Евразийский научно-исследовательский центр
сравнительного и международного финансового права
http://eurasiatax.com
Euro-Asian Law Congress
Ninth session, on 14 May, 18-19 of June 2015 год
«The procedure aspects of confirmation the tax
treaty application right in the countries of BRICS».
Mihaleva Maria Olegovna
Ekaterinburg
Евразийский научно-исследовательский центр
сравнительного и международного финансового права
http://eurasiatax.com
TABLE OF CONTENTS:
1. Tax treaty definition and its meaning. ……...……………………………...…………..…3
2. Tax treaties administration ……………………….………….…...…………………...….4
3. Peculiarities of tax resident certificate receipt in BRICS member countries …………….5
Brazil………………………………………………………………….……….……………...5
Russia…………………………………………………………….…………………………...7
India…………………………………………………………………………………….……..9
China……………………………………………………………………………………...…11
South African Republic………………………………………………………………….......13
4. In judicial practice there could be difficulties concerning the tax resident certificate
submission. …………………………………………..……………………………………...14
5. Defining tax resident Certificate criterions. Indian experience…………………..………15
6. Peculiarities of confirmation the status of a person who has a real right to get a profit
(beneficial owner). ……………………………………………………………………….…16
7. Tax resident certificate……………………………………………………………………17
Евразийский научно-исследовательский центр
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1. Tax treaty definition and its meaning.
Tax treaty / DTAA (Double Taxation Avoidance Treaty) has a purpose
to promote countries cooperation and provide the most favourable tax
conditions for external-economic activity.
It effects:
1. Double Taxation Avoidance;
2. Application of tax benefits;
3. Unilaterally tax exemption;
4. Application of tax deductions or tax set-off;
5. The way of tax optimization;
6. Capital flow increase;
7. Prevention of fiscal evasion;
8. Income distribution between countries budgets.
Евразийский научно-исследовательский центр
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2. Tax treaties administration.
Bilateral Double Taxation Avoidance treaties between Russia and members of BRICS.
Table №1.
COUNTRY
the date of
signing the
agreement
entry into force
date of
application
Brazil
22.11.2004
-------------------
-----------------
India
25.03.1997
11.04.1998
01.01.1999
China
27.05.1994
10.04.1997
01.01.1998
South
Africa
27.11.1995
26.06.2000
01.01.2001
Terms and conditions of application:
1. Substantive aspects;
2. Procedural aspects:
- confirmation of the foreign resident status (tax resident certificate submission);
- confirmation of the status of the person who has a real right to get profit («beneficial
owner»).
Евразийский научно-исследовательский центр
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3. Peculiarities of tax resident certificate receipt in BRICS member countries.
Table №2.
COUNTRY
BRAZIL
Form approved
by“Instrução
Normativa nº
1.226, de 23 de
dezembro” de
2011 of the
Secretariat of the
Federal Revenue
of Brazil.
Features of the procedure for obtaining the document
The tax authority (“Autoridade fiscal Brasileira”) issues
certificates of residence. The form for the confirmation of residence
can be obtained online under the following link:
http://www.receita.fazenda.gov.br/publico/Legislacao/Ins/2002/Anex
oUnicoINSRF2442002.doc
Written application including:
1. BRAZILIAN TAXPAYER IDENTIFICATION (NUMBER, FULL NAME
OR COMPANY, COUNTRY, ADRESS)
2. INCOME EARNED ABROAD (TAX WITHHELD OR TO BE
WITHHELD AT SOURCE, CONVENTION FOR THE AVOIDANCE OF
DOUBLE TAXATION OF INCOME BETWEEN COUNTRES, TYPE OF
INCOME, NAME AND ADDRESS OF THE SOURCE OF PAYMENT
3. TAXPAYER’S STATEMENT (CONFIRM THE VERACITY OF THE
INFORMATION PROVIDED HEREOF AND THE FULFILLMENT OF THE
LEGISLATION OF THE COUNTRY OF THE SOURCE OF PAYMENT)
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COUNTRY
BRAZIL
Form approved
by“Instrução
Normativa nº
1.226, de 23 de
dezembro” de 2011
of the Secretariat
of the Federal
Revenue of Brazil.
