Dbriefs Bytes

1. Cases • India: Credit Lyonnais - Calculation of profit attributable to Indian branch (PE) - Indian branch performs credit analysis of prospective borrowers - A core function – not mere “facilitation” - 20% of fees allocated to Indian branch, but no interest - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • India: A.P. Moller - Danish general partnership (transparent in Denmark, taxable entity in India) - Tribunal applies OECD Commentary to allow treaty claim to be made - Under “arising” definition, fees for technical services (FTS) held to “arise” in Denmark: FTS article thus does not apply - Exemption under business profits article - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • Hong Kong: Nice Cheer - Accounting treatment: unrealized profit on unsold securities recognized in financial statements - Tax treatment: such unrealized profit not recognized - For information: Anthony Lau (Hong Kong): antlau@deloitte.com.hk 2. Hong Kong • Change in Hong Kong tax authority’s position in regard to issuing tax residency certificates to foreign banks with branches in Hong Kong • Hong Kong tax authority agrees with OECD’s viewpoint on treaty claims by foreign transparent partnerships • For information: Anthony Lau (Hong Kong): antlau@deloitte.com.hk 3. BEPS • OECD’s public consultation on transfer pricing topics - Country-by-country reporting - July white paper on transfer pricing documentation - July revised discussion draft on transfer pricing aspects of intangibles - Other transfer pricing aspects of the BEPS Action Plan • For information: John Henshall (London): jhenshall@deloitte.co.uk 4. In brief • New Zealand - Government announces major tax policy work program for 2014, including several BEPS items - Report on “black-hole R&D expenditure” - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz • Singapore - Changes to conditions for 10% tax rate for fund managers - For information: Rohit Shah (Singapore): roshah@deloitte.com

1. Cases • India: Credit Lyonnais - Calculation of profit attributable to Indian branch (PE) - Indian branch performs credit analysis of prospective borrowers - A core function – not mere “facilitation” - 20% of fees allocated to Indian branch, but no interest - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • India: A.P. Moller - Danish general partnership (transparent in Denmark, taxable entity in India) - Tribunal applies OECD Commentary to allow treaty claim to be made - Under “arising” definition, fees for technical services (FTS) held to “arise” in Denmark: FTS article thus does not apply - Exemption under business profits article - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • Hong Kong: Nice Cheer - Accounting treatment: unrealized profit on unsold securities recognized in financial statements - Tax treatment: such unrealized profit not recognized - For information: Anthony Lau (Hong Kong): antlau@deloitte.com.hk 2. Hong Kong • Change in Hong Kong tax authority’s position in regard to issuing tax residency certificates to foreign banks with branches in Hong Kong • Hong Kong tax authority agrees with OECD’s viewpoint on treaty claims by foreign transparent partnerships • For information: Anthony Lau (Hong Kong): antlau@deloitte.com.hk 3. BEPS • OECD’s public consultation on transfer pricing topics - Country-by-country reporting - July white paper on transfer pricing documentation - July revised discussion draft on transfer pricing aspects of intangibles - Other transfer pricing aspects of the BEPS Action Plan • For information: John Henshall (London): jhenshall@deloitte.co.uk 4. In brief • New Zealand - Government announces major tax policy work program for 2014, including several BEPS items - Report on “black-hole R&D expenditure” - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz • Singapore - Changes to conditions for 10% tax rate for fund managers - For information: Rohit Shah (Singapore): roshah@deloitte.com

