Евразийский научно-исследовательский центр сравнительного и международного финансового права

Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com Euro-AsianLawCongressNinth session, on 14 May, 18-19 of June 2015 год«The procedure aspects of confirmation the tax treaty application right in the countries of BRICS».Mihaleva Maria OlegovnaEkaterinburg

TABLE OF CONTENTS:1. Tax treaty definition and its meaning. ……...……………………………...…………..…32. Tax treaties administration ……………………….………….…...…………………...….43. Peculiarities of tax resident certificate receipt in BRICS membercountries …………….5 Brazil………………………………………………………………….……….……………...5Russia…………………………………………………………….…………………………...7India…………………………………………………………………………………….……..9China……………………………………………………………………………………...…11South African Republic………………………………………………………………….......134. In judicial practice there could be difficulties concerning the tax resident certificate submission. …………………………………………..……………………………………...145. Defining tax resident Certificate criterions. Indian experience…………………..………156. Peculiarities of confirmation the status of a person who has a real right to get a profit (beneficial owner). ……………………………………………………………………….…167. Tax resident certificate……………………………………………………………………17 Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

1. Tax treaty definition and its meaning.Tax treaty / DTAA (Double Taxation Avoidance Treaty) has a purpose to promote countries cooperation and provide the most favourable tax conditions for external-economic activity.It effects:1. Double Taxation Avoidance;2. Application of tax benefits;3. Unilaterally tax exemption;4. Application of tax deductions or tax set-off;5. The way of tax optimization;6. Capital flow increase;7. Prevention of fiscal evasion;8. Income distribution between countries budgets. Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

2. Tax treaties administration.Bilateral Double Taxation Avoidance treaties between Russia and members of BRICS. Table №1.Terms and conditions of application:1. Substantive aspects;2. Procedural aspects:- confirmation of the foreign resident status (tax resident certificate submission);- confirmation of the status of the person who has a real right to get profit («beneficial owner»). Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

3. Peculiarities of tax resident certificate receipt in BRICS membercountries.Table №2. Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

4. In judicial practice there could be difficulties concerning the tax resident certificate submission:1. About the possibility of alternative documents application, that confirm foreign country tax resident status;(abstracts from the trade register; certificates issued by other competent governmental authorities).Federal Arbitrage Court of North-Caucasus region29.06.2012, decision from N А32-30502/2010.2. The time when the document should be submitted;(to the moment of payment or to the moment of tax authorities requirement).Federal Arbitrage Court of Moscow region 17.01.2014 № Ф05-16745/13 decision from № А40-16818/2013.3. About using tax resident certificate in other tax periods; Federal Arbitrage Court Povolzhsky region 30.07. 2013 № Ф06-5981/13 decision from N А12-29089/20124. Matters of substance and certificate legalization;(the absence of required information, improper certification of the document)Federal Arbitrage Court of Moscow region 15.02.2013 № Ф05-15470/12 decision from № А40-59278/2012. Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

5. Defining tax resident Certificate criterions. Indian experience.The Finance Act 2012 strictly defined tax certificate criterions.Certificate shall contain the following particulars, namely:1Name of the assessee;2. Status (individual, company, firm etc.) of the assessee;3. Nationality (in case of individual);4. Country or specified territory of incorporation or registration (in case of others);5. Assessee’s tax identification number in the country or specified territory of residence or in case no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory;6. Residential status for the purposes of tax;7. Period for which the certificate is applicable; and8. Address of the applicant for the period for which the certificate is applicable;The consequences:The reaction of foreign business partners were rather negative.(Specified criterions are not clause to a contract).A new law was passed in 2013 (The Finance Act 2013) and defined that criterions as optional. Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

6. Peculiarities of confirmation the status of a person who has a real right to get a profit (beneficial owner).(Articles 10, 11, 12 of Agreements adopted within the OECD (Organization for Economic Cooperation and Development) frame Convention use a term "beneficial owner" as a condition for granting tax benefits)Condition:In order to prove that the recipient is a “tax resident”, merely providing a tax resident certificate issued by the tax authority of the other country is not enough.(IndiaThe Finance Act 2013, China Circular 601,81, 24 )A recently published letter of the Ministry of Finance RF 2 (the Letter) addresses the question of the documents needed to determine the actual recipient of dividend income (the beneficial ownerLetter No.03-00-R3/16236 of 9 April 2014).Confirmation procedure includes:1. Subject examination according to "beneficial owner" criterions.2. Complex check-out of receiver accounts and transactions.3. Enquiry of confirming information documents. Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

7. Tax resident certificate.Features of the document:1. National legislation of every country defines provisions concerning procedural and substantive aspects.2. Certificate is an international document. (Just a few of bilateral double taxation avoidance treaties set a form of this document (as an example treaty between Russia and Belorussia). - Substance requirements should be established on the international level.- Receipt procedure could be universal and more simple.Ways of solving problems:1. Establish unified certificate form.2. Provide universal certificate application.3. Establish unified procedure of certificate receipt.4. Work out alternative ways of document receipt and confirmation of information:* Administrative procedures providing mutual assistance among the state authorities;* Application of other papers (abstracts from the international editions, notarial copies of documents). Евразийский научно-исследовательский центр сравнительного и международного финансового права http://eurasiatax.com

Евразийский научно-исследовательский центр сравнительного и международного финансового права

Евразийский научно-исследовательский центр сравнительного и международного финансового права

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