TAX NEWS - 
2010
Tax Treaty Summary
Australia-New Zealand Tax Treaty – The new tax treaty entered into force on 19 March 2010, with the revised withholding tax rates applying as from 1 May 2010 (generally applicable in New Zealand for income years beginning on or after 1 April 2010). A 0% withholding tax applies if dividends are paid to a company that owns, directly or indirectly, 80% or more of the voting power of the payer company for a 12-month period (certain other criteria also will need to be fulfilled). Tax rate is 5% if the beneficial owner is a company that holds directly at least 10% of the voting power in the payer company. Tax rate in all other cases is 15%.
Austria-Serbia Tax Treaty – Once the tax treaty is in effect, the tax treaty signed on 7 May 2010 provides for a 5% withholding tax on dividends paid to a company that holds directly at least 25% of the capital of the payer company, and 15% in all other cases. Tax rate on interest will be 10%. Royalties paid in respect of a copyright of literary, artistic or scientific works (including cinematograph films or films or tapes used for radio or television broadcasting) will be subject to a 5% withholding tax; a 10% tax rate will apply to royalties paid on patents, trademarks, designs or models, plans, secret formulae or processes, or for the use of or the right to use, industrial, commercial or scientific equipment, or for information relating to industrial, commercial or scientific experience.
Belgium-Chile Tax Treaty – The 2007 tax treaty entered into force on 5 May 2010 and will apply as from 1 January 2011. Once the tax treaty is in effect, the treaty provides for 0% rate on dividends paid to a company that holds at least 10% of the capital of the company paying the dividends for an uninterrupted period of at least 12 months before the dividends are paid, and 15% in all other cases. A 5% tax rate will apply to interest derived from loans granted by banks and insurance companies, bonds and securities that are regularly and substantially traded on a regulated securities market and credit sales on machinery or equipment to a beneficial owner that is also the seller of the machinery or equipment. Otherwise, the rate will be 15%. A 5% rate will apply to royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment; the tax rate will be 10% in all other cases.
Chile-Switzerland Tax Treaty – The 2008 tax treaty entered into force on 5 May 2010 and will be effective as from 1 January 2011. Once the tax treaty is in effect, the treaty provides for a 15% withholding tax on dividends. However, the 15% tax rate is not applicable in Chile if the first category tax (corporate tax) is fully creditable in computing the amount of additional tax. Interest will be subject to a 5% rate where it is derived from: (1) loans granted by banks and insurance companies; (2) bonds or securities that are regularly and substantially traded on a recognized securities market; or (3) sales on credit paid by the purchaser of machinery and equipment to a beneficial owner that is the seller of the machinery and equipment. Otherwise, the tax rate will be 15%. A 5% rate will apply to royalties paid for the use of, or the right to use, industrial, commercial or scientific equipment; otherwise, the tax rate will be 10%.
China-Finland Tax Treaty – Once the tax treaty is in effect, tax treaty signed on 25 May 2010 provides for a 5% withholding tax on dividends paid to a company that holds directly at least 25% of the capital of the payer, and 10% in all other cases. The rate on interest and royalties will be 10%.
Czech Republic-Bosnia-Herzegovina Tax Treaty – The 2007 tax treaty entered into force on 12 May 2010 and will apply generally as from 1 January 2011. Once the tax treaty is in effect, the tax treaty provides for a 5% tax rate on dividends, 0% on interest and 10% on royalties.
Estonia-Serbia Tax Treaty – The 2009 tax treaty entered into force on 14 June 2010 and will apply as from 1 January 2011. When in effect, the treaty provides for a 5% withholding tax on dividends paid to a company (other than a partnership) that holds directly at least 25% of the capital of the company paying the dividends; the tax rate in all other cases will be 10%. The rate on interest will generally be 10%. A 5% tax rate will apply to royalties paid for the use of a copyright of a literary, artistic or scientific work (except for software); and 10% for royalties paid for a patent, trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.
Finland-India Tax Treaty – The 2010 tax treaty entered into force on 19 April 2010 and will apply as from 1 January 2011 for Finland and 1 April 2011 for India. Once the tax treaty is in effect, the treaty provides for a 10% withholding tax on dividends, interest, royalties and fees for technical services.
France-Georgia Tax Treaty – The 2007 tax treaty to replace the treaty with the former Soviet Union entered into force on 1 June 2010 and will apply as from 1 January 2011. Once the tax treaty is in effect, the treaty provides that dividends will be exempt if the beneficial owner is a company that holds, directly or indirectly, at least 50% of the capital of the company paying the dividends and has invested at least EUR 3 million in the capital of the subsidiary on the date the dividends are distributed; a 5% tax rate will apply where the dividends are paid to a company that holds, directly or indirectly, at least 10% of the capital of the company and has invested more than EUR 100,000 in the capital of the subsidiary on the date the dividends are distributed; and 10% in all other cases. Royalties will be tax exempt.
France-Malta Tax Treaty – Once the tax treaty is in effect, the protocol signed on 29 August 2008 provides for a 0% rate on dividends paid by a French company to a company that holds directly at least 10% of the capital of the payer. The withholding tax on interest will be reduced to 5%.