1. Cases • India: Credit Lyonnais - Calculation of profit attributable to Indian branch (PE) - Indian branch performs credit analysis of prospective borrowers - A core function – not mere “facilitation” - 20% of fees allocated to Indian branch, but no interest - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • India: A.P. Moller - Danish general partnership (transparent in Denmark, taxable entity in India) - Tribunal applies OECD Commentary to allow treaty claim to be made - Under “arising” definition, fees for technical services (FTS) held to “arise” in Denmark: FTS article thus does not apply - Exemption under business profits article - For information: K.R. Sekar (Bangalore): krsekar@deloitte.com • Hong Kong: Nice Cheer - Accounting treatment: unrealized profit on unsold securities recognized in financial statements - Tax treatment: such unrealized profit not recognized - For information: Anthony Lau (Hong Kong): antlau@deloitte.com.hk 2. Hong Kong • Change in Hong Kong tax authority’s position in regard to issuing tax residency certificates to foreign banks with branches in Hong Kong • Hong Kong tax authority agrees with OECD’s viewpoint on treaty claims by foreign transparent partnerships • For information: Anthony Lau (Hong Kong): antlau@deloitte.com.hk 3. BEPS • OECD’s public consultation on transfer pricing topics - Country-by-country reporting - July white paper on transfer pricing documentation - July revised discussion draft on transfer pricing aspects of intangibles - Other transfer pricing aspects of the BEPS Action Plan • For information: John Henshall (London): jhenshall@deloitte.co.uk 4. In brief • New Zealand - Government announces major tax policy work program for 2014, including several BEPS items - Report on “black-hole R&D expenditure” - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz • Singapore - Changes to conditions for 10% tax rate for fund managers - For information: Rohit Shah (Singapore): roshah@deloitte.com

1. Indian case: Poompuhar Shipping Corporation • Madras High Court • Time charter: legal and actual possession of ship retained by non-resident ship owner • Article 12 definition of "royalties": payment for the use of, or the right to use, equipment? - OECD: no - Court: yes (right of commercial exploitation) • Is a ship "equipment"? - Court: yes • Article 5(1) PE at the berths leased by the Indian charterer - However, charter fees are not attributable to such PE • Bare boat charter, with purchase option - Charter fees are "royalties" under Article 12 definition For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. Australia • Interest paid to U.S. LLC - "Interpretative decision" issued by Australian Tax Authorities (ATO) - Payment of interest to U.S. LLC (disregarded entity for U.S. tax purposes), 100% owned by U.S. corporation - Australia / U.S. treaty: will Australian interest withholding tax be reduced under treaty? + ATO: yes, despite the absence of a general “hybrid entity” provision in treaty + Reasons: (1) "purposive" interpretation, and (2) consistent with the principles of OECD’s partnerships report - For information: David Watkins (Sydney): dwatkins@deloitte.com.au • New government's "clearance" of measures announced by former government - Former government left backlog of 96 measures - New government announces plan in regard to backlog - To obtain our report: www.deloitte.com/ap/dbriefs/bytes 3. UN • UN Committee of Tax Experts: 2013 annual meeting • China and India argue that Article 5(3)(b) (“furnishing of services” PE) does not require any physical presence in source country • Rejected by majority of UN Committee • Consequence of argument made by China and India: there would be a deemed PE for digital services, under the existing Article 5(3)(b) 4. India • Cyprus - India has issued a notification that Cyprus is a "non-cooperative jurisdiction" - Consequences + Transfer pricing rules + Minimum 30% withholding tax + Non-deductibility of payments, unless some conditions are satisfied + Deemed taxable income for receipts, unless satisfactory explanation - For information: Vijay Dhingra (Mumbai): vdhingra@deloitte.com Enwright De Sales (Hong Kong): ejdesales@deloitte.com Rohan Solapurkar (Singapore): rohans@deloitte.com • IBM - USD860 million assessment 5. In brief • Treaties - Ireland / Thailand - Vietnam / Palestinian Autonomous Areas • China: TP assessment (USD18 million) issued to pharmaceutical company • Vietnam: Draft circular on treaty shopping (based on China's Circular 601 and Indonesia's Regulation 62) - For information: Tom McClelland (Ho Chi Minh City): tmcclelland@deloitte.com • Japan: Annual report on APAs and MAP • Indonesia: Contract void because not in Bahasa Indonesian language

