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Taxation Update 18 October 2005

Taxation Update 18 October 2005. Taxation Update. Tax strategy Income derived from land & property Corporate income tax Distributable Profits Charge International issues. Taxation Strategy. Background International considerations “0/10”. 10% Rate for Companies.

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Taxation Update 18 October 2005

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  1. Taxation Update18 October 2005

  2. Taxation Update • Tax strategy • Income derived from land & property • Corporate income tax • Distributable Profits Charge • International issues

  3. Taxation Strategy • Background • International considerations • “0/10”

  4. 10% 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%

  5. Company Rates of Tax 2% - Banks’ income from reserves 0% - General rate for companies 20% - Understated income

  6. Timing April 2006 • 0/10 • Distributable Profits Charge April 2007 • Exempt/international companies repealed • Land transactions • New income tax regime for companies

  7. Income Derived from Land Consultation Document • Introduction of schedular system • 10% rate on the schedule • Legislation for property development income

  8. Income Derived from Land schedular system includes • Rental income • Property development • Trading • New charging provision • Other e.g. mineral extraction

  9. Income 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

  10. Company Income Tax Timing • Consultation • Legislation • Commencement Basis of assessment • Accounts period basis • Computation

  11. Company 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)

  12. CompanyIncome Tax Compliance in a zero rate regime • Default assessments • Flat-rate penalties • Investigation rate of tax

  13. Company Income Tax Transition Option 1 (Corporate Tax Working Party) • 5 years • Move payment dates Option 2 • 1 Year • Taper relief Other Options

  14. Distributable Profits Charge • Income Tax (Amendment)(No.2) Bill 2005 • Consultation • DPC “Big Guide” • Regulations early 2006

  15. Distributable 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

  16. Distributable Profits Charge • Timing of distributions • 3 year averaging • Current/ future years • Resident interest • Look through

  17. Distributable Profits Charge The charge • Only for “non- distributing company” • 55% x 18% trading/100% x 18% non- trading • Resident interest

  18. Distributable Profits Charge Non-Resident Resident 10% 90% Non -Resident Resident 50% 50% Co A

  19. Distributable Profits Charge • Payment • Treatment of interim distributions • Interest charge for late payment

  20. Distributable Profits Charge TheCalculation • Change resident/non-resident shareholding • Double taxation relief • Foreign income taxed at more than 18% • Foreign income taxed at less than 18% • Groups

  21. International Issues TIEAs • Netherlands • Others EU • EUSD OECD

  22. Taxation Update QUESTIONS ?

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