Dbriefs Bytes

1. Cases • Casio - Delhi Income Tax Appellate Tribunal - "Excessive" amount of advertising, marketing and promotion (AMP) expenditure - Charge-back principle applies, even though the Indian company is a fully-fledged distributor - For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • Li and Fung - Delhi High Court - Indian company rewarded by related Hong Kong company on "cost plus 5%" basis for performance of sourcing functions - Tax authorities argued that the purchase price of goods should be included in the cost base, and that the Indian company assumed significant risks - Court: decision for taxpayer - For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • Dash Engineering - Philippines Supreme Court - Taxpayer failed to file petition for judicial review (for refund of excess VAT input tax) within 30 day "window" - Court denies refund - For information: Fredieric Landicho (Manila): flandicho@deloitte.com 2. China • Bulletin 72 - Non-recognition treatment for certain share reorganizations - "Foreign to foreign" + Non-recognition treatment will not apply if transferee is in better "capital gains" treaty position than transferor + If transferee is in better "dividend withholding tax" treaty position than transferor, non-recognition treatment can still apply, but transferee will be denied lower treaty rate for dividends paid out of pre-acquisition profits. Treaty override? - For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn • Circular 698 case - Largest tax bill for a circular 698 (indirect share transfer) case 3. India • TP safe harbors - Central Board directs that safe harbors are not evidence of arm's length prices - For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • Vodafone - News report that Vodafone and government are likely to commence conciliation talks in regard to all outstanding tax disputes 4. Japan • 2014 tax reform proposals • Reduction in effective corporate income tax rate from approximately 38% to 35% • For Japanese brances of foreign companies and foreign branches of Japanese companies: change from "entire income" rule to profit attribution rule (effective for income year commencing on 1 April 2016) • For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 5. In brief • Treaties: entry into force - Belgium / China - Singapore / Belarus - India / Latvia - Thailand / Estonia - India / UK (protocol) • Australia - Backlog of unlegislated measures - Discussion draft on thin cap - For information: David Watkins (Sydney): dwatkins@deloitte.com.au • BEPS - Italy: "Google tax" - Discussion drafts and public consultations: February to May

1. Cases • Casio - Delhi Income Tax Appellate Tribunal - "Excessive" amount of advertising, marketing and promotion (AMP) expenditure - Charge-back principle applies, even though the Indian company is a fully-fledged distributor - For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • Li and Fung - Delhi High Court - Indian company rewarded by related Hong Kong company on "cost plus 5%" basis for performance of sourcing functions - Tax authorities argued that the purchase price of goods should be included in the cost base, and that the Indian company assumed significant risks - Court: decision for taxpayer - For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • Dash Engineering - Philippines Supreme Court - Taxpayer failed to file petition for judicial review (for refund of excess VAT input tax) within 30 day "window" - Court denies refund - For information: Fredieric Landicho (Manila): flandicho@deloitte.com 2. China • Bulletin 72 - Non-recognition treatment for certain share reorganizations - "Foreign to foreign" + Non-recognition treatment will not apply if transferee is in better "capital gains" treaty position than transferor + If transferee is in better "dividend withholding tax" treaty position than transferor, non-recognition treatment can still apply, but transferee will be denied lower treaty rate for dividends paid out of pre-acquisition profits. Treaty override? - For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn • Circular 698 case - Largest tax bill for a circular 698 (indirect share transfer) case 3. India • TP safe harbors - Central Board directs that safe harbors are not evidence of arm's length prices - For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • Vodafone - News report that Vodafone and government are likely to commence conciliation talks in regard to all outstanding tax disputes 4. Japan • 2014 tax reform proposals • Reduction in effective corporate income tax rate from approximately 38% to 35% • For Japanese brances of foreign companies and foreign branches of Japanese companies: change from "entire income" rule to profit attribution rule (effective for income year commencing on 1 April 2016) • For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 5. In brief • Treaties: entry into force - Belgium / China - Singapore / Belarus - India / Latvia - Thailand / Estonia - India / UK (protocol) • Australia - Backlog of unlegislated measures - Discussion draft on thin cap - For information: David Watkins (Sydney): dwatkins@deloitte.com.au • BEPS - Italy: "Google tax" - Discussion drafts and public consultations: February to May