1. Indian case: Poompuhar Shipping Corporation • Madras High Court • Time charter: legal and actual possession of ship retained by non-resident ship owner • Article 12 definition of "royalties": payment for the use of, or the right to use, equipment? - OECD: no - Court: yes (right of commercial exploitation) • Is a ship "equipment"? - Court: yes • Article 5(1) PE at the berths leased by the Indian charterer - However, charter fees are not attributable to such PE • Bare boat charter, with purchase option - Charter fees are "royalties" under Article 12 definition For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. Australia • Interest paid to U.S. LLC - "Interpretative decision" issued by Australian Tax Authorities (ATO) - Payment of interest to U.S. LLC (disregarded entity for U.S. tax purposes), 100% owned by U.S. corporation - Australia / U.S. treaty: will Australian interest withholding tax be reduced under treaty? + ATO: yes, despite the absence of a general “hybrid entity” provision in treaty + Reasons: (1) "purposive" interpretation, and (2) consistent with the principles of OECD’s partnerships report - For information: David Watkins (Sydney): dwatkins@deloitte.com.au • New government's "clearance" of measures announced by former government - Former government left backlog of 96 measures - New government announces plan in regard to backlog - To obtain our report: www.deloitte.com/ap/dbriefs/bytes 3. UN • UN Committee of Tax Experts: 2013 annual meeting • China and India argue that Article 5(3)(b) (“furnishing of services” PE) does not require any physical presence in source country • Rejected by majority of UN Committee • Consequence of argument made by China and India: there would be a deemed PE for digital services, under the existing Article 5(3)(b) 4. India • Cyprus - India has issued a notification that Cyprus is a "non-cooperative jurisdiction" - Consequences + Transfer pricing rules + Minimum 30% withholding tax + Non-deductibility of payments, unless some conditions are satisfied + Deemed taxable income for receipts, unless satisfactory explanation - For information: Vijay Dhingra (Mumbai): vdhingra@deloitte.com Enwright De Sales (Hong Kong): ejdesales@deloitte.com Rohan Solapurkar (Singapore): rohans@deloitte.com • IBM - USD860 million assessment 5. In brief • Treaties - Ireland / Thailand - Vietnam / Palestinian Autonomous Areas • China: TP assessment (USD18 million) issued to pharmaceutical company • Vietnam: Draft circular on treaty shopping (based on China's Circular 601 and Indonesia's Regulation 62) - For information: Tom McClelland (Ho Chi Minh City): tmcclelland@deloitte.com • Japan: Annual report on APAs and MAP • Indonesia: Contract void because not in Bahasa Indonesian language

1. Indian case: Poompuhar Shipping Corporation • Madras High Court • Time charter: legal and actual possession of ship retained by non-resident ship owner • Article 12 definition of "royalties": payment for the use of, or the right to use, equipment? - OECD: no - Court: yes (right of commercial exploitation) • Is a ship "equipment"? - Court: yes • Article 5(1) PE at the berths leased by the Indian charterer - However, charter fees are not attributable to such PE • Bare boat charter, with purchase option - Charter fees are "royalties" under Article 12 definition For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. Australia • Interest paid to U.S. LLC - "Interpretative decision" issued by Australian Tax Authorities (ATO) - Payment of interest to U.S. LLC (disregarded entity for U.S. tax purposes), 100% owned by U.S. corporation - Australia / U.S. treaty: will Australian interest withholding tax be reduced under treaty? + ATO: yes, despite the absence of a general “hybrid entity” provision in treaty + Reasons: (1) "purposive" interpretation, and (2) consistent with the principles of OECD’s partnerships report - For information: David Watkins (Sydney): dwatkins@deloitte.com.au • New government's "clearance" of measures announced by former government - Former government left backlog of 96 measures - New government announces plan in regard to backlog - To obtain our report: www.deloitte.com/ap/dbriefs/bytes 3. UN • UN Committee of Tax Experts: 2013 annual meeting • China and India argue that Article 5(3)(b) (“furnishing of services” PE) does not require any physical presence in source country • Rejected by majority of UN Committee • Consequence of argument made by China and India: there would be a deemed PE for digital services, under the existing Article 5(3)(b) 4. India • Cyprus - India has issued a notification that Cyprus is a "non-cooperative jurisdiction" - Consequences + Transfer pricing rules + Minimum 30% withholding tax + Non-deductibility of payments, unless some conditions are satisfied + Deemed taxable income for receipts, unless satisfactory explanation - For information: Vijay Dhingra (Mumbai): vdhingra@deloitte.com Enwright De Sales (Hong Kong): ejdesales@deloitte.com Rohan Solapurkar (Singapore): rohans@deloitte.com • IBM - USD860 million assessment 5. In brief • Treaties - Ireland / Thailand - Vietnam / Palestinian Autonomous Areas • China: TP assessment (USD18 million) issued to pharmaceutical company • Vietnam: Draft circular on treaty shopping (based on China's Circular 601 and Indonesia's Regulation 62) - For information: Tom McClelland (Ho Chi Minh City): tmcclelland@deloitte.com • Japan: Annual report on APAs and MAP • Indonesia: Contract void because not in Bahasa Indonesian language

