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The United States and Croatia signed their first double tax treaty (“treaty”) on 8 December 2022.
This means that all member states of the European Union (“EU”) now has a tax treaty with the US, as Croatia was the ‘last man standing’ in terms of not having such a treaty.
So, what does the treaty say?
| Item | Description |
| Dividends | The treaty reduces withholding taxes (“WHT”) on dividends. The treaty rate is capped at 15%. One exception is where the beneficial owner of the dividend is a company which has held a direct interest of at least 10% of the company paying the dividends for the preceding twelve-month period. Here, the maximum rate under the Treaty is reduced to 5%. In addition, dividends generally paid to certain pension funds qualify for a full exemption from WHT in the source company. |
| Interest | The treaty seeks to eliminate WHT on most interest payments. However, WHT is payable and capped at 15% in some circumstances. Those circumstances include: interest arising in Croatia that is determined with reference to receipts, sales, income, profits or other cash flow of the debtor, to any change in the value of any property of the debtor or to any dividend, partnership distribution or similar payment made by the debtor interest arising in the United States that is contingent interest of a type that does not qualify as portfolio interest under the law of the United States. |
| Royalties | The treaty limits WHT on royalties to 5%. |
| Reservation | In the treaty, the US reserves the right to impose what is known as the “BEAT” tax under US Internal Revenue Code section 59A (“Tax on Base Erosion Payments of Taxpayers with Substantial Gross Receipts”). This applies to relevant profits of a company resident in Croatia and attributable to a US permanent establishment. |
| Limitation on benefits (“LoB”) | Those familiar with double tax treaties where one of the contracting parties is the US will be familiar with the LoB article. Broadly, such a clause has applied since the introduction of the 2016 US model tax convention. It is a complex limitation on benefits clause. The result of the LoB in this case means that the application of the treaty is generally limited to “qualified persons” as defined in Article 22 of the Treaty. In general, Article 22(2) requires a resident to be a qualified person at the relevant time that treaty benefits are sought. For the ownership-base erosion test under Article 22(2)(f), the resident must also satisfy the ownership threshold on at least half of the days of any 12-month period that includes the date when the treaty benefit would be accorded. Alternatively, a resident that is not a qualified person under paragraph 2 may still be eligible for treaty benefits for an item of income if it meets one of the other tests under the LOB provision, namely the active trade or business test (ATB test), derivative benefits test or headquarters company test under Articles 22(3), (4) and (5) respectively. |
The signing of the treaty by the US and Croatia is a welcome development. It will clearly be of great application to businesses and individuals operating across the two jurisdictions.
The Treaty will enter into force after both contracting parties have approved it in accordance with their internal legislative procedures.
If you have any queries about the United States / Croatia double tax treaty, or US tax or Croatia tax matters more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
Several weeks ago, we commented on the Spanish Government’s recently proposal to introduce a Solidarity Wealth Tax.
However, this article considers new wealth tax proposals – in respect of the Net Wealth Tax and the Solidarity Wealth Tax – for non-Spanish-tax-resident individuals who hold Spanish real estate through one or multiple non-Spanish-resident entities.
It is envisaged that non-Spanish-tax-resident individuals would be subject to the Net Wealth Tax (“NWT”) when they hold shares in an unlisted entity. This would be where “at least 50% of its assets are directly or indirectly made up of real estate located in Spain”.
These new proposals would replace the current domestic provisions which historically have required non-resident individuals to pay NWT in circumstances where they directly own real estate only.
Additionally, the Spanish Government plans to bring in the Solidarity Tax (“ST”) to supplement the regional NWT. The ST will be calculated and assessed at the federal level.
The ST will be levied on non-Spanish-tax-resident individuals with a net wealth in Spain of at least EUR 3 million. It should be noted that this will include any interests in non-resident entities that own Spanish real estate
The NWT can be credited against any ST liability.
It is expected that these measures will be passed before the end of 2022.
If the new legislation is published prior to the end of 2022, then both would apply to indirect holdings of Spanish real estate held on 31 December 2022.
It is currently expected that both would have to be paid in June or July of the following year.
