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17 total articles

UK Digital Tax Guidance Needed On Scope, Liability: CIOT

4/17/2020 9:00:00 AM

The Chartered Institute of Taxation has called on the UK Government to clarify questions remaining about the UK's Digital Services Tax, which became effective this month.

The CIOT said questions remain about who will pay it and how much they will pay.

The aim of the UK's DST is to ensure that digital businesses pay tax reflecting the value they derive from the participation of UK users. This has not been possible under the existing scheme of corporation tax.

The detailed provisions implementing the DST are in the Finance Bill, which is passing through the UK Parliament.

CIOT said "the clauses in the Finance Bill include helpful changes from the draft legislation published in July 2019 [...] for example, there is greater clarity as to what is in scope in relation to online marketplaces and what constitutes a platform. In particular, there is clarification that platforms and market places used internally by businesses are not within scope."

However, according to Glyn Fullelove, President of the CIOT, "More clarity and greater understanding about DST is needed."

He said: "There is welcome detail in the Finance Bill aimed at assisting how to calculate revenues attributed to UK users but businesses will still face significant practical difficulties in identifying the relevant components of what is within the charge to tax. There is continued uncertainty around online gambling and gaming platforms and it is not easy to see whether these are in or out of scope."

"The general public is broadly behind the DST. Many online companies are perceived to be doing well as more business is directed online due to COVID-19 restrictions on movement. However, DST is not aimed at protecting the high street from competition from on-line retailers. Nor is it aimed at stopping profits arising in the UK being shifted by multinationals out of the UK to tax havens, as some recent reports have said. Instead it creates a new taxing right on revenues, as a proxy for (and in lieu of global agreement for) allocating profits to be taxed in the UK which have never been previously subject to tax here. Existing internationally agreed rules allocate profits only to where physical activities are undertaken. Moreover, by the Government's own estimates it is unlikely to raise amounts that materially affect the country's finances, particularly in the context of the amounts being spent on COVID-19 measures."

"We have supported broadly the proposed design of the DST through its consultation process, as the most practical approach available to achieve the policy aims. Many companies have known for several years that they are likely to face the tax and have had time to prepare for its introduction. But it is a tax on revenues and this means the tax will inevitably over-tax some companies and under-tax others. The DST should not be viewed as a long term solution whatever one's opinion on the broader merits of the tax; and questions remain on its scope and impact."

"The Government must manage expectations and the public perception of the taxation of the largest digital businesses, the impact of the DST and what it is intended to achieve and what it can achieve. We welcome the Government's commitment to a multilateral solution to taxing digital multinational companies, and the commitment to repeal the DST once an appropriate global solution is in place."

Cyprus Extends Tax Compliance Dates In Light Of COVID-19

4/3/2020 9:00:00 AM

The Cyprus Government has announced a number of extensions to tax return filing dates.

In a number of separate decisions, the Government has extended the deadline for annual corporate income tax returns and for personal income tax returns for the 2018 tax year from March 31, 2020, to May 31, 2020.

Value-added tax payments for the tax periods ending February 29, March 31, and April 30, 2020, may instead be paid by November 10, 2020, without the imposition of penalties or interest. VAT returns must still be submitted by the standard deadlines. Certain taxpayers are not eligible, such as food retailers and utility suppliers.

Finally, Cyprus has extended the deadline for the payment of tonnage tax and the annual fee for 2020 from March 31, 2020, to May 31, 2020, and cut the various rates of general health contribution (GSEY) during April, May, and June 2020.

France Confirms No Changes To VAT Rules Amid COVID-19

4/6/2020 9:00:00 AM

In a set of frequently asked questions and answers clarifying recent changes to tax obligations as a result of the COVID-19 virus, the French tax authority stressed that tax payment relief does not extend to value-added tax.

The FAQs confirm that requests for deferral only concern direct taxes and social security contributions, with the payment of indirect taxes (VAT, excise duties, etc.) due on normal deadlines, without any delay.

"Government action focuses on taxes that directly affect businesses and not the end consumer, which already represents a considerable effort", the FAQ relating to VAT payments states.

However, for taxpayers unable to gather all documents necessary for establishing monthly VAT liability, the tax authority will permit them to estimate their VAT payment within a margin of error of 20 percent.

