document 16
Annex 2
QUESTIONNAIRE FOR MONITORING THE IMPLEMENTATION
OF THE GUIDANCE AGREED ON INBOUND PROFIT
TRANSFERS
CONSOLIDATED REPLIES FROM MEMBER STATES
INDEX:
Member
State
Page
1 Austria
2
2 Belgium
7
3 Bulgaria
12
4 Cyprus
17
5 Czech
Republic
20
6 Denmark
26
7 Estonia
30
8 Finland
33
9 France
(missing)
38
10 Germany
39
11 Greece
42
12 Hungary
47
13 Ireland
52
14
15 Latvia
60
16 Lithuania
64
17 Luxembourg
71
18 Malta
(missing)
75
19 Netherlands
76
20 Poland
79
21 Portugal
83
22 Romania
88
23 Slovak
Republic
91
24 Slovenia
95
25 Spain
99
26
27 United
Kingdom
108
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01. AUSTRIA
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
The Austrian Corporate Income Tax Act provides for an exemption for intercompany profit
distributions. This participation exemption generally applies to domestic as well as to foreign
participations without any further requirements like a minimum participation (holding quota) or a
minimum holding period. The scope of the participation exemption does only cover profit
distributions, however not realised and unrealised capital gains or losses (see 2).
1a. If yes:
¾
Do you have a minimum
The exemption for profit distributions from domestic
participation requirement. Is this
participations applies without any further requirements.
different for domestic, EU, treaty
For profit distributions from EU and 3rd country
or 3rd country participations?
participations, the exemption generally applies without
Please explain.
any further requirements as well, irrespective of the
holding quota or holding period. It is however required
that the foreign company distributing the dividend is
comparable with a domestic company. Profit distributions
from third country portfolio participations (< 10%) are,
furthermore, only exempted if a comprehensive mutual
assistance between Austria and the third country is in
place.
The exemption for inbound intercompany profit
distributions from corporate income tax does therefore
neither require a minimum participation quota nor a
minimum holding period.
¾
Is there a minimum holding
See above.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
The exemption for profit distributions from domestic
"minimum effective taxation"
participations applies without any further requirements.
requirement? If yes, please
The exemption for profit distributions from participations
explain.
in foreign companies does not apply, if the foreign
subsidiary does not meet certain requirements. These
requirements differ between foreign substantive
participations (> 10%) and foreign portfolio participations
(< 10%):
The participation exemption is not applicable for profit
distributions from substantive participations held in
foreign companies in case the foreign subsidiary’s main
activity is to generate passive income
and the subsidiary is
located in a tax jurisdiction, that does not effectively tax
comparably to domestic companies. This is the case, if the
effective tax rate is lower than 15%. If these criteria are
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fullfilled, the credit method applies instead of the
exemption method (“switch-over clause”).
The participation exemption is not applicable for profit
distributions from portfolio participations held in foreign
companies in case company is located in a tax jurisdiction,
that does not provide for a tax rate comparable to the
domestic tax rate of 25%. This is the case, if the effective
tax rate is lower than 15% or the company is subject to a
comprehensive exemption. If one of those criteria is
fullfilled, the credit method applies instead of the
exemption method (“switch-over clause”).
Irrespective of whether the foreign company generates
passive income and/or is located in a low tax jurisdiction,
the exemption method for profit distributions is denied
insofar as the payment has been deductible abroad. In
those cases however, there is no switch-over to the credit
method.
¾
Does the "subject-to-tax" or
The minimum effective taxation requirement does also
"minimum effective taxation"
consider the taxation of indirect subsidiaries; underlying
requirement apply to the
taxes are taken into consideration.
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes Underlying taxes are taken into consideration for means of
available in case one of the above
determining the tax credit.
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
/
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Whereas the application of the participation exemption does generally not distinguish between
domestic, EU and 3rd country participations, there is a different treatment for capital gains from
domestic participations on the one hand, and foreign participations on the other hand:
Capital gains arising from the sale of domestic participations as well as from the sale of domestic
portfolio participations are treated tax effectively as ordinary business profits. The Austrian Corporate
Income Tax act does not provide for an exemption for capital gains deriving from the sale of these
participations.
On the other hand, the Austrian Corporate Income Tax Act provides for an international participation
exemption for realised and unrealised capital gains and losses. Capital gains arising from the sale of
foreign participations (EU, 3rd country) are treated tax neutral as a general rule if certain requirements
are met.
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2a. If yes:
¾
Is there a minimum participation
The international participation exemption for realised and
requirement. Is this different for
unrealised capital gains and losses applies to substantive
domestic, EU, treaty or 3rd country participation only. This requires a minimum participation
participations? Please explain.
of 10 % held in the foreign subsidiary as well as a
minimum holding period of one year. Further, the foreign
subsidiary sold off has to be comparable to a domestic
company in order to qualify as substantive international
participation.
The international participation exemption provides for a
tax neutral treatment of realised and unrealised capital
gains (and losses) as a general rule. However, the taxpayer
may opt – in the year of the acquisition of a foreign
participation – for tax effective treatment of realised and
unrealised capital gains (or losses) arising from that
participation. If the taxpayer exercises the option for tax
effective treatment, capital gains are treated tax effectively
as ordinary business profits. The option for tax effective
treatment is irrevocable.
¾
Is there a minimum holding
See above.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
The switch over clause (see 1a) does not only apply to
"minimum effective taxation"
profit distributions but also to realised and unrealised
requirement? If yes, please
capital gains. Generally, the switch-over clause applies in
explain.
case the foreign subsidiary’s main activity is to generate
passive income
and the subsidiary is located in a tax
jurisdiction, that does not effectively taxed comparably to
domestic companies. This is the case, if the effective tax
rate is lower than 15%.
¾
Is a tax credit for underlying taxes Underlying taxes are taken into consideration for means of
available in case one of the above
determining the tax credit.
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
/
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Realised capital losses (historical acquisition costs - sales price ) from domestic participations are
treated tax effectively in general. However, there are restrictions to the deduction of these capital
losses. Capital losses arising from the sale of a domestic participation have to be spread over seven
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years. In other words, they can be deducted only to 1/7 in the year of realisation.
Realised capital losses from foreign substantive participations (> 10%, EU, 3rd countries) are treated
tax neutral as a general rule. Only if the tax payer has opted into tax effective treatment in the year of
the former acquisition (see 2b), a capital loss is taken into consideration. If that is the case, it is treated
like a loss from domestic participations; therefore it has to be spread over 7 years.
Realised capital losses from the sale of a foreign portfolio participation (< 10%, EU, 3rd countries) are
treated like losses from domestic participations (tax effectively, however spread over 7 years).
Whenever capital losses have to be spread over seven years, the deduction can only be accelerated if
realised or unrealised capital gains derive from another participation held as fixed asset within the
seven-years-period. In those cases, 1/7 spreads that have not been offset so far may be fully offset
against these realised and unrealised capital gains. The same is true for recapture taxation of the same
participations (see below, 5)
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
Unrealised capital losses from domestic participations allow the taxpayers to write off the participation
(depreciation = book value - “fair value”) tax effectively. However, the same restrictions as for
realised capital losses apply.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
A participation written off in value (see 4) is subject to a mandatory, tax effective recapture (write up
in value, unrealised capital gain), if the value of the participation increases due to any reasons
(Jurisprudence of the Highest Administrative Court).
If the value of the participation recovers within seven years since its write off, 1/7 spreads that have
not been offset yet may be fully offset against these realised and unrealised capital gains.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
A deduction of good will arising from the acquisition of a participation is only available under the
group taxation regime (when acquiring a new group member). Generally, the good will is calculated –
in accordance with the holding quota – as follows:
Acquisition cost of the participation
-(proportionate Equity in the balance sheet + hidden reserves in the fixed assets)
However, the depreciable good will is limited to 50 % of the acquisition costs of the participation. A
good will calculated in accordance with these rules and restrictions has to be spread over 15 years.
The deduction of good will is however denied, if the acquisition takes place within the same group of
companies.
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7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
[reply]
Please indicate.
¾
A "low-or-no-tax" test? Please
[reply]
indicate.
¾
An activities based test? Please
[reply]
indicate.
¾
An income based test? Please
[reply]
indicate.
¾
Any other test? Please indicate.
[reply]
¾
Is there a layer limitation in the
[reply]
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying taxes [reply]
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please
explain.
¾
Do you provide advance clearance [reply]
on the non-applicability of your
CFC provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Austria does not apply a CFC legislation, providing for the immediate taxation of profits realised by a
foreign subsidiary. Instead, Austria applies a “CFC-type legislation”, however, with the aim to avoid a
taxfree repatriation of profits. Under certain circumstances, the application of the exemption method is
denied; instead, the credit method applies (“switch-over-rule”) – see before.
_____________________
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02. BELGIUM
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
OUI. Il s’agit en fait d’une déduction de 95 % du montant du dividende encaissé ou recueilli (articles
202, § 1er et 204 du Code belge des impôts sur les revenus (CIR 92)
1a. If yes:
¾
Do you have a minimum
Oui. Conformément à l'article 202, § 2, 1° CIR 92, les
participation requirement. Is this
dividendes reçus ne sont déductibles que pour autant qu'à
different for domestic, EU, treaty
la date d'attribution ou de mise en paiement de ceux-ci, la
or 3rd country participations?
société qui en bénéficie, détienne dans le capital de la
Please explain.
société qui les distribue une participation de
10 p.c. au
moins ou dont la valeur d'investissement atteint au moins
2.500.000 EUR, sans faire de différence selon que les
dividendes sont domestiques, UE, traité ou pays tiers .
¾
Is there a minimum holding
Oui. Conformément à l'article 202, § 2, 2° CIR 92, les
period? Is this different for
dividendes ne sont déductibles que pour autant que ces
domestic, EU, treaty or 3rd country revenus se rapportent à des actions ou parts qui sont ou
participations? Please explain.
ont été détenues en pleine propriété pendant une période
ininterrompue
d'au moins un an, sans faire de
différence selon que les dividendes sont domestiques, UE,
traité ou pays tiers.
¾
Is there a "subject-to-tax" or
Oui. Les dividendes ne sont, conformément à l'article 203,
"minimum effective taxation"
§ 1er, CIR 92 pas déductibles lorsqu'ils sont alloués ou
requirement? If yes, please
attribués par:
explain.
1°
une société qui n'est pas assujettie à l'impôt des
sociétés ou à un impôt étranger analogue à cet impôt ou
qui est établie dans un pays dont les
dispositions du droit
commun en matière d'impôts sont notablement plus
avantageuses qu'en Belgique;
Les dispositions de droit commun, sont présumées être
notablement plus avantageuses qu'en Belgique lorsque:
- soit le
taux nominal de droit commun de l'impôt sur les
bénéfices de la société est
inférieur à 15 p.c.;
- soit, en
droit commun, le taux correspondant à la charge
fiscale effective est
inférieur à 15 p.c.
Les dispositions du droit commun en matière d'impôts qui
sont applicables aux sociétés établies dans un
Etat
membre de l'Union européenne sont censées ne pas être
notablement plus avantageuses qu'en Belgique.
2° une
société de financement, une
société de
trésorerie ou une
société d'investissement qui, bien
qu'assujettie, dans le pays de son domicile fiscal, à un
impôt visé au 1°, bénéficie dans celui-ci d'un
régime
fiscal exorbitant du droit commun;
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3°
une société dans la mesure où les revenus
qu'elle recueille, autres que des dividendes,
trouvent leur
source en dehors du pays de son domicile fiscal et
bénéficient dans le pays du domicile fiscal d'un régime
d'imposition distinct exorbitant du droit commun;
4°
une société dans la mesure où elle réalise des
bénéfices par l
'intermédiaire d'un ou de plusieurs
établissements étrangers qui sont assujettis d'une manière
globale à un régime de taxation notablement plus
avantageux qu'en Belgique.
Les conventions préventives de la double imposition
conclues par la Belgique avec des pays en développement
peuvent assouplir ces exigences, à condition que les
dividendes proviennent de bénéfices tirés d’activités
d’entreprise.
¾
Does the "subject-to-tax" or
Oui. Conformément à l'article 203, § 1, 5° CIR 92, les
"minimum effective taxation"
dividendes ne sont en outre pas déductibles lorsqu'ils sont
requirement apply to the
alloués ou attribués par une société, autre qu'une société
subsidiary only or also to indirect
d'investissement, qui redistribue des dividendes qui, en
subsidiaries. Please explain.
application du 1° à 4°, ne pourraient pas eux-mêmes être
déduits à concurrence
d'au moins 90 p.c.
¾
Is a tax credit for underlying taxes NON
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
Sans objet
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
OUI, Conformément à l'article 192, § 1er, CIR 92
Lorsque ces participations ont été détenues en pleine propriété pendant une période ininterrompue d'au
moins un an.
En ce qui concerne le portefeuille commercial de sociétés financières, l'exonération des plus-values ne
s'applique pas. Les valeurs contenues dans ce portefeuille commercial sont traitées comme des stocks
avec taxation des plus-values et déduction des moins-values ou réductions de valeur, les plus-values
non réalisées et les réductions de valeur devant être exprimées dans les comptes annuels
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2a. If yes:
¾
Is there a minimum participation
NON
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding
OUI. La participation doit avoir été détenue en pleine
period? Is this different for
propriété pendant une période ininterrompue d'au moins
domestic, EU, treaty or 3rd country un an.
participations? Please explain.
¾
Is there a "subject-to-tax" or
OUI
"minimum effective taxation"
(voir réponse à la question 1a)
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes NON
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Si la condition de détention d'au moins un an n'est pas remplie, la plus-value sera taxée à un taux fixé à
25 p.c.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Non. Conformément à l'article 198, 7° CIR 92, les moins-values réalisées sur les actions ou parts ne
sont pas considérées comme des frais professionnels, à l’exception des moins-values actées à
l’occasion du partage total de l’avoir social d’une société jusqu’à concurrence de la perte du capital
libéré représenté par ces actions ou parts.
Toutefois, les valeurs contenues dans le portefeuille commercial de sociétés financières sont traitées
comme des stocks avec déduction des moins-values réalisées.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
Non. Toutefois, les valeurs contenues dans le portefeuille commercial de sociétés financières sont
traitées comme des stocks avec déduction des réductions de valeur.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
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yes please explain the methodology.
Non, sauf en ce qui concerne les réductions de valeur qui ont été déduites sur des actions ou parts
contenues dans le portefeuille commercial de sociétés financières; celles-ci sont recapturées par leur
prise en compte dans le calcul de la plus-value réalisée ultérieurement qui sera soumise à taxation. De
même, les reprises de réductions de valeur sur actions ou parts comptabilisées avant le 24.07.1991 et
qui ont été déduites des montants soumis à taxation suivant la fiscalité applicable à l'époque, seront
intégrées au bénéfice taxable de la période imposable au cours de laquelle elles sont reprises.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
Non
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Non
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
Sans objet
Please indicate.
¾
A "low-or-no-tax" test? Please
Sans objet
indicate.
¾
An activities based test? Please
Sans objet
indicate.
¾
An income based test? Please
Sans objet
indicate.
¾
Any other test? Please indicate.
Sans objet
¾
Is there a layer limitation in the
Sans objet
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying taxes Sans objet
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please
explain.
¾
Do you provide advance clearance Sans objet
on the non-applicability of your
CFC provisions? If yes, please
explain via examples.
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7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Oui, le nouvel article 344, § 1er du Code belge des impôts sur les revenus introduit en droit fiscal belge
une mesure générale anti-abus reconnaissant l’abus de droit en matière fiscale. Par exemple, une filiale
ou une sous-filiale « boîte aux lettres » ou une filiale ou une sous-filiale « écran » peut constituer une
construction purement artificielle. Dans ce cas, le fisc belge peut agir comme si l’abus n’avait eu lieu.