__________________
Advantages and
disadvantages
Features of the procedure for obtaining the document
Information could be received through the electronic communication
services. There is an opportunity to print the document. After that
certificate information is included to a general base where residency of
other people could be checked-out.
___________________________________________________________
- Difficulties concerning the confirmation of certificate authenticity could
emerge when apply to foreign fiscal agencies with printed certificate;
+ The use of electronic services (general base where certificate could be
checked-out, the possibility to print certificate);
+ Short terms of request examination;
Евразийский научно-исследовательский центр
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COUNTRY
RUSSIA
The information
message of the
Federal tax
service of the
Russian
Federation
"About the
procedure of tax
resident of
Russian
Federation status
confirmation"18.
02.2008
Features of the procedure for obtaining the document
The Federal Tax Service issues certificates of residence. The request
must be submitted to the “Interdistrict Inspectorate of the Federal
Tax Service for Central Data Processing” including the following
documentation:
1.Written application including: Name and address of the applicant,
Country and authority where this certificate should be filed, List of
the documents enclosed, Contact telephone number, Calendar year
for which the confirmation is required, Tax Identification Number (if
any);
2. Copy of the entire passport (incl. entry/exit stamps);
3. Copy of registration at the place of residence in Russia
4. Calculation of days spent in Russia in the respective year
Depending on the individual circumstances, additional documents
may be required proving the permanent residence of the applicant in
Russia.
The request should be processed within one month.
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COUNTRY
RUSSIA
Advantages and
disadvantages
Features of the procedure for obtaining the document
- The list of documents is not strictly determined as a consequence
expert could enquire any other documents from the applicant;
- Additional document enquiry could delay the date of certificate
issue;
+ Establishment of general rules of certificate receipt on the federal
level.
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COUNTRY
Features of the procedure for obtaining the document
The local tax authority issues certificates of residence.
The CBDT has released Form 10FA and Form 10FB for residents of India
specifying the manner in which the TRC can be obtained from an Assessing
Officer in India.
The request must be submitted to the individual’s Assessing Officer
and include the following document:
Written application
(1.Full Name and address of the applicant
2.Status
3. Nationality (in case of individual)
4. Country of incorporation/ registration (in case of others).
5. Address of the applicant during the period for which TRC is desired.
6.PAN/ TAN No. (if applicable)
Notification of
CENTRAL BOARD 7. Basis on which the status of being resident in India is claimed.
OF DIRECT TAXES 8. Period for which the residence certificate is applicable.
(«CBDT») into force 9. Purpose of obtaining Tax Residency Certificate (mustbe specified).
on the 1st day of
10. Any other detail.
April, 2013.
INDIA
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COUNTRY
INDIA
Notification of
CENTRAL
BOARD OF
DIRECT TAXES
(«CBDT») into
force on the 1st
day of April,
2013.
_________
Advantages and
disadvantages
Features of the procedure for obtaining the document
Another information:
- Individual’s Permanent Account Number;
- Copy of the last tax assessment;
Copy of the last tax return filed.
______________________________________________________________
+ Forms 10 FA, 10 FB were passed on federal level to regulate tax
resident certificate receipt;
- Experts could enquire additional documents from the applicant;
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COUNTRY
CHINA
.
Features of the procedure for obtaining the document
The local tax authority issues certificates of residence.
The request must be submitted to the tax authority in charge of the
employer who has the Individual Income Tax (IIT) withholding
obligation for the individual.
The requirements for obtaining a certificate of residence may vary,
depending on the province in which such a certificate is
requested.
________________________________________________________
In Beijing, the following documents have to be handed in:
- Completed and signed application form for the certificate of
Chinese resident status
- Relevant documents of Chinese resident status, including the list of
periods of time spent in China and the copy of entry record
- Copy of PRC IIT payment certificate (if no taxes have been paid, a
written explanation letter is required)
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COUNTRY
CHINA
________________
Advantages and
disadvantages
Features of the procedure for obtaining the document
In the City of Guangzhou, the applicant should submit the following
documents to the local tax authority;
-The completed application form for a certificate of Chinese resident status in
triplicate
-The original and a copy of the passport of the applicant (the original will be
returned to the applicant)
- The original PRC IIT and other tax payment receipts (if no taxes have been
paid, a written explanation letter is required) - supporting documents for PRC
residence days (applicable to non-Chinese domicile only, e.g. entry stamped
pages on passport
The request should be processed within 10 days.