In general, taxpayers can request to defer or spread payments of all the main taxes, with the exception of VAT. Deferrals are granted for periods of three months without penalty and without the need to submit supporting documentation. Taxpayers must use a special form to request tax deferrals.

Taxpayers in the most difficulty can also request a rebate of direct taxes. Applicants must give reasons for this request on the relevant form, such as a fall in turnover, the need to make other payment obligations, and lack of liquidity.

The FAQs were last updated on March 31, 2020.

COVID-19: UK Delays Expansion Of Making Tax Digital For VAT

4/8/2020 9:00:00 AM

The UK Government has announced that it will delay ramping up its Making Tax Digital project, in light of COVID-19.

Making Tax Digital introduced new reporting obligations on value-added tax registered persons, requiring them to keep their records digitally (for VAT purposes only) and provide their VAT return information to HM Revenue and Customs (HMRC) through MTD-compatible software. The regime was introduced from April 1, 2019.

A light-touch approach was taken to the enforcement of the regime from April 2019. It was agreed that value-added tax-registered businesses would be required to establish digital links for the transmission of data to HM Revenue and Customs only from April 1, 2020. The UK Government has now said that businesses will be allowed an additional year, until April 1, 2021, to establish such digital links.

COVID-19: Netherlands Announces Extra Tax Help For Small Businesses

4/7/2020 9:00:00 AM

On April 2, 2020, the Dutch Ministry of Finance announced that the rules for requesting tax payment deferrals have been simplified and extended to cover additional taxes.

The ministry said that small businesses and the self-employed can apply for a three-month tax deferral by submitting a simple online form. This postponement applies not only to existing tax debts, but also to those that arise during the three-month deferral period.

The Government had previously announced that taxpayers would be able to request a three-month deferral of personal and corporate income taxes, payroll tax, and value-added tax. However, the measure has now been extended to gambling tax, excise duty, consumption tax for alcohol-free drinks, insurance tax, the landlord levy, and energy tax and other environmental taxes. This measure also applies to equivalent taxes in the Dutch territories in the Caribbean.

The ministry said that this policy will remain in place until June 19, 2020.

Taxpayers may also be able to request an additional three-month tax payment extension by submitting a request to the tax authority in writing. Taxpayers with tax debt up to EUR20,000 (USD21,600) will be required to provide documentary evidence of a substantial fall in turnover or orders to qualify for the additional three-month deferral. Taxpayers with tax debts in excess of EUR20,000 will be required to submit a statement from their accountant or industry association.

Belgium Extends Deadlines In Light Of COVID-19

3/23/2020 9:00:00 AM

On March 18, 2020, the Belgian tax authorities announced the postponement of various value-added tax filing and payment deadlines to support companies during the coronavirus crisis.

Companies and non-resident companies with corporate tax filing deadlines falling in the period March 16 to April 30, 2020, are allowed until April 30, 2020, to file their returns.

For periodic declarations, the following deadlines have been extended:

  • February declarations (due March 20) are now due by April 6, 2020.
  • March declarations (due April 20) are now due by May 7, 2020.
  • Declarations for the first quarter (due April 20) are now due by May 7, 2020.

For intra-community transaction declarations:

  • February declarations (due March 20, 2020) are now due by April 6, 2020.
  • March declarations (due April 20, 2020) are now due by May 7, 2020.
  • Declarations for the first quarter (due April 20) are now due by May 7, 2020.

Taxpayers have also been granted an automatic two-month extension to the VAT payment deadlines for February, March, and the first quarter of 2020. This means that:

  • VAT payments on February monthly returns, normally due on March 20, are now due by May 20, 2020.
  • VAT payments on March monthly returns and on quarterly returns, normally due on April 20, are now due by June 20, 2020.

Additionally, the deadline for submitting the annual client list has been extended to April 30 from March 31, 2020. For taxpayers who have ceased trading, client lists are due by the end of the fourth month after the cessation of activities subject to VAT.

Furthermore, taxpayers experiencing financial difficulties due to the COVID-19 outbreak can apply to pay VAT in installments, as well as request exemption from late payment interest and penalties, as per the tax authority's previously announced COVID-19 tax relief measures.