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03. BULGARIA
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Bulgarian legislation provides for the following tax treatment of dividends:
1. Dividends distributed by a Member State or another country – a Party to the Agreement on
the European Economic Area.
Revenues resulting from the distribution of dividends by resident legal entities and foreign legal
persons who are residents for tax purposes of a European Union’s Member State or another country in
the European Economic Area to local entities are not subject to corporate tax. An exception to this rule
is the case of hidden profit distribution. There is also an exception when the accrued income is as a
result of dividends distributed by licensed companies with special investment purpose under the Act
on Companies with Special Investment Purpose.
There is a provision in the law which regulates the tax treatment of dividends distributed as a result of
investments where the investments are accounted for using the equity method. When the financial
result of shareholders for tax purposes is determined, the accounting result is reduced with the
dividends distributed by resident legal persons or by non-resident persons who are residents for tax
purposes of a Member State or another country - a Party to the Agreement on the European Economic
Area when the investment is accounted for using the equity method.
2. Dividends distributed by a country with which Republic of Bulgaria has concluded a double
taxation agreement.
If there is a double taxation agreement in force, legal entities may opt to apply its provisions.
3. Dividends distributed by a third country with which Republic of Bulgaria does not have a
double taxation agreement.
No tax exemption is provided for revenues received as a result of dividends distributed by a third
country. It is not envisaged the accounting financial result to be reduced with dividends distributed by
third countries if the investment is accounted for using the equity method.
1a. If yes:
¾
Do you have a minimum
No minimum participation in the company’s capital is
participation requirement. Is this
required. Taxation is as defined above.
different for domestic, EU, treaty
or 3rd country participations?
Please explain.
¾
Is there a minimum holding
There is no requirement for a minimum holding period in
period? Is this different for
the company’s capital. Taxation is as defined above.
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
No
"minimum effective taxation"
requirement? If yes, please
explain.
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¾
Does the "subject-to-tax" or
No
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes If there is no obligation the provisions of international
available in case one of the above
treaties to be applied (if an international treaty ratified by
requirements is not met? Please
the Republic of Bulgaria, promulgated and entered into
explain.
force, contains provisions different from the provisions of
the
Corporate Income Tax Act, the provisions of the treaty
are applied), the taxpayers are entitled to a tax credit under
the terms and conditions of the
Corporate Income Tax Act.
When the corporate tax or alternative tax under the
Corporate Income Tax Act is assessed, taxpayers are
entitled to a tax credit in respect of each tax similar to
corporate income tax or imposed in lieu of such tax and
paid abroad. The tax credit is assessed for each country
and each type of income separately and is limited to the
Bulgarian tax on such profits or income.
1b. If no, please briefly explain your credit system.
- N/A
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
No
2a. If yes:
¾
Is there a minimum participation
N/A
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding
N/A
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
N/A
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes N/A
available in case one of the above
requirements is not met? Please
explain.
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2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Capital gains are taxed as ordinary profits.
However, the
Corporate Income Tax Act provides for a tax exemption described hereafter. When the
financial result for tax purposes is determined, the accounting result is reduced with the profit realized
from the disposition of financial instruments within the meaning of § 1, item 21 of the Supplementary
Provisions and determined as a positive difference between the selling price and the documented cost
of acquisition of the said financial instruments. This does not apply to any profits from a source
outside Bulgaria in respect of which the method of avoidance of double taxation is “exemption with
progression”, provided for in a double taxation treaty.
§ 1, item 21 of the Supplementary Provisions of the
Corporate Income Tax Act stipulates that
"Disposition of financial instruments" for the purposes of Articles 44 herein shall be any transaction:
(a) in units in collective investment schemes, shares and rights, effected on a regulated market within
the meaning given by Article 73 of the Markets in Financial Instruments Act; "rights" for the purposes
of sentence one shall be the securities entitling the holder to subscribe for a specified number of shares
in connection with a passed resolution on an increase of capital;
(b) concluded under the terms and according to the procedure of repurchase or redemption by
collective investment schemes which have been admitted to public offering in Bulgaria or in another
Member State of the European Union, or in a State, a Party to the Agreement on the European
Economic Area;
(c) concluded under the terms and according to the procedure of tender offering under Section II of
Chapter Eleven of the Law on the Public Offering of Securities, or transactions of analogous type in
another Member State of the European Union, or in a State, a Party to the Agreement on the European
Economic Area.
If there is a double taxation agreement in force, legal entities may opt to apply its provisions.
No tax exemption is envisaged in any other cases not mentioned herein.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
No
In case of the tax relief cited above (item 2b), similar to gains, losses from these transactions are not
recognized for tax purposes., namely, when the tax financial result is determined, the accounting
financial result is increased with the loss from the disposition of financial instruments (within the
meaning of § 1, item 21 of the additional provisions of the law) which is defined as the negative
difference between the selling price and the documented cost of acquisition of the said financial
instruments.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
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No
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
No
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No
Goodwill arisen as a result of business combination is not a depreciable asset for tax purposes. Losses
as a result of impairment and write-off of goodwill are not tax deductible.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No
7a. If yes, does the definition of a CFC
-
contain:
¾
A minimum shareholding test?
-
Please indicate.
¾
A "low-or-no-tax" test? Please
-
indicate.
¾
An activities based test? Please
-
indicate.
¾
An income based test? Please
-
indicate.
¾
Any other test? Please indicate.
-
¾
Is there a layer limitation in the
-
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying taxes -
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please
explain.
¾
Do you provide advance clearance -
on the non-applicability of your
CFC provisions? If yes, please
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explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
According to the
Corporate Income Tax Act, “a dividend is the distribution in favour of a person,
arising from the holding that such person has in the capital of another person, resulting in a reduction
of the owners' equity of the latter, including:
(a) income from shares;
(b) income from participations, even in unincorporated associations, and from other corporate rights,
where treated as income from shares;
(c) hidden profit distribution.”
Any distribution which, according to accounting legislation, has been recognised as an expense for the
distributing entity is not a dividend, with the exception of the cases of hidden profit distribution.
In general, income received from the distribution of dividends by resident legal entities and foreign
legal persons who are residents for tax purposes of a Member State or another country - a Party to the
Agreement on the European Economic Area is not recognized as a taxable income. This provision
does not apply in case of hidden profit distribution. Thus, in case of hidden profit distribution which
falls within the definition of a dividend, the revenue from this hidden profit distribution (dividend) is
recognized for tax purposes, namely, it is a taxable income. The income received from hidden
distribution of profits is a taxable income for the taxpayers. Therefore, revenues received as result of a
hidden profit distribution are involved in determining the taxable income.
There is also a provision according to which in the case of dividends in the form of a hidden profit
distribution, the provision which allows the financial result for tax purposes of the shareholders to be
reduced with the dividends distributed by resident legal entities or foreign legal persons who are
residents for tax purposes of a Member State or another country - a Party to the Agreement on the
European Economic Area (where the investment is accounted for using the equity method) does not
apply.
The
Law on Corporate Income Tax gives a definition of a hidden profit distribution.
Moreover, under the definition of a dividend, аny distribution by a foreign legal entity which
(according to accounting legislation) has been recognized as an expense for the distributing foreign
entity is not a dividend.
The Bulgarian
Law on Corporate Income Tax contains provisions which regulate the prevention of tax
evasion. These are the provisions related to the performance of commercial and financial relations
under terms which affect the amount of the tax base and which differ from the terms between
unrelated parties. There are also provisions which govern transactions between unrelated parties
concluded under terms which fulfillment leads to tax evasion. In these cases, the tax base is
determined without these transactions, some of their terms or their legal form to be taken into account.
The tax base that would result from a customary transaction at market prices which aims to achieve the
same economic result but without to lead to tax evasion must be taken into consideration instead.
Finally, the law stipulates that if a transaction is used in order to conceal another, the tax liability
should be assessed under the terms of the concealed transaction.
Please note that the provisions of the Bulgarian
Corporate Income Tax Act cited above are not an
official translation in English language.
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04. CYPRUS
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes. However, dividends distributed by a foreign subsidiary will be subject to special contribution for
the defence, if the subsidiary:
(i) Directly or indirectly engages more than 50% in activities which lead to investment income,
and
(ii) The foreign tax burden on the profits out of which the dividends are paid is substantially
lower than the tax burden of the recipient of the dividend in Cyprus.
1a. If yes:
¾
Do you have a minimum
No
participation requirement. Is this
different for domestic, EU, treaty
or 3rd country participations?
Please explain.
¾
Is there a minimum holding
No
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
See 1 above.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Does the "subject-to-tax" or
To direct subsidiaries only.
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes Only if stipulated in a Double Tax Agreement.
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
N/A
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes.
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2a. If yes:
¾
Is there a minimum participation
No.
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding
No.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
No, only the stipulated conditions that must be met.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes No.
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
N/A
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
No.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
N/A
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
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deductible amount (write down, amortisation, provision).
No.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test? Please
N/A
indicate.
¾
A "low-or-no-tax" test? Please indicate. N/A
¾
An activities based test? Please
N/A
indicate.
¾
An income based test? Please indicate.
N/A
¾
Any other test? Please indicate.
N/A
¾
Is there a layer limitation in the CFC-
N/A
definition (application to indirect
subsidiaries).
¾
Is a tax credit for underlying taxes
N/A
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance on
N/A
the non-applicability of your CFC
provisions? If yes, please explain via
examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Dividends distributed by a foreign subsidiary will be subject to special contribution for the defence, if
the subsidiary:
(i) Directly or indirectly engages more than 50% in activities which lead to investment income,
and
(ii) The foreign tax burden on the profits out of which the dividends are paid is substantially
lower than the tax burden of the recipient of the dividend in Cyprus.
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05. CZECH REPUBLIC
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
The Czech Republic provides for an exemption of inbound intercompany dividends if certain
conditions are met.
Section 19 subsection 1 letter ze) the point 1 Income taxes Act*:
The following shall be subject to tax exemption:
Income (capital gains)
1. in the form of dividends and other shares in (portions of) profits paid out by a subsidiary, which is a
taxpayer referred to in section 17 (3), to its parent company (entity).
1a. If yes:
¾
Do you have a minimum
For domestic companies and the EU: Minimum
participation requirement. Is this
shareholding is required 10% (section 19 subsection 3
different for domestic, EU, treaty
point. b) and c))
or 3rd country participations?
For companies of third countries (section 19 subsection 9)
Please explain.
- is a tax resident in a third State with which the Czech
Republic has concluded an effective double taxation
treaty, and
- is in the legal form comparable to the features of a
limited liability company, joint stock company or
cooperative under other statutory provisions, and
- is in a similar relationship to the taxpayer, to whom this
income is generated from dividends, other shares of profit
or transfer of a shareholding, as is that of a subsidiary to
its parent company under the conditions laid down in
subsections (3) and (4)**, and
- is liable to a tax which is comparable to (Czech)
corporate income tax and which is not below 12% in at
least the taxable period when the taxpayer referred to in
section 17(3) posts this income (gained from dividends,
other shares of profits or transfer of a shareholding in a
company) as a receivable in his books of accounts
pursuant to other statutory provisions, and also in the
taxable period preceding the taxable period in question;
where a company has been wound up without having gone
into liquidation, this condition must be met by the
company´s legal predecessor. However, a company
/business entity) which is tax-exempt or may opt to be tax-
exempt or may claim a relief from corporate tax, shall not
be deemed to be company (business entity) liable to
corporate (or similar) tax.
Tax exemptions pursuant to subsection (1) (ze) and (zi)
and pursuant to this subsection may be claimed if the
recipient of income from dividends, other shares of profits
and a shareholding transfer is the beneficial owner of this
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income.
¾
Is there a minimum holding
For domestic companies and the EU: minimum
period? Is this different for
shareholding period of 12 months (section 19 subsection 3
domestic, EU, treaty or 3rd country point. b) and c))
participations? Please explain.
For the third country (section 19 subsection 9): see 1a
¾
Is there a "subject-to-tax" or
For third countries: subject- to- tax :minimum 12%
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Does the "subject-to-tax" or
The minimum taxation applies only to the subsidiary.
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes No.
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
The Czech Republic provides for an exemption of capital gains on participations if certain conditions
are met.
Section 19 subsection 1 letter ze) point 2
The following shall be subject to tax exemption:
Income (capital gains)
from the transfer of a parent company´s shareholding (ownership interest) in a subsidiary effected by a
taxpayer referred to in section 17(3) or effected by a company that is a tax resident in another EU
Member State.
2a. If yes:
¾
Is there a minimum participation
For domestic companies and the EU: Minimum
requirement. Is this different for
shareholding is required 10% (section 19 subsection 3
domestic, EU, treaty or 3rd country point. b) and c))
participations? Please explain.
For companies of third countries (section 19 subsection 9)
- is a tax resident in a third State with which the Czech
Republic has concluded an effective double taxation
treaty, and
- is in the legal form comparable to the features of a
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limited liability company, joint stock company or
cooperative under other statutory provisions, and
- is in a similar relationship to the taxpayer, to whom this
income is generated from dividends, other shares of profit
or transfer of a shareholding, as is that of a subsidiary to
its parent company under the conditions laid down in
subsections (3) and (4)**, and
- is liable to a tax which is comparable to (Czech)
corporate income tax and which is not below 12% in at
least the taxable period when the taxpayer referred to in
section 17(3) posts this income (gained from dividends,
other shares of profits or transfer of a shareholding in a
company) as a receivable in his books of accounts
pursuant to other statutory provisions, and also in the
taxable period preceding the taxable period in question;
where a company has been wound up without having gone
into liquidation, this condition must be met by the
company´s legal predecessor. However, a company
/business entity) which is tax-exempt or may opt to be tax-
exempt or may claim a relief from corporate tax, shall not
be deemed to be company (business entity) liable to
corporate (or similar) tax.
Tax exemptions pursuant to subsection (1) (ze) and (zi)
and pursuant to this subsection may be claimed if the
recipient of income from dividends, other shares of profits
and a shareholding transfer is the beneficial owner of this
income.
¾
Is there a minimum holding
For domestic companies and the EU: minimum
period? Is this different for
shareholding period of 12 months (section 19 subsection 3
domestic, EU, treaty or 3rd country point. b) and c))
participations? Please explain.
For the third country (section 19 subsection 9): see 2a
¾
Is there a "subject-to-tax" or
For third countries: subject-to-tax: min:12%
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes No.
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
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No, the realised capital losses are not deductible.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No, the securities representing participation with substantial influence are not overvalued at the fair
market value.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
Goodwill is deductible only in cases relating to the purchase of the company. Goodwill is the
difference between the purchase price and the value of individual items of property valued by an
expert.
In the case of a positive valuation difference it is possible to amortize by successive reducing the tax
base, in the case of a negative valuation difference by successive increasing the tax base, in both cases
evenly spread over a period of 180 months (Section 23 subsection 15)
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
The Czech Republic does not apply CFC type legislation.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
Please indicate.
¾
A "low-or-no-tax" test? Please
indicate.
¾
An activities based test? Please
indicate.
¾
An income based test? Please
indicate.
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¾
Any other test? Please indicate.
¾
Is there a layer limitation in the
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying taxes
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please
explain.
¾
Do you provide advance clearance
on the non-applicability of your
CFC provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
The Czech Republic applies the rules of transfer pricing and substance over form.
* Income Taxes Act (Zákon o daních z příjmů) No. 586/1992 Coll.
