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COVID-19: Belgium Clarifies Tax Deadlines For Non-Resident Individuals

26/06/2020 09:00

On June 24, 2020, the Belgian Ministry of Finance issued a clarification of tax payment deadlines for non-resident individuals after the tax authority issued tax statements with the wrong due dates.

The deadlines in question depend on the dispatch date of tax statements relating to 2019 income tax returns for non-residents. Due to a technical error, the statements failed to reflect the two-months extension to the payment deadline put in place because of COVID-19.

The clarification is as follows:

  • For statements with a dispatch date of May 12, 2020, the payment deadline is September 12, 2020.
  • For statements with a dispatch date of May 27, 2020, the payment deadline is September 27, 2020.
  • For statements with a dispatch date of June 5, 2020, the payment deadline is October 5, 2020.
  • For statements with a dispatch date of June 12, 2020, the payment deadline is October 12, 2020.

Switzerland Planning New VAT Rules For Mail Order Companies

24/06/2020 09:00

The Swiss Federal Council has launched a consultation on amendments to the VAT law, with a focus on the tax treatment of mail order businesses and the administrative burden on SMEs.

Since 2019, foreign mail order companies have been required to register with the Swiss Federal Tax Administration (FTA) if their sales turnover in Switzerland from small consignments – where the amount of VAT is less than CHF5 – exceeds CHF100,000. According to the Federal Council, the effect of this measure has been limited, with few foreign mail order firms registering with the FTA.

The Federal Council has proposed that operators of mail order platforms be required to declare all deliveries of goods to Switzerland made through their platform. To ensure compliance, the FTA may implement administrative measures against platforms or mail order companies that fail to register as taxpayers or who fail to comply with these new obligations. It may order an import ban for goods supplied by non-compliant companies or the destruction of those goods, and may publish the name of such companies, it is proposed.

The Council has also proposed simplifications to the process for establishing VAT accounts for SMEs, as well as concessions for foreign companies subject to Swiss VAT to facilitate compliance.

Netherlands To Restrict Excessive Borrowing From Own Companies

24/06/2020 09:00

The Dutch Government has submitted a bill to parliament that will restrict the amount that shareholders can borrow from their own companies without the imposition of tax.

Under the proposals, those who own five percent or more of a company's shares will be able to borrow up to €500,000 ($561,320) tax-free. Income tax will then be payable on borrowings in excess of this threshold. The measure is set to be introduced on January 1, 2023.

The Government points out that while wages and dividends paid to shareholders are subject to income tax, loans are not, creating an incentive for excessive borrowing from companies and the long-term deferral or non-payment of tax.

The measure will apply to all debts acquired by a shareholder with a substantial interest in a company. Special rules apply to mortgages, applied for by the company, that are used to purchase a shareholder's home.

The draft bill was subject to an online public consultation in 2019. The Government subsequently decided to amend the draft proposals to prevent potential instances of double taxation.

COVID-19: Austria To Bring Forward Individual Income Tax Cut

18/06/2020 09:00

Austrian Finance Minister Gernot Blumel said on June 16, 2020, that elements of an income tax cut package agreed by the governing coalition earlier this year will be brought forward as part of a post-COVID-19 economic stimulus package.

In January 2020, Blumel announced that the first three personal income tax brackets would be reduced in 2021 under the program for government agreed by the People's Party and the Green Party. In his latest announcement, the Finance Minister said that the reduction in the lowest income tax bracket from 25 to 20 percent will be brought forward.

Other proposed tax measures announced by Blumel include improvements to the depreciation regime, allowing companies to depreciate 30 percent of capital investments in the first year. This change is set to be introduced from September 2020.

Blumel also mentioned that taxpayers will be able to carry back losses to offset against income in previous tax years, without going into detail on this proposal.

COVID-19: EU Approves Cypriot VAT Deferral Scheme

16/06/2020 09:00

The European Commission has approved under the Temporary State Aid Framework a Cypriot aid scheme allowing for the deferral of VAT payments by companies affected by the COVID-19 pandemic.

Cyprus notified the Commission of a scheme that allows companies facing difficulties due to the COVID-19 outbreak to delay the payment of VAT due by April 10, May 10, and June 10, 2020. Under the scheme, no interest or penalties will be imposed on those companies, which pay the VAT due by November 10, 2020.

The Commission said that the scheme will be accessible to companies of all sizes and in all sectors, except those sectors which continued to operate during the lockdown in Cyprus. The aim is to ease the liquidity constraints faced by companies severely affected by the economic impact of the pandemic.