Number 10: GAARs • India • Australia Number 9: Tax rate reductions in Vietnam Number 8: China developments • Bulletin 19 (PE issues concerning secondments) • China (Shanghai) Pilot Free Trade Zone Number 7: MAP / APAs • Highlights: Philippines, Vietnam, Japan, and China • Lowlight: Dispute between Indian and U.S. competent authorities Number 6: Cases • Sanofi (India) • RCF (Australia) • Deutsche Bank (Philippines) • Lone Star Fund IV (Korea) • Right Florists (India) Number 5: Japan’s corporate income tax changes • Earnings stripping rules • Rate reduction • Japanese branches: “authorized OECD approach” Number 4: Treaties • Japan / U.S. protocol • Japan / UK protocol • Korea / Luxembourg protocol • China / Netherlands treaty • China / Switzerland treaty • China / France treaty • Vietnam: draft circular on treaty shopping Number 3: VAT • China • Japan • Malaysia • OECD Number 2: Transfer pricing • India: local marketing intangibles • India: safe harbors • India: R&D • India: “tolerance band” • India: issue of shares at an undervalue • OECD: safe harbors • OECD: intangibles • China: location specific advantages Dbriefs Bytes’ Number 1 story for 2013: BEPS

Number 10: GAARs • India • Australia Number 9: Tax rate reductions in Vietnam Number 8: China developments • Bulletin 19 (PE issues concerning secondments) • China (Shanghai) Pilot Free Trade Zone Number 7: MAP / APAs • Highlights: Philippines, Vietnam, Japan, and China • Lowlight: Dispute between Indian and U.S. competent authorities Number 6: Cases • Sanofi (India) • RCF (Australia) • Deutsche Bank (Philippines) • Lone Star Fund IV (Korea) • Right Florists (India) Number 5: Japan’s corporate income tax changes • Earnings stripping rules • Rate reduction • Japanese branches: “authorized OECD approach” Number 4: Treaties • Japan / U.S. protocol • Japan / UK protocol • Korea / Luxembourg protocol • China / Netherlands treaty • China / Switzerland treaty • China / France treaty • Vietnam: draft circular on treaty shopping Number 3: VAT • China • Japan • Malaysia • OECD Number 2: Transfer pricing • India: local marketing intangibles • India: safe harbors • India: R&D • India: “tolerance band” • India: issue of shares at an undervalue • OECD: safe harbors • OECD: intangibles • China: location specific advantages Dbriefs Bytes’ Number 1 story for 2013: BEPS

Number 10: GAARs • India • Australia Number 9: Tax rate reductions in Vietnam Number 8: China developments • Bulletin 19 (PE issues concerning secondments) • China (Shanghai) Pilot Free Trade Zone Number 7: MAP / APAs • Highlights: Philippines, Vietnam, Japan, and China • Lowlight: Dispute between Indian and U.S. competent authorities Number 6: Cases • Sanofi (India) • RCF (Australia) • Deutsche Bank (Philippines) • Lone Star Fund IV (Korea) • Right Florists (India) Number 5: Japan’s corporate income tax changes • Earnings stripping rules • Rate reduction • Japanese branches: “authorized OECD approach” Number 4: Treaties • Japan / U.S. protocol • Japan / UK protocol • Korea / Luxembourg protocol • China / Netherlands treaty • China / Switzerland treaty • China / France treaty • Vietnam: draft circular on treaty shopping Number 3: VAT • China • Japan • Malaysia • OECD Number 2: Transfer pricing • India: local marketing intangibles • India: safe harbors • India: R&D • India: “tolerance band” • India: issue of shares at an undervalue • OECD: safe harbors • OECD: intangibles • China: location specific advantages Dbriefs Bytes’ Number 1 story for 2013: BEPS

