Australian R&D tax incentives â another reason for ... - PwC

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TaxTalk – Electronic Bulletin of Australian Tax Developments consequence, the underlying foreign tax credit (UFTC) rules will become redundant and will also be repealed • most foreign dividends from portfolio interests received by companies will be exempt. Dividends derived from entities that are exempt from the FIF rules will continue to be taxed • with the repeal of the conduit rules, conduit tax relief account balances as at the start of the 2009-2010 income year will be cancelled, subject to a transitional antiavoidance rule, and • attributed CFC net losses and foreign tax credits accrued under the current rules can be carried forward into the new system, but will continue to be reduced by reference to total CFC net income (including non-attributable income). The taxation of foreign dividends received by persons other than companies (such as individuals and trustees) is not affected by the proposals. The suggested changes would apply from the start of the 2009–2010 income year. The deadline for commenting on the proposals is 15 February 2008. New Zealand: review aimed at reducing compliance costs A NZ Government Discussion Paper released on 5 December 2007 seeks feedback on a range of ideas aimed at reducing tax-related compliance costs for small and medium-sized enterprises (SMEs). Measures suggested include: • raising business tax thresholds for certain Pay As You Earn, fringe benefits tax (FBT) and goods and services tax (GST) filing and registration requirements, and introducing a single threshold for certain concessions • simplifying the rules for deducting entertainment and legal expenses • for FBT purposes, introducing a single category of restricted private use motor vehicles for SMEs and simplifying record-keeping requirements for the private use of motor vehicles • simplifying GST invoice disclosure requirements, and • for tax administration purposes, allowing the correction of minor errors in subsequent returns and reviewing certain other rules. Some of the measures would generally apply from 1 April 2009 and are proposed to be included in the next available taxation Bill (eg the thresholdrelated amendments). The more complex measures will be included in a later tax Bill, with the likely application date being 1 April 2010. Closing dates for submissions are 31 January 2008 for submissions on thresholds, and 29 February 2008 for submissions on all other matters. For further information please contact your usual PricewaterhouseCoopers adviser, or: Peter Collins, Partner PricewaterhouseCoopers Tax International Tax and Transaction Services Phone: +61 3 8603 6247 peter.collins@au.pwc.com Norah Seddon, Partner PricewaterhouseCoopers Tax International Tax and Transaction Services Phone: +61 2 8266 5864 norah.seddon@au.pwc.com United Kingdom (UK) proposal to tax interest like returns On Thursday 6 December 2007, the UK Revenue published a consultation document detailing proposed draft legislation in relation to “financial products tax avoidance”. In the past, the UK Government has often responded to avoidance by setting out detailed rules which target a specific arrangement. In a departure from this approach, the UK Government proposes to introduce “principlebased” legislation as follows: • The disguised interest principle: A return designed to be economically equivalent to interest is to be taxed in the same way as interest. Where a UK company is party to an arrangement designed to produce an interest-like return that is not taxed or not wholly taxed, the proposed rules may tax returns as if they were returns on a loan relationship (ie tax returns on the arrangement like interest income which is taxed on an accruals basis). Targeted schemes will be those which seek to convert taxable interest into an exempt dividend or capital gain. For example, a UK company holding redeemable preference shares page
TaxTalk – Electronic Bulletin of Australian Tax Developments issued by a UK or foreign company might result in a tax liability to the holder without any deduction to the issuer. • The principle for income stream transfers: Receipts which are derived from a right to receive income and do not involve any loss of capital are economic substitutes for income and are to be treated for tax purposes as income. Targeted schemes will be those which are designed to turn economic income into a return that is treated by tax law as capital. The consultation document invites detailed comments on the proposed legislation by the end of February 2008. Legislation is intended to be introduced in Finance Bill 2008 (ie effective 1 April 2008). For further information please contact your usual PricewaterhouseCoopers adviser, or: Neil Fuller, Partner PricewaterhouseCoopers Tax International Tax and Transaction Services Phone: +61 2 8266 2025 neil.fuller@au.pwc.com Germany: tax amendments for 2008 The 2008 Annual Tax Bill was enacted on 29 December 2007. From an international tax structuring point of view, the most relevant changes brought by the Bill are: • the non-deductibility of losses connected with inter-company loan receivables • the re-written general anti-abuse rule • the taxation of previously untaxed profits (so-called ‘EK 02’) • the non-applicability of German controlled foreign company (CFC) rules within the European Union/European Economic Community, and • the reduction in the non deductible amount of certain finance costs for trade tax purposes. The new rules will generally apply to assessment periods from 2008 onwards. For further information please contact your usual PricewaterhouseCoopers adviser, or: Christian Holle, Partner PricewaterhouseCoopers Tax International Tax Phone: +61 2 8266 5697 christian.holle@au.pwc.com Goods and services tax (GST) developments New exempt taxes, fees and charges determination Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST applies to payments of taxes, fees and charges, except those taxes, fees and charges that are excluded by a determination of the Treasurer. A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2008 (No.1), registered on 16 January 2008, lists the fees, taxes, and charges that are excluded from the scope of GST by a determination of the Treasurer (in accordance with Division 81). The Determination replaces the former year 2007 Determination and is effective from 17 January 2008. High Court grants special leave in Reliance Carpet In our August 2007 edition of TaxTalk, we reported that the Full Federal Court in Reliance Carpet Co Pty Ltd v Commissioner of Taxation [2007] FCAFC 99 (5 July 2007) had held that there was no taxable supply in circumstances where a deposit for the sale of land was forfeited, and thus there was no GST liability payable by the vendor. Not surprisingly, the Commissioner sought special leave from the High Court for this matter to be appealed, and on 14 December 2007, the High Court granted this special leave request. The outcome of this appeal is eagerly awaited. For further information, please contact your usual PricewaterhouseCoopers adviser, or: Patrick Walker, National GST Leader PricewaterhouseCoopers Tax Goods & Services Tax Phone: +61 2 8266 1596 patrick.walker@au.pwc.com Kevin O’Rourke, Partner PricewaterhouseCoopers Tax Goods & Services Tax Phone: +61 2 8266 3114 kevin.orourke@au.pwc.com Ken Fehily, Partner PricewaterhouseCoopers Tax Goods & Services Tax Phone: +61 3 8603 6216 ken.fehily@au.pwc.com Michelle Tremain, Partner PricewaterhouseCoopers Tax Goods & Services Tax Phone: +61 8 9238 3403 michelle.tremain@au.pwc.com page
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