** Section 19, subsection 3:
For the purposes of this Act:
a) “company that is a tax resident in another EU Member State” shall mean a company that is
not a taxpayer referred to in section 17(3) and
1. takes one of the legal forms that are listed in the European Communities Directives and that
are published by the (Czech) Ministry of Finance in the Financial Bulletin and in the remote-
access information system, and
2. according to the tax laws of the EU Member States is considered as a tax resident and, under
the terms of a double taxation agreement (treaty) concluded with a third State, is not
considered as a tax resident outside the European Union, and
3. is subject to one of the taxes that are listed in the relevant European Communities Directives
and that are similar in their nature to the (Czech) income tax. S list of the said taxes are
published by the (Czech) Ministry of Finance in the Financial Bulletin and in the remote-
access information system. A company which is tax-exempt or may opt to be tax-exempt shall
not be considered as a company being subject to such tax;
b) “parent company” shall mean a business entity that is a taxpayer referred to in section 17(3)
and is in the legal form of a joint stock company or limited liability company or a cooperative,
or a company (entity) that is a tax resident in another EU Member State, on condition that
such a business company (entity) has a minimum shareholding of 10%in another company´s
share capital for an uninterrupted period of at least 12 months;
c) “subsidiary shall mean a business entity that is a taxpayer referred to in section 17(3) and is in the
legal form of a joint stock company or limited liability company or cooperative, or a company that is a
tax resident in another EU Member State, on condition that the capital of such a business company
(entity) includes a minimum shareholding of 10% owned by its parent company for an uninterrupted
period of at least 12 months;
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d) “a third State shall mean a State that is not a Member State of the European Union.
Section 19, subsection 4:
A tax exemption pursuant to subsection 1 (ze) to (zi) and subsection 9 may be claimed if the condition
of a minimum shareholding of 10% in share capital is fulfilled even before the requirement of an
uninterrupted period of 12 months pursuant to subsection (3) is met provided that this requirement is
subsequently fulfilled. Where the condition of having a minimum shareholding of 10 % in share
capital for an uninterrupted period of at least 12 months is not (in future) fulfilled, tax exemption :
a) pursuant to subsection (1) (zf) to zi) claimed by a taxpayer referred to in section 17 (3) shall be
considered as non-compliance with tax liability for a taxable period or period for which a tax return is
filed and tax exemption has been claimed,
b) pursuant to subsection (1) (ze) to zh) claimed by a taxpayer shall be considered as non-compliance
with tax liability and the procedure pursuant to section 38s shall be followed.
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06. DENMARK
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes
1a. If yes:
¾
Do you have a minimum
Yes. There is a minimum participation requirement.
participation requirement. Is this
If the dividend-distributing company is a resident of
different for domestic, EU, treaty
Denmark or another Member State or another state with
or 3rd country participations?
which Denmark has a double taxation convention, it is a
Please explain.
condition that the Danish dividend-receiving company
holds at least 10 per cent of the capital of the dividend-
distributing company.
If the dividend-distributing company is a resident of
another state, it is a condition that the income of this
company is subject to Danish CFC-taxation, which
demands that the Danish dividend-receiving company
controls at least 50 per cent of the voting power of the
foreign dividend-distributing company.
A special anti-avoidance rule precludes that corporate
shareholders which do not hold 10 per cent of the capital
of the dividend-distributing company meet this
requirement through a chain of interposed holding
companies. Corporate shareholders are considered to be
direct owners of shares of the dividend-distributing
company even though they own shares in an interposed
holding company (or a chain of interposed holding
companies) which own the shares of the dividend-
distributing company. It is a condition that the shares of
the interposed holding company are unlisted, that the
primary function of this company is to own shares in
subsidiaries, that this company has no genuine economic
activity and that more than 50 per cent of this company is
directly owned by entities which would not individually
meet the 10 per cent ownership condition if the interposed
company was disregarded.
¾
Is there a minimum holding
No
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
For foreign dividends it is a requirement, that the foreign
"minimum effective taxation"
distributing company – or another sub- subsidiary – has
requirement? If yes, please
not deducted the dividend payment at its company
explain.
taxation.
¾
Does the "subject-to-tax" or
The no deduction requirement also applies to a subsidiary
"minimum effective taxation"
on a lower level, unless there was a corresponding
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requirement apply to the
taxation on a higher level than the subsidiary which
subsidiary only or also to indirect
benefitted from the deduction.
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes In case the above requirements are not met, the receiving
available in case one of the above
Danish company is entitled to an ordinary credit for
requirements is not met? Please
underlying taxes.
explain.
1b. If no, please briefly explain your credit system.
N.A.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes
2a. If yes:
¾
Is there a minimum participation
Yes. There is a minimum participation requirement.
requirement. Is this different for
In case of alienation of shares in a company which is a
domestic, EU, treaty or 3rd country resident of Denmark or another Member State or another
participations? Please explain.
state with which Denmark has a double taxation
convention, it is a condition that the alienating Danish
company held at least 10 per cent of the capital of the
dividend-distributing company.
In case of alienation of shares in a company which is a
resident of another state, it is a condition that the income
of this company is subject to Danish CFC-taxation, which
demands that the alienating Danish company controlled at
least 50 per cent of the voting power of the foreign
dividend-distributing company.
A special anti-avoidance rule precludes that corporate
shareholders which did not hold 10 per cent of the capital
of the dividend-distributing company meet the 10 per cent
requirement through a chain of interposed holding
companies. As mentioned under 1.a.
¾
Is there a minimum holding
No
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
No
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes No
available in case one of the above
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requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
N.A.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
No
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
N.A.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Yes
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
It is a requirement, that the foreign subsidiary is controlled
Please indicate.
by the Danish parent company which means that the
Danish company holds more than 50 per cent of the voting
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power of the subsidiary.
¾
A "low-or-no-tax" test? Please
No
indicate.
¾
An activities based test? Please
No
indicate.
¾
An income based test? Please
Yes. It is a requirement that the business of the foreign
indicate.
subsidiary is mainly of a financial nature. This means the
fulfilment of two conditions. More than 50 per cent of the
total taxable income of the subsidiary shall consist of net
interest income, dividends, commissions, net capital gains
on shares, payments and capital gains with respect to
intellectual property rights, income from leasing or
insurance activities etc. More than 10 per cent of the
assets of subsidiary shall be of a financial nature.
¾
Any other test? Please indicate.
No
¾
Is there a layer limitation in the
No. The CFC-definition also applies to indirect
CFC-definition (application to
subsidiaries.
indirect subsidiaries).
¾
Is a tax credit for underlying taxes Yes. Ordinary credit.
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please
explain.
¾
Do you provide advance clearance Yes.
on the non-applicability of your
Taxpayers may request for a binding advance ruling
CFC provisions? If yes, please
regarding the tax consequences of a specific transaction.
explain via examples.
These rulings are obtained from the tax authorities.
However, a binding advance ruling is issued from the
Taxation Board if the case may have consequences for a
large number of taxpayers, involves a large amount of tax,
involves interpretation of new legislation, involves EU
law to a considerable extent or is of public interest.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
N.A.
_____________________
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07. ESTONIA
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes, on certain conditions.
1a. If yes:
¾
Do you have a minimum
Yes. The minimum participation required is 10% in all
participation requirement. Is this
cases.
different for domestic, EU, treaty
or 3rd country participations?
Please explain.
¾
Is there a minimum holding
No minimum holding period is required.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
There is a subject-to-tax requirement for 3rd country
"minimum effective taxation"
participations but not for EU/EEA participations.
requirement? If yes, please
explain.
¾
Does the "subject-to-tax" or
The subject-to-tax rule requires that the dividend or
"minimum effective taxation"
underlying profit has been taxed. It may have been taxed
requirement apply to the
on the level of the subsidiary or any of the indirect
subsidiary only or also to indirect
subsidiaries.
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes When the requirements of the participation exemption are
available in case one of the above
not met, the taxpayer may deduct from income tax payable
requirements is not met? Please
(upon distribution of profits) the income tax paid on or
explain.
withheld from the dividend abroad, up to the amount of
Estonian tax due.
Underlying credit is available under some Estonian tax
treaties. In that case where a company that is a resident of
Estonia receives a dividend from a company that is a
resident of the other Contracting State in which it owns at
least 10 per cent of its shares having full voting rights, the
tax paid in the other Contracting State shall include not
only the tax paid on the dividend, but also the tax paid on
the underlying profits of the company out of which the
dividend was paid.
1b. If no, please briefly explain your credit system.
–
2. Does your Member State provide for an exemption of capital gains on participations if certain
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conditions are met?
No.
2a. If yes:
¾
Is there a minimum participation
–
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period?
–
Is this different for domestic, EU,
treaty or 3rd country participations?
Please explain.
¾
Is there a "subject-to-tax" or
–
"minimum effective taxation"
requirement? If yes, please explain.
¾
Is a tax credit for underlying taxes
–
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Capital gains are taxed as ordinary profits (upon distribution).
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
No, as only distributed profits are taxed.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
No.
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6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Not to companies. Estonia only applies CFC legislation to resident individuals (participating in a
CFC). Our corporate income tax system is based on taxation of distributions and no unrealised gains
are included in the tax base.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test? Please –
indicate.
¾
A "low-or-no-tax" test? Please
–
indicate.
¾
An activities based test? Please
–
indicate.
¾
An income based test? Please indicate. –
¾
Any other test? Please indicate.
–
¾
Is there a layer limitation in the CFC-
–
definition (application to indirect
subsidiaries).
¾
Is a tax credit for underlying taxes
–
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance on –
the non-applicability of your CFC
provisions? If yes, please explain via
examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
No specific rules.
_____________________
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08. FINLAND
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes.
1a. If yes:
¾
Do you have a minimum
As a rule, a dividend received by a corporation is tax-
participation requirement. Is this
exempt, .i.e. there is no participation requirement. In
different for domestic, EU, treaty
cases where a dividend falls outside the scope of the tax
or 3rd country participations?
exemption for corporations, thus being partially taxable
Please explain.
income, a participation exemption applies to EU
participations with the minimum holding of 10 %. In tax
treaties the minimum participation requirement may vary,
but is usually 10 %.
No participation exemption in regard
to participations in companies residing in 3rd countries
with which there is no tax treaty.
¾
Is there a minimum holding
No.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
No.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Does the "subject-to-tax" or
N/A.
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes No. Ordinary credit is available with carry forward for 5
available in case one of the above
years.
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
If the requirements for the participations exemption are not fulfilled and the dividend is wholly or
partially tax liable, a tax credit can usually be granted. This takes place either according to the tax
treaty, in situations where a tax treaty exists, and according to domestic legislation in non-treaty
situations.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes, a tax exemption is available for capital gains derived from transfer of shares held in the fixed
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assets of the company.
2a. If yes:
¾
Is there a minimum participation
Yes, minimum participation requirement is 10 %. The
requirement. Is this different for
requirement is same for domestic, EU and treaty
domestic, EU, treaty or 3rd country participations. Exemption does not apply to 3rd country
participations? Please explain.
participation in non-treaty situations.
¾
Is there a minimum holding
Yes. Minimum holding period is one year immediately
period? Is this different for
preceding the transfer. The requirement is the same for
domestic, EU, treaty or 3rd country domestic, EU and treaty participations. Exemption does
participations? Please explain.
not apply to 3rd country participation in non-treaty
situations.
¾
Is there a "subject-to-tax" or
No.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes No.
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
In regard to the credit system, should the capital gains be wholly or partially tax liable, a tax credit can
usually be granted. This takes place either according to the tax treaty, in situations where a tax treaty
exists, or according to domestic legislation in non-treaty situations.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
In regard to capital gains, participation has relevance only in regard to transfer of shares held in the
fixed assets of the company. If the conditions for the tax exemption are met, the capital loss is not
deductible. If the requirement for minimum holding period is not fulfilled, a deduction for the capital
loss is available and determined by deducting the amount of dividends received, group contributions
and other corresponding items that have reduced the assets of the entity. However, the capital losses is
not deductible if the entity either resides outside Finland, or is not a company referred to in Art 2 of
the Parent-Subsidiary Directive or there is no tax treaty between Finland and the country in which the
subsidiary resides.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
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No.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
No.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No. In connection of the purchase of shares, the additional price relating to the goodwill is regarded to
form a part of the acquisition price of the shares, which is deductible from the eventual selling price.
Deduction for the depreciation of value of shares is not available.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Yes.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
Yes. A such test is the fact whether the foreign body is
Please indicate.
under the control of persons resident in Finland; this is the
case if one or several such persons directly or indirectly
own at least 50 per cent of the capital of or the voting
rights in a CFC or they are entitled to at least 50 per cent
of the yield of the net wealth of the CFC.
¾
A "low-or-no-tax" test? Please
Yes. In non-treaty situation the test is whether the foreign
indicate.
body has in its country of residence an actual rate of
income tax which is less than 3/5 of the tax rate of a
corporate body resident in Finland. In treaty situations, the
test is whether the foreign body has in its country of
residence an actual rate of income tax which is less than ¾
of the tax rate of corporate body resident in Finland.
¾
An activities based test? Please
Yes. Following bodies are not regarded as CFC: a) a
indicate.
corporate body whose income is mainly derived from
industrial activities, any other comparable production
activities or shipping business exercised in its country of
residence; b) a corporate body whose income is mainly
derived from sales and marketing activities exercised in
and mainly directed to its country of residence. In
addition, see below the actual economic activities test.
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¾
An income based test? Please
No income type test.
indicate.
¾
Any other test? Please indicate.
Yes.
I) The CFC provisions are not applied to foreign corporate
bodies resident in an EEA Member State or in a treaty
partner State not on the so called grey list (see below), if:
a) EU Directive concerning mutual assistance by the
competent authorities of the Member States in the field of
direct taxation and taxation of insurance premiums
(77/799/EEC) is applicable to that State; or
b) An agreement on exchange of information in tax
matters between authorities has been concluded with that
State and that agreement together with the internal
legislation of the contracting States allows a sufficient
exchange of information for the application of the Act on
the Taxation of Shareholders in Controlled Foreign
Companies.
c) a further requirement is that the corporate body in
question is actually established in the State where it is
resident and carries on actual economic activity there.
The requirement in c) is fulfilled if, taking into account
the character of the activity:
1. the corporate body has at its disposal in its State of
residence necessary premises and assets for carrying on its
activities;
2. the corporate body has at its disposal in its State of
residence sufficient staff with the authority to
independently carry on its business; and
3. that staff independently decides upon the day-to-day
activities of that corporate body.
II) A foreign body is not regarded a CFC on the basis of
tax treaty status, if
a) a corporate body is resident in a State with which
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Finland has an agreement for the avoidance of double
taxation of income in force;
b) the agreement is applicable to the profits of the
corporate body provided that corporate bodies are in that
State liable to pay for their profits a tax that doesn’t
significantly deviate from the tax that corporate bodies
must pay in Finland for their profits; and
c) the corporate body has not profited from the specific
tax relief legislation of that State.
The Ministry of Finance issues a decree containing a list
on those tax treaty states where the tax is regarded to
significantly deviate from the tax which corporate bodies
must pay in Finland (grey list).
¾
Is there a layer limitation in the
Applies also to the indirect subsidiaries. A foreign body is
CFC-definition (application to
regarded to be under control of persons resident in Finland
indirect subsidiaries).
if one or several such persons directly or indirectly own at
least 50 per cent of the capital of or the voting rights in a
CFC or they are entitled to at least 50 per cent of the yield
of the net wealth of the CFC.
¾
Is a tax credit for underlying taxes Yes. The shareholder of a CFC is entitled to credit the tax
available in case your CFC rules
of the CFC against the tax imposed by virtue of the CFC
trigger immediate taxation of non-
rules. The tax credit is available for the state tax having
distributed income? Please
been imposed to the CFC in its State of residence or in a
explain.
third country. In a treaty situation, all such taxes are
eligible for tax credit which according to the tax treaty
would have been eligible for tax credit, had the
shareholder resident in Finland been liable to pay such tax.
If the credit cannot be granted in full, the un-credited part
of the tax can be deducted from the income tax during the
subsequent five tax year if the taxpayer so claims.
¾
Do you provide advance clearance The normal procedure of issuing advance rulings on tax
on the non-applicability of your
matters based on the requests of tax payers is applicable.