1. Cases • India: Glenmark Pharmaceuticals - Mumbai Income Tax Appellate Tribunal - Transfer pricing in regard to guarantee fees - “Naked quotes” on bank websites should not be used as direct comparables - “Conceptual and legal” differences between bank guarantees and corporate guarantees: such differences should be reflected in adjustments - “Interest saved approach” effectively endorsed - For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • India: Device Driven - Cochin Income Tax Appellate Tribunal - Commission agency fees paid to Swiss director of Indian company - “Fees for technical services” under India / Switzerland treaty? Yes - Article 14: “fixed base” in India? Yes - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • India: J.P. Morgan Securities - Mumbai Income Tax Appellate Tribunal - Article 11 (interest) of India / Singapore treaty: does it apply to surcharge and education cess? Yes - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. Treaties • Hong Kong / Qatar - Treaty entered into force • China / UK - New treaty and protocol entered into force • Singapore / San Marino and India / Macedonia - Two new treaties recently signed • Japan / UK - Protocol signed, with substantive amendments to existing 2006 treaty - Dividends: 5% rate abolished, and shareholding level for 0% rate reduced from 50% to 10% - Interest: 0% rate will generally apply, except for 10% rate for profit-participating loans and similar instruments - Article 7: 2010 edition of OECD model - Binding arbitration - Mutual assistance in the collection of taxes - For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 3. India • Cyprus - India has given Cyprus a test - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • Nokia - Delhi High Court has allowed the sale of assets by Nokia India to Microsoft, subject to certain conditions 4. In brief • China: Circular 106 (VAT) - For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn • Singapore: circular in regard to REITs - For information: Rohit Shah (Singapore): roshah@deloitte.com • New Zealand: old rulings - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz 5. Things we are waiting for • India: Shome Committee – GAAR and indirect share transfers (carry-over from 2012) • Indonesia: Hong Kong / Indonesia treaty: “income subject to tax” (carry-over from 2012) • Vodafone: indirect share transfer dispute - settlement? • Japan: third arrow

1. Cases • India: Glenmark Pharmaceuticals - Mumbai Income Tax Appellate Tribunal - Transfer pricing in regard to guarantee fees - “Naked quotes” on bank websites should not be used as direct comparables - “Conceptual and legal” differences between bank guarantees and corporate guarantees: such differences should be reflected in adjustments - “Interest saved approach” effectively endorsed - For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • India: Device Driven - Cochin Income Tax Appellate Tribunal - Commission agency fees paid to Swiss director of Indian company - “Fees for technical services” under India / Switzerland treaty? Yes - Article 14: “fixed base” in India? Yes - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • India: J.P. Morgan Securities - Mumbai Income Tax Appellate Tribunal - Article 11 (interest) of India / Singapore treaty: does it apply to surcharge and education cess? Yes - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. Treaties • Hong Kong / Qatar - Treaty entered into force • China / UK - New treaty and protocol entered into force • Singapore / San Marino and India / Macedonia - Two new treaties recently signed • Japan / UK - Protocol signed, with substantive amendments to existing 2006 treaty - Dividends: 5% rate abolished, and shareholding level for 0% rate reduced from 50% to 10% - Interest: 0% rate will generally apply, except for 10% rate for profit-participating loans and similar instruments - Article 7: 2010 edition of OECD model - Binding arbitration - Mutual assistance in the collection of taxes - For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 3. India • Cyprus - India has given Cyprus a test - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • Nokia - Delhi High Court has allowed the sale of assets by Nokia India to Microsoft, subject to certain conditions 4. In brief • China: Circular 106 (VAT) - For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn • Singapore: circular in regard to REITs - For information: Rohit Shah (Singapore): roshah@deloitte.com • New Zealand: old rulings - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz 5. Things we are waiting for • India: Shome Committee – GAAR and indirect share transfers (carry-over from 2012) • Indonesia: Hong Kong / Indonesia treaty: “income subject to tax” (carry-over from 2012) • Vodafone: indirect share transfer dispute - settlement? • Japan: third arrow