If you have any queries about the Spanish Net Wealth Tax or Solidarity Wealth Tax, or Spanish tax matters in general, then please do get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
A new ruling was issued by Judge Yardena Seroussi in respect of an appeal to the Real Estate Tax Appeals Committee. The ruling concerned how luxury apartments should be taxed.
The Appeals Committee considered whether a land appreciation tax exemption should be granted to several sellers during the sale of a luxury apartment.
It was claimed by the vendors that they were entitled to the full sum of the maximum exemption for a single apartment prescribed by law.
However, the Israel Tax Authority held that the exemption applies only to sales of an entire apartment unit and not each share in a multiple ownership arrangement. Accordingly, it calculated its tax on the maximum exemption per seller—not according to their actual portion of ownership.
The owner of a single apartment is entitled to an exemption from land appreciation tax, up to the amount permitted by law.
At the moment, this amount stands at ILS 4.6 million.
It is worth noting in the case that:
The Israel Tax Authority had decided that the exemption was available in respect of the entire apartment rather than to each individual seller.
However, the Appeals Committee ruled that the exemption applied to the sale of a single apartment and therefore the exemption should be granted to each separate vendor.
This was on the basis that the sellers were not part of the same family unit
It seems quite likely the Israel Tax Authority will appeal this ruling.
If you have any queries about this Israel Real Estate Tax Appeal or Israel tax matters in general, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
As from 1 January 2012, according to the provisions of article 5 (2) of the Income Tax Law 118 (I) / 2002, whenever a company grants a loan or any other monetary facility including cash withdrawal (other than balances derived from trade transactions) to natural persons, being its directors or shareholders or their spouses or their relatives up to second degree, then that person is deemed to have a monthly benefit equal to nine percent (9%) per annum on the balance of the loan or of any other monthly cash benefit at the end of each month (including cash withdrawals during the month).
The tax on the monthly benefit is calculated based on the applicable income tax rates and is due in accordance with the Pay-As-You-Earn ‘PAYE’ regulations. This means that the benefit is included in the taxable income of that person in Cyprus.
It is noted that calculation of the benefit does not take into consideration the number of days spent in the Republic by the individual throughout the year (circular 14, dated 14 November 2017), as was the case up to the end of 2017.
Considering the above, the individual will have an obligation to register with the Income Tax authorities in Cyprus and submit an annual tax declaration provided that the annual amount of the deemed benefit, including any income from other sources, exceeds the tax-free amount of €19.500. If his total income is less than €19.500 then the Company has no obligation to withhold any tax.
We note that in case the company charges interest to the individual’s debit balance, then that amount of interest reduces the value of the deemed benefit.
Result: An obligation arises for the Company to withhold tax on behalf of the shareholder according to the applicable rates and pay the tax under the PAYE system.
Result: No obligation arises for the Company to withhold tax on behalf of the shareholder.
Result: No obligation arises for the Company to withhold tax on behalf of the shareholder.
If you have any queries about this article, Cyprus tax , or the matters discussed more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
Last week, Belgium approved its federal budget for 2023 – 2024.
The new budget agreement will have a tax impact for individuals and companies established or operating in Belgium. Below is an initial discussion of the tax measures announced in this context.
The highlights in the Belgian Budget are as follows:
| Curtailment to aspects of the copyright regime | At present, copyright income is subject to withholding tax of 15% following the deduction of lump sum expenses of up to 50%. This will be curtailed over a phasing in period of two years. |
| Tax relief for second homes | From 2024, tax relief for second homes will be abolished. |
| Flexi job scheme extension | The scope of the flexi jobs regime will be extended with an increase in hours for student jobs. |
The prime cuts of corporate measures in the Belgian Budget are as follows:
| Employer contributions on indexed wages | There will be a reduction for employer contributions on indexed wages. This applies to contributions for quarters one and two of 2023. |
| Restriction on offset of carried forward tax losses | Tax losses from earlier periods are restricted if the profit of the current taxable period is in excess of €1m. For the 2023 year, large companies would be able to offset only 40% (as opposed to 70%) of profits that exceed €1m against carried forward tax losses. |
| Restrictions to deduction for risk capital | From financial year 2023, the application of the deduction for risk capital will be restricted. |
| Energy Producers Profits Tax | For energy produced between 1 January 2022 and 1 November 2022, there will be an excess profits tax on profits above €180 per MWh. This is a retrospective tax. From November to June 2023, excess profits above EUR 130 per MWh will be taxed. |
The main indirect tax measures are as follows:
| Excise taxes on tobacco | An increase in tobacco excise duties was announced |
| Excise taxes on e-cigarettes | Further, the introduction excise duty on e-cigarettes was unveiled |
| Eco tax on polluting packaging | The tax on polluting packaging was extended |
It is worth noting that the budget has not yet been finalised at this stage so there might be changes or revisions to these proposals.