The tax authority also said that personal and corporate income taxpayers will be automatically granted a two-month extension to their payment deadlines for tax due on 2019 income.

Switzerland Announces COVID-19 Plan To Scrap Interest On Tax Arrears

3/27/2020 9:00:00 AM

The Swiss Government has announced that it will waive interest on late payments of tax, to allow companies to delay their tax payments.

A zero percent interest rate will apply to outstanding tax dues, covering value-added tax, customs duties, special consumption taxes and certain other levies, and all federal direct taxes. The waiver applies for taxes due between March 21, 2020, and December 31, 2020.

Turkey Props Up Airlines Impacted By COVID-19 With VAT Relief

3/27/2020 12:00:00 AM

On March 23, 2020, the Turkish Government published a resolution in the official gazette to temporarily reduce the rate of VAT on air passenger transport to one percent.

Under the measure, VAT will be charged on air passenger services at this reduced rate during the period from April 1 to June 30, 2020.

Air passenger transport is currently subject to VAT at the 18 percent standard rate.

Malta Defers Tax Payment Deadlines In Response To COVID-19

3/27/2020 9:00:00 AM

In response to the coronavirus outbreak, the Maltese Government has announced deferrals for the payment of a number of taxes.

The announcement impacts provisional tax, employee taxes, maternity fund payments, social security contributions, social security contributions from self-employed persons, and VAT that is due in March and April.

With the exception of VAT, these taxes will now be settled in four equal monthly instalments between May and August. VAT due will be settled in two equal instalments, with payment for March and April said to be due in line with the due dates for the two quarters' VAT returns.

No interest or penalties will be charged in respect of taxes deferred.

The eased deadlines will apply to those companies or self-employed persons whose turnover falls by 25 percent or more as a result of COVID-19.

The Government said "companies and self-employed persons who are not adversely affected by the crisis are encouraged not to avail of the scheme. Ideally, their taxes should continue to be paid every month and on time."

Companies and self-employed persons that failed to comply with their tax obligations (submission of documents / returns and payments) falling due by December 31, 2019, are specifically excluded.

Applications for deferral can be made on the Malta Enterprise website. Applications should be made no later than April 15.

ECJ Rules UK Can Unilaterally Ditch Brexit Plans

12/11/2018 12:00:00 AM

The European Court of Justice has ruled that the UK can unilaterally abandon the process of leaving the European Union, providing parliament approves the move.

In its December 10 judgment, the ECJ ruled that, when a member state has notified the European Council of its intention to withdraw from the European Union, as the UK has done, that member state is free to revoke that notification unilaterally – i.e. without the approval of the European Union.

The Court said: "That possibility exists for as long as a withdrawal agreement concluded between the EU and that Member State has not entered into force or, if no such agreement has been concluded, for as long as the two-year period from the date of the notification of the intention to withdraw from the EU, and any possible extension, has not expired."

The ruling means that, if parliament approves such, the UK Government could end the process by which it will no longer be an EU member state from March 29, 2019, or at a later date if a transition period is agreed.

On December 19, 2017, a petition for judicial review was lodged in the Court of Session, Inner House, First Division (Scotland, United Kingdom) by members of the UK Parliament, the Scottish Parliament and the European Parliament to determine whether the notification referred to in Article 50 can be revoked unilaterally before the expiry of the two-year period, with the effect that such revocation would result in the United Kingdom remaining in the EU.

On October 3, 2018, the Court of Session referred this question to the Court of Justice for a preliminary ruling, pointing out that the response would allow members of the House of Commons to know, when exercising their vote on a withdrawal agreement, whether there are not two options, but three, namely withdrawal from the European Union without an agreement, withdrawal from the European Union with an agreement, or revocation of the notification of the intention to withdraw and the United Kingdom's remaining in the European Union.

The Court ruled that Article 50 of the Treaty of the European Union (TEU) does not explicitly address the subject of revocation. It neither expressly prohibits nor expressly authorizes revocation. That being so, the Court noted that Article 50 TEU pursues two objectives, namely, first, that of enshrining the sovereign right of a member state to withdraw from the European Union and, second, that of establishing a procedure to enable such a withdrawal to take place in an orderly fashion. According to the Court: "The sovereign nature of the right of withdrawal supports the conclusion that the member state concerned has a right to revoke the notification of its intention to withdraw from the EU for as long as a withdrawal agreement has not entered into force or, if no such agreement has been concluded, for as long as the two-year period, and any possible extension, has not expired."

