Tax Treaty Summaries

Australia - Turkey Tax Treaty – Once in effect, the tax treaty signed 28 April 2010 provides for a 5% withholding tax rate on dividends paid to an Australian company that holds directly at least 10% of the voting power of the company paying the dividends. The 5% tax rate will apply to dividends paid to a Turkish company that holds directly at least 25% of the voting power of the payer company, where the dividends are paid out of profits that have been subject to the full rate of corporation tax in Turkey. The tax rate will be 15% in all other cases. Tax rate on interest and royalties will be 10%.

Austria - Hong Kong Tax Treaty – Once in effect, the tax treaty signed on 25 May 2010 provides that dividends will be exempt from withholding tax if the beneficial owner is a company (other than a partnership) that directly holds at least 10% of the capital of the payer company; otherwise the rate will be 10%. Interest will be exempt and royalties will be subject to a 3% withholding tax rate.

Georgia – The Ministry of Finance has approved an order that reintroduces a procedure and application form requirement to claim double taxation relief in Georgia. Nonresidents must provide a residence certificate legalized by apostil or in embassies of Georgia to claim tax relief under a tax treaty.

Germany – The local tax court of Düsseldorf has ruled that dividends distributed by a foreign subsidiary are exempt from German trade tax at the level of the German parent company if the applicable tax treaty provides for a participation exemption, even if the requirements of the Trade Tax Act are not met. For additional coverage of this development, please see the 14 May 2010 issue of World Tax Advisor.

Hong Kong - Hungary Tax Treaty – Once in effect, the tax treaty signed on 12 May 2010 provides for a 5% withholding tax rate on dividends paid to a company (other than a partnership that is not liable to tax) that holds directly at least 10% of the capital of the payer company, and 10% in all other cases. The tax rate on interest and royalties will be 5%.

Hong Kong - Kuwait Tax Treaty – Once in effect, the tax treaty signed on 13 May 2010 provides that dividends will be exempt if paid to a government or government institution; otherwise, tax rate will be 5%. Tax rate on interest and royalties will be 5%.

India – The Authority for Advance Rulings has held that a Dutch company deriving capital gains from the sale of an Indian subsidiary to another nonresident would not be subject to tax in India and that the Dutch company's ultimate parent company cannot automatically become the beneficial owner of such gains if the subsidiary has its own board of directors and management system. For additional coverage of this development, please see the 14 May 2010 issue of World Tax Advisor.

Indonesia – The Director General of Taxation issued Regulations 24 and 25 on 30 April 2010 that amend and clarify previous guidance for obtaining benefits under Indonesia's tax treaties. The new rules were issued in response to taxpayer concerns about the practical consequences of Regulations 61 and 62 issued in November 2009, in particular unclear language that could make it difficult for nonresident recipients of Indonesian-source income to qualify for treaty benefits. For additional coverage of this development, please see the 21 May 2010 issue of World Tax Advisor.

Ireland - Albania Tax Treaty – Once in effect, the tax treaty signed on 16 October 2009 provides for a 5% withholding tax rate on dividends paid to a company (other than a partnership) that holds directly or indirectly at least 25% of the capital of the payer company, and 10% in all other cases. Tax rate on interest and royalties will be 7%.

Japan - Switzerland Tax Treaty – Once in effect, the protocol signed on 21 May 2010 provides for a 0% withholding tax rate on dividends paid to a company that holds directly or indirectly at least 50% of the voting rights of the payer company for the six-month period ending on the date on which entitlement to the dividends is determined; and on dividends paid to a pension fund. A 5% tax rate will apply on dividends paid to a company that holds directly or indirectly at least 10% of the voting rights of the payer for the six-month period ending on the date on which entitlement to the dividends is determined. The tax rate will be 10% in all other cases. A 0% tax rate will apply to interest paid to financial institutions, such as banks, insurance/reinsurance companies and securities dealers, and on interest paid to a pension fund. Royalties will be taxed only in the state of residence of the recipient.

Luxembourg - Qatar Tax Treaty – The 2009 tax treaty entered into force on 9 April 2010 and applies generally as from 1 January 2011. Once in effect, the tax treaty provides for a 0% withholding tax rate on dividends paid to a company that holds directly at least 10% of the capital of the company paying the dividends; 5% tax rates where dividends are paid to an individual who holds at least 10% of the company paying the dividends for the 48-month period immediately preceding the year the dividends are paid; and 10% in all other cases. Interest and royalties will be taxable only in the state of residence of the recipient.

Netherlands - United Arab Emirates Tax Treaty – The 2007 tax treaty enters into force on 2 June 2010 and will apply as from 1 January 2011 for income tax purposes (2 June 2010 for all other purposes). Dividends will be subject to a 5% withholding tax rates if paid to a company that holds directly at least 10% of the capital of the company paying the dividends, and 10% in all other cases. Interest and royalties will be exempt from withholding tax.

OECD – The OECD released a draft 2010 update to its Model Tax Convention on 21 May 2010, with submission for approval of the OECD's Committee on Fiscal Affairs in June and of the Ministerial Council in July. No comment period applies as the proposed changes were previously released for comment following discussion drafts. Several changes are addressed in the draft, to include the treatment of collective investment vehicles, the business profits article, state-owned entities (including sovereign wealth funds), telecommunications transactions and commentary to residence-based taxation of income from employment, as well as a number of changes to member reservations and observations and non-OECD positions, to include the elimination of all reservations and positions on the information exchange article.

Singapore - Saudi Arabia Tax Treaty – Once in effect, the tax treaty signed 3 May 2010 provides for a 5% withholding tax rate on dividends and interest. Tax rate on royalties will be 8%.