Tax News Luxembourg

By GT Fiduciaires

1. Employee stock option plans: a new reporting requirement for employers

On 28 December 2015, the director of the Luxembourg tax authorities issued Circular L.I.R. n° 104/2bis relating to employee stock option plans. The new circular merely introduces a new reporting requirement. As from 1 January 2016, employers who intend to set up stock option /warrant plans will have to notify the competent tax office in charge of withholdings on employment income at least two months before the implementation date of the plan. The notification  shall include a copy of the plan rules as well as a list of the beneficiaries of the above-mentioned plan. Furthermore, for all plans set up prior to 1 January 2016, but for which the grant of options /warrants did not yet take place, employers are obliged to also inform the competent tax office in charge of withholdings on employment income at their earliest convenience.

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International Tax and Royalties

By Eric Longley & Harold Peterson, Prager Metis International LLC

The text of the OECD Model Tax Convention is closely followed by most international tax treaties. In doing so it provides consistency of approach removing the need for recourse to the competent authority rules where there is a dispute as to interpretation between taxpayers and domestic tax authorities. Even so there are still interpretational issues that can aid and/or trap the unwary or uninitiated.

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Italy introduces the branch exemption regime

By Stefano Loconte and Emanuele Tozzi

With effect from 1 January 2016 (for calendar year taxpayers) Italian enterprises with a foreign permanent establishment can opt for the branch exemption regime (Art. 14, Legislative Decree no. 147/2015). Under this optional regime the income attributable to the foreign branch will be treated as tax exempt income in Italy. Of course, in case of a tax loss, it will not be deductible from the taxable income of the head office.

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Disput Resolution arising out of Base Erosion and Profit Sharing

By Aditya Kumar, Ashwani & Associates 

Base Erosion in Profit Sharing (BEPS) is a Package, negotiated in just over two years, which includes reports on fifteen “actions” ranging from countering harmful tax practices and treaty shopping to addressing transfer pricing, interest deductibility, and transparency in exploring the tax implications of the digital economy.

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German fiscal unity taxation: with a sub-subsidiary

By Bernhard Schwechel, FACT GmbH

Multinational groups often hold their domestic and foreign sub-subsidiaries by an intermediary holding company, which is resident in a different country (e.g. Luxembourg) to its parent company (Germany). In this case, a tax-optimised profit repatriation from the sub-subsidiaries to their grandparent company depends on the conditions of the double tax treaties (DTA). But often, due to anti-treaty shopping rules, the foreign intermediary holding is not able to benefit from a reduced withholding tax rate stipulated in the DTA.

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How Mexico has implemented the BEPS Action Plan

By José Carreras Benitez, Integroup S.C.

The Mexican economy is and has consistently been growing as a result of the rapid expansion of the middle class due to education and the maturing of Mexico as an economic powerhouse. Companies from Europe and the USA are investing billions of dollars into the Mexican economy. Mexican government knows that global businesses are coming and the Base Erosion and Profit Shifting (BEPS) Action Plan suggestions have been implemented in order to protect the tax system as well as giving same protection to the Mexican partners of the Organisation for Economic Co-operation and Development (OECD). Below is a brief description of one of them:

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The New Italian Patent Box Regime (Art.1 paragraph 36 to 45 of Law no.190 of 2014)

By Dr Massimiliano Russo, Studio Signori

After a recent debate as to the possible introduction of new tax tools and incentives to attract foreign investments in Italy as well as a long period in which we have seen measures increasing the tax burden for both companies and individuals, this newly introduced legislation on the Patent Box Regime as a tax incentive is most welcome (in the following also referred to as the “incentive”). Unfortunately, as with most the newly introduced legislation in Italy, some aspects have not yet been committed and will be further regulated in future ministerial decrees. The interpretation of the newly introduced rule by tax  authorities is also still awaited.

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IHQs & ITCs: New incentives for Thailand or just a change of letters?

On 1st May a Royal Decree was published,  implementing incentives for companies establishing their international headquarters (IHQ) and international trading centres (ITC) in Thailand. The idea behind the scheme is to attract businesses to establish their headquarters or a trading hub in Thailand, thus bringing more tax revenues, skilled jobs and know-how to the Land of Smiles.

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India moves forward on taxation of indirect transfer

By Ashish Bairagra, PeriGrow Consulting

Since 2012, India has been levying tax on transactions which involve transfer of shares or interest in a foreign entity, if it derives its value substantially from assets located in India (the Vodafone controversy). However, there was ambiguity about the term substantially.

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Changing tax conditions for foreign investors in Mexico

By Sergio Guerrero Rosas, Guerrero y Santana, S.C.

In order to make its tax terms more attractive to foreign investors, Mexico has altered its adjustment mechanism (similar to the windfall profits tax in other countries) for oil exploration bidders, which will occur should oil prices rise beyond certain levels or if hydrocarbon discoveries turn out to be greater than anticipated. As a result,
a pre-tax profit margin of 20% (up from 15%) has been set before that adjustment mechanism kicks in.

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