taxation update 18 october 2005. taxation update tax strategy income derived from land &...
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Taxation Update
18 October 2005
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Taxation UpdateTaxation Update
• Tax strategy
• Income derived from land &
property
•Corporate income tax
• Distributable Profits Charge
• International issues
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Taxation StrategyTaxation Strategy
• Background
• International considerations
• “0/10”
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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%
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Company Rates of TaxCompany Rates of Tax
2% - Banks’ income from reserves
0% - General rate for companies
20% - Understated income
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TimingTiming
April 2006• 0/10• Distributable Profits ChargeApril 2007• Exempt/international companies
repealed• Land transactions• New income tax regime for
companies
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Income Derived from LandIncome Derived from Land
Consultation Document•Introduction of schedular system•10% rate on the schedule•Legislation for property
development income
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Income Derived from LandIncome Derived from Land
schedular system includes
•Rental income
•Property development •Trading•New charging provision
•Other e.g. mineral extraction
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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
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Company Income TaxCompany Income Tax
Timing• Consultation• Legislation• CommencementBasis of assessment• Accounts period basis• Computation
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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)
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CompanyCompany Income TaxIncome Tax
Compliance in a zero rate
regime
• Default assessments
• Flat-rate penalties
• Investigation rate of tax
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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
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Distributable Profits ChargeDistributable Profits Charge
• Income Tax (Amendment)(No.2)
Bill 2005
• Consultation
• DPC “Big Guide”
• Regulations early 2006
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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
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Distributable Profits ChargeDistributable Profits Charge
• Timing of distributions
• 3 year averaging
• Current/ future years
• Resident interest
• Look through
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Distributable Profits Distributable Profits ChargeCharge
The charge
•Only for “non- distributing company”
•55% x 18% trading/100% x 18%
non- trading
•Resident interest
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Distributable Profits ChargeDistributable Profits Charge
Co A
Resident Non -Resident
Resident
50% 50%
10%
Non-Resident
90%
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Distributable Profits ChargeDistributable Profits Charge
•Payment
•Treatment of interim distributions
•Interest charge for late payment
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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
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International IssuesInternational Issues
TIEAs•Netherlands•Others
EU •EUSD
OECD
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Taxation UpdateTaxation Update
QUESTIONS ?