Summary: 1. India • India / U.S. competent authority relationship - Proposed meetings: 4 to 6 per year • India’s APA program - July 2012 to 31 March 2013: 146 applications (mostly from U.S. groups and mostly for unilateral APAs) - Site visits - Art. 7 profit attribution - No bilateral APA where the treaty does not have Art. 9(2): this policy will be reviewed - Safe harbor margins are not considered to be arm’s length - No “roll-back” For information: Anis Chakravarty (Mumbai): anchakravarty@deloitte.com • Final transfer pricing “safe harbor” rules - Rules will apply for 5 years - Financial value ceilings have been relaxed for IT services, IT-enabled services, corporate guarantees, and knowledge process outsourcing (KPO) For information: Rakesh Alshi (Mumbai): ralshi@deloitte.com • Indian-based fund managers of offshore funds - Proposed law change: presence of Indian-based fund manager will be deemed not to cause offshore fund to have a business connection, or a PE, in India For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 2. Cases • Indonesia: Bekaert - Indonesian subsidiary of Dutch parent: related party debt to equity ratio of 4.4 to 1 considered non-arm’s length - Application of Indonesia’s “debt to equity re-characterization” rules: calculation of “hidden capital” - Interest on the “hidden capital” is non-deductible and subject to dividend withholding tax For information: Nazly Siregar (Jakarta): nsiregar@deloitte.com • India: Raheja - Swiss resident sells units in Indian unit trust - Tax authorities assert that the profit is permitted to be taxed in India under Art. 13(5) of the India / Switzerland treaty: alienation of shares in a company resident in India - Tribunal: Art. 13(5) does not apply, because units in a unit trust are not shares in a company - Thus, Art. 13(6) exempts Swiss resident from Indian tax For information: K.R. Sekar (Bangalore): krsekar@deloitte.com 3. In brief • Treaties - Philippines / Germany + New treaty signed on 9 September (to replace existing 1983 treaty) + General reduction in dividend, interest, and royalty withholding tax rates - India / Latvia + New treaty signed on 18 September • Japan - Still waiting for decision on phase-in of consumption tax rate increases - Capital gains tax rate (for individuals) will increase from 10% to 20% on 1 January 2014 + Will there be a large sale of shares in November and December? For information: Jun Takahara (Tokyo): jun.takahara@tohmatsu.co.jp Linda Ng (New York): ling@deloitte.com • China - SAT has issued Bulletin 53 (guidelines on Hong Kong residency certificates required for claiming benefits under the China / Hong Kong double tax arrangement) For information: Vicky Wang (Shanghai): vicwang@deloitte.com.cn Ye Hong (Shanghai): hoye@deloitte.com.cn
