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5.6. Qualification of Specific Income Categories for Tax Purposes

Dividend Income

The term “dividend” includes income from shares, income from participating interests and other corporate rights, hidden profit distributions, and distribution of assets as a dividend, which is deemed realized at the market value of the asset distributed.

Hidden profit distributions mean any amounts paid or distributed to the shareholders, partners or any related parties if the amounts paid are not connected with the business activity, or if the amounts paid exceed the usual market value for similar transactions. The term also includes interest payments on loans in certain cases.

Interest Income

The term ‘interest’ includes:

  • income from any kind of debt claims (both secured and unsecured and whether or not carrying a right to participate in the debtor’s profits);
  • interest paid under finance lease agreements;
  • interest on deposits with banks;
  • income or premium from debentures and bonds; and
  • deferred interest deduction under thin capitalization rules.

Royalty Income

For withholding tax purposes, the term “royalty” includes:

  • use of, or the right to use, any copyright of scientific, artistic or literary work, including cinematograph films and television films, recordings for transmission by radio or television or software, patent, trademark, industrial design or utility model, drawing, plan, secret formula or process; or
  • use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

The term industrial, commercial or scientific equipment refers to all movable properties, including means of transport, plant, means of production, and means of provision of services which the enterprise uses in economic activity.

Service Fees

The term “Service Fees” includes payments for:

  • erection or installation of tangible assets;
  • consulting services, technical services, managerial services; and
  • market research.