German Cabinet Approves COVID-19 Stimulus Package

15/06/2020 09:00

A €130bn ($148bn) fiscal stimulus package with numerous tax measures, intended to help revive the German economy following the COVID-19 pandemic, was approved by the Federal Cabinet on June 12, 2020.

Salient tax proposals in the stimulus plan include:

  • A reduction in the standard rate of value-added tax from 19 to 16 percent for the period from July 1 to December 31, 2020. The reduced seven percent rate will also be cut, to five percent, during the same period.
  • Improved amortization rules for investment in movable assets such as machinery for the tax years 2020 and 2021.
  • An extension of the loss carryback rules, to allow taxpayers to carry back up to EUR5m in losses in 2020 and 2021 (up from EUR1m). For joint filers, the limit will be set at EUR10m.
  • An extension of the due date for import VAT payments to the 26th of the following month.
  • A modernization of the corporate tax law to, among other changes, provide partnerships with the option to be taxed as corporations.
  • A doubling of the maximum allowance for research and development expenditure to EUR1m per year for the period from 2020 to 2025.
  • Changes to the vehicle tax to reduce the tax for cars with lower CO2 emissions and increase it for those with higher emissions.

The stimulus package will need to be approved by parliament before these measures can be put in place.

Belgium To Fix Glitch In VAT Administrative System

20/05/2020 09:00

On May 15, 2020, the Belgian tax authority said taxpayers have been contacted in error despite filing their value-added tax return in a timely manner.

According to the tax authority, due to a technical problem with its VAT administration platform, certain periodic VAT declarations filed between April 28 and May 12, 2020, were recorded as being late in the current account of taxable persons.

This glitch resulted in taxpayers being sent VAT account statements that included incorrect amounts or highlighted missing declarations. Some taxpayers will also have received letters.

The tax authority said that taxpayers in receipt of such notifications should "disregard these letters if you have filed a declaration during this period."

"We are doing everything to resolve this problem so that the people concerned are not penalized," the statement said.

Netherlands Mulling Tax System Overhaul

19/05/2020 09:00

The Dutch Government has submitted a report to parliament which includes an extensive set of proposals intended to improve and "future-proof" the country's tax system.

The report is based on the results of 11 investigations into seven "bottlenecks" in the tax regime which lead to unfavorable outcomes. It suggests 169 "building blocks" that political parties could use in future to rebuild the tax system.

According to the Government, the seven bottlenecks include:

  • A rising tax burden on labor;
  • Tax complexity;
  • Ineffective taxation of the platform and gig economy;
  • Inconsistent taxation of capital, with some forms of capital income taxed more lightly than others;
  • Inadequate taxation of profits;
  • Insufficent "pricing" of pollution through taxation; and
  • The declining effectiveness of national taxation.

Policy options detailed in the report are intended to better align the taxation of workers, the self-employed, and retirees; tackle tax avoidance; and simplify the tax system.

Additionally, the report proposes that the tax burden should be shifted from labor towards wealth, and that additional environmental taxes should be put in place, in particular targeting the aviation and energy sectors.

Further, the report suggests that a more harmonized European approach to the taxation of profits and environmental taxation could be more effective than national measures in these areas.

However, in recognition of the economic impact of tackling the COVID-19 virus, the report says that tax incentives and support measures may be needed in the short-term.

France To Press On With Digital Tax

19/05/2020 09:00

French Finance Minister Bruno Le Maire has said that the Government intends to introduce a digital services tax this year.

The French DST is a 3% tax on the revenue of digital companies providing advertising services, selling user data for advertising purposes, or performing intermediation services. Companies with global revenues of €750 millions ($811 millions) or more and French sales of at least €25 millions are required to pay the tax.

The tax, approved by the French parliament on July 11, 2019, applies to turnover realized in France since January 1, 2019. Le Maire subsequently confirmed that France will suspend collection of the DST until December 2020 to prevent the United States from applying retaliatory tariffs on a range of French goods.

France's digital services tax would apply in the absence of an international agreement on a global levy, Le Maire said.

International Organizations Tracking COVID-19 Policies

18/05/2020 09:00

The International Monetary Fund has collated information on the tax and non-tax policy responses of some 193 jurisdictions to COVID-19.

The IMF's COVID-19 Policy Tracker webpage summarizes the key economic responses governments are taking to limit the human and economic impact of the COVID-19 pandemic.

As well as covering states' fiscal policy decisions, the IMF is monitoring decisions on monetary and macro-financial policy and on exchange rates and balance of payments. The tracker was late updated on May 8, 2020.

The OECD is also tracking countries' tax responses in a spreadsheet hosted on its website titled: COVID-19 tax policy and other measures, which was last updated on May 2, 2020.