1. Cases • Cadila Healthcare - Ahmedabad Income Tax Appellate Tribunal - Optional convertible loan - No interest if the loan is converted - Based on comparables, zero interest was held to satisfy the arm’s length standard • U.S. Technology Resources - Cochin Income Tax Appellate Tribunal - Outbound service fees: “fees for included services” under India / U.S. treaty? - Advice in regard to management and financial decision making - Held to be “technical services” which “make available” technical knowledge, etc. • Hede Consultancy Company - Applicability of judicial anti-avoidance doctrine to tax planning strategy For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. China • Jiangsu case - Interest paid to Hong Kong lender denied benefit of 7% withholding tax rate under China / Hong Kong double tax arrangement, due to lack of “beneficial ownership” • Bulletins - Bulletin 62: income from technology transfers - Bulletin 75: import tax policy for China (Shanghai) Pilot Free Trade Zone For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 3. BEPS • Ireland - Underwhelming change to corporate residence - For information: Conor Hynes (Dublin): chynes@deloitte.ie • New Zealand - Report foreshadows unilateral actions - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz • EU - Special expert group: digital economy - UK’s patent box regime • Trouping the color - Be careful what you publish 4. Article 7 • Japan: report on plan to align domestic treatment of PEs with “authorized OECD approach” For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 5. In brief • Hong Kong / Canada treaty - Enters into force • Australia - Draft bill to repeal Minerals Resource Rent Tax (MRRT) - For information: Harold Payne (Perth): hpayne@deloitte.com.au • Malaysia: Budget - GST: 6% rate, effective from 1 April 2015 - Corporate income tax: rate will reduce by 1% to 24% (year of assessment 2016) - Real property gains tax: revamping of rates scale - For information: Tan Eng Yew (Kuala Lumpur): etan@deloitte.com

1. Cases • Cadila Healthcare - Ahmedabad Income Tax Appellate Tribunal - Optional convertible loan - No interest if the loan is converted - Based on comparables, zero interest was held to satisfy the arm’s length standard • U.S. Technology Resources - Cochin Income Tax Appellate Tribunal - Outbound service fees: “fees for included services” under India / U.S. treaty? - Advice in regard to management and financial decision making - Held to be “technical services” which “make available” technical knowledge, etc. • Hede Consultancy Company - Applicability of judicial anti-avoidance doctrine to tax planning strategy For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. China • Jiangsu case - Interest paid to Hong Kong lender denied benefit of 7% withholding tax rate under China / Hong Kong double tax arrangement, due to lack of “beneficial ownership” • Bulletins - Bulletin 62: income from technology transfers - Bulletin 75: import tax policy for China (Shanghai) Pilot Free Trade Zone For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 3. BEPS • Ireland - Underwhelming change to corporate residence - For information: Conor Hynes (Dublin): chynes@deloitte.ie • New Zealand - Report foreshadows unilateral actions - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz • EU - Special expert group: digital economy - UK’s patent box regime • Trouping the color - Be careful what you publish 4. Article 7 • Japan: report on plan to align domestic treatment of PEs with “authorized OECD approach” For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 5. In brief • Hong Kong / Canada treaty - Enters into force • Australia - Draft bill to repeal Minerals Resource Rent Tax (MRRT) - For information: Harold Payne (Perth): hpayne@deloitte.com.au • Malaysia: Budget - GST: 6% rate, effective from 1 April 2015 - Corporate income tax: rate will reduce by 1% to 24% (year of assessment 2016) - Real property gains tax: revamping of rates scale - For information: Tan Eng Yew (Kuala Lumpur): etan@deloitte.com