CFC provisions? If yes, please
The taxpayer submits an application for an advance ruling
explain via examples.
to the Central Board of Taxation or to a tax office. In the
application the taxpayer presents a question or questions
relating to the application of CFC legislation, to which the
advance ruling takes a stand that is binding to the tax
authorities.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
-
_____________________
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09. FRANCE
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10. GERMANY
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
[yes]
1a. If yes:
¾
Do you have a minimum participation [no]
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period?
[no]
Is this different for domestic, EU,
treaty or 3rd country participations?
Please explain.
¾
Is there a "subject-to-tax" or
[no]
"minimum effective taxation"
requirement? If yes, please explain.
¾
Does the "subject-to-tax" or
[N/A]
"minimum effective taxation"
requirement apply to the subsidiary
only or also to indirect subsidiaries.
Please explain.
¾
Is a tax credit for underlying taxes
[N/A]
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
[N/A]
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
[yes]
2a. If yes:
¾
Is there a minimum participation
[no]
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period?
[no]
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Is this different for domestic, EU,
treaty or 3rd country participations?
Please explain.
¾
Is there a "subject-to-tax" or
[no]
"minimum effective taxation"
requirement? If yes, please explain.
¾
Is a tax credit for underlying taxes
[N/A]
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
[N/A]
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
[No]
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
[No]
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
[No]
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
[no]
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign (sub)
subsidiaries)?
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Yes
7a. If yes, does the definition of a
CFC contain:
¾
A minimum shareholding
Yes, more than 50% of the shares must be owned directly or
test? Please indicate.
indirectly by residents (individuals or other).
If a foreign company’s income consists largely of investment
income (other than dividends), then the threshold is 1 %
shareholding or even less.
¾
A "low-or-no-tax" test? Please Yes, effective tax burden less than 25% based on the CFC’s
indicate.
income being calculated under German rules.
¾
An activities’ based test?
Yes. Any income of the CFC is subject to CFC rules unless
Please indicate.
derived from activities described in the statute.
¾
An income based test? Please
No.
indicate.
¾
Any other test? Please
No. However, if the foreign company has either its seat or its
indicate.
place of effective management in a member state of the
European Economic Area CFA, CFC rules shall not be applied
if the taxpayer can proof that the foreign company carries on a
real economic activity. This rule is a consequence of the ECJ
decision C-196/06 (
Cadbury-Schweppes).
¾
Is there a layer limitation in
No. Tainted income of lower tier subsidiaries is covered as
the CFC-definition
long as more than 50 % of the shares of lower tier subsidiaries
(application to indirect
are owned directly or indirectly by residents. However, in
subsidiaries).
order to avoid multiple inclusion of income, dividends are not
treated as income subject to CFC. Also, gains from the
disposition of shares in a CFC are in most cases not treated as
tainted income.
¾
Is a tax credit for underlying
Yes. Taxes born by the CFC are either deductible from the
taxes available in case your
income attributed to the resident shareholder or may be
CFC rules trigger immediate
credited against the shareholder’s tax.
taxation of non-distributed
income? Please explain.
¾
Do you provide advance
No
clearance on the non-
applicability of your CFC
provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
N/A
_____________________
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11. GREECE
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Unofficial translation:
According to our national legislation (Income Tax Code), we can distinguish the following cases:
Dividends from associated companies of Member States of the European Union
According to the provisions of point ia’ of paragraph 1 of Article 103 of Income Tax Code (Law
2238/1994), which were added with paragraph 13 of Article 14 of Law 3943/2011, it is provided that
the profits received by domestic corporations (S.A.s) and limited liability companies, from companies
established in another Member State of the EU, in which they participate in the meaning of Article 11
of Law 2578/1998 (which incorporated the Parent-Subsidiary Directive 90/435/EEC), are tax exempt
provided that they appear in a reserve account.
If this reserve or part of it is distributed or capitalized, a withholding tax of 25% is effected.
Furthermore, according to the provisions of point a’ of paragraph 2 of Article 8a of Law 2578/1998, it
is specified that the provisions of Articles 8 through 11 of Law 2578/1998 apply to profits received by
domestic companies listed in Article 101 and paragraph 4 of Article 2 of the Income Tax Code,
because of their participation in subsidiary companies whose head office is in another Member State
of the European Union
(question 1a).
In more detail, according to the provisions of the first paragraph of article 11 of Law 2578/1998, the
provisions of articles 8 to 10 of the same law do not apply in case that the parent national company
does not retain for two (2) consecutive years the participation percentage required by point c’ of article
9 of the same law (at least 10% from 1st January 2009 and onwards).
(question 1a).
Taking into account all the above mentioned, the exemption to inbound dividends from associated
companies of Member States of the EU is applied only when the requirements of the Directive
90/435/EEC are met and there is no “subject-to-tax” or “minimum effective taxation” requirement.
(question 1a).
In case that the requirements of the Directive 90/435/EC are not met (for example participation below
10%, retaining of the participations less than 2 years), in the inbound dividends from associated
companies of Member States of the EU a withholding tax of 25% is effected, according to the
provisions of article 54 (par. 6 point d’) or article 55 of Income Tax Code, as appropriate, without
prejudice to the provisions of the Double Taxation Agreements.
These dividends are subject to income taxation under the general tax provisions, adding up all other
relevant income of the companies. The tax withheld under the provisions of article 54 or 55, the tax of
the foreign legal entity or the tax withheld in these dividends abroad in all levels is credited.
(question
1a).
Dividends from associated companies of third countries
In the inbound dividends from associated companies of third countries, a withholding tax of 25% is
effected, according to the provisions of article 54 (par. 6 point d’) or article 55 of Income Tax Code, as
appropriate, without prejudice to the provisions of the Double Taxation Agreements. These dividends
are subject to income taxation under the general tax provisions, adding up all other relevant income of
the companies. The tax withheld under the provisions of article 54 or 55, the tax of the foreign legal
entity or the tax withheld in these dividends abroad up to the level of the subsidiary of the foreign
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company abroad in all levels is credited.
(question 1a).
Dividends from associated domestic companies
Under the provisions of paragraph 1 of Article 54 and point d’ of paragraph 1 of Article 55 of the
Income Tax Code, profits distributed by domestic corporations (S.A.s) and limited liability companies
in other S.A.s or limited liability companies are subject to a withholding tax of 25%. With this
witholding tax, the tax liability of the recipient entity ends for these dividends. In case the recipient
entity makes a distribution of profits and its income includes income from its participation to another
legal entity, from the tax obliged to pay with the tax return, the part of the tax that has already been
withheld on its part and relates to the distributed by it profits that origin from the above mentioned
participations is credited.
1a. If yes:
¾
Do you have a minimum participation
[reply]
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period? Is
[reply]
this different for domestic, EU, treaty or
3rd country participations? Please
explain.
¾
Is there a "subject-to-tax" or "minimum [reply]
effective taxation" requirement? If yes,
please explain.
¾
Does the "subject-to-tax" or "minimum
[reply]
effective taxation" requirement apply to
the subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes
[reply]
available in case one of the above
requirements is not met? Please explain.
1b. If no, please briefly explain your credit system.
[reply]
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Unofficial translation
The provisions of our domestic law (Article 13 of Income Tax Code) do not provide for an exemption
for gains on the disposal of participations held by a domestic company to other companies (domestic
and foreign).
2a. If yes:
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¾
Is there a minimum participation
[reply]
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period?
[reply]
Is this different for domestic, EU,
treaty or 3rd country participations?
Please explain.
¾
Is there a "subject-to-tax" or
[reply]
"minimum effective taxation"
requirement? If yes, please explain.
¾
Is a tax credit for underlying taxes
[reply]
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Unofficial translation
The goodwill of gains on the disposal of participations held by a domestic company to other
companies (domestic and foreign) is taxed in principle with a specific rate, depending on the type of
participation (eg shares or units of limited liability companies) and furthermore, any profit is subject to
taxation according to the general income tax provisions.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Unofficial translation
Assuming that the realized capital loss from participations is a loss from a transfer of participations or
from liquidation of the company, of which the participations are held, we note the following:
As regards the participations of domestic companies to other domestic corporations (S.A.s), the loss
arising from their transfer is transferred to a special reserve account which is formed from the sale of
shares listed on the Athens Stock Exchange and any uncovered amount is not deductible from the
gross income (Article 38 of Income Tax Code). The loss from the liquidation of a domestic company
is recognized for deduction from the gross income of the company that holds participations in it.
Furthermore, the loss resulting from the transfer of participations of a foreign company as well as its
liquidation, is not recognized as a deduction from the gross income, as a negative item of income from
sources located abroad is only credited with positive income of the taxpayer that incurs abroad (Article
4 of Income Tax Code).
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
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provision).
Unofficial translation
Assuming that the unrealized loss from participations is a loss from valuation, we note that according
to the provisions of Article 38 of Income Tax Code, the loss from the evaluation of participations in
domestic companies has the same tax treatment as the loss from the sale of unlisted shares, as
discussed above (transfer to the debit of the special reserve account) (see question 3). Respectively, the
loss from the evaluation of participations in foreign companies, is not recognized, as mentioned above
(see question 3).
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
Unofficial translation
We would like to reserve our right to reply, after the clarification of the rule/methodology of
“recapture rule”.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
Unofficial translation
There is no corresponding tax treatment based on our internal legislation.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Unofficial translation
Our national legislation does not provide for CFC rules.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test? Please [reply]
indicate.
¾
A "low-or-no-tax" test? Please
[reply]
indicate.
¾
An activities based test? Please
[reply]
indicate.
¾
An income based test? Please indicate. [reply]
¾
Any other test? Please indicate.
[reply]
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¾
Is there a layer limitation in the CFC-
[reply]
definition (application to indirect
subsidiaries).
¾
Is a tax credit for underlying taxes
[reply]
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance on [reply]
the non-applicability of your CFC
provisions? If yes, please explain via
examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Unofficial translation
We believe that the exchange of information can be an alternative anti-avoidance rule to ensure that
profits artificially diverted which may give rise to foreign source dividends are appropriately taxed,
when the recipient of the profits is an intermediate company and not the real beneficiary, taking into
account that several member states do not provide for CFC rules.
-----------------------------
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12. HUNGARY
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
As for Hungary the dividends are exempt from corporate income tax, except for the dividends received
from controlled foreign companies.
1a. If yes:
¾
Do you have a minimum
No.
participation requirement. Is this
different for domestic, EU, treaty
or 3rd country participations?
Please explain.
¾
Is there a minimum holding
No.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
Yes, as form 1 of January 2012 the definition of dividend
"minimum effective taxation"
was introduced, which reads as follows: Dividend is an
requirement? If yes, please
amount accounted as such under the accounting regulation
explain.
provided that the entity paying the amount does not
account it as an expense deducted from its pre-tax profit.
¾
Does the "subject-to-tax" or
No difference.
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes No.
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
Withholding tax can only be credited if the definition of dividend is met.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes, Hungary provides for an exemption of capital gains on participations.
In general capital gains of companies are treated as ordinary income and taxed accordingly. From 1
January 2007, a participation exemption regime was introduced which exempts the disposal of
'reported participations' from corporate income tax. A reported participation is one of at least 30% in
the capital of the relevant company, except for CFCs. The exemption only applies to participations
acquired on or after 1 January 2007 and held for at least one year. (for further details please see our
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replies below).
2a. If yes:
¾
Is there a minimum participation
Yes, Hungary has a minimum participation requirement of
requirement. Is this different for
30 per cent (registered share). Hungary’s ‘registered
domestic, EU, treaty or 3rd country share’ rule applies to a share of
at least 30 per cent (and
participations? Please explain.
above, except for the increase of the value of the
registered share)
in the capital of a legal person or
business association lacking the legal status of a legal
person established according to Hungarian laws, and in
any foreign person (other than a CFC), provided that the
taxpayer notifies the tax authority concerning the
acquisition of this share
within sixty days. The sixty days
deadline is mandatory (if the taxpayer fails to submit the
notification is time it is not a possible to replace it).
Notification of a share above 30 per cent may be
submitted only if the taxpayer has previously notified his
share of at least 30 per cent to the tax authority. On the
basis of this rule the minimum participation requirement
does not differ in the case of domestic, EU or third
countries.
¾
Is there a minimum holding
The pre-tax profit of the taxpayer might be deducted with
period? Is this different for
the capital gains from the sale of a registered share shown
domestic, EU, treaty or 3rd country for the tax year, furthermore, in connection with registered
participations? Please explain.
shares, the capital gain claimed for the tax year due to the
retiring of notified shares from the records shown as non-
monetary, in-kind contributions in excess of the amount of
expenses claimed, on condition that that the taxpayer
(including any predecessor) has shown the share in
question under his assets for at least one year previously.
On the basis of this rule the minimum holding period does
not differ in the case of domestic, EU or third countries.
¾
Is there a "subject-to-tax" or
No.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes No. If the abovementioned requirements are not met the
available in case one of the above
taxpayer is supposed to pay the tax in relation to its shares
requirements is not met? Please
according to the general rules.
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
-
3. Is a deduction available for realised capital losses concerning the participations? If yes please
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briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
No, in the case of registered shares the pre-tax profit shall be
increased by the capital losses claimed
for the tax year under expenses, and any expenses claimed due to the retiring of shares from the
records for any reason (other than settlement in connection with transformation) in excess of the
amount of income claimed.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
Unrealised foreign exchange loss is deductible temporarily.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
Yes, the pre-tax profit shall be increased with any capital loss (and the value adjustments) shown
under expenses for the tax year in connection with the shares in a controlled foreign company, and the
part of expenses resulting from the retirement of such shares for any reason, that is in excess of the
income accounted.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
In the case of goodwill of acquired participations the loss in value is deductible for corporate income
tax purposes.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Yes, Hungary applies CFC-type legislation according to Paragraph 4. Point 11. of Act LXXXI of 1996
on Corporate Tax and Dividend Tax.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
For the purposes of CFC provision, beneficial owner shall
Please indicate.
mean a private individual who controls - directly or
indirectly - at least
ten per cent of the voting rights or the
capital of the nonresident company,
or has a dominant
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influence by definition of the Civil Code of Hungary.
¾
A "low-or-no-tax" test? Please
If the quotient of the tax amount paid (payable) by the
indicate.
nonresident company for the tax year - less any tax refund
- and the tax base [in the case of group taxation
arrangement the amount of tax paid (payable) at group
level, less any tax refund, and the tax base] is less than 10
per cent or the nonresident company did not pay any tax
equivalent to corporate tax on account of its tax base being
zero or negative, even though it has made a profit.
If the balance sheet total or the tax base is zero or
negative, the amount of the tax equivalent to corporate tax
according to the laws of the foreign state shall reach 10
per cent.
¾
An activities based test? Please
Real economic presence means when a nonresident
indicate.
company is engaged in gainful activities in another state -
together with its affiliates established in that state, where
applicable -, such as in manufacturing, processing,
agricultural, service, investment and trading activities,
using its own equipment and own workforce, where their
revenues from such activities represent at least 50 per cent
of all revenues; burden of proof of the said real economic
presence shall lie with the taxpayer.
¾
An income based test? Please
Controlled foreign company shall mean nonresident
indicate.
company whose revenues for the tax year originate from
Hungary for the most part.
¾
Any other test? Please indicate.
Controlled foreign company shall mean foreign persons
and nonresident entities whose head office is located
abroad (hereinafter referred to as “nonresident company”),
in which there is a beneficial owner who is considered a
resident according to the Personal Income Tax Act
concerning the majority of the nonresident company’s tax
year.
¾
Is there a layer limitation in the
No. But CFC provisions shall apply to any fixed
CFC-definition (application to
establishment of the nonresident company located in a
indirect subsidiaries).
state other than where the said company is established or
in which it is a resident.
