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Tag Archive for Withholding Tax

U.S. Law Firms Consulting In India – Trap For The Unwary

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International legal and independent professionals consulting in India often have issues receiving funds from their clients in India. India has stringent exchange control regulations contained in the Act called Foreign Exchange Management Act – FEMA. Accordingly all foreign remittances must go through certain procedures. Additionally, Income Tax Department asks for “Tax Residency Certificate” (TRC) from the US service provider so that the treaty benefits can be allowed. If TRC is not produced, the payer must withhold tax from the income remitted to US service provider. This is true regardless of where the services were provided.

Until recently, it was mandatory that TRC issued by foreign tax authority must contain all items required by the government of India in order to exempt any tax withholding Read more

Only 13% of US Source Payments Are Subject To US Withholding Tax!

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The IRS has issued 2 tabular presentations of data for Tax Year 2012 from Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The table for 2012 shows that:

Only 13.10% of all US source payments are subject to US withholding tax and of this 13.10%, which is subject to US withholding tax, the average withholding tax rate is 25.37%.

Effectively what this means is, that for 2012 the effective rate of withholding tax on all US tax payments was roughly 3.33% as compared to the statutory 30% withholding tax rate on US income not otherwise exempt or reduced by tax treaty. Read more

Canadian Source Interest Payments To Non-Residents Generally No Longer Subject To Withholding Tax

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A large percentage of countries that have income taxes levy withholding taxes on interest paid by residents of those countries to non-residents.

Up until fairly recently, Canada generally applied withholding tax under Part XIII of the Income Tax Act (“the Act”) on Canadian-source interest payments to non-residents. This general rule was subject to many exceptions, including one commonly used one that applied to five-year corporate debt, as well as exception for government obligations and foreign currency debt. In the absence of a lower rate being applied under a tax treaty, interest that was not eligible for an exemption was subject to 25% tax.

However, that all changed in 2008. As a general rule, Canadian-source interest payments Read more

REITs – A South African perspective as an OTC investment option

iStock_ Africa Money and Flag XSmallReal Estate Investment Trusts or REITs is a well known internationally known appropriate business structure yet South Africa only adopted its tax law as of April 1st, 2013 and its stock exchange listed or publicly listed trading rules to accommodate REIT’s as of May 1st, 2013.

Since then many property groups not only converted to a listed REIT but also restructured their balance sheets to remove the debt linked to a unit or a share. Now, on September 6th, the first American Depositry Receipt (ADR) status was granted to a South African listed REIT. One ADR unit equals 10 REIT units on the Johannesburg Stock Exchange. Despite the ZA Rand being at a 3 week high, the more recent currency exchange is circa R10=1U$D.

Real Estate Investment Trusts (REIT)

REIT’s are tax transparent or tax through flow investment vehicles that invest in and derive their income from real estate properties and mortgage, without necessarily paying tax on their trade result. To qualify for the South African REIT dispensation, a the REIT (either a company or a trust) must be tax resident in South Africa and be listed as an REIT in terms of the JSE (Johannesburg Stock Exchange) listing requirements.

REIT profits are distributed as tax deductible expenses (effectively pre-tax income) which is then received and taxed in the investors’ hands as taxable dividend income. As of 1 January 2014 the SA dividend withholding tax at 15% or the treaty governed rate where the investor is resident in a treaty country, will apply to nonresident investors. Read more

Ireland – An Ideal Location For Intellectual Property Trading Companies – Withholding Tax and Stamp Duty – Part 4

Apart from a highly skilled, English speaking workforce; membership of the E.U.; an excellent standard of living for employees seconded to Ireland; a large network of international routes and a successful track record of investment, research and development from United States corporations there are many advantages to setting up Intellectual Property Trading companies in Ireland.

The main focus of this article is the tax advantages which can be summarized under the following headings and viewed in Parts 1 through 4 on TaxConnections Worldwide Tax Blogs:

1.  Corporation Tax – Part 1
2.  Capital Allowances – Part 2
3.  Research & Development Relief – Part 3
4.  Withholding Tax – Part 4
5.  Stamp Duty and Summary – Part 4

4. WITHHOLDING TAX

In general, Irish resident companies must deduct 20% withholding tax on dividends and other profit distributions.

There are, however, a number of situations where shareholders can receive dividends free from withholding tax from an Irish resident company providing certain documentation is filed.  For example: Read more

Ireland – An Ideal Location For Intellectual Property Trading Companies – Research & Development Relief – Part 3

Apart from a highly skilled, English speaking workforce; membership of the E.U.; an excellent standard of living for employees seconded to Ireland; a large network of international routes and a successful track record of investment, research and development from United States corporations there are many advantages to setting up Intellectual Property Trading companies in Ireland.

The main focus of this article is the tax advantages which can be summarized under the following headings and viewed in Parts 1 through 4 on TaxConnections Worldwide Tax Blogs:

1.  Corporation Tax – Part 1
2.  Capital Allowances – Part 2
3.  Research & Development Relief – Part 3
4.  Withholding Tax – Part 4
5.  Stamp Duty and Summary – Part 4

3. RESEARCH & DEVELOPMENT RELIEF

Background

The 2012 Finance Act introduced a new tax relief which allowed a company to surrender a portion of its R&D tax credit to key employees engaged in research and development activities.

This relief reduced the employee’s Income Tax (but not Universal Social Charge) on relevant emoluments providing the employee’s effective income tax rate didn’t fall below 23% in any tax year.

To be eligible for this relief: Read more

Ireland – An Ideal Location For Intellectual Property Trading Companies – Capital Allowances- Part 2

Apart from a highly skilled, English speaking workforce; membership of the E.U.; an excellent standard of living for employees seconded to Ireland; a large network of international routes and a successful track record of investment, research and development from United States corporations there are many advantages to setting up Intellectual Property Trading companies in Ireland. 

The main focus of this article is the tax advantages which can be summarized under the following headings and viewed in Parts 1 through 4 on TaxConnections Worldwide Tax Blogs:

1.  Corporation Tax – Part 1
2.  Capital Allowances – Part 2
3.  Research & Development Relief – Part 3
4.  Withholding Tax – Part 4
5.  Stamp Duty and Summary – Part 4

2. CAPITAL ALLOWANCES

Capital Allowances are available for capital expenditure on the creation, acquisition and/or licence to use certain “specified intangible assets” which includes:

1.  Copyrights
2.  Patents and registered designs
3.  Trademarks, brands, domain names and service marks Read more

Ireland – An Ideal Location For Intellectual Property Trading Companies – Corporation Tax – Part 1

Apart from a highly skilled, English speaking workforce; membership of the E.U.; an excellent standard of living for employees seconded to Ireland; a large network of international routes and a successful track record of investment, research and development from United States corporations there are many advantages to setting up Intellectual Property Trading companies in Ireland. 

The main focus of this article is the tax advantages which can be summarized under the following headings and viewed in Parts 1 through 4 on TaxConnections Worldwide Tax Blogs:

1.  Corporation Tax – Part 1
2.  Capital Allowances – Part 2
3.  Research & Development Relief – Part 3
4.  Withholding Tax – Part 4
5.  Stamp Duty and Summary – Part 4

1. CORPORATION TAX

Ireland has one of the lowest corporation tax rates on trading income in the world.  The standard rate is 12½% on trading profits.

A 25% rate is charged on non-trading and foreign source income.  It is the rate applied to “passive income.”

To be eligible for the 12½% Corporation Tax rate the following criteria must apply: Read more

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