1. Cases • Cadila Healthcare - Ahmedabad Income Tax Appellate Tribunal - Optional convertible loan - No interest if the loan is converted - Based on comparables, zero interest was held to satisfy the arm’s length standard • U.S. Technology Resources - Cochin Income Tax Appellate Tribunal - Outbound service fees: “fees for included services” under India / U.S. treaty? - Advice in regard to management and financial decision making - Held to be “technical services” which “make available” technical knowledge, etc. • Hede Consultancy Company - Applicability of judicial anti-avoidance doctrine to tax planning strategy For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. China • Jiangsu case - Interest paid to Hong Kong lender denied benefit of 7% withholding tax rate under China / Hong Kong double tax arrangement, due to lack of “beneficial ownership” • Bulletins - Bulletin 62: income from technology transfers - Bulletin 75: import tax policy for China (Shanghai) Pilot Free Trade Zone For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn 3. BEPS • Ireland - Underwhelming change to corporate residence - For information: Conor Hynes (Dublin): chynes@deloitte.ie • New Zealand - Report foreshadows unilateral actions - For information: Teresa Farac (Auckland): tfarac@deloitte.co.nz • EU - Special expert group: digital economy - UK’s patent box regime • Trouping the color - Be careful what you publish 4. Article 7 • Japan: report on plan to align domestic treatment of PEs with “authorized OECD approach” For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp 5. In brief • Hong Kong / Canada treaty - Enters into force • Australia - Draft bill to repeal Minerals Resource Rent Tax (MRRT) - For information: Harold Payne (Perth): hpayne@deloitte.com.au • Malaysia: Budget - GST: 6% rate, effective from 1 April 2015 - Corporate income tax: rate will reduce by 1% to 24% (year of assessment 2016) - Real property gains tax: revamping of rates scale - For information: Tan Eng Yew (Kuala Lumpur): etan@deloitte.com

1. Cases • Thailand: Thai Tank Terminal - Supreme Court - Monthly fixed fee under Offshore Services Agreement with Dutch parent: royalty or service fee? - Court held the fee to be a service fee, because + Services were actually performed + Any information provided was not confidential + Know-how was separately provided (and remunerated) in another contract • Thailand: Philips Electronics - Supreme Court - Variable fee (0.5% of sales) under Marketing Services Agreement with Dutch parent: royalty or service fee? - Court held the fee to be a royalty, because + Items to be provided were confidential trade secrets + No significant marketing services (activities) were performed • Thailand: Esso Thailand - Supreme Court - Master Services Agreement with Belgian affiliate - Allocation of costs in respect of group’s accounting system: royalty or service fee? - Costs were software license fees paid to external vendor - Belgian affiliate was not a licensee or sub-licensee - Court held the cost allocation payments to be royalties - Possible reasons + Look-through approach: the cost allocation payments can be traced to software license fees, and such fees are regarded (in Thailand) as royalties + Default approach: Belgian affiliate did not provide services to the Thai company (because it was not a licensee or sub-licensee) and the default characterization is “royalties” • For information: Wanna Suteerapornchai (Bangkok): wsuteerapornchai@deloitte.com Darika Soponawat (Bangkok): dsoponawat@deloitte.com 2. UN • UN Committee of Tax Experts: annual meeting this week • For papers presented at meeting: go to www.deloitte.com/ap/dbriefs/bytes 3. BEPS • OECD: Agenda for transfer pricing (TP) consultation on 12 and 13 November 2013 - Packed agenda + Intangibles + TP documentation, including country-by-country reporting + BEPS: other TP topics • OECD: PE avoidance request - Focus Group on BEPS Action 7 has requested descriptions of PE avoidance strategies - Suggests that Action 7 will not be restricted to commissionaire structures and the use of Article 5(4) exceptions 4. In brief • Vietnam / Serbia treaty enters into force • India: Shell and Vodafone joint case (issuing shares at undervalue) - Hearing this week in Bombay High Court - For information: Vipul Jhaveri (Mumbai): vjhaveri@deloitte.com • Korea - Public ruling in regard to characterization of “Johap” - For information: Gyung Ho Kim (Seoul): gykim@deloitte.com • Malaysia: Budget on 25 October 2013 - GST? - For information: Tan Eng Yew (Kuala Lumpur): etan@deloitte.com