The Court added: "In the absence of an express provision governing revocation of the notification of the intention to withdraw, that revocation is subject to the rules laid down in Article 50(1) TEU for the withdrawal itself, with the result that it may be decided unilaterally, in accordance with the constitutional requirements of the Member State concerned."

"The revocation by a Member State of the notification of its intention to withdraw reflects a sovereign decision to retain its status as a Member State of the European Union, a status which is neither suspended nor altered by that notification."

Also on December 10, UK Prime Minister Theresa May announced a delay to a vote on whether to adopt the agreement negotiated with the EU on an orderly withdrawal from the EU. If UK lawmakers approve the deal, the UK would be offered a transitional period during which the UK would continue to be treated as though it were an EU state, until at least 2020, to allow time for the two parties to negotiate the future relationship between the UK and the bloc and a solution to the border issue in Ireland. May said that the current proposal would have been voted down by a significant margin had it been put to a vote as scheduled on December 11, 2018. She is planning to engage with lawmakers concerning the agreement's provisions on the "backstop," which would in particular involve Northern Ireland being included in the EU customs area for as long as there is no workable solution to avoid a hard border between Northern Ireland and the Republic of Ireland to its south.

Belgium Reminds Traders Of Upcoming VAT Deadlines

12/12/2018 12:00:00 AM

The Belgian tax agency has issued a reminder to value-added tax-registered persons of their obligations to file VAT returns and pay VAT during the holiday season.

Payments are due by December 24, 2018, at the latest in respect of the VAT installment for either the fourth quarter of 2018 (for quarterly filers), or for December 2018 (for monthly filers).

VAT liability can be calculated under one of two methods.

Under the first approach, for quarterly filers, the VAT paid should be that due for transactions taking place between October 1, 2018, and December 20, 2018. For monthly filers, VAT is due in respect of the period December 1, 2018, to December 20, 2018.

Such taxpayers opting to calculate their tax liability on this basis must complete grid 91 of the quarterly return for the fourth quarter of 2018, or in the December monthly transaction report, which must be filed by January 20, 2019, at the latest.

Alternatively, taxpayers can choose to pay the same amount of tax as was due for the third quarter of 2018 or November 2018. In this case, grid 91 need not be completed in the aforementioned returns.

Ukrainian Corporate Tax Reform Plans Shelved

12/13/2018 12:00:00 AM

Ukraine has reportedly postponed consideration of a bill that would reform the country's corporate tax system to shift the burden of tax from company profits to distributions.

Bill 8557, Draft Law on Amendments to the Tax Code of Ukraine as regards the tax on the withdrawn capital, was tabled in parliament, the Rada, on July 5, 2018. Both the text of the bill and an explanatory memorandum have been released, in Ukrainian.

Proposals for the "new model of taxation" were announced in March 2018 by Ukraine's President, Petro Poroshenko, who described them as a "new philosophy" in taxation that would simplify tax for small businesses and lead to higher rates of investment, noting such had been effective also in Georgia and Estonia. "What does it mean? Every investment you make in Ukraine is free from taxation. Every penny you withdraw from business - pay a tax for it," Poroshenko said in May. "It simplifies the taxation system. It stimulates investments in Ukraine, which we urgently need."

The bill was reportedly been shelved in response to concerns raised by lawmakers and committees concerning massive revenue losses in the first year of implementation. This was despite amendments to introduce the regime gradually, and initially only for the largest businesses, with turnover of UAH200m or more. Ukraine's Chamber of Commerce had urged the Rada to support the reform, even supporting a plan to require companies to pay a minimum of 50 percent of the tax that would otherwise have been due under the previous system.

The regime was proposed to be in place from January 1, 2019. Banks were to be allowed to operate under the current regime voluntarily until December 31, 2021. Transitional arrangements were to be put in place to ensure companies are not doubly taxed, such as for distributions from profits already subject to the current tax on corporate profits.

Ukraine is due to hold presidential elections on March 31, 2019.