¾
Is a tax credit for underlying taxes No.
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please
explain.
¾
Do you provide advance clearance CFC provisions shall not apply if the nonresident
on the non-applicability of your
company in question is established or is a resident of a
CFC provisions? If yes, please
Member State of the European Union, a Member State of
explain via examples.
the OECD, or a State with which the Republic of Hungary
has an agreement on double taxation and in which state
the said nonresident company maintains real economic
presence.
Real economic presence means when a nonresident
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company is engaged in gainful activities in another state -
together with its affiliates established in that state, where
applicable -, such as in manufacturing, processing,
agricultural, service, investment and trading activities,
using its own equipment and own workforce, where their
revenues from such activities represent at least 50 per cent
of all revenues; burden of proof of the said real economic
presence shall lie with the taxpayer.
Any nonresident company in which a person that is listed
on a recognized exchange for a period of not less than five
years effective on the first day of the tax year, or its
affiliated company holds a share of at least 25 per cent on
each day of the tax year shall not be recognized as a
controlled foreign company.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Hungary applies CFC-type legislation according to Paragraph 4. Point 11 of Act LXXXI of 1996 on
Corporate Tax and Dividend Tax.
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13. IRELAND
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
No.
The sole exemption is in the case of portfolio investor companies (companies with a holding or voting
rights of
less than 5 per cent) where the dividends form part of the trading income of the company.
This limited exemption for inbound dividends was provided in 2010 to ensure parity of treatment with
Irish-source dividends received by insurance companies.
1a. If yes:
¾
Do you have a minimum participation Not applicable
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period?
Not applicable
Is this different for domestic, EU,
treaty or 3rd country participations?
Please explain.
¾
Is there a "subject-to-tax" or
Not applicable
"minimum effective taxation"
requirement? If yes, please explain.
¾
Does the "subject-to-tax" or
Not applicable
"minimum effective taxation"
requirement apply to the subsidiary
only or also to indirect subsidiaries.
Please explain.
¾
Is a tax credit for underlying taxes
Not applicable
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
Credit is given for tax paid by 5 per cent (minimum – by reference to voting rights) subsidiaries and
sub-subsidiaries, whether withholding tax on the dividends or a proportion of the direct tax paid on the
underlying profits from which the dividends were paid. The set-off of credit in any period cannot
exceed the Irish corporation tax on the dividends.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes
Where the conditions are not met the capital gains are subject to a specific capital gains tax or an
equivalent amount of corporation tax.
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2a. If yes:
¾
Is there a minimum participation
There is a 5 per cent minimum participation requirement
requirement. Is this different for
in all cases— exemption applies to domestic, EU and
domestic, EU, treaty or 3rd country Double Taxation Treaty-partner participations only.
participations? Please explain.
¾
Is there a minimum holding
In all cases the participation must have been held for a
period? Is this different for
continuous period of 12 months ending within two years
domestic, EU, treaty or 3rd country prior to the date of disposal of the participation.
participations? Please explain.
¾
Is there a "subject-to-tax" or
Exemption applies to domestic, EU and Double Taxation
"minimum effective taxation"
Treaty-partner participations only.
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes Where the gain on disposal is charged to Irish tax, credit is
available in case one of the above
given for tax on the gain paid in a Treaty partner country.
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Not applicable
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
No
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
Not applicable— please see answer at 4. above.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
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deductible amount (write down, amortisation, provision).
No
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No.
Ireland does not have a general CFC regime. Immediate taxation is only applicable in the limited
circumstances of capital gains arising on non-trading assets disposed of by foreign companies
controlled by 5 or fewer Irish residents.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test? Please
Not applicable
indicate.
¾
A "low-or-no-tax" test? Please indicate. Not applicable
¾
An activities based test? Please
Not applicable
indicate.
¾
An income based test? Please indicate.
Not applicable
¾
Any other test? Please indicate.
Not applicable
¾
Is there a layer limitation in the CFC-
Not applicable
definition (application to indirect
subsidiaries).
¾
Is a tax credit for underlying taxes
Not applicable
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance on
Not applicable
the non-applicability of your CFC
provisions? If yes, please explain via
examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Retaining the credit system of relief for foreign tax ensures appropriate taxation of foreign-source
dividends representing profits repatriated to Ireland.
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tible
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15. LATVIA
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes
1a. If yes:
¾
Do you have a minimum
Law “On Enterprise Income Tax” (hereinafter – EIT)
participation requirement. Is this
provides that dividends received from a resident of Latvia,
different for domestic, EU, treaty
other EU Member State or EEA state (with which tax
or 3rd country participations?
information can be exchanged under agreement for the
Please explain.
avoidance of double taxation (DTA)), shall be exempted
from taxation without any participation requirement.
However, dividends received from a resident of the 3rd
country shall be tax exempt only if the dividends are
received from such a non-resident in which the recipient
EIT taxpayer at the time of payment owns at least 25 per
cent of the capital and voting rights, provided the payer of
the dividends is not a resident in low tax or no tax country
or territory listed in the regulations of the Cabinet of
Ministers.
As from January 1, 2013 dividends received from a
resident of the 3rd country will be exempt from taxation
without any participation requirement, but only if the
payer of the dividends is not a resident of low tax or no
tax country or territory listed in the regulations of the
Cabinet of Ministers.
¾
Is there a minimum holding
No
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
No. In general it is assumed that dividends received from
"minimum effective taxation"
a non-resident company, other than that residing in a low
requirement? If yes, please
tax or no tax country or territory listed in the regulations
explain.
of the Cabinet of Ministers, have been paid out of profits
that have been subjected to taxation.
¾
Does the "subject-to-tax" or
No
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes In general credit for underlying foreign tax is not granted
available in case one of the above
under the provisions of EIT law. However, it is available
requirements is not met? Please
under certain number of concluded DTAs (in case of
explain.
participations of at least 10%).
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1b. If no, please briefly explain your credit system.
In respect of dividends, other than those exempt under the EIT provisions, double taxation is
eliminated under the ordinary credit method on a per country basis.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
EIT law provides that capital gains derived from the alienation of securities which are under public
circulation in the EU Member States or EEA States shall be exempt from taxation without any
participation requirement.
As from January 1, 2013 capital gains derived from the alienation of all kind of securities will be tax
exempt without any participation requirement.
However, this exemption shall not apply if the company, the securities of which are alienated is a
resident in a low tax or no tax country or territory listed in the regulations of the Cabinet of Ministers.
2a. If yes:
¾
Is there a minimum participation
No
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding
No
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
No. However, exemption shall not apply in respect of
"minimum effective taxation"
capital gains from securities of companies resident in a
requirement? If yes, please
low tax or no tax countries or territories listed in the
explain.
regulations of the Cabinet of Ministers.
¾
Is a tax credit for underlying taxes No
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Capital gains are taxable as part of ordinary profits of recipient, except exempt gains mentioned in 2.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Until 1 January, 2013 losses from the alienation of securities (other than exempt securities under
public circulation in the EU Member States or EEA States) may be covered only from the positive
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taxable income from the alienation of such securities in a chronological sequence during the eight
subsequent taxation periods following that of the alienation of such securities, but not exceeding the
amount of the actual losses.
However, the mentioned losses may be covered also from the other taxable income in a chronological
sequence during the eight subsequent taxation periods if the taxpayer does not regularly performs such
sales of securities (not more frequently than once in a taxation period) and the alienated securities have
been owned by such a taxpayer for more than 12 months.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
No
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
-
Please indicate.
¾
A "low-or-no-tax" test? Please
-
indicate.
¾
An activities based test? Please
-
indicate.
¾
An income based test? Please
-
indicate.
¾
Any other test? Please indicate.
-
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¾
Is there a layer limitation in the
-
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying taxes
-
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance
-
on the non-applicability of your
CFC provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Under the EIT law provisions EIT taxpayers are obliged to withheld at source tax at the basic EIT tax
rate of 15% from any payment paid to persons in low tax or no tax countries or territories listed by the
Cabinet of Ministers, provided that such payments are deductible at the determination of taxable
income of the EIT taxpayer. The State Revenue Service may allow not to withheld tax from such
payments, provided, the taxpayer proves that the transactions with the person in the low tax or no tax
country or territory have not been entered with a purpose to reduce the taxable income of the taxpayer
( are based on real business activity).
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16. LITHUANIA
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
According to Lithuanian Law on Corporate Income Tax (hereinafter - LCIT) we provide for an
exemption of inbound intercompany dividends if certain conditions are met:
“Dividends received by a Lithuanian entity from Lithuanian entities, in which the recipient controls
for an uninterrupted period of at least 12 months, including the moment of distribution of the
dividends, at least 10% of voting shares (interests, member shares), shall not be subject to corporate
income tax and shall not be included in the income of the entity receiving the dividends (LCIT 33
(2))”
or
“Dividends received by a Lithuanian entity or a permanent establishment for the shares, portion of
capital or other rights held in or attributed to the permanent establishment foreign entities which are
registered or otherwise organised in a state of the European Economic Area (hereinafter - EEA) and
whose profit is subject to corporate income tax or an equivalent tax shall not be subject to taxation”
(LCIT 35 (2));
or
“Dividends received by a Lithuanian entity or permanent establishment from foreign entities, not
specified in paragraph 2 of this Article, in which the Lithuanian or foreign entity whose permanent
establishment (to which the dividend paying shares, portion of the capital or other rights are attributed)
receives such dividends controls for an uninterrupted period of at least 12 months, including the
moment of distribution of dividends, at least 10% of voting shares (interests, member shares), shall not
be subject to taxation, provided that the dividends are received from a foreign entity whose profit is
subject to corporate income tax or an equivalent tax and which is not registered or otherwise organised
in target territories” (LCIT 35 (3)).
1a. If yes:
¾
Do you have a minimum
There is a minimum participation requirement: at least 10%
participation requirement. Is this
of voting shares (interests, member shares).
different for domestic, EU, treaty
The requirement is applied to domestic entities and to the
or 3rd country participations?
entities which are not registered or otherwise organised in a
Please explain.
state of the EEA (LCIT 33 (2), 35(2) or LCIT 35 (3)).
¾
Is there a minimum holding
There is a minimum holding period: continuously for at
period? Is this different for
least 12 months.
domestic, EU, treaty or 3rd
The requirement is applied to domestic entities and to the
country participations? Please
entities which are not registered or otherwise organised in a
explain.
state of the EEA. (LCIT 33 (2), 35(2) or LCIT 35 (3)).
¾
Is there a "subject-to-tax" or
The exemption of inbound intercompany dividends is
"minimum effective taxation"
applicable (if the above-mentioned conditions are met)
requirement? If yes, please
when a foreign entity’s profit is subject to corporate income
explain.
tax or an equivalent tax (LCIT 35(2) or LCIT 35 (3)).
¾
Does the "subject-to-tax" or
The “subject to tax” requirement applies only to the
"minimum effective taxation"
subsidiaries (LCIT 33 (2), 35(2) or LCIT 35 (3)).
requirement apply to the
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subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying
“Where an entity distributes profits by paying dividends in
taxes available in case one of the
cash in accordance with the procedure laid down in the
above requirements is not met?
Law of the Republic of Lithuania on Companies, the Law
Please explain.
of the Republic of Lithuania on Cooperative Companies
(Cooperatives) and the Law of the Republic of Lithuania on
Agricultural Companies, the amount of the withheld
corporate income tax shall be set off and reduce the amount
of corporate income tax to be paid by the Lithuanian entity
receiving the dividends for the tax period during which the
tax on the dividends paid to it was withheld. Where in the
tax period during which the tax on the dividends paid out
was withheld and paid the amount of the offset tax
withheld by the Lithuanian entity receiving the dividends
exceeds the amount of corporate income tax to be paid by
the entity, the difference between the two amounts shall be
refunded (credited) in accordance with the procedure for
refunding (crediting) of tax overpayment laid down in the
Law on Tax Administration” (LCIT 33(3)).
A Lithuanian entity may deduct the amount of corporate
income tax or equivalent tax paid in a foreign country on
income received in that country during the relevant fiscal
year from the amount of corporate income tax calculated in
accordance with the procedure laid down in LCIT (LCIT
55(1)).
1b. If no, please briefly explain your credit system.
-
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes, we provide for an exemption of capital gains on participation if certain conditions are met:
“income from the increase in the value of assets resulting from transfer of shares of an entity registered
or otherwise organised in a state of the EEA or in a state with which a treaty for the avoidance of
double taxation has been concluded and brought into effect and which is a payer of corporate income
tax or an equivalent tax, if the entity that transfers to another entity or natural person the shares held
more than 25% of voting shares in that entity for an uninterrupted period of at least two years or if the
transfer of shares was made in case of reorganization or alienation (referred to CIT 41(2) which is
consistent with EU directive 90/434/EC) – more than 25% of voting shares must be held an
uninterrupted period of at least three years. This relief shall not apply if the entity that transfers the
shares transfers them to the entity that has issued the shares” (LCIT 12(15))”.
2a. If yes:
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¾
Is there a minimum participation
There is a minimum participation requirement: more than
requirement. Is this different for
25% of voting shares.
domestic, EU, treaty or 3rd country The requirement is applied to domestic, EEA and treaty
participations? Please explain.
participations (LCIT 12(15)).
¾
Is there a minimum holding
There is a minimum holding period: an uninterrupted
period? Is this different for
period of at least 2 years or if the transfer of shares was
domestic, EU, treaty or 3rd country made in case of reorganization or alienation (referred to
participations? Please explain.
LCIT 41(2) which is consistent with EU directive
90/434/EC) - uninterrupted period of at least 3 years.
The requirement is applied to domestic, EEA and treaty
participations (LCIT 12(15)).
¾
Is there a "subject-to-tax" or
The exemption of capital gains on participations is
"minimum effective taxation"
provided (if the above-mentioned conditions are met)
requirement? If yes, please
when a foreign entity is a payer of corporate income tax or
explain.
an equivalent tax (LCIT 12(15)).
¾
Is a tax credit for underlying taxes No.
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
In all other cases which are not above-mentioned (2a), capital gains are taxed as an ordinary profits in
accordance with LCIT 16(1):
“Income from the increase in the value of assets shall be income earned which comprises the
difference between the price of the sale or other transfer into ownership of assets and the acquisition
price of such assets.”
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Losses incurred as a result of transferring securities or derivative financial instruments shall be carried
forward to the following fiscal year, however, such losses will cover only the income received from
the transfer of securities and/or derivative financial instruments. Losses incurred as a result of
transferring the shares of an entity registered or otherwise organised in a member state of the EEA or
in a state with which a treaty for the avoidance of double taxation has been concluded and brought into
effect and which is a payer of corporate income tax or an equivalent tax, if the entity that transfers the
shares held more than 25% of voting shares in that entity for an uninterrupted period of at least two
years shall be deducted from taxable income received from the transfer of securities during the tax
period, but the amount of losses deducted in this manner can not exceed the amount of the increase in
the value of assets of taxable securities during that tax period and the non-deducted amount of such
losses shall not be carried forward to the following fiscal year (LCIT 30(2)).
The methodology for calculating the loss:
Income from the increase in the value of assets shall be income earned which comprises the difference
between the price of the sale or other transfer into ownership of assets and the acquisition price of such
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assets (LCIT 16(1)).
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
No.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
Where all or one or more branches of activity of another entity in the form of its rights and obligations
which from an organisational point of view constitute an independent economic entity engaged in
activities and capable of functioning by its own means, are acquired, the accumulated value of
goodwill shall be included in the deductions of limited amounts in a manner similar to fixed assets.
Where the shares of another entity are acquired for the purpose of controlling its net assets and
activity, the accumulated value of goodwill shall be included in the deductions of limited amounts in a
manner similar to fixed assets only after subsequent merger of these entities or merger by acquisition
of one entity by another, if any.