If you have any queries about the Belgian budget and the proposed tax changes, or Belgian tax more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
This article considers the tax implications of an employer making payments to its employees in cryptocurrencies such as bitcoin and Ethereum.
The German authorities have determined that cryptocurrency is not any of the following:
If cryptocurrencies are given to employees for nil, or under market, consideration in exchange for providing their services then this is likely to be taxable earnings.
This ‘remuneration’ could be:
First of all, payments of emuneration in cryptocurrencies is taxable This is the case regardless of whether it is a cash benefit and as a benefit in kind.
The tax is levied on employees as wage tax in accordance with Section 38 of the German Income Tax Act (EStG). The tax point is at the time of the ‘inflow’ of the cryptoassets.
The tax authority will only accept euros for the payment of payroll taxes.
As such, where remuneration is paid wholly (or the majority is paid) in cryptocurrency, then some of it will need to be sold or exchanged for immediately for fiat in order to pay the tax.
This must be the most asked question to tax advisers around the world!
However, the tax office learns about cryptocurrencies through various sources, including the reporting obligations that are imposed on employers.
In addition, many crypto intermediaries require identification in order to use their marketplaces so cryptocurrencies are not as anonymous as many might believe. Indeed, transactions on the blockchain are immutable and, by and large, fully traceable.
Further, the tax authorities can also make targeted inquiries in accordance with Section 93 of the German Fiscal Code (AO) in order to obtain information.
If you have any queries about cryptocurrency or the cryptoassets in Germany, or German tax more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
At the end of September, Spain announced a package of new measures to be included in the General State Budget Bill for 2023.
One such measure was the Solidarity Wealth Tax.
This will be a temporary tax and will apply for 2023 and 2024 at the end of which it’s success will be reviewed.
The tax will be levied on individuals with net assets valued at over €3m.
The rate of tax will be:
| Threshold | Rate |
| €3-5m | 1.7% |
| €5-10m | 2.1% |
| In excess of €10m | 3.5% |
As you may be aware, the autonomous regions already apply a Wealth Tax to their residents. As such, n order to avoid double taxation, the amount paid under the existing Wealth Tax regime will be credited against the new “Solidarity” Wealth Tax.
It is anticipated that this new tax will be paid by around 23,000 taxpayers. The expected revenue to be raised from these new measures is around €1.5b.
Although not yet confirmed, it is understood that non-Spanish residents who own assets in Spain will also be subject to this new tax on those assets.
It should be noted that some parliamentary groups have already announced their intention to challenge the constitutionality of the new tax.
If you have any queries about Solidarity Wealth Tax, or Spanish tax matters in general, then please do get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
Back in May we set out the reasons why Portugal had become a beacon for crypto investors. However, in that very article, we raised the prospect that a mooted change in the winds might potentially snuff out that beacon.
The ill wind stems from the publication of the 2023 State Budget document earlier in the week. It included a section in respect of the taxation of cryptocurrencies. Thus far, as can be gleaned from our previous article, profits have largely been untouched.
Instead, Portugal’s government is proposing a new 28% tax on capital gains from cryptocurrencies held for less than a year. This is consistent with the statements of the finance minister Mr Medina reported on this blog in May this year.
There is also a proposed income tax from other crypto activities such as mining or trading.
Other proposals include a 4% taxation fee on transfers of cryptocurrencies as a result of death plus stamp duties on commissions charged by crypto intermediaries.
Of course, Portugal’s parliament is still to have its say on whether these proposals are enacted.