IRS Issues Proposed Regulations On BEAT

12/17/2018 12:00:00 AM

On December 13, 2018, the United States Internal Revenue Service issued proposed regulations on the operation of the base erosion and anti-abuse tax (BEAT), contained in Section 59A of the Internal Revenue Code.

Added to the tax code by the Tax Cuts and Jobs Act of 2017, Section 59A is a minimum tax provision, designed to penalize those companies that make deductible payments to foreign affiliates to substantially reduce their exposure to US taxation. The BEAT is calculated by adding back certain deductible payments made to foreign affiliates and applying a minimum tax to a percentage of the difference between the taxpayer's modified taxable income and their regular tax liability, at a rate of five percent for 2018. This rate will rise to 10 percent in 2019 and to 12.5 percent from 2025.

The provision primarily affects corporate taxpayers with gross receipts averaging more than USD500m over a three-year period who make deductible payments to foreign related parties.

The proposed regulations provide detailed guidance regarding which taxpayers will be subject to Section 59A, the determination of what is a base erosion payment, the method for calculating the base erosion minimum tax amount, and the required base erosion and anti-abuse tax resulting from that calculation.

The IRS is welcoming comments on the proposed regulations. These must be submitted within 60 days of their publication in the Federal Register.

France To Levy Digital Tax Starting Jan 2019

12/19/2018 12:00:00 AM

The French Government has decided to bring forward the introduction of a national tax on digital companies following the failure of European Union member states to agree on an EU-wide digital services tax.

Finance Minister Bruno Le Maire informed a press conference on December 17 that a French digital tax would be introduced on January 1, 2019, and would raise an estimated EUR500m (USD567m) next year. However, the exact scope of the tax has yet to be determined.

After EU finance ministers failed to reach an agreement on a proposed digital services tax earlier this month, Le Maire indicated that France would continue to push for an EU solution early in 2019, but would seek to legislate for a national digital tax if no agreement could be reached by next March.

However, it is thought that the French Government has decided to accelerate the introduction of a national digital tax to offset proposed new tax cuts for individuals in the wake of street protests against its tax policies.

UK Legislates To Close Insurance VAT Loophole

12/20/2018 12:00:00 AM

On December 11, 2018, the UK Government tabled The Value Added Tax (Input Tax) (Specified Supplies) (Amendment) Order 2018 before the House of Commons to close a VAT avoidance loophole that is exploited by some UK insurers.

The legislation is intended to prevent offshore looping, a VAT avoidance technique that involves UK insurers setting up associates in non-VAT territories and using these associates to supply their UK customers. It will be effective from March 1, 2019.

Currently, the Specific Supplies Order allows companies who export certain financial services from the EU to reclaim the VAT they incur while providing those services. When these services are supplied inside the EU, this VAT cannot be reclaimed. The Order is currently being exploited by companies that form arrangements with organizations outside of the EU to re-supply or "loop" those services back to United Kingdom consumers, allowing themselves to reclaim the VAT.

The legislation will restrict the application of the Specified Supplies Order in certain circumstances to prevent offshore looping. The Government previously said that, in response to feedback it received during a consultation that concluded at the end of September 2018, it will refine the measure to target it more tightly on the known cases of avoidance. As such, it will now apply to insurance intermediary supplies only and VAT recovery will only be restricted when the principal supply is made to consumers located within the UK, rather than within the UK and the EU as originally drafted.

At present, intermediary services (as described in item 4, group 2, schedule 9 Value Added Tax Act 1994) that are supplied to a person outside of the EU are specified, allowing recovery of input VAT no matter who the final consumer of those supplies is. Intermediary services made in respect of a principal supply which is made to a customer belonging in the UK will no longer be specified, and therefore no longer have a right to recover input tax.

Greece To Cut Corporate Tax

12/26/2018 12:00:00 AM

Greece will gradually lower the rate of corporate tax over the next four years, under proposals announced in September and recently approved by the Greek parliament.

Under the changes, corporate tax will be reduced from 29 to 28 percent in 2019, to 27 percent in 2020, to 26 percent in 2021, and to 25 percent in 2022 and subsequent years.

However, credit institutions will continue to pay corporate tax at the existing 29 percent rate.