There is 15 years period for amortisation of goodwill using the linear method.
(LCIT 18(10),18(5) and the Appendix 1)
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Yes.
The requirements for the application of CFC rules are presented down below.
7a. If yes, does the definition of a
CFC contain:
¾
A minimum shareholding
The shareholding test is related to the definition of controlled
test? Please indicate.
taxable entity (LCIT 2(4)).
Controlled taxable entity (hereinafter referred to as the
“controlled entity”) shall mean any entity deemed to be under
the control of another entity or a resident of Lithuania
(hereinafter referred to as the “controlling person”), provided
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that:
1) it is controlled by the controlling person on the last day of the
tax period, and
2) the controlling person holds directly or indirectly over 50%
of the shares (interests, member shares) in the controlled entity
or other rights to a portion of distributable profits or pre-emptive
rights to the acquisition thereof,
3) the controlling person, together with related persons, holds
over 50% of the shares (interests, member shares) in the
controlled entity or other rights to a portion of distributable
profits or pre-emptive rights to the acquisition thereof, and the
portion controlled by the controlling person accounts for at least
10% of the shares (interests, member shares) or other rights to a
portion of distributable profits or pre-emptive rights to the
acquisition thereof.
¾
A "low-or-no-tax" test?
In reference with LCIT 39(4 (1)), Minister of Finance order No.
Please indicate.
24, 24 January, 2002 (hereinafter – MFO 24) and Minister of
Finance order No. 344, 22 December, 2001 (hereinafter – MFO
344) CFC rules shall be applied:
1) The controlled taxable entity is registered or otherwise
organized in the state listed in the MFO 344 (known as
“Black list”) as a tax haven
or;
2) The controlled taxable entity is registered or otherwise
organized in the state listed in the MFO 24 (known as
“White list”) but the form of business organization
complies one of the foreign business organization forms
which acquiring special corporate income tax or the
equivalent tax exemptions under the law of the rezident
State regulations
or;
3) The controlled taxable entity is registered or otherwise
organized in the state which is neither listed in “Black
list” nor “White list” but where the corporate income
tax rate is less than 75% of Lithuanian corporate income
tax rate.
¾
An activity based test?
(LCIT 2(29) and Government ruling No. 517, 12 April, 2002).
Please indicate.
All income (known as positive income) received by a controlled
entity, registered or otherwise organised in the countries or
zones referred to in paragraph 4 of Article 39 of LCIT, or part of
such income shall be included in the income of a controlling
entity of Lithuania in proportion to the number of the shares
(interests, member shares), votes or rights to the profits of the
controlled entity held by the Lithuanian entity
except
controlled entity’s income received from active activity if:
1) in the foreign-controlled entity there are as many
workers as foreign- controlled entity’s business
normally requires,
and
2) not more than 10% of foreign-controlled entity’s
income per tax year is received from other than the state
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(or territory) where this entity is registered or otherwise
organized,
and
3) foreign-controlled entity’s income received from the
transactions with unrelated persons is more than 50% of
all foreign-controlled entity’s income per tax year.
¾
An income based test? Please According to LCIT 39 (5) CFC rules shall not be applied if:
indicate.
1) the income of a controlled foreign entity comprises only
the payments made by the controlling entity which are
treated as non-allowable deductions
or
2) the
income of a controlled foreign entity comprises less
than 5% of the income of the controlling entity.
¾
Any other test? Please
No.
indicate.
¾
Is there a layer limitation In reference with the definition of controlled foreign entity,
in the CFC-definition
there is no difference between direct or indirect holding:
(application to indirect
“the controlling person holds directly or indirectly over 50% of
subsidiaries).
the shares (interests, member shares) in the controlled entity or
other rights to a portion of distributable profits or pre-emptive
rights to the acquisition thereof” LCIT 2(4).
¾
Is a tax credit for
According to LCIT 55 (6), (7):
underlying taxes
“6. A Lithuanian entity may deduct the amount of corporate
available in case your
income tax or equivalent tax paid in a foreign country on
CFC rules trigger
positive income received by a controlled entity in that country
immediate taxation of
during the relevant fiscal year, as specified in paragraphs 6 and
non-distributed income?
7 of Article 39 of LCIT, from the amount of corporate income
Please explain.
tax calculated in accordance with the procedure laid down in
LCIT on the positive income included in the income of the
Lithuanian entity. Deductions from the calculated amount of
corporate income tax shall be allowed in accordance with the
procedure laid down in this Article (LCIT 55) only where
documents certified by the tax administrator of a foreign country
have been issued concerning the income received in that country
during the relevant fiscal year and the amount of corporate
income tax or equivalent tax calculated and paid on that income
and where the Lithuanian entity supplies the local tax
administrator with the following information:
1) the name of the controlled entity and the address of its
registered office;
2) a list of its managers;
3) the balance sheet and the profit and loss account;
4) the amount of positive income attributed to income
5) evidence of payment of taxes on positive income attributed to
income.
7. The Lithuanian entity shall submit the documents specified in
paragraph 6 of this Article (55) in accordance with the
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procedure established by the central tax administrator.”
and LCIT 39 (6),(7):
“6. A Lithuanian entity shall have the right to reduce corporate
income tax on the positive income included in its income, which
is payable to the budget and calculated according to LCIT, by
the amount of corporate income tax on the positive income of a
controlled foreign entity included in the income of the
Lithuanian entity, which was paid in a country or zone wherein
the controlled foreign entity is registered or otherwise organised,
in proportion to the number of the shares (interests, member
shares), votes or rights to the profit of the controlled entity held
by the Lithuanian entity. Where the tax paid in the said country
or zone exceeds the amount provided for in the laws of that
country or zone, the Lithuanian entity shall have the right to
reduce corporate income tax on the positive income included in
its income, which is payable to the budget and calculated
according to LCIT, by the amount of tax on the positive income
of a controlled foreign entity included in the income of the
Lithuanian entity, which had to be paid in the country or zone
wherein the controlled foreign entity is registered or otherwise
organised.
7. A Lithuanian entity shall have the right to reduce corporate
income tax on the positive income included in its income of the
Lithuanian entity, which is payable to the budget and calculated
according to this Law, by the amount of corporate income tax
on the positive income of a controlled foreign entity included in
the income of the Lithuanian entity, which was paid in a foreign
country with which the Republic of Lithuania has concluded a
treaty for the avoidance of double taxation and the prevention of
fiscal evasion and under the relevant law whereof the positive
income of the controlled foreign entity is included in the income
of the entity of that country and taxed subject to the rules
analogous to those laid down in LCIT.”
¾
Do you provide advance
No.
clearance on the non-
applicability of your CFC
provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
-
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17. LUXEMBURG
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes
1a. If yes:
¾
Do you have a minimum
The recipient owns at least 10% of the share capital of the
participation requirement. Is
distributing company / entity or the acquisition cost of the
this different for domestic, EU,
shareholding is at least € 1.2 million.
treaty or 3rd country
The recipient:
participations? Please explain.
a company / entity listed in annex I, part A of directive
2011/96 UE resident in Luxembourg
or a capital company not listed in the annex, but resident
fully liable to tax in Luxembourg
or a permanent establishment in Luxembourg of such a
company / entity
or a permanent establishment in Luxembourg of a capital
company resident of a State where Luxembourg has a DTC
or a permanent establishment of an EEE capital company or
cooperative society.
The payer:
a company / entity listed in annex I, part A of directive
2011/96 UE
or a resident fully liable to tax capital company not listed in
the annex
or a non resident capital company subject to a tax
corresponding to Luxembourg corporation tax
¾
Is there a minimum holding
The recipient holds the minimum participation in the
period? Is this different for
distributing company for at least 12 months.
domestic, EU, treaty or 3rd
No differences in treatment.
country participations? Please
explain.
¾
Is there a "subject-to-tax" or
See answer in 1a.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Does the "subject-to-tax" or
A corresponding income tax to Luxembourg corporation tax
"minimum effective taxation"
must be satisfied by the direct subsidiary. 3 criterions have to
requirement apply to the
be fulfilled:
subsidiary only or also to
1) a State tax
indirect subsidiaries. Please
explain.
2) a comparable assessment basis
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3) a comparable tax rate (at least half of the rate of
Luxembourg corporation tax).
¾
Is a tax credit for underlying
No
taxes available in case one of the
above requirements is not met?
Please explain.
1b. If no, please briefly explain your credit system.
Luxembourg gives credit only for taxes paid by the taxpayer.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes
2a. If yes:
¾
Is there a minimum participation
The holding represents at least 10% of the share capital of
requirement. Is this different for
the subsidiary or the acquisition cost of the shareholding is
domestic, EU, treaty or 3rd country at least € 6 million.
participations? Please explain.
Same companies / entities as under 1 a..
¾
Is there a minimum holding
The recipient holds the minimum participation in the
period? Is this different for
distributing company for at least 12 months.
domestic, EU, treaty or 3rd country Same companies / entities as under 1 a..
participations? Please explain.
¾
Is there a "subject-to-tax" or
See 1 a.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes No
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
With companies / entities – generally as a business profit, in some cases as a capital gain, but
Luxembourg does not apply a specific capital gains tax.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
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If a loss occurs when a shareholding is sold or otherwise alienated, this loss is tax deductible. The loss
is computed by comparing the book value to the selling price.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
Unrealised capital losses are tax deductible, when there is a need to depreciate a shareholding (write
down), however, if such a write down is linked to an exempt dividend, such a loss is not deductible.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
If in a subsequent year the value of the shareholding will increase the formerly incurred loss is
recaptured for tax purposes, the same will apply if a shareholding is sold and where the capital gain is
tax exempt
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
n/a
Please indicate.
¾
A "low-or-no-tax" test? Please
n/a
indicate.
¾
An activities based test? Please
n/a
indicate.
¾
An income based test? Please
n/a
indicate.
¾
Any other test? Please indicate.
n/a
¾
Is there a layer limitation in the
n/a
CFC-definition (application to
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indirect subsidiaries).
¾
Is a tax credit for underlying taxes n/a
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please
explain.
¾
Do you provide advance clearance n/a
on the non-applicability of your
CFC provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Luxembourg applies a general anti-abuse rule which enables the tax authorities to requalify wholly
artificial arrangements. The application of the concept of simulation allows the disregarding of
pretended legal transactions for tax purposes. According to the concepts of substance over form and
economic ownership, transactions in which the economic reality is not identical with the taxpayer’s
choice would for tax purposes be classified based on the economic qualification.
_____________________
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18. MALTA
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19. NETHERLANDS
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes, participation exemption.
1a. If yes:
¾
Do you have a minimum
Yes, 5%. No difference between domestic, EU, treaty or
participation requirement. Is this
3rd country participations.
different for domestic, EU, treaty
or 3rd country participations?
Please explain.
¾
Is there a minimum holding
No.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
Yes, but only if the participation is held as a portfolio
"minimum effective taxation"
investment and if more than 50% of the assets of the direct
requirement? If yes, please
and indirect subsidiaries consists of passive investments.
explain.
¾
Does the "subject-to-tax" or
Both direct and indirect subsidiaries.
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes Yes.
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
N/A.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes.
2a. If yes:
¾
Is there a minimum participation
Yes, cf. 1a.
requirement. Is this different for
domestic, EU, treaty or 3rd country
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participations? Please explain.
¾
Is there a minimum holding
No.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
Yes, cf. 1a.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes Yes.
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
N/A.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Only upon liquidation (acquisition price minus liquidation proceeds).
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
N/A.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No.
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7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
[reply]
Please indicate.
¾
A "low-or-no-tax" test? Please
[reply]
indicate.
¾
An activities based test? Please
[reply]
indicate.
¾
An income based test? Please
[reply]
indicate.
¾
Any other test? Please indicate.
[reply]
¾
Is there a layer limitation in the
[reply]
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying taxes
[reply]
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance
[reply]
on the non-applicability of your
CFC provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Mandatory annual revaluation of a shareholding in a passive investment subsidiary, profits arising, if
any, will be taxed accordingly. Transfer pricing rules and general anti-avoidance rule (abuse of law).
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20. POLAND
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
yes
1a. If yes:
¾
Do you have a minimum
Dividends being paid in domestic transactions: dividends
participation requirement. Is paid in transaction between Polish residents are tax exempted if
this different for domestic,
the recipient directly holds no less than 10 per cent shares in the
EU, treaty or 3rd country
capital of paying company
participations? Please
Dividends being paid by EU resident: revenues earned by the
explain.
Polish residents, from dividends paid by legal persons whose
registered office is located beyond the territory of the Republic
of Poland, shall be free from tax if the recipient directly holds
no less than 10 per cent shares in the capital of the paying
company (the same applies to European Economic Area )
Treaty: generally
dividends are taxed at the rate of 19%.
However, this rate is applied taking into consideration DTAs in
which Poland is a party. Application of the tax rate or refraining
from tax collection under the relevant DTA shall be possible
provided that the taxpayer documents his place of residence for
tax purposes by "certificate of residence".
Minimum participation requirement varies depending on
specific DTA. (generally if such requirement exists it is 10%)
¾
Is there a minimum holding
Dividends being paid in domestic transactions: the exemption
period? Is this different for
shall apply where the company receiving payments holds shares
domestic, EU, treaty or 3rd
of the paying company for
country participations?
a period of two years without interruption.
Please explain.
Dividends paid by EU resident: the same rules apply to EU
and EEA country participations.
The abovementioned exemption shall also apply where the two-
year period of uninterrupted shareholding in the amount of 10
percent lapses after the date of earning this income (revenue).
Where the prerequisite to hold the shares in the amount
specified above without interruption for a period of two years is
not met, the company that applied the exemption shall submit a
correction of the tax return for the tax years when it applied the
exemption.
Treaty: Minimum holding period varies depending on specific
DTA regulations (2 year or there is no such requirement)
¾
Is there a "subject-to-tax" or Yes, there is.
"minimum effective
The payer of the dividend is a company which is subject to
taxation" requirement? If
taxation on the entirety of its income in
yes, please explain.
a European Union member state other than the Republic of
Poland or in another state of the European Economic Area
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regardless of where it is earned.
The recipient is a company being a payer of income tax, having
its registered office or management within the territory of the
Republic of Poland and that company does not enjoy exemption
from income taxation on the entirety of its income, regardless of
where it is earned.
¾
Does the "subject-to-tax" or Direct only.
"minimum effective
taxation" requirement apply
to the subsidiary only or also
to indirect subsidiaries.
Please explain.
¾
Is a tax credit for underlying No
taxes available in case one of
the above requirements is
not met? Please explain.
1b. If no, please briefly explain your credit system.
Where Polish residents also earn income (revenues) beyond the territory of the Republic of Poland and
this income is subject to taxation in a foreign state and in the tax settlement for a given tax year, this
income (revenues) shall be combined with the income (revenues) earned within the territory of the
Republic of Poland. In such a case, the calculated tax on the total amount of income shall be decreased
by an amount equal to the tax paid in the foreign state. Nevertheless, the amount of deduction shall not
exceed the part of tax calculated prior to making the deduction, that is proportionally attributable to the
income earned in the foreign state.
In the event where:
1) a company having a legal personality, with its registered office or management within the territory
of Poland, earns income (revenues) from dividends, as well as other revenues from participation in the
profits of a legal person, and
2) the income (revenues) referred to in point 1 are earned due to participation in the profits of a
company subject to taxation on the entirety of its income, regardless of where it is earned, within the
territory of a state bound with the Republic of Poland with an agreement in force for the avoidance of
double taxation, where such state is not a European Union member state nor one belonging to the
European Economic Area, nor is it the Swiss Confederation, and
3) the company referred to in point1 directly holds no less than 75 per cent shares in the capital of the
company referred to in point 2
- a right to a deduction also applies to the amount of tax on the income in respect of which the profit
has been paid, such amount of tax having been paid by the company referred to in point 2 in the state
where its registered office is located - in the part corresponding with the share of the company referred
to in point 1 in the profits paid out by the company referred to in point 2.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
yes
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2a. If yes:
¾
Is there a minimum participation
Similarly as in 1a.