1. Cases • Thailand: Thai Tank Terminal - Supreme Court - Monthly fixed fee under Offshore Services Agreement with Dutch parent: royalty or service fee? - Court held the fee to be a service fee, because + Services were actually performed + Any information provided was not confidential + Know-how was separately provided (and remunerated) in another contract • Thailand: Philips Electronics - Supreme Court - Variable fee (0.5% of sales) under Marketing Services Agreement with Dutch parent: royalty or service fee? - Court held the fee to be a royalty, because + Items to be provided were confidential trade secrets + No significant marketing services (activities) were performed • Thailand: Esso Thailand - Supreme Court - Master Services Agreement with Belgian affiliate - Allocation of costs in respect of group’s accounting system: royalty or service fee? - Costs were software license fees paid to external vendor - Belgian affiliate was not a licensee or sub-licensee - Court held the cost allocation payments to be royalties - Possible reasons + Look-through approach: the cost allocation payments can be traced to software license fees, and such fees are regarded (in Thailand) as royalties + Default approach: Belgian affiliate did not provide services to the Thai company (because it was not a licensee or sub-licensee) and the default characterization is “royalties” • For information: Wanna Suteerapornchai (Bangkok): wsuteerapornchai@deloitte.com Darika Soponawat (Bangkok): dsoponawat@deloitte.com 2. UN • UN Committee of Tax Experts: annual meeting this week • For papers presented at meeting: go to www.deloitte.com/ap/dbriefs/bytes 3. BEPS • OECD: Agenda for transfer pricing (TP) consultation on 12 and 13 November 2013 - Packed agenda + Intangibles + TP documentation, including country-by-country reporting + BEPS: other TP topics • OECD: PE avoidance request - Focus Group on BEPS Action 7 has requested descriptions of PE avoidance strategies - Suggests that Action 7 will not be restricted to commissionaire structures and the use of Article 5(4) exceptions 4. In brief • Vietnam / Serbia treaty enters into force • India: Shell and Vodafone joint case (issuing shares at undervalue) - Hearing this week in Bombay High Court - For information: Vipul Jhaveri (Mumbai): vjhaveri@deloitte.com • Korea - Public ruling in regard to characterization of “Johap” - For information: Gyung Ho Kim (Seoul): gykim@deloitte.com • Malaysia: Budget on 25 October 2013 - GST? - For information: Tan Eng Yew (Kuala Lumpur): etan@deloitte.com

1. Cases • Thailand: Thai Tank Terminal - Supreme Court - Monthly fixed fee under Offshore Services Agreement with Dutch parent: royalty or service fee? - Court held the fee to be a service fee, because + Services were actually performed + Any information provided was not confidential + Know-how was separately provided (and remunerated) in another contract • Thailand: Philips Electronics - Supreme Court - Variable fee (0.5% of sales) under Marketing Services Agreement with Dutch parent: royalty or service fee? - Court held the fee to be a royalty, because + Items to be provided were confidential trade secrets + No significant marketing services (activities) were performed • Thailand: Esso Thailand - Supreme Court - Master Services Agreement with Belgian affiliate - Allocation of costs in respect of group’s accounting system: royalty or service fee? - Costs were software license fees paid to external vendor - Belgian affiliate was not a licensee or sub-licensee - Court held the cost allocation payments to be royalties - Possible reasons + Look-through approach: the cost allocation payments can be traced to software license fees, and such fees are regarded (in Thailand) as royalties + Default approach: Belgian affiliate did not provide services to the Thai company (because it was not a licensee or sub-licensee) and the default characterization is “royalties” • For information: Wanna Suteerapornchai (Bangkok): wsuteerapornchai@deloitte.com Darika Soponawat (Bangkok): dsoponawat@deloitte.com 2. UN • UN Committee of Tax Experts: annual meeting this week • For papers presented at meeting: go to www.deloitte.com/ap/dbriefs/bytes 3. BEPS • OECD: Agenda for transfer pricing (TP) consultation on 12 and 13 November 2013 - Packed agenda + Intangibles + TP documentation, including country-by-country reporting + BEPS: other TP topics • OECD: PE avoidance request - Focus Group on BEPS Action 7 has requested descriptions of PE avoidance strategies - Suggests that Action 7 will not be restricted to commissionaire structures and the use of Article 5(4) exceptions 4. In brief • Vietnam / Serbia treaty enters into force • India: Shell and Vodafone joint case (issuing shares at undervalue) - Hearing this week in Bombay High Court - For information: Vipul Jhaveri (Mumbai): vjhaveri@deloitte.com • Korea - Public ruling in regard to characterization of “Johap” - For information: Gyung Ho Kim (Seoul): gykim@deloitte.com • Malaysia: Budget on 25 October 2013 - GST? - For information: Tan Eng Yew (Kuala Lumpur): etan@deloitte.com

