ICLGThe International Comparative Legal Guide to: Corporate Tax 2018 14th Edition A practical cross-border insight into corporate tax work Published by Global Legal Group, with contributions from: Arqués Ribert Junyer Advocats Maples and Calder Avanzia Taxand Limited Mayer Brown International LLP Baker Tilly Klitou and Partners MIM Law Business Services EOOD Nagashima Ohno & Tsunematsu Blackwood & Stone LP P+P Pöllath + Partners Blake, Cassels & Graydon LLP SBH Law Office Boga & Associates Schindler Attorneys Cases & Lacambra Sele Frommelt & Partners Attorneys at Law Ltd. Čipčić-Bragadin and Associates Slaughter and May in cooperation with Tax Advisory TUK Ltd. SMPS Legal Concern Dialog law firm SSH Advisors Dobrinescu Dobrev SCA Stavropoulos & Partners Law Office Domański Zakrzewski Palinka T. P. Ostwal & Associates LLP, Chartered Accountants Greenwoods & Herbert Smith Freehills Tirard, Naudin K&D Law Firm Totalserve Management Limited Lenz & Staehelin VdA Vieira de Almeida LEX Law Offices Wachtell, Lipton, Rosen & Katz Ludovici Piccone & Partners Waselius & Wist The International Comparative Legal Guide to: Corporate Tax 2018 General Chapters: 1 Fiscal State Aid: the Kraken Wakes? – William Watson, Slaughter and May 1 2 The Implications for UK Taxpayers of BEPS Actions 2 (on Hybrid Mismatches), 4 (on Interest Deductibility) and 6 (on Treaty Access) – Sandy Bhogal & Kitty Swanson, Mayer Brown International LLP 6 Contributing Editor Country Question and Answer Chapters: William Watson, Slaughter and May 3 Albania Boga & Associates: Alketa Uruçi & Andi Pacani 12 Sales Director 4 Andorra Arqués Ribert Junyer Advocats: Daniel Arqués i Tomàs & Florjan Osmani Mireia Ribó i Bregolat 17 Account Director 5 Angola VdA Vieira de Almeida: Samuel Almeida & Joana Lobato Heitor 24 Oliver Smith 6 Armenia Concern Dialog law firm: Rustam Badasyan 30 Sales Support Manager Toni Hayward 7 Australia Greenwoods & Herbert Smith Freehills: Adrian O’Shannessy & Tony Frost 35 Editor 8 Austria Schindler Attorneys: Clemens Philipp Schindler & Martina Gatterer 44 Nicholas Catlin Senior Editors 9 Belarus SBH Law Office: Anastasiya Malakhova & Evgeniya Starosotnikova 52 Suzie Levy 10 Bulgaria Baker Tilly Klitou and Partners Business Services EOOD: Svetla Marinova Caroline Collingwood & Svetlana Dermendjieva 59 Chief Operating Officer 11 Canada Blake, Cassels & Graydon LLP: Zvi Halpern-Shavim & Shavone Bazarkewich 65 Dror Levy Group Consulting Editor 12 Croatia Čipčić-Bragadin and Associates in cooperation with Tax Advisory TUK Ltd.: Alan Falach Silvije Čipčić-Bragadin & Edo Tuk 71 Publisher 13 Cyprus Totalserve Management Limited: Petros Rialas & Marios Yenagrites 75 Rory Smith 14 Finland Waselius & Wist: Niklas Thibblin & Mona Numminen 81 Published by Global Legal Group Ltd. 15 France Tirard, Naudin: Maryse Naudin & Jean-Marc Tirard 87 59 Tanner Street 16 Germany P+P Pöllath + Partners: Michael Best & Nico Fischer 95 London SE1 3PL, UK Tel: +44 20 7367 0720 17 Greece Stavropoulos & Partners Law Office: Ioannis Stavropoulos & Fax: +44 20 7407 5255 Vasiliki Koukoulioti 103 Email: [email protected] URL: www.glgroup.co.uk 18 Iceland LEX Law Offices: Garðar Víðir Gunnarsson & Guðrún Lilja Sigurðardóttir 110 GLG Cover Design 19 India T. P. Ostwal & Associates LLP, Chartered Accountants: T. P. Ostwal & F&F Studio Design Siddharth Banwat 116 GLG Cover Image Source 20 Ireland Maples and Calder: Andrew Quinn & David Burke 123 iStockphoto 21 Italy Ludovici Piccone & Partners: Paolo Ludovici & Stefano Tellarini 129 Printed by Ashford Colour Press Ltd 22 Japan Nagashima Ohno & Tsunematsu: Shigeki Minami 136 November 2017 23 Kazakhstan SSH Advisors: Safkhan Shahmammadli & Jahangir Juraev 144 Copyright © 2017 Global Legal Group Ltd. 24 Kosovo Boga & Associates: Andi Pacani & Fitore Mekaj 151 All rights reserved No photocopying 25 Liechtenstein Sele Frommelt & Partners Attorneys at Law Ltd.: Heinz Frommelt 156 ISBN 978-1-911367-83-3 26 Malta Avanzia Taxand Limited: Walter Cutajar & Mary Anne Inguanez 162 ISSN 1743-3371 27 Mexico SMPS Legal: Ana Paula Pardo Lelo de Larrea & Alexis Michel 170 Strategic Partners 28 Mozambique VdA Vieira de Almeida: Samuel Almeida & Ana Raquel Costa 177 29 Nigeria Blackwood & Stone LP: Kelechi Ugbeva 183 30 Poland Domański Zakrzewski Palinka: Joanna Wierzejska & Tomasz Leszczewski 188 31 Portugal VdA Vieira de Almeida: Samuel Almeida & Bárbara Miragaia 195 32 Romania Dobrinescu Dobrev SCA: Luisiana Dobrinescu 201 33 Serbia MIM Law: Tanja Ungura 207 Continued Overleaf Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720 Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. WWW.ICLG.COM The International Comparative Legal Guide to: Corporate Tax 2018 Country Question and Answer Chapters: 34 Spain Cases & Lacambra: Ernesto Lacambra & Marc Montserrat 212 35 Switzerland Lenz & Staehelin: Pascal Hinny & Jean-Blaise Eckert 218 36 Turkey K&D Law Firm: Murat Bal & Ezgi Kumas 228 37 United Kingdom Slaughter and May: Zoe Andrews & William Watson 235 38 USA Wachtell, Lipton, Rosen & Katz: Jodi J. Schwartz & Swift S.O. Edgar 244 Chapter 11 Canada Zvi Halpern-Shavim Blake, Cassels & Graydon LLP Shavone Bazarkewich 1 Tax Treaties and Residence 1.5 Are treaties overridden by any rules of domestic law (whether existing when the treaty takes effect or introduced subsequently)? 