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period? Is
Similarly as in 1a question 2.
this different for domestic, EU, treaty or
3rd country participations? Please
explain.
¾
Is there a "subject-to-tax" or "minimum Similarly as in 1a question 3.
effective taxation" requirement? If yes,
please explain.
¾
Is a tax credit for underlying taxes
Similarly as in 1a question 5.
available in case one of the above
requirements is not met? Please explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
No, except of sales of shares.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
no
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
In case of sales of shares, the loss may be carried forward for five tax years subsequent to the year in
which it was suffered, however, in no single year of this period may the income be lowered in respect
of such losses by an amount exceeding 50 per cent of the total amount carried forward.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
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deductible amount (write down, amortisation, provision).
Amortisation of goodwill is possible if such goodwill arose as a result of acquisition of an enterprise
or an organised part thereof by means of: purchase; adopting for paid use, whereas the depreciation
write-downs are made by the user; contribution to the company under the regulations on
commercialisation and privatisation.
The initial value of goodwill shall be the positive difference between the price of acquisition of an
enterprise or an organised part thereof or the nominal value of shares issued in exchange for a
contribution in kind, and the market value of assets being part of the enterprise or of the organised part
thereof that was purchased, adopted for use for consideration or contributed to the company -
respectively from the date of purchase, of adoption for use for consideration or contribution to the
company.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No
7a. If yes, does the definition of a CFC
n/a
contain:
¾
A minimum shareholding test? Please
n/a
indicate.
¾
A "low-or-no-tax" test? Please indicate.
n/a
¾
An activities based test? Please indicate.
n/a
¾
An income based test? Please indicate.
n/a
¾
Any other test? Please indicate.
n/a
¾
Is there a layer limitation in the CFC-
n/a
definition (application to indirect
subsidiaries).
¾
Is a tax credit for underlying taxes
n/a
available in case your CFC rules trigger
immediate taxation of non-distributed
income? Please explain.
¾
Do you provide advance clearance on the n/a
non-applicability of your CFC
provisions? If yes, please explain via
examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Transfer pricing rules.
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21. PORTUGAL
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes
1a. If yes:
¾
Do you have a minimum
The minimum participation is:
participation requirement. Is this
- 10%, for domestic and EU participations; and
different for domestic, EU, treaty
- in general, 25%, for treaty and third country
or 3rd country participations?
participations
Please explain.
¾
Is there a minimum holding
The minimum holding period is:
period? Is this different for
-
one year for domestic and EU participations; and
domestic, EU, treaty or 3rd country
participations? Please explain.
-
in general, two years for treaty or third country
participations
¾
Is there a "subject-to-tax" or
Yes.
"minimum effective taxation"
1. Concerning domestic and EU participations, the
requirement? If yes, please
dividends qualify for the participation exemption regime
explain.
only when they are paid out of profits that have been
subject to “effective taxation”. The domestic law does not
provide any explicit indication of what is meant by
“effective taxation”. However, the tax authorities issued a
“Circular” in order to clarify the concept of “effective
taxation” for the purpose of the application of the
participation exemption regime. Under this “Circular”,
profits are considered to be subject to “effective taxation”
when they:
- have been subject to and not exempt from Portuguese
corporate income tax, or to a comparable foreign tax, and
such taxation has actually been borne; however, a
minimum level of taxation has not been defined;
- have been actually taxed at the level of the subsidiary
distributing the profits or at any other lower tier subsidiary
of the corporate structure; or
- refer to profits distributed by an EU subsidiary, which
is subject to and not exempt from corporate income tax, as
provided for in the Parent-Subsidiary Directive (90/435)
of 23 July 1990.
In addition, profits should be considered as having been
subject to corporate income tax even if the entity
distributing the profits has not paid any amount of tax, as a
result from (i) offsetting of tax losses brought forward; (ii)
tax deductions of a temporary nature (e.g. depreciation
charge); or (iii) the use of tax credits.
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Finally, the “Circular” also considers that the general anti-
avoidance rule may be applicable on a case-by-case basis .
In this sense, the participation exemption regime may be
denied to artificially created corporate structures or
interposed companies whose income that is subject to, and
not exempt from tax, is:
- not significant when compared with the global amount
of profits of the respective taxable period; or
-
not derived from an effective economic activity of
the company.
2. Concerning treaty or 3rd country participations, the law
establishes a minimum effective taxation requirement, i.e,
the dividends must be related to profits of the subsidiary
that have been taxed at a rate of at least 10% and that are
not derived from passive activities, namely (a) royalties,
(b) capital gains, (c) other income related to securities, (d)
income from immovable property situated outside the
subsidiary’s state of residence or (e) banking and
insurance income from operations not directed to that
particular market
¾
Does the "subject-to-tax" or
The requirement of “effective taxation” can be met at any
"minimum effective taxation"
level of the profits distribution chain, i.e., at the level of a
requirement apply to the
subsidiary or at the level of any sub-affiliated companies
subsidiary only or also to indirect
that contributed to the generation of those profits.
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes NO
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
N/A
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
-
Holding companies qualify for a full exemption in respect of capital gains realized on the
disposal of shares or other corporate rights held for at least 1 year. This does not, however,
apply to capital gains on corporate rights that have been held for less than 3 years and were
acquired from a related party or a resident of a listed tax haven.
-
An exemption regime of capital gains is also applicable, with some exceptions, whenever the
alienator is a non-resident entity .
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2a. If yes:
¾
Is there a minimum participation
No
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding
The minimum holding period (one year) is only applicable
period? Is this different for
to the participations alienated by resident holding
domestic, EU, treaty or 3rd country companies.
participations? Please explain.
¾
Is there a "subject-to-tax" or
No
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes No
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Whenever capital gains don’t benefit from an exemption, they are taxed as ordinary profits
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
The capital losses for tax purposes correspond to the difference between the proceeds from the
disposal and the cost of acquisition adjusted in accordance with the indexation coefficient for the year
of acquisition.
Capital losses are not deductible if the corporate rights (i) have been held for less than 3 years and
were acquired from a related party or a resident entity subject to special tax regime; or (ii) are sold to a
related party or a resident entity subject to a special regime of taxation; or the (iii) the alienation is
made by a resident holding, under certain conditions. In the other cases, only 50% of the net capital
loss incurred in the tax year on the sale of shares or other corporate rights is deductible.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No
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5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
N/A
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
N/A
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Yes
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test? A resident entity is deemed to have a substantial
Please indicate.
participation in a non-resident entity for CFC purposes if
it owns (directly or indirectly, including through an agent,
a fiduciary or an interposed person):
-
25% or more of its capital or voting rights or
rights over income or property of that entity ; or
-
10% or more of its capital, or voting rights or
rights over income or property of that entity
where more than 50% of its capital or voting
rights or rights over income or property of that
entity is owned (directly or indirectly , including
through an agent, a fiduciary or an interposed
person) by resident entities.
¾
A "low-or-no-tax" test? Please The controlled foreign entity should be subjected to a
indicate.
privileged tax regime. This requirement is deemed to be
verified in the following situations :
-
The entity is resident in a low-tax jurisdiction
included in the list approved by the Ministerial
Order (Portaria) nº 292/2011 of 8 November
2011, or.
-
The entity is resident in any country in which it is
not taxed or it is taxed but the tax burden is equal
to or less than 60% of the IRC paid if it were
resident in Portugal.
¾
An activities based test? Please No attribution of profits will take place if the foreign
indicate.
entity meets the following conditions :
- at least 75% of its profits arise from local farming or
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manufacturing activities, or from commercial transactions
mainly with the local market or not involving Portuguese
residents; and
- its main activity is other than one of the listed activities
(e.g. banking, certain types of insurance, holding or
transfer of corporate rights or other securities).
¾
An income based test? Please
The resident controlling entity must include in its taxable
indicate.
income the after-tax profits of the non-resident controlled
entity in proportion to its total direct or indirect
participation.
¾
Any other test? Please indicate. No
¾
Is there a layer limitation in
No
the CFC-definition
(application to indirect
subsidiaries).
¾
Is a tax credit for underlying
No. There is only a tax credit in respect of the foreign
taxes available in case your
withholding tax on dividends paid by the controlled
CFC rules trigger immediate
entity.
taxation of non-distributed
income? Please explain.
¾
Do you provide advance
In theory, yes, under the general mechanism applicable to
clearance on the non-
a binding information. There are no practical examples.
applicability of your CFC
provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
N/A
----------------------
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22. ROMANIA
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes.
1a. If yes:
¾
Do you have a minimum
Domestic – 0%.
participation requirement. Is this
EU – 10%.
different for domestic, EU, treaty
or 3rd country participations?
Treaty – as it is provided in the treaty.
Please explain.
Third country – we don’t apply any exemption.
¾
Is there a minimum holding
Domestic – none.
period? Is this different for
EU – 2 years.
domestic, EU, treaty or 3rd country
participations? Please explain.
Treaty - as it is provided in the treaty.
¾
Is there a "subject-to-tax" or
No.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Does the "subject-to-tax" or
No.
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes No.
available in case one of the above
requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
Not necessary.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
No.
2a. If yes:
¾
Is there a minimum participation
-
requirement. Is this different for
domestic, EU, treaty or 3rd country
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participations? Please explain.
¾
Is there a minimum holding
-
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
-
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes -
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
The capital gains are taxed as ordinary profits.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Yes, we have a deduction available for realised capital losses concerning the participations and the
loss is calculated as a difference between the sale price and the acquisition price.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
Yes, we have a deduction available for unrealised capital losses of participation through the
depreciation rules.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
No, it is not subject to a recapture rule.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No.
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7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
-
Please indicate.
¾
A "low-or-no-tax" test? Please
-
indicate.
¾
An activities based test? Please
-
indicate.
¾
An income based test? Please
-
indicate.
¾
Any other test? Please indicate.
-
¾
Is there a layer limitation in the
-
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying taxes
-
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance
-
on the non-applicability of your
CFC provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
No.
_____________________
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23. SLOVAK REPUBLIC
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes.
According to the Act No. 595/2003 Coll. on Income Tax as later amended (hereinafter only “Income
Tax Act”) dividends paid out of profit of a company (whether Slovak company, or similar foreign
company) to persons who participate in the company´s share capital (whether individuals, or legal
entities), are not subject to tax in the Slovak Republic. This provision applies to dividends paid out of
company profits generated since 2004. Dividends paid out of company profits generated before 2004
are taxable income.
Dividends are tax exempt in the Slovak Republic only if the distribution of dividends is made in
compliance with the Business Code, i.e. the distribution is approved by the general meeting of
shareholders, dividends are paid out of profit after tax etc.
1a. If yes:
¾
Do you have a minimum
No.
participation requirement. Is this
As mentioned in answer to question 1, dividends are paid
different for domestic, EU, treaty
out by a company to persons who participate in the
or 3rd country participations?
company´s share capital (no minimum participation
Please explain.
requirement).
¾
Is there a minimum holding
No.
period? Is this different for
There are no special requirements other than those listed
domestic, EU, treaty or 3rd country in answer to question 1.
participations? Please explain.
¾
Is there a "subject-to-tax" or
Dividends are not subject to tax in the Slovak Republic,
"minimum effective taxation"
whether they are paid to an individual, or to a legal entity.
requirement? If yes, please
As mentioned in answer to question 1, dividends must be
explain.
paid out of profit
after tax to be classified as dividends
that are exempt from taxation in the Slovak Republic, i.e.
there has to be effective taxation of profits at the level of
company that pays out the dividends.
¾
Does the "subject-to-tax" or
N/A
"minimum effective taxation"
Exemption of dividends from taxation is applied to
requirement apply to the
persons (individuals, or legal entities generally) that have
subsidiary only or also to indirect
participation in the company´s share capital.
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes If profit distribution does not meet above mentioned
available in case one of the above
requirements (especially that dividends have to be paid out
requirements is not met? Please
of profits after tax), the tax exemption shall not be applied
explain.
as such payment is not considered to be dividend payment.
Tax authority has the right to prequalify and tax such
income based on the actual substance of the transaction in
relation to which the income is paid. When applying
method for elimination of double taxation (in case of
particular payment), pertinent double tax treaty would be
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taken into account.
1b. If no, please briefly explain your credit system.
N/A
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
No.
According to the Income Tax Act capital gain is ordinary taxable income.
2a. If yes:
¾
Is there a minimum participation
N/A
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period?
N/A
Is this different for domestic, EU,
treaty or 3rd country participations?
Please explain.
¾
Is there a "subject-to-tax" or
N/A
"minimum effective taxation"
requirement? If yes, please explain.
¾
Is a tax credit for underlying taxes
N/A
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Capital gain is ordinary taxable income of legal entity and is included in the tax base (taxed at 19 %
tax rate).
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
No.
According to the Income Tax Act loss from sale of company shares is not tax deductible (the loss
arises when the acquisition costs exceed the sale price).
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4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No.
Unrealised capital losses (from revaluation of long-held shares in company) are recorded on balance
sheet accounts, i.e. they do not affect profit/loss or tax base.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
N/A
(Please refer to answers to questions 3 and 4)
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
Goodwill may be amortized (included in tax base) only if the transferred assets are valued at real value
for tax purposes. Goodwill is calculated as the difference between the purchase price/investment value
and the real value of assets and liabilities. Such goodwill is amortized for tax purposes during
maximum of consecutive seven years, in the amount at least of one seventh of the total goodwill.
Goodwill shall not be amortized if transferred assets are valued at its original (tax) value, then it is not
tax deductible expense.
This legislative treatment is in accordance with the Council Directive 2009/133/EC on the common
system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges
of shares concerning companies of different Member States and to the transfer of the registered office
of an SE or SCE between Member States.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
No.
Slovak legislation does not provide for CFC legislation.
7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test?
N/A
Please indicate.
¾
A "low-or-no-tax" test? Please
N/A
indicate.
¾
An activities based test? Please
N/A
indicate.
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¾
An income based test? Please
N/A
indicate.
¾
Any other test? Please indicate.
N/A
¾
Is there a layer limitation in the
N/A
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying taxes
N/A
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance
N/A
on the non-applicability of your
CFC provisions? If yes, please
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
General anti-abuse rule (“substance over form”) enables tax administrator to prequalify and tax the
income based on the actual substance of the transaction in relation to which the income is paid (as
mentioned in answer to question 1a. in the last row).
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24. SLOVENIA
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes. An exemption of inbound intercompany dividends if certain conditions are met is stipulated by
Corporate Income Tax Act (CIT-2).
1a. If yes:
¾
Do you have a minimum
No.
participation requirement? Is this
different for domestic, EU, treaty
or 3rd country participations?
Please explain.
¾
Is there a minimum holding
No.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
Yes, there are “subject-to-tax” and "minimum effective
"minimum effective taxation"
taxation" requirement.
requirement? If yes, please
A payer must:
explain.
- be a taxpayer under CIT-2; or
- (according to the tax law of a Member State) considered
to be resident in Member State for tax purposes and, under
the terms of a double taxation agreement concluded with a
third State, is not considered to be resident for tax
purposes outside Community and, in addition, must be
subject to one of the taxes to which the common system of
taxation, applicable in the case of parent companies and
subsidiaries of different Members States applies, and
without the possibility of an option or of being exempt; or
- be a taxpayer - subject to income tax and/or profit tax,
comparable to the tax under CIT-2.
There is no exemption in a case a payer is a resident of the
state, and in the case of a business unit this is located in a
state where the general and/or average nominal rate of
taxation applicable to profits generated by companies is
lower than 12.5% and the state is listed on a published list
in accordance with CIT-2. This does not apply to a payer
who is a resident of another EU Member State.