Portugal will be aware that it is treading a fine line here. Portugal has become a magnet for crypto enthusiasts because of its benign tax position. Many such individuals are highly mobile and it might be that, if enacted, it causes a flight of crypto capital
If you have any queries about Portugal crypto tax changes, Portugal tax matters, or the matters discussed more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
For further resource on crypto assets please see www.cryptotaxdegens.com.
In an eagerly anticipated announcement, the German Federal Ministry of Finance (BMF) has clarified its view on the taxation of cryptocurrencies.
In addition to the position on the buying and selling of crypto, the guidance also sets out the position on activities such as mining, staking, lending, and other transactions.
The German tax man has determined that units of cryptocurrencies are economic goods. These ‘goods’ are attributable to the owner as the holder of the private key.
In cases where the wallet and private key is managed by a third party provider (such as Coinbase or Binance) then the asset is attributable to the beneficial owner of the cryptoassets.
Like many jurisdictions, the key issue for determining the tax position on any profits generated is whether the transactions take place through personal activity or in the conduct of a commercial activity.
In this regard, the BMF has confirmed that investors who hold their cryptocurrency as personal assets can sell them free of tax as long as they hold the assets for at least one year.
This is welcome as, in previous missives, the BMF had stated that the holding period was ten years for private investors.
This one-year period does not apply if the cryptocurrency is held as business assets.
Again, as per other jurisdctions, in many cases the distinction between commercial and private activity might be a blurred one and is an area ripe for dispute.
It should be noted that if cryptocurrencies are held by a domestic corporation such as a GmbH then the income is always considered to be commercial.
The authorities have also set out the position for other blockchain activities including:
It seems to be the case that the German tax authorities will assume that such activity is commercial in nature.
The block creation leads to an acquisition (not to a production!) of the asset, which has to be recognized at the market price at the time of acquisition (profit-increasing). Only at the time of the realization of the proceeds from a future sale are any acquisition costs to be deducted from the profit.
Only the staking (without taking over the block creation), as well as, if applicable, the participation in mining and staking pools or a cloud mining service may again fall within the scope of private asset management. However, again, this depends on the individual case.
The authorities has also set out its view on the acquisition of cryptocurrencies received by private investors in the context of airdrops. Here, the receipt of the new tokens may be taxable where the recipient of the airdrop has dome something in return for the airdrop.
Perhaps surprisingly, the authority considers it sufficient for this purpose that the recipient is required to provide contact details on an online form.
Where nothing is done in return for the airdrop then there are no tax consequences (although German gift taxes might be in point on the receipt).
Of course, this additional clarity is helpful. Of course, the fact that an private investor can dispose of assets free of tax after 12 months is very welcome for relevant investors.
It remains to be seen whether there will be further missives from the German tax authorities that include their position regarding Non‑Fungible Tokens (NFTs) and other types of assets and activities.
If you have any queries about this article, German cryptocurrency tax, or the matters discussed more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
For further resource on crypto assets please see www.cryptotaxdegens.com.
This article provides a brief overview of Cyprus tax residency in relation to individuals, the implications of such a status and some of the practical considerations.
Firstly, an individual who is present in Cyprus for 183 days will be resident for tax purposes in Cyprus.
In addition, one will also be resident for tax purposes in Cyprus under the so-called 60 day rules where each of the following is satisfied:
Cyprus personal income tax is imposed on the worldwide income of individuals that are resident for tax purposes in Cyprus.
However, income from dividends and (most types of) interest income that is received by individuals are exempt from personal income tax
From 16 July 2015, individuals are subject to Special Defence Contribution on dividends and interest income where the person is both both Cyprus tax resident and Cyprus domiciled.
Capital gains are also not usually taxable in Cyprus unless they have arisen in respect of Cyprus situs immovable property
Individuals who are not tax residents of Cyprus are taxed only on certain types of income accrued or derived from sources in Cyprus.
In order to obtain a certificate of tax residence, all supporting documents must be submitted to the Tax Department of Cyprus. These docs must be stamped.
If the documents are in any other language than English or Greek then they must be translated.
If an individual is considering relocating to Cyprus, expert advice should be taken with respect to Cypriot as well as cross-border tax implications arising from the relocation.
If you have any queries about this article, tax residency in Cyprus, or Cyprus tax matters more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article