taxation update 18 october 2005. taxation update tax strategy income derived from land &...
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Taxation Update
18 October 2005
Taxation UpdateTaxation Update
• Tax strategy
• Income derived from land &
property
•Corporate income tax
• Distributable Profits Charge
• International issues
Taxation StrategyTaxation Strategy
• Background
• International considerations
• “0/10”
10% Rate for Companies10% Rate for Companies
• Licensed banks, banking business• Post-importation or wholesaling of
goods by branches and subsidiaries of non-resident companies
• Income from land and property• Companies that elect to pay 10%
Company Rates of TaxCompany Rates of Tax
2% - Banks’ income from reserves
0% - General rate for companies
20% - Understated income
TimingTiming
April 2006• 0/10• Distributable Profits ChargeApril 2007• Exempt/international companies
repealed• Land transactions• New income tax regime for
companies
Income Derived from LandIncome Derived from Land
Consultation Document•Introduction of schedular system•10% rate on the schedule•Legislation for property
development income
Income Derived from LandIncome Derived from Land
schedular system includes
•Rental income
•Property development •Trading•New charging provision
•Other e.g. mineral extraction
Income Derived from LandIncome Derived from Land
Property development income• Changes to Part 3 IT (Amendment) Bill 2005• 5 year ownership• Principal private residence exemption• Disposal by a non-resident
Development levy
Company Income TaxCompany Income Tax
Timing• Consultation• Legislation• CommencementBasis of assessment• Accounts period basis• Computation
Company Income TaxCompany Income Tax
Pay and file• Within 9 months from end of
period of account• 12 month review period• Discovery (S84A ITA 1970)• Reduction request (S107 ITA 1970)
CompanyCompany Income TaxIncome Tax
Compliance in a zero rate
regime
• Default assessments
• Flat-rate penalties
• Investigation rate of tax
Company IncomeCompany Income Tax Tax
Transition Option 1 (Corporate Tax Working
Party)•5 years•Move payment dates
Option 2•1 Year•Taper relief
Other Options
Distributable Profits ChargeDistributable Profits Charge
• Income Tax (Amendment)(No.2)
Bill 2005
• Consultation
• DPC “Big Guide”
• Regulations early 2006
Distributable Profits ChargeDistributable Profits Charge
What is a distributing company?
• Distributes 55%/100%• 10% tax paying companies• Tax exempt bodies• Companies where members are unable to benefit from a distribution
• PLC traded on recognised stock exchange
Distributable Profits ChargeDistributable Profits Charge
• Timing of distributions
• 3 year averaging
• Current/ future years
• Resident interest
• Look through
Distributable Profits Distributable Profits ChargeCharge
The charge
•Only for “non- distributing company”
•55% x 18% trading/100% x 18%
non- trading
•Resident interest
Distributable Profits ChargeDistributable Profits Charge
Co A
Resident Non -Resident
Resident
50% 50%
10%
Non-Resident
90%
Distributable Profits ChargeDistributable Profits Charge
•Payment
•Treatment of interim distributions
•Interest charge for late payment
Distributable Profits ChargeDistributable Profits Charge
The Calculation
•Change resident/non-resident
shareholding
•Double taxation relief• Foreign income taxed at more than 18%
• Foreign income taxed at less than 18%
•Groups
International IssuesInternational Issues
TIEAs•Netherlands•Others
EU •EUSD
OECD
Taxation UpdateTaxation Update
QUESTIONS ?
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