1. Cases • Korea: Spanish merger case - Merger between two Spanish companies, causing shares in Korean company to be transferred to survivor company - Supreme Court: taxable transaction - For information: Gyung Ho Kim (Seoul): gykim@deloitte.com • Australia: Enforcement of Korean "tax" judgment - Royalty conduit arrangement - Korean sub-licensee + Did not withhold tax from royalty payments + Subsequently paid withholding tax to Korean tax authorities (following tax audit) + Obtained Korean court judgment against Australian "beneficial owner" for the tax amount - Australian Court: agrees to enforce Korean judgment (i.e. not a "tax debt") - For information: David Watkins (Sydney): dwatkins@deloitte.com.au • Singapore: Cases on exchange of information - Two recent cases on information exchange requests received by Singapore tax authorities - For information: See Jee Chang (Singapore): jcsee@deloitte.com 2. BEPS • Australia: ISAPS audit program launched by ATO • For information: David Watkins (Sydney): dwatkins@deloitte.com.au Cam Smith (Melbourne): camsmith@deloitte.com.au 3. India • Cyprus - Cyprus and India agree to amend treaty to improve the exchange of information article - In response to India's November notice that Cyprus is a non-cooperative jurisdiction • Direct Taxes Code (DTC) - Finance Minister: DTC Bill will be released soon - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 4. China • Circular 46: exemption for dividends on "preferred stock" • For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 5. In brief • Treaties - Vietnam / Uruguay: treaty signed - Japan / Sweden: protocol signed (significant changes to existing treaty) - Korea / Kyrgyzstan: treaty entered into force - Hong Kong / Guernsey: treaty entered into force • Vale: ouch! - Vale settles tax dispute with Brazilian tax authorities for USD 9.5 billion

1. Cases • Korea: Spanish merger case - Merger between two Spanish companies, causing shares in Korean company to be transferred to survivor company - Supreme Court: taxable transaction - For information: Gyung Ho Kim (Seoul): gykim@deloitte.com • Australia: Enforcement of Korean "tax" judgment - Royalty conduit arrangement - Korean sub-licensee + Did not withhold tax from royalty payments + Subsequently paid withholding tax to Korean tax authorities (following tax audit) + Obtained Korean court judgment against Australian "beneficial owner" for the tax amount - Australian Court: agrees to enforce Korean judgment (i.e. not a "tax debt") - For information: David Watkins (Sydney): dwatkins@deloitte.com.au • Singapore: Cases on exchange of information - Two recent cases on information exchange requests received by Singapore tax authorities - For information: See Jee Chang (Singapore): jcsee@deloitte.com 2. BEPS • Australia: ISAPS audit program launched by ATO • For information: David Watkins (Sydney): dwatkins@deloitte.com.au Cam Smith (Melbourne): camsmith@deloitte.com.au 3. India • Cyprus - Cyprus and India agree to amend treaty to improve the exchange of information article - In response to India's November notice that Cyprus is a non-cooperative jurisdiction • Direct Taxes Code (DTC) - Finance Minister: DTC Bill will be released soon - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 4. China • Circular 46: exemption for dividends on "preferred stock" • For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 5. In brief • Treaties - Vietnam / Uruguay: treaty signed - Japan / Sweden: protocol signed (significant changes to existing treaty) - Korea / Kyrgyzstan: treaty entered into force - Hong Kong / Guernsey: treaty entered into force • Vale: ouch! - Vale settles tax dispute with Brazilian tax authorities for USD 9.5 billion

1. BEPS • Digital economy - Task force - Request for input • BEPS calendar (For more information: www.deloitte.com/ap/dbriefs/bytes) • Global Forum on Transparency and Exchange of Information for Tax Purposes - Yellow cards: Luxembourg, Cyprus, BVI, and Seychelles • Mike Danilack regarding MAP - Competant authorities should increase their MAP resources - India / U.S. discussions • EU actions - Parent / subsidiary directive: hybrid loan arrangements - EU task force on digital economy 2. Cases • Verizon - Bandwidth and telecom services provided by non-resident telecom company - Retrospective amendments to Indian domestic law definition of "royalties": equipment and process - Madras High Court: such retrospective amendments also apply for the purposes of the definition of "royalties" under the India / Singapore treaty - Many commentators have criticized the decision • Intrasoft - Licence of computer software, with no right to copy - Retrospective amendments to Indian domestic law definition of "royalties": software - Delhi High Court: such retrospective amendments do not apply for the purposes of the definition of "royalties" under the India / U.S. treaty + Instead, OECD Commentary applied • Vodafone - TP dispute regarding assertion that Vodafone India issued new shares to 100% Mauritius parent at an undervalue - Bombay High Court sent the matter to the Dispute Resolution Panel - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 3. Treaties • China / France: new treaty and protocol signed • Singapore / Guernsey treated: entered into force 4. China • Bulletin 66 - Scope of VAT exemption for "asset reorganizations" • Bulletin 91 - Capital gains deferral for companies in the China (Shanghai) Pilot Free Trade Zone • For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 5. In brief • Japan - Decision to repeal special reconstruction surtax - For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp Mark Brandon (Tokyo): mark.brandon@tohmatsu.co.jp • New Zealand - Omnibus Bill released (changes include thin cap and "black hole" expenditure) - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz

1. BEPS • Digital economy - Task force - Request for input • BEPS calendar (For more information: www.deloitte.com/ap/dbriefs/bytes) • Global Forum on Transparency and Exchange of Information for Tax Purposes - Yellow cards: Luxembourg, Cyprus, BVI, and Seychelles • Mike Danilack regarding MAP - Competant authorities should increase their MAP resources - India / U.S. discussions • EU actions - Parent / subsidiary directive: hybrid loan arrangements - EU task force on digital economy 2. Cases • Verizon - Bandwidth and telecom services provided by non-resident telecom company - Retrospective amendments to Indian domestic law definition of "royalties": equipment and process - Madras High Court: such retrospective amendments also apply for the purposes of the definition of "royalties" under the India / Singapore treaty - Many commentators have criticized the decision • Intrasoft - Licence of computer software, with no right to copy - Retrospective amendments to Indian domestic law definition of "royalties": software - Delhi High Court: such retrospective amendments do not apply for the purposes of the definition of "royalties" under the India / U.S. treaty + Instead, OECD Commentary applied • Vodafone - TP dispute regarding assertion that Vodafone India issued new shares to 100% Mauritius parent at an undervalue - Bombay High Court sent the matter to the Dispute Resolution Panel - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 3. Treaties • China / France: new treaty and protocol signed • Singapore / Guernsey treated: entered into force 4. China • Bulletin 66 - Scope of VAT exemption for "asset reorganizations" • Bulletin 91 - Capital gains deferral for companies in the China (Shanghai) Pilot Free Trade Zone • For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 5. In brief • Japan - Decision to repeal special reconstruction surtax - For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp Mark Brandon (Tokyo): mark.brandon@tohmatsu.co.jp • New Zealand - Omnibus Bill released (changes include thin cap and "black hole" expenditure) - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz

1. BEPS • Digital economy - Task force - Request for input • BEPS calendar (For more information: www.deloitte.com/ap/dbriefs/bytes) • Global Forum on Transparency and Exchange of Information for Tax Purposes - Yellow cards: Luxembourg, Cyprus, BVI, and Seychelles • Mike Danilack regarding MAP - Competant authorities should increase their MAP resources - India / U.S. discussions • EU actions - Parent / subsidiary directive: hybrid loan arrangements - EU task force on digital economy 2. Cases • Verizon - Bandwidth and telecom services provided by non-resident telecom company - Retrospective amendments to Indian domestic law definition of "royalties": equipment and process - Madras High Court: such retrospective amendments also apply for the purposes of the definition of "royalties" under the India / Singapore treaty - Many commentators have criticized the decision • Intrasoft - Licence of computer software, with no right to copy - Retrospective amendments to Indian domestic law definition of "royalties": software - Delhi High Court: such retrospective amendments do not apply for the purposes of the definition of "royalties" under the India / U.S. treaty + Instead, OECD Commentary applied • Vodafone - TP dispute regarding assertion that Vodafone India issued new shares to 100% Mauritius parent at an undervalue - Bombay High Court sent the matter to the Dispute Resolution Panel - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 3. Treaties • China / France: new treaty and protocol signed • Singapore / Guernsey treated: entered into force 4. China • Bulletin 66 - Scope of VAT exemption for "asset reorganizations" • Bulletin 91 - Capital gains deferral for companies in the China (Shanghai) Pilot Free Trade Zone • For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 5. In brief • Japan - Decision to repeal special reconstruction surtax - For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp Mark Brandon (Tokyo): mark.brandon@tohmatsu.co.jp • New Zealand - Omnibus Bill released (changes include thin cap and "black hole" expenditure) - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz

