subject to corporate income tax (CIT). CIT is in principle levied over the worldwide profits of entities tax resident in the Netherlands. CIT is imposed at a rate of 25%, but a rate of 20% applies for the first EUR 200,000 of profits.

On 15 October 2018, the Dutch government announced that the main Dutch CIT rate will gradually be reduced to 20.5% in 2021. The rate for 2019 will remain 25% and for 2020 the rate will be reduced, but it is not clear to what percentage. Also the lower Dutch CIT rate will gradually be reduced to 15% in 2021.

Business profits of individual taxpayers are subject to personal income tax. These are taxed at progressive rates with a maximum rate of 51.95% for net profits exceeding EUR 68.507 (2018). The Dutch government published proposals to reduce the top rate gradually to 49.5% in 2021.

b) Employment income and pensions

Employment income and pensions are subject to income tax and social security levies at progressive rates of 36.55% for income up to EUR 20,142, 40.85% for income between EUR 20,142 and EUR 68,507 and 51.95% over the excess (2018 rates and thresholds). The Dutch government published proposals to only have two brackets: income up to EUR 68.507 would be subject to 37.05% tax and the excess to 49.5% tax in 2021.

c) VAT

Supply of goods and services are generally subject to VAT at a rate of 21%, while for some goods and services reduced rates of 0% and 6% may apply (2018 rates).

On 18 September 2018, the Dutch government published a proposal to increase the reduced rate from 6% to 9% as of 1 January 2019.

d) Taxation of individuals’ savings assets

Individuals are not subject to personal income tax (PIT) over the actual income derived from their savings assets. These savings assets are deemed to generate a fixed return and this fixed return is taxed against a flat rate of 30%. The percentage of the deemed return is between 2.017% and 5.38% depending on the value of the assets (2018 rates). A tax-free threshold of EUR 30,000 per taxable person applies in 2018. This regime is referred to as “Box 3” taxation.

e) Income from land

If the income from land qualifies as active income, individuals will be taxed for the income from land as business profits. If the income from land qualifies as passive income, individuals will be taxed in Box 3 for the income from land as savings income in the manner set out in the above paragraph, i.e. on a deemed fixed return.

For corporate taxpayers, income from land is taxed in the same way as their business profits.

f) Capital gains

For corporate taxpayers capitals gains are taxed in the same way as their business profits. Capital gains (plus other types of income like dividend) derived by a Dutch corporate tax payer from a qualifying participation can be exempt from Dutch tax.

The participation exemption is a full exemption from Dutch CIT. The participation exemption in practice is fairly straightforward and should normally apply to (groups of) operational companies.

In summary, the participation exemption is applicable to an interest in a subsidiary if the following conditions are satisfied:

  • The company in which the interest is held (i.e. the subsidiary) has a capital divided into shares;
  • The Dutch shareholder, or an entity related to it, owns at least 5% of the nominal paid-up share capital of the subsidiary; and
  • The subsidiary is not a portfolio investment (based on meeting the “Motive Test”) or is considered a qualifying portfolio investment (based on meeting the "Asset Test" or the "Subject-to-Tax Test"). Please note that only one of these tests has to be met.

For individuals capital gains can be qualified as:

- Business profits (see item a. above);

- Savings income (see item d. above); or

- Capital gains derived from a substantial interest is taxed a flat rate of currently 25%. A substantial interest is present if the individual (together with his/her spouse) holds 5% or more of the shares of the company. The Budget Day proposals of 18 September 2018 provide that the substantial interest tax rate will be increased to 26.25% as of 2020 and to 26.9% as of 2021.

g) Stamp and/or capital duties

The Netherlands levies real estate transfer tax (RETT) on the sale of immovable property as well as of immovable property companies. For residential properties 2% RETT will be levied, for other immovable property 6% RETT will be levied.

Romania Small Flag Romania

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

Romania has a flat corporate tax rate of 16%, 10% income tax on most personal income and 5% on dividend income (if this is not exempted, subject to certain conditions). A special tax on revenue of 1% or 3% (depending on certain conditions) is applicable for small incorporated businesses, having an annual turnover of less than EUR 1 million.

Starting 1st of January 2018 the tax legislation in respect of payroll was amended as the employer social charges were transferred to employee. The following social contributions are applicable: the employee pension contribution, for normal work conditions is 25%, the employee health fund contribution is 10%, and the personal income tax is 10%. The only contribution due by the employer is work insurance contribution of 2.25%.

As of 1 January 2018, employee social charges are of 35% and employer social charge is of 2.25%.

Under certain conditions, individuals who derive income certain type or private sources (such as investment, independent activities, rental, excluding salary) are liable to pay health fund contribution if the cumulated net annual income exceeds 12 minimum salaries per economy (approx. EUR 4,900 for 2018). The contribution of 10% is due at a capped computation base of 12 minimum national salaries per economy.

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 2018/2019)

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 2018/2019)

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

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 £11,500 – 0%
  • Basic rate between £11,500 to £45,000 – 20%
  • Higher rate between £45,001 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. If your total taxable income is £17,500 or less, no tax is paid on savings income. Otherwise the tax free allowance on savings depends on the tax bracket into which the taxpayer falls. Domestic UK law imposes a 20% royalty withholding tax on limited types of payment and on specific categories of intellectual property.

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

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

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

Updated: October 30, 2018