Czech Republic – The Czech Republic government accepted the austerity package drafted by the Minister of Finance (MOF) on 21 September 2009, which is designed to reduce the state budget deficit by approximately CZK 75 billion. Although the MOF originally intended to re-introduce a progressive tax system for individuals beginning on 1 January 2010 (a 15% tax was proposed to apply to individuals with annual income up to CZK 2,287,200, with a 23% rate on income exceeding this amount), the approved bill however, did not contain the progressive tax, so it can be presumed that personal income will be subject to a flat rate of 15% in 2010. The austerity program should not affect the planned corporate income tax rate reduction from 20% to 19%, which will become effective on 1 January 2010.
Indonesia – The parliament has endorsed the Draft Law on Regional Taxes and User Fees to replace the current law. The president is expected to sign the new law in the near future, so it will become effective 1 January 2010. The draft law applies a “closed list” system for applicable regional taxes and user fees, which means that the types of taxes and user fees that can be imposed by the regional governments are restricted to those enumerated in the law. Therefore, the current rules, which allow regional governments to impose other types of regional taxes, will not be carried over to the new law.
Lithuania – Amendments to the Corporate Tax Law published in the Official Gazette on 4 August 2009 eliminated the 10% withholding tax on interest paid to foreign entities resident in a European Economic Area Member State or in a country that has concluded a tax treaty with Lithuania. The changes are effective as from 1 January 2010.
Norway – As from 7 October 2008, only 97% of net income qualifying for the Norwegian participation exemption (on dividends and capital gains) is tax exempt. Based on the wording of the law, it was presumed that Norwegian corporations would be entitled to a tax credit related to the remaining 3% taxable income (provided other conditions for a credit were satisfied). However, under revisions to the 2009 budget, enacted on 19 June 2009, no foreign tax credit will be available in respect of the tax on the 3%, and the 3% taxable income will not be included in the calculation of the maximum tax credit under the general Norwegian tax credit rules. According to the government, the 3% taxable income is considered as deemed expenses relating to the tax-exempt income. The rule is effective retroactively as from 1 January 2009.
United Kingdom – The U.K. tax authorities have published detailed guidance on the VAT rate increase that is due to take effect on 1 January 2010, i.e. when the standard rate of VAT will revert to 17.5% (from 15%). The guidance is intended to help businesses deal with the rate change and contains numerous examples of how to deal with various transactions taking place around the time of the rate change, as well as transitional rules applying to transactions that span the date of the change.