1. BEPS • OECD's public consultation on transfer pricing on 12 and 13 November 2013 • Last consultation on intangibles • Key issue: how do you ensure that the significant functions performed by related parties (other than the legal owner) are properly rewarded, reflecting the "added value" which those functions bring? • "Special measures": different taxing principle? • For information: John Henshall (London): jhenshall@deloitte.co.uk 2. Japan • Report on consumption tax treatment of inbound supplies of services and intangibles (such as digital products) • Under current law, such supplies are not subject to consumption tax • Report recommends change of law to cause the foreign supplier to be subject to consumption tax • Alternatives to enforce compliance • For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 3. OECD • Discussion draft on international traffic - Proposed change to Article 8 of model treaty: from place of effective management to residence - Proposed change to Commentary: "may be taxed" has no impact on residence country (other than via Article 23A) • Discussion draft on "technical" amendments to Commentary - Article 10 and Article 13: share redemptions - Article 11: definition of "interest", in regard to third party sales of securities with accrued interest, premium, or discount 4. China • Bulletin 63 • Business tax on sales on financial products will be calculated based on one category, instead of four • Thus, gains and losses will be able to be offset • For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 5. In brief • Korea / Ecuador treaty: entered into force • India: Metro & Metro - Indian company paid service fees to non-resident at time when no withholding tax obligation - Retrospective change to deemed source rule, thereby causing withholding tax obligation - Such change does not cause payer of service fees to have "failed" to withhold tax - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com

1. BEPS • OECD's public consultation on transfer pricing on 12 and 13 November 2013 • Last consultation on intangibles • Key issue: how do you ensure that the significant functions performed by related parties (other than the legal owner) are properly rewarded, reflecting the "added value" which those functions bring? • "Special measures": different taxing principle? • For information: John Henshall (London): jhenshall@deloitte.co.uk 2. Japan • Report on consumption tax treatment of inbound supplies of services and intangibles (such as digital products) • Under current law, such supplies are not subject to consumption tax • Report recommends change of law to cause the foreign supplier to be subject to consumption tax • Alternatives to enforce compliance • For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 3. OECD • Discussion draft on international traffic - Proposed change to Article 8 of model treaty: from place of effective management to residence - Proposed change to Commentary: "may be taxed" has no impact on residence country (other than via Article 23A) • Discussion draft on "technical" amendments to Commentary - Article 10 and Article 13: share redemptions - Article 11: definition of "interest", in regard to third party sales of securities with accrued interest, premium, or discount 4. China • Bulletin 63 • Business tax on sales on financial products will be calculated based on one category, instead of four • Thus, gains and losses will be able to be offset • For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 5. In brief • Korea / Ecuador treaty: entered into force • India: Metro & Metro - Indian company paid service fees to non-resident at time when no withholding tax obligation - Retrospective change to deemed source rule, thereby causing withholding tax obligation - Such change does not cause payer of service fees to have "failed" to withhold tax - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com

1. BEPS • OECD's public consultation on transfer pricing on 12 and 13 November 2013 • Last consultation on intangibles • Key issue: how do you ensure that the significant functions performed by related parties (other than the legal owner) are properly rewarded, reflecting the "added value" which those functions bring? • "Special measures": different taxing principle? • For information: John Henshall (London): jhenshall@deloitte.co.uk 2. Japan • Report on consumption tax treatment of inbound supplies of services and intangibles (such as digital products) • Under current law, such supplies are not subject to consumption tax • Report recommends change of law to cause the foreign supplier to be subject to consumption tax • Alternatives to enforce compliance • For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 3. OECD • Discussion draft on international traffic - Proposed change to Article 8 of model treaty: from place of effective management to residence - Proposed change to Commentary: "may be taxed" has no impact on residence country (other than via Article 23A) • Discussion draft on "technical" amendments to Commentary - Article 10 and Article 13: share redemptions - Article 11: definition of "interest", in regard to third party sales of securities with accrued interest, premium, or discount 4. China • Bulletin 63 • Business tax on sales on financial products will be calculated based on one category, instead of four • Thus, gains and losses will be able to be offset • For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 5. In brief • Korea / Ecuador treaty: entered into force • India: Metro & Metro - Indian company paid service fees to non-resident at time when no withholding tax obligation - Retrospective change to deemed source rule, thereby causing withholding tax obligation - Such change does not cause payer of service fees to have "failed" to withhold tax - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com