Greece-United Arab Emirates Tax Treaty – Once the tax treaty is in effect, the tax treaty signed on 18 January 2010 provides for a 5% withholding tax on dividends, interest and royalties.
Hong Kong-Ireland Tax Treaty – Once the tax treaty is in effect, the tax treaty signed on 22 June 2010 provides that dividends generally will be exempt. Interest will be subject to a 10% withholding tax and royalties will be subject to a 3% withholding tax.
Hong Kong-United Kingdom Tax Treaty – Once the tax treaty is in effect, the tax treaty signed on 21 June 2010 provides that dividends generally will be exempt, except where dividends are paid by a real estate investment trust (to other than a pension scheme) out of income (including gains) derived from immovable property, in which case a 15% withholding tax will apply. Interest will be exempt from withholding tax. A 3% withholding tax rate will apply to royalties.
Ireland-Georgia Tax Treaty – The 2008 tax treaty entered into force on 6 May 2010 and will apply as from 1 January 2011. Once the tax treaty is in effect, dividends will be exempt from withholding tax if the beneficial owner is a company that controls directly or indirectly at least 50% of the voting power of the payer and has invested at least EUR 2 million (or its equivalent in Georgian currency) in the capital of the payer company. A 5% tax rate will apply if the beneficial owner is a company that controls directly or indirectly at least 10% of the voting power of the payer and has invested more than EUR 100,000 (or its equivalent in Georgian currency) in the payer company's capital; tax rate in all other cases will be 10% (Ireland, however, does not impose withholding tax on dividends if certain conditions are satisfied). Interest and royalties will be exempt.
Ireland-Moldova Tax Treaty – The 2009 tax treaty entered into force on 22 April 2010 and will apply as from 1 January 2011. Once the tax treaty is in effect, the treaty provides for a 5% withholding tax on dividends paid to a company that holds at least 25% of the voting power in the company paying the dividends, and 10% in all other cases. Tax rate on interest and royalties will be 5%.
Italy-Jordan Tax Treaty – The 2004 tax treaty entered into force on 10 May 2010 and will apply as from 1 January 2011. Once in effect, the treaty provides for a withholding tax rate of 10% on dividends, interest and royalties.
Italy-Slovenia Tax Treaty – The 2001 tax treaty between Italy and Slovenia entered into force on 12 January 2010 and applies as from 1 January 2011. Once in effect, a 5% withholding tax rate will apply to dividends where the beneficial owner is a company (other than a partnership) that holds directly at least 25% of the capital of the company paying the dividends, and 15% in all other cases. Interest will generally be taxed at a rate of 10% and royalties at a tax rate of 5%.
Luxembourg-Armenia Tax Treaty – The 2009 tax treaty entered into force on 9 April 2010 and will apply as from 1 January 2011. Once the tax treaty is in effect, dividends will be subject to a withholding tax rate of 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the company paying the dividends; otherwise the tax rate is 15%. The withholding tax on interest will be 10% and that on royalties will be 5%.
Luxembourg-Monaco Tax Treaty – The 2009 tax treaty entered into force on 3 May 2010 and will apply as from 1 January 2011. Once the tax treaty is in effect, the treaty provides for a 5% rate on dividends paid to a company that holds at least 10% of the capital of the payer; otherwise, the rate will be 15%. Tax rate on interest and royalties will be 0%.
Norway-Poland Tax Treaty – The 2009 tax treaty entered into force on 25 May 2010 and will generally apply as from 1 January 2011. Once the tax treaty is in effect, the treaty provides for an exemption from withholding tax rate on dividends paid to a company that holds directly at least 10% of the capital of the company paying the dividends on the date the dividends are paid, and has held the participation or will have done so for an uninterrupted 24-month period within which that date falls. The rate in all other cases will be 15%. Interest and royalties will be taxed at a rate of 5%.
Spain – The Ministry of Foreign Affairs published in the Official Gazette on 23 June 2010 an announcement that successor application of the 1985 treaty between Spain and the former Soviet Union would no longer apply to the following former Soviet republics: Armenia (as of 10 October 2007), Azerbaijan (as of 28 January 2008), Georgia (as of 10 October 2007), Kazakhstan (as of 8 July 2008), and Moldova (as of 1 October 2007). For Moldova, however, a 2007 treaty entered into force on 30 March 2009 and applies generally as from 1 January 2010. Spain also signed a (not yet in force) treaty in July 2009 with Kazakhstan, and has negotiated, but not yet signed, treaties with Armenia, Azerbaijan and Georgia.
Switzerland-Georgia Tax Treaty – Once the tax treaty is in effect, the tax treaty signed on 15 June 2010, provides that dividends will be exempt if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the distributing company's capital; otherwise the rate is 10%. Interest and royalties will be exempt.
Switzerland-Turkey Tax Treaty – Once the tax treaty is in effect, the tax treaty signed on 18 June 2010 (replacing a pending 2008 treaty) provides that dividends will be subject to a withholding tax rate of 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 20% of the capital of the distributing company (dividends arising in Turkey are subject to the additional requirement that relief from Swiss tax is granted by way of an abatement of the profits tax under a specific ratio); otherwise the tax rate is 15%. Interest and royalties will be subject to a withholding tax rate of 10%.
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