1.1 How many income tax treaties are currently in force in your jurisdiction? While domestic legislation generally does not override treaties, treaties are subject to the provisions of the Income Tax Conventions Canada currently has 93 treaties that are in force, four treaties that Interpretation Act (Canada) which, among other things, provides are signed but not yet in force, and seven treaties that are either that the general anti-avoidance rule in the Income Tax Act can apply under negotiation or re-negotiation. In addition, Canada currently to eliminate treaty benefits if it is determined that a tax treaty has has 22 tax information exchange agreements that are in force, two been abused. Canada’s tax treaties are generally also subject to a that are signed but not yet in force, and six under negotiation. general tax benefit rule (expressly included in many of Canada’s tax treaties) whereby a tax treaty will not be applied to deprive a 1.2 Do they generally follow the OECD Model Convention taxpayer of a benefit otherwise available under domestic tax law. or another model? Similarly, and as mentioned above, the principal purpose test that Canada will adopt for treaties covered by the MLI may operate Canada’s tax treaties generally follow the OECD model. to deny treaty benefits in certain circumstances. The MLI also contains a number of other provisions which would modify such 1.3 Do treaties have to be incorporated into domestic law treaties in order to implement other tax treaty measures contained before they take effect? in the BEPS Project. Treaties take effect once Parliament enacts legislation incorporating 1.6 What is the test in domestic law for determining the them into domestic law. residence of a company? 1.4 Do they generally incorporate anti-treaty shopping A corporation will be resident in Canada if it is incorporated under rules (or “limitation on benefits” articles)? the laws of Canada or a province, or if central management and control of the corporation is exercised in Canada, subject to the Canada’s tax treaty with the U.S. has a specific limitation on benefits application of certain deeming and tie-breaker rules contained in rule that is derived from the limitation of benefits rule in the U.S. Canada’s treaties and domestic law. model treaty. Additionally, some of Canada’s treaties have narrow limitation on benefits provisions, e.g., benefits are not available to 2 Transaction Taxes certain types of entities. On June 7, 2017, Canada signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion 2.1 Are there any documentary taxes in your jurisdiction? and Profit Shifting (MLI) which contains certain measures intended to address “treaty shopping”. Through the MLI, Canada’s tax There are no documentary taxes in Canada. treaties which are covered by the MLI will be amended, among other things, to incorporate (a) a stated intention for tax treaties to 2.2 Do you have Value Added Tax (or a similar tax)? If so, eliminate double taxation without creating opportunities for non- at what rate or rates? taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements), and (b) a Federal goods and services tax (GST) is a VAT that applies at a rate principal purpose test, which will operate to deny treaty benefits in of 5%. Some provinces have harmonised their provincial sales tax certain circumstances where a principal purpose of an arrangement base with the federal GST, resulting in a harmonised sales tax (HST) or transaction was to obtain a treaty benefit. with rates varying by province between 13%–15%. The province of Canada has also indicated that, where appropriate, it may seek Quebec imposes its own provincial VAT in addition to the 5% GST to negotiate on a bilateral basis a detailed limitation on benefits at a rate of 9.975%. provision with its treaty partners. ICLG TO: CORPORATE TAX 2018 WWW.ICLG.COM 65 © Published and reproduced with kind permission by Global Legal Group Ltd, London Blake, Cassels & Graydon LLP Canada 2.3 Is VAT (or any similar tax) charged on all transactions 3.2 Would there be any withholding tax on royalties paid or are there any relevant exclusions? by a local company to a non-resident? VAT applies to nearly all supplies of property and services, but there Canada levies a 25% withholding tax on royalties paid by Canadian are exceptions.