Amendments to the Cabinet Regulation No. 178 “Procedures for Application of Tax Relief Determined in International Agreements for Prevention of Double Taxation and Tax Evasion” have come into force starting from 1 May 2015.
As we already informed our readers in February’s news according to the amendments the income payer must hold a completed residence certificate approved by the foreign tax authorities at the time of filing the corporate income tax (CIT) return for the reporting period (not at the time of payment).
The starting date of validity period of the residence certificate has also been changed. Now it is the date from which an approval of residence certificate for applying reduced rates or tax exemptions is requested (submitted to the State Revenue Service (SRS)) (previously – from the date of approval by the SRS). As before, the residence certificate is valid for five years.
So, according to the double tax treaties lower rate or tax exemption may be applied and CIT taxable income for the tax period should not be increased for the payments made to non-residents, if:
1) there is received from the non-resident a completed residence certificate which is approved by foreign state’s competent authorities (or residency certificate issued by the foreign authorities in their own form);
2) residence certificate together with CIT report shall be submitted to the SRS.
The same as before, the SRS review and within 30 days make a decision, i.e. approves residency certificate or refuse to approve.
Although the new amendments entered into force only on 1 May 2015, according to the Ministry of Finance’s views the new procedure may also be applied in situations where company’s CIT return filing deadline is after 1 May 2015, for example, if the reporting period is July 1, 2014 – June 30, 2015.
With regard to the foreign state-issued residence certificate or similar document use, amendments provide that this document shall certify the payee’s status of residence at the payment date. In this case, the tax relief is applicable up to 1 year from date of issue of the certificate. “Up to 1 year” stated for cases in which the non-resident’s status may be changed during the year and at the time of payment, it is no longer a resident of the foreign country in accordance with the double tax treaty.