ECJ Rules Against UK's VAT Rules For Commodities Trading

17/05/2020 09:00

The European Court of Justice (ECJ) on May 14, 2020, ruled against UK value-added tax rule changes for commodities trading.

The European Commission decided in January 2019 to refer the UK to the ECJ for extending the scope of a zero-rate VAT scheme for certain commodities traders.

Since 1977, the UK has applied a zero-rate of VAT to transactions carried out on certain commodity markets. The UK has, in the period since, considerably extended the scope of the measure. The Commission considered that it has expanded it to the extent that it is no longer limited to trading in the commodities originally covered.

Article 394 of the EU's VAT Directive provides for a special arrangement derogating from the usual EU system for collecting VAT. However, this case concerns a so-called "standstill derogation," meaning that the measure cannot be extended in scope, the Commission said. The Commission said that the UK has made at least eight amendments to the derogation, without notifying it of the changes.

The ECJ ruled, in Commission v the United Kingdom (Case C-276/19): "[The Court declares] that by introducing new simplification measures that extend the zero-rating and the exception to the normal requirement to keep value added tax records which were provided for in the Value Added Tax (Terminal Markets) Order 1973, as amended by the Value Added Tax (Terminal Markets) (Amendment) Order 1975, without submitting an application to the European Commission with a view to seeking the authorisation of the Council of the European Union, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 395(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax."

The UK Government said it is reviewing the decision of the Court. It said it will provide further details on the next steps in due course.

HM Treasury stated: "The decision does not require businesses to pay any VAT on historic transactions, and the law applying to derivatives trades today means no VAT is due. That will remain the case while the UK considers next steps in the light of the ruling."

France Announces COVID-19 Tax Support For Wine Industry

15/05/2020 09:00

On May 11, 2020, the French Government presented a COVID-19-related economic support package targeted at the nation's wine industry, which includes relief from social contributions.

Following a videoconference between Government ministers, three specific measures were announced to support the wine sector, including social security contribution exemptions for small and very-small businesses.

The other non-tax features of the package include a €140 millions ($152 millions) fund (partly funded by the European Union), and a request for a compensation fund to be establised at EU level.

In addition to COVID-19, France's wine industry has been negatively affected by US tariffs on imports of French wine imposed as part of the ongoing trade dispute between the EU and US over aircraft subsidies.

COVID-19: Belgium, Germany Conclude Cross-Border Worker Agreement

15/05/2020 09:00

On May 13, 2020, the Belgian tax authority announced that the competent authorities of Belgium and Germany have concluded an agreement which clarifies the tax situation of cross-border workers in the context of the COVID-19 health crisis.

In summary, the agreement, concluded on May 6, 2020, provides that employees working from home due to the COVID-19 crisis may remain taxable in the state in which they exercised their professional activity before the health crisis.

This agreement is applicable from March 11, 2020, until May 31, 2020.

Austria Announces COVID-19 Tax Relief Package For Catering Industry

14/05/2020 09:00

On May 11, 2020, the Austrian Ministry of Finance announced a €500 million ($542 million) package of financial and tax measures to support the hospitality industry, which is being hit particularly hard as a result of the restrictions in place to contain COVID-19.

The main tax measures in the package include the following:

  • Non-alcoholic beverages will be subject to value-added tax at 10% instead of 20% until the end of 2020;
  • The tax-free limit for meal vouchers will be increased from €4.40 to €8;
  • The tax on sparkling wine will be abolished;
  • The deduction for business meal costs in inns will be increased from 50 percent to 75 percent.

EU Defers E-Commerce VAT Package In Light Of COVID-19

12/05/2020 09:00

The EU will postpone the entry into force of its VAT e-commerce package and will defer certain filing deadlines under the administrative cooperation directives due to the COVID-19 pandemic.

The European Commission has proposed that the VAT e-commerce package will apply from July 1, 2021, rather than January 1, 2021. This is to give member states and businesses more time to prepare for the new rules.

Under the VAT e-commerce package, new obligations will be introduced for online marketplaces and platforms and their business users and VAT exemptions will be removed for low-value consignments. The EU will also expand its mini one-stop shop (MOSS) system.

The Commission has also announced a three-month deferral in relation to obligations under the second and sixth Directives on Administrative Cooperation, which relate to financial accounts (DAC2) and tax planning schemes (DAC6).

DAC6 will be implemented from July 1, 2020, as planned. However, member states will have three additional months to exchange information on financial accounts relating to beneficiaries who are tax resident in another member state. Similarly, member states will have three additional months to exchange information on certain cross-border tax planning arrangements.