1. Treaties • Singapore / Luxembourg signed new treaty on 9 October 2013, to replace 1993 treaty • Notable aspects of new treaty - No "limitation of relief" article - Collective investment vehicles covered - Deletion of exclusion of third country branches - PE definition changes, making it more difficult for there to be a PE - Withholding tax rates reduced 2. Cases • India: Marine Links shipping agencies - Owner of ship: Iranian company - Charterer: Netherlands company - Ship carries cargo from India to Belgium - Charterparty agreement effectively places the balance of risks and rewards with the Iranian company - Court: Netherlands company did not derive "profits from the operation of ships in international traffic", and thus was not exempt from Indian tax under the India / Netherlands treaty • India: Cairn UK Holdings - UK company sold shares in an Indian listed company in an off-market transaction, deriving a long-term capital gain - Controversial issue: 20% tax rate or 10% tax rate? - Court: 10% - Opportunity for refunds 3. BEPS • OECD / BIAC meeting - 1 October 2013 meeting between OECD and BIAC (Business and Industry Advisory Committee) - Focused on digital economy, interest deductions, and the PE definition - OECD gave impression that Action Number 7 would be widened to cover some types of buy / sell limited risk distributors - Unilateral law changes by some countries • OECD memorandum on country-by-country reporting - OECD issued memorandum on 3 October 2013 - OECD asking business community for input on how to draft a workable country-by-country reporting template - Memorandum sets out four possible models - Feedback to be given during intangibles consultation on 12 and 13 November 2013 • Ireland - 15 October 2013: Irish government announced that its law will be changed to remove the so-called "Stateless" Irish company – an Irish incorporated company which is not tax-resident anywhere 4. Mongolia • New law on foreign investment passed by Mongolian Parliament, effective on 1 November 2013 • Private companies will no longer need government approval to invest in the strategic areas of mining, telecommunications, and banking • "Stability" on rates for VAT, corporate income tax, mining royalties, and customs duties, during the project's "stabilization period" 5. In brief • OECD: R&D report - Report released on 10 October 2013, focusing on tax incentives for R&D • UN Committee of Tax Experts - Annual meeting next week - Items to watch + UN Commentary on Article 9 + Next update of the UN's Transfer Pricing Manual • China: MAP - SAT issued Bulletin 56, which sets out new implementation rules for MAP procedures

