Withholding tax

Withholding tax has been attracting increased attention of the tax authorities in recent years while the underlying law has become much more complicated. Examples include the new pay and refund mechanism, the beneficial owner test, and the due diligence requirement for the application of preferential tax treatments (exemptions or reduced rates).

But the law remains cryptic, for example about what specifically must be done to comply with the due diligence standard, while the tax authorities continue to issue inconsistent rulings.

At the same time, applying any preferential treatments without ensuring compliance may mean financial penalties (including penalty tax at the rates ranging from 10% to 30% of taxable amount) and personal liability under criminal tax provisions.