¾
Does the "subject-to-tax" or
It applies to the subsidiary only.
"minimum effective taxation"
requirement apply to the
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes A tax credit for underlying taxes is not available.
available in case one of the above
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requirements is not met? Please
explain.
1b. If no, please briefly explain your credit system.
We have ordinary tax credit on country by country basis – for elimination of juridical double taxation.
It is available only for taxation of income of foreign permanent establishment and for withholding tax
on different income which is included in taxpayer’s tax base.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes. 50% of profit from disposal of equity holdings is exempt from the tax base of the taxpayer.
2a. If yes:
¾
Is there a minimum participation
Yes, there is a minimum participation requirement.
requirement. Is this different for
According to CIT-2 50% of profit is exempt from the tax
domestic, EU, treaty or 3rd country base of the taxpayer, if the taxpayer who earns profit has
participations? Please explain.
participated in capital and/or managing of another person
in such a manner that he/she is the holder of a holding,
shares or voting rights amounting to at least 8%.
It is not different for domestic, EU, treaty or 3rd country
participations.
¾
Is there a minimum holding
Yes, there is a minimum holding period. According to
period? Is this different for
CIT-2 exemption of profits from disposal of equity
domestic, EU, treaty or 3rd country holdings is available if the time of participation (see
participations? Please explain.
above) in capital and/or managing companies, cooperative
societies and other types of organisations last at least 6
months.
It is not different for domestic, EU, treaty or 3rd country
participations.
¾
Is there a "subject-to-tax" or
Yes. The abovementioned exemption is not applicable in a
"minimum effective taxation"
case of profits from investments in ownership shares of
requirement? If yes, please
companies, cooperative societies or other types of
explain.
organisations that have a seat or place of actual operation
of their management established in states where the
general and/or average nominal rate of taxation applicable
to the profits generated by companies is lower than 12.5%
and the state is listed on a published list in accordance
with CIT-2 and the these states are not EU Member States.
¾
Is a tax credit for underlying taxes No. In general, there is no tax credit for underlying taxes.
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
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specific capital gains tax).
Capital gains are taxed as ordinary profits.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Yes, deduction is available for realised capital losses concerning the participation. 50% of losses
arising from disposal of equity holdings under certain condition (see answer 2a.) are exempt from the
tax base of the taxpayer.
Loss arising from disposal of equity holdings is calculated as a surplus of purchase price or carrying
amount after revaluation above the sum of the consideration received less cumulative loss plus
cumulative gain that had been recognised directly in equity.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No. Deduction is available only for unrealised capital losses arising from revaluation of financial
investments and/or financial instruments at fair value through profit or loss.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
No.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
In accordance with the accounting standards amortisation of goodwill is not allowed. For tax purposes
- deduction is available for the expenses arising from a revaluation for impairment in goodwill in the
accounted amount, however not exceeding an amount equalling 20% of the initial goodwill value. The
surplus amount, which is not recognised as expense, shall be recognised in subsequent periods in such
a way that this transferred amount plus the expense arising from revaluation for impairment in
goodwill in the current tax period shall not exceed an amount equalling 20% of the initial goodwill
value.
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign (sub)
subsidiaries)?
No, we do not apply CFC-type legislation.
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7a. If yes, does the definition of a CFC
contain:
¾
A minimum shareholding test? Please [reply]
indicate.
¾
A "low-or-no-tax" test? Please
[reply]
indicate.
¾
An activities based test? Please
[reply]
indicate.
¾
An income based test? Please indicate. [reply]
¾
Any other test? Please indicate.
[reply]
¾
Is there a layer limitation in the CFC-
[reply]
definition (application to indirect
subsidiaries).
¾
Is a tax credit for underlying taxes
[reply]
available in case your CFC rules
trigger immediate taxation of non-
distributed income? Please explain.
¾
Do you provide advance clearance on [reply]
the non-applicability of your CFC
provisions? If yes, please explain via
examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
We have described the anti avoidance rules for inbound dividends and realised capital gains in 1a and
2a. We have general tax measures as transfer pricing rules, non deductibility of interest, WHT on
interests and some services paid to jurisdiction with tax rate lower than 12.5%.
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25. SPAIN
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes, article 21 of Spanish Corporation Tax Law provides for an exemption to avoid double taxation of
dividends and foreign-sourced income derived from the transfer of securities of companies non
resident in Spain.
1a. If yes:
¾
Do you have a minimum
Under Article 21.1.a, the minimum direct or indirect
participation requirement. Is this
participation in the capital or equity of the non resident
different for domestic, EU, treaty
company is determined in a 5%.
or 3rd country participations?
There is no exemption for domestic participations.
Please explain.
¾
Is there a minimum holding
Under Art 21.1.a, the minimum holding period is 1 year.
period? Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
Under Art 21.1.b: the participated company must have
"minimum effective taxation"
been taxed under a foreign tax identical or substantially
requirement? If yes, please
similar to the Spanish Corporation Tax in the tax year in
explain.
which the profits distributed or participated are derived.
This requirement shall be considered met if the
participated company is a resident of a country with which
Spain has signed a Convention to Avoid Double Taxation
applicable to it, which includes an exchange of
information clause.
¾
Does the "subject-to-tax" or
It is also applicable to indirect subsidiaries. They have
"minimum effective taxation"
also to fulfil the minimum participation and the minimum
requirement apply to the
holding period requirements.
subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes Under Art 32.1, when the tax base includes dividends or
available in case one of the above
participation in profits paid by a company non resident in
requirements is not met? Please
Spain, the tax effectively paid with respect to the profits
explain.
out of which the dividends are paid (underlying tax) shall
be credited. The amount to be credited is that attributable
to such profits, as long as it is included in the taxpayer’s
tax base.
To make this credit enforceable it is required: i) a direct or
indirect participation in the capital of the non resident
company of at least 5%; and ii) an uninterrupted holding
during the year prior to the day in which the profit to be
distributed becomes due; otherwise, the participation must
be held for the time necessary to complete a year.
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1b. If no, please briefly explain your credit system.
[reply]
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Under Art 21.2 income derived from the transfer of participations in a company non resident in Spain
is exempt when requirements in Art. 21.1 are met.
2a. If yes:
¾
Is there a minimum participation
The minimum participation is 5% (EU or 3rd countries).
requirement. Is this different for
There is no exemption for domestic capital gains.
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period? The minimum holding period is 1 year.
Is this different for domestic, EU,
treaty or 3rd country participations?
Please explain.
¾
Is there a "subject-to-tax" or
The participated company has to be taxed under an
"minimum effective taxation"
identical or substantially similar tax to the Spanish
requirement? If yes, please explain.
Corporate Income Tax.
¾
Is a tax credit for underlying taxes
No
.
available in case one of the above
requirements is not met? Please
explain.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
[reply]
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Art 21.2.c) In the case of the transfer of a participation in a company non resident in Spain, when the
participation in the non resident company has been previously transferred by another entity of the
same group of companies than the taxpayer and such transfer has derived a negative income integrated
in the tax base of this tax. Any positive income derived from the subsequent transfer of the
participation is taxed up to the amount of the negative income formerly derived by the other company
of the group.
Art 21.4 2º paragraph: Likewise, if a negative income is derived from the transfer of the participation
in a non resident company formerly transferred by another company meeting requirements to be a part
of the same group of companies as the taxpayer, such negative income is lessened in the amount of the
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positive income formerly derived in the transfer to which the exemption was applied.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
Art 21.4, 1st paragraph: If the exemption was applied to foreign-sourced dividends the amortization of
the participation cannot be included in the tax base, irrespective of its nature and of the tax year in
which it arises, up to the amount of such dividends.
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
[reply]
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No
7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Yes, it is foreseen in Article 107 of Corporate Income Tax Law
7a. If yes, does the definition of a
CFC contain:
¾
A minimum shareholding test?
Art 107.1.a. Taxpayers on their own or together with related
Please indicate.
persons or entities must have a participation equal to or
exceeding 50% in the capital, equity, results or voting rights
of the company non resident in Spain at the closing date of
the business year of the non resident company.
¾
A "low-or-no-tax" test? Please
Art 107.1.b. The amount paid by the company non resident
indicate.
in Spain, attributable to any type of income qualified for
inclusion in the taxable base due to the equal or similar
nature of the tax paid, has to be less than 75% of the amount
which would have been calculated in accordance with the
Spanish Corporation Tax rules.
¾
An activities based test? Please
Art 107.2 Only positive income derived from the following
indicate.
sources shall be included in the taxable base:
a. Ownership of urban or rural properties or rights
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attributable to them, except when these properties
are attached to a business activity or assigned for
their use by non resident companies belonging to the
same group of companies as the owner.
b. Participation in equity of any entity and assignment
to third parties of equity, subject to some exceptions.
c. Credit, financial, insurance or services activities,
except services directly related to export activities
directly or indirectly performed with related persons
or entities resident in Spain as long as these activities
generate tax allowable expenses in these resident
companies.
Positive income shall not be included if more than 50% of
the above mentioned revenues come from transactions
performed with non related persons or entities.
d. Transfer of goods and rights referred to in
paragraphs a and b generating income.
¾
An income based test? Please
Art 107.2.d: Income provided for in paragraphs a, b and d of
indicate.
paragraph 107.2 derived by the non resident company shall
neither be included when stemming from companies in
which it directly or indirectly participates in more than 5%, if
the revenue of the companies deriving the income comes at
least in an 85% from business activities.
Art 107.3 Income referred to in paragraphs a, b and d of
paragraph 107.2 shall not be included when their total
amount is less than 15% of total income or 4% of total
revenues of the non resident company.
¾
Any other test? Please indicate.
No
¾
Is there a layer limitation in the The CFC regime is also applicable to indirect subsidiaries.
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying
Art. 107.9 The following amounts are allowable from net
taxes available in case your
payable tax:
CFC rules trigger immediate
a. Taxes or levies effectively paid of the same or
taxation of non-distributed
similar nature as the Corporation Tax, in the amount
income? Please explain.
corresponding to any positive income included in the
tax base.
b. The tax or levy effectively paid abroad on the
distribution of dividends or the participation in
profits, in the amount corresponding to any positive
income previously included in the tax base.
In the case of indirect participation in the non resident
company through one or more non resident companies, the
tax or levy effectively paid of the same or similar nature to
the Corporation Tax shall be deducted by this or these
companies, in the amount corresponding to the positive
income previously included in the taxable base.
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The total amount of deductions referred to in paragraphs a
and b cannot exceed the amount payable in Spain on the
positive income included in the tax base.
¾
Do you provide advance
Art 107.15 The provisions of this Article shall not apply if
clearance on the non-
the company non resident in Spain is a resident of another
applicability of your CFC
EU Member country, provided that the taxpayer proves that
provisions? If yes, please
its incorporation and operation has sound economic reasons
explain via examples.
and that it performs business activities.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
[reply]
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2
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27. UNITED KINGDOM
1. Does your Member State provide for an exemption of inbound intercompany dividends if
certain conditions are met?
Yes.
1a. If yes:
¾
Do you have a minimum participation
No.
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding period? Is
No.
this different for domestic, EU, treaty or
3rd country participations? Please
explain.
¾
Is there a "subject-to-tax" or "minimum No.
effective taxation" requirement? If yes,
please explain.
¾
Does the "subject-to-tax" or "minimum
Not applicable.
effective taxation" requirement apply to
the subsidiary only or also to indirect
subsidiaries. Please explain.
¾
Is a tax credit for underlying taxes
Not applicable.
available in case one of the above
requirements is not met? Please explain.
1b. If no, please briefly explain your credit system.
Not applicable. The UK does provide for an exemption.
2. Does your Member State provide for an exemption of capital gains on participations if certain
conditions are met?
Yes – but only for disposals by a member of a trading group of substantial shareholdings in trading
companies or in the holding company of a trading sub-group.
2a. If yes:
¾
Is there a minimum participation
Yes – 10% holding of ordinary share capital in all cases.
requirement. Is this different for
domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a minimum holding
Yes – 12 months, in all cases.
period? Is this different for
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domestic, EU, treaty or 3rd country
participations? Please explain.
¾
Is there a "subject-to-tax" or
No.
"minimum effective taxation"
requirement? If yes, please
explain.
¾
Is a tax credit for underlying taxes Not for underlying tax. If a chargeable gain on the same
available in case one of the above
shares is taxed in another territory then relief may be due,
requirements is not met? Please
subject to the provisions of any Double Taxation
explain.
Agreement.
2b. If no, please briefly explain how capital gains are taxed (as ordinary profits or under a
specific capital gains tax).
Where the substantial shareholding exemption does not apply then gains are subject to corporation tax
on chargeable gains.
3. Is a deduction available for realised capital losses concerning the participations? If yes please
briefly explain the conditions and methodology for calculating the loss (acquisition minus sales
price or different).
Where the conditions for exemption under the substantial shareholding exemption are met then
realised losses are not deductible.
4. Is a deduction available for unrealised capital losses of participations? If yes please briefly
explain the conditions and methodology for calculating the loss (write down, amortisation,
provision).
No – unless the holding has become of negligible value, in which case the holder may claim to treat
the asset as if it had been disposed of. But not if subject to substantial shareholding exemption (SSE).
5. Is the deduction for (un)realised capital losses of participations subject to a recapture rule? If
yes please explain the methodology.
Yes - if there is a subsequent disposal of the asset.
6. Is a deduction available for amortisation of any underlying goodwill of acquired
participations? If yes please briefly explain the conditions and methodology for calculating the
deductible amount (write down, amortisation, provision).
No.
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7. Do you apply CFC-type legislation (immediate taxation of profits realised by foreign
(sub)subsidiaries)?
Yes. Please note the questionnaire has been answered by reference to new draft CFC rules contained in
Finance Bill 2012. These rules will have effect for CFCs with accounting periods beginning on or after
1 January 2013.
7a. If yes, does the definition of a
CFC contain:
¾
A minimum shareholding test?
The definition of whether an overseas company is a CFC is
Please indicate.
dependent on a range of factors, one of which includes
shareholding. Once it is established that an overseas
company is a CFC, a 25% shareholding is required before
CFC profits are apportioned to any of the UK shareholders.
¾
A "low-or-no-tax" test? Please
Yes – rules only apply if tax suffered by CFC is less than
indicate.
75% of tax that would be suffered in UK.
¾
An activities based test? Please
Yes. Profits may be brought into the CFC regime because the
indicate.
activity that generates the profit is in the UK.
¾
An income based test? Please
Yes. The CFC charge is limited to certain defined categories
indicate.
of profit arising in the CFC.
¾
Any other test? Please indicate.
There are a number of entity based exemptions: excluded
territories test; low profits test; low profit margin test;
temporary period of exemption following acquisition or
reorganisation.
¾
Is there a layer limitation in the Rules apply to direct and indirect subsidiaries.
CFC-definition (application to
indirect subsidiaries).
¾
Is a tax credit for underlying
In exceptional circumstances (for example a CFC charge in
taxes available in case your
respect of dividend income that would not be exempt if
CFC rules trigger immediate
received by a UK company), underlying tax credit would be
taxation of non-distributed
given. Generally, credit will be given for foreign taxes paid
income? Please explain.
in the CFC territory of residence, in effect leaving the UK
with a secondary tax charge on the CFC profits.
¾
Do you provide advance
Yes – clearance is available on all aspects of the regime. For
clearance on the non-
example, whether entity level exemptions apply, whether the
applicability of your CFC
UK activity conditions are met, or whether a full or partial
provisions? If yes, please
charge arises in respect of finance income.
explain via examples.
7b. If you don't apply CFC-type legislation, do you apply alternative anti-avoidance rules to
ensure that profits artificially diverted which may give rise to foreign source dividends are
appropriately taxed? Please explain.
Not applicable. The UK does apply CFC legislation.
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