_______________________________________________________________
- There is no unified certificate receipt procedure (specific province
requirements)
- The necessity to submit some documents in original;
+ Short term of document issue.
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COUNTRY
SOUTH
AFRICA
Features of the procedure for obtaining the document
No formal process is in place. However, one can attempt to obtain a
certificate of residence from the South African Revenue Service in
writing (incl. the tax reference number).
No formal process is
in place.
_______________________________________________________
________________
- The procedure of certificate receipt is not defined precisely and as
Advantages and
a consequence that could cause both receipt terms procrastinating
disadvantages
and ungrounded requirements of SAR tax experts;
+ In practice document is issuing
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4. In judicial practice there could be difficulties concerning the tax resident certificate
submission:
1. About the possibility of alternative documents application, that confirm foreign country
tax resident status;
(abstracts from the trade register; certificates issued by other competent governmental
authorities).
Federal Arbitrage Court of North-Caucasus region 29.06.2012, decision from N А3230502/2010.
2. The time when the document should be submitted;
(to the moment of payment or to the moment of tax authorities requirement).
Federal Arbitrage Court of Moscow region 17.01.2014 № Ф05-16745/13 decision from №
А40-16818/2013.
3. About using tax resident certificate in other tax periods;
Federal Arbitrage Court Povolzhsky region 30.07. 2013 № Ф06-5981/13 decision from N
А12-29089/2012
4. Matters of substance and certificate legalization;
(the absence of required information, improper certification of the document)
Federal Arbitrage Court of Moscow region 15.02.2013 № Ф05-15470/12 decision from №
А40-59278/2012.
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5. Defining tax resident Certificate criterions. Indian experience.
The Finance Act 2012 strictly defined tax certificate criterions.
Certificate shall contain the following particulars, namely:
1 Name of the assessee;
2. Status (individual, company, firm etc.) of the assessee;
3. Nationality (in case of individual);
4. Country or specified territory of incorporation or registration (in case of others);
5. Assessee’s tax identification number in the country or specified territory of residence or in case no
such number, then, a unique number on the basis of which the person is identified by the Government
of the country or the specified territory;
6. Residential status for the purposes of tax;
7. Period for which the certificate is applicable; and
8. Address of the applicant for the period for which the certificate is applicable;
The consequences:
The reaction of foreign business partners were rather negative.
(Specified criterions are not clause to a contract).
A new law was passed in 2013 (The Finance Act 2013) and defined that criterions as optional.
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6. Peculiarities of confirmation the status of a person who has a real right to get a
profit (beneficial owner).
(Articles 10, 11, 12 of Agreements adopted within the OECD (Organization for Economic
Cooperation and Development) frame Convention use a term "beneficial owner" as a
condition for granting tax benefits)
Condition:
In order to prove that the recipient is a “tax resident”, merely providing a tax resident
certificate issued by the tax authority of the other country is not enough.
(India The Finance Act 2013, China Circular 601,81, 24 )
A recently published letter of the Ministry of Finance RF 2 (the Letter) addresses the
question of the documents needed to determine the actual recipient of dividend income (the
beneficial owner Letter No.03-00-R3/16236 of 9 April 2014).
Confirmation procedure includes:
1. Subject examination according to "beneficial owner" criterions.
2. Complex check-out of receiver accounts and transactions.
3. Enquiry of confirming information documents.
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7. Tax resident certificate.
Features of the document:
1. National legislation of every country defines provisions concerning procedural
and substantive aspects.
2. Certificate is an international document.
(Just a few of bilateral double taxation avoidance treaties set a form of this
document (as an example treaty between Russia and Belorussia).
- Substance requirements should be established on the international level.
- Receipt procedure could be universal and more simple.
Ways of solving problems:
1. Establish unified certificate form.
2. Provide universal certificate application.
3. Establish unified procedure of certificate receipt.
4. Work out alternative ways of document receipt and confirmation of information:
* Administrative procedures providing mutual assistance among the state
authorities;
* Application of other papers (abstracts from the international editions, notarial
copies of documents).