1. Treaties • Singapore / Luxembourg signed new treaty on 9 October 2013, to replace 1993 treaty • Notable aspects of new treaty - No "limitation of relief" article - Collective investment vehicles covered - Deletion of exclusion of third country branches - PE definition changes, making it more difficult for there to be a PE - Withholding tax rates reduced 2. Cases • India: Marine Links shipping agencies - Owner of ship: Iranian company - Charterer: Netherlands company - Ship carries cargo from India to Belgium - Charterparty agreement effectively places the balance of risks and rewards with the Iranian company - Court: Netherlands company did not derive "profits from the operation of ships in international traffic", and thus was not exempt from Indian tax under the India / Netherlands treaty • India: Cairn UK Holdings - UK company sold shares in an Indian listed company in an off-market transaction, deriving a long-term capital gain - Controversial issue: 20% tax rate or 10% tax rate? - Court: 10% - Opportunity for refunds 3. BEPS • OECD / BIAC meeting - 1 October 2013 meeting between OECD and BIAC (Business and Industry Advisory Committee) - Focused on digital economy, interest deductions, and the PE definition - OECD gave impression that Action Number 7 would be widened to cover some types of buy / sell limited risk distributors - Unilateral law changes by some countries • OECD memorandum on country-by-country reporting - OECD issued memorandum on 3 October 2013 - OECD asking business community for input on how to draft a workable country-by-country reporting template - Memorandum sets out four possible models - Feedback to be given during intangibles consultation on 12 and 13 November 2013 • Ireland - 15 October 2013: Irish government announced that its law will be changed to remove the so-called "Stateless" Irish company – an Irish incorporated company which is not tax-resident anywhere 4. Mongolia • New law on foreign investment passed by Mongolian Parliament, effective on 1 November 2013 • Private companies will no longer need government approval to invest in the strategic areas of mining, telecommunications, and banking • "Stability" on rates for VAT, corporate income tax, mining royalties, and customs duties, during the project's "stabilization period" 5. In brief • OECD: R&D report - Report released on 10 October 2013, focusing on tax incentives for R&D • UN Committee of Tax Experts - Annual meeting next week - Items to watch + UN Commentary on Article 9 + Next update of the UN's Transfer Pricing Manual • China: MAP - SAT issued Bulletin 56, which sets out new implementation rules for MAP procedures

1. Treaties • Singapore / Luxembourg signed new treaty on 9 October 2013, to replace 1993 treaty • Notable aspects of new treaty - No "limitation of relief" article - Collective investment vehicles covered - Deletion of exclusion of third country branches - PE definition changes, making it more difficult for there to be a PE - Withholding tax rates reduced 2. Cases • India: Marine Links shipping agencies - Owner of ship: Iranian company - Charterer: Netherlands company - Ship carries cargo from India to Belgium - Charterparty agreement effectively places the balance of risks and rewards with the Iranian company - Court: Netherlands company did not derive "profits from the operation of ships in international traffic", and thus was not exempt from Indian tax under the India / Netherlands treaty • India: Cairn UK Holdings - UK company sold shares in an Indian listed company in an off-market transaction, deriving a long-term capital gain - Controversial issue: 20% tax rate or 10% tax rate? - Court: 10% - Opportunity for refunds 3. BEPS • OECD / BIAC meeting - 1 October 2013 meeting between OECD and BIAC (Business and Industry Advisory Committee) - Focused on digital economy, interest deductions, and the PE definition - OECD gave impression that Action Number 7 would be widened to cover some types of buy / sell limited risk distributors - Unilateral law changes by some countries • OECD memorandum on country-by-country reporting - OECD issued memorandum on 3 October 2013 - OECD asking business community for input on how to draft a workable country-by-country reporting template - Memorandum sets out four possible models - Feedback to be given during intangibles consultation on 12 and 13 November 2013 • Ireland - 15 October 2013: Irish government announced that its law will be changed to remove the so-called "Stateless" Irish company – an Irish incorporated company which is not tax-resident anywhere 4. Mongolia • New law on foreign investment passed by Mongolian Parliament, effective on 1 November 2013 • Private companies will no longer need government approval to invest in the strategic areas of mining, telecommunications, and banking • "Stability" on rates for VAT, corporate income tax, mining royalties, and customs duties, during the project's "stabilization period" 5. In brief • OECD: R&D report - Report released on 10 October 2013, focusing on tax incentives for R&D • UN Committee of Tax Experts - Annual meeting next week - Items to watch + UN Commentary on Article 9 + Next update of the UN's Transfer Pricing Manual • China: MAP - SAT issued Bulletin 56, which sets out new implementation rules for MAP procedures