The Commission stated: "Depending on the evolution of the Coronavirus pandemic, the Commission proposes the possibility to extend the deferral period once, for a maximum of three further months. The proposed tax measures only affect the deadlines for reporting obligations."

"The beginning of application of DAC 6 will remain July 1, 2020, and the reportable arrangements made during the postponement period will have to be reported by the time the deferral has terminated. Equally, the information on financial accounts to be exchanged under DAC 2 during that period will have to be reported by the time the deferral has ended."

German Cabinet Approves COVID-19 VAT Cut For Catering

08/05/2020 09:00

On May 6, 2020, the German Cabinet adopted the draft Coronavirus Tax Assistance Act, which provides for a temporary reduction in value-added tax on food served in catering outlets.

Currently, food supplied for consumption on catering premises is subject to VAT at the 19% standard rate, while supplies of takeaway food are taxed at the 7% reduced rate.

Under the draft law, food supplied in restaurants, cafes, and similar outlets will be taxed at the seven percent reduced rate.

The measure is intended to apply from July 1, 2020, until June 30, 2021.

COVID-19: Malta Extends Corporate Tax Return E-Filing Deadline

05/05/2020 09:00

Malta's Commissioner for Revenue has announced extensions to deadlines for the electronic filing of income tax returns by companies.

The extension only affects electronically filed tax returns and does not impact tax payment due dates.

The following extended due dates have been announced:

  • For financial years ending January 31, 2019, the deadline is: July 31, 2020.
  • For financial years ending February 28, 2019, the deadline is: July 31, 2020.
  • For financial years ending March 31, 2019, the deadline is: July 31, 2020.
  • For financial years ending April 1, 2019, the deadline is: July 31, 2020.
  • For financial years ending May 31, 2019, the deadline is: July 31, 2020.
  • For financial years ending June 30, 2019, the deadline is: July 31, 2020.
  • For financial years ending July 31, 2019, the deadline is: July 31, 2020.
  • For financial years ending August 31, 2019, the deadline is: July 31, 2020.
  • For financial years ending September 30, 2019, the deadline is: August 31, 2020.
  • For financial years ending October 31, 2019, the deadline is: September 30, 2020.
  • For financial years ending November 30, 2019, the deadline is: November 2, 2020.
  • For financial years ending December 31, 2019, the deadline is: November 27, 2020.

COVID-19: Belgium Extends Corporate Tax Return Deadline

30/04/2020 09:00

On April 29, 2020, the Belgian tax authority announced changes to the deadline for the submission of annual corporate tax declarations due to the COVID-19 crisis.

Under the changes, companies whose year-end fell between October 1, 2019, and December 30, 2019, inclusive, will have seven months to file their corporate tax declarations. This period begins on the first day of the month following the month the taxpayer's tax year ended. Should the deadline fall on a weekend or a public holiday, it is moved forward to the next working day.

The new deadline applies to all companies regardless of legal status and filing method (electronic or manual).

For companies with a financial year-end prior to October 1, 2019, the existing rules apply. This means that corporate tax returns must be filed no earlier than one month after the date of the annual general shareholders' meeting and not later than six months after the end of the accounting year. However, due to the COVID-19 virus, companies may, under certain circumstances, request to postpone their annual general meeting by a maximum of 10 weeks.

Companies can also request to further extend the corporate tax return deadline if they cannot meet the existing revised deadlines.

OECD Schedules BEPS Webcast For Early May

30/04/2020 09:00

The OECD has scheduled a new Tax Talks webcast to update stakeholders on its work on the reform of international tax rules for the digitalized economy.

The webcast will be held on May 4, 2020, at 14:00 Central European Time.

Earlier, in March 2020, the OECD said that the COVID-19 pandemic would not delay its work towards delivering proposed solutions to reform the way the digitalized economy is taxed.

The OECD said that although it has made changes to working arrangements, it still intends to deliver its two-pronged plan by the end of this year.

The digital tax work involves two workstreams:

  • As part of "Pillar One", states will negotiate new rules on where tax should be paid ("nexus" rules) and on what portion of profits that should be taxed ("profit allocation" rules). This work seeks to ensure that multinational enterprises conducting sustained and significant business in places where they may not have a physical presence can be taxed in such jurisdictions.
  • Pillar Two (also referred to as the "Global Anti-Base Erosion" or "GloBE" proposal) calls for the development of a coordinated set of rules, including on a minimum effective tax burden for multinationals, to address ongoing risks from structures that allow MNEs to shift profit to jurisdictions where they are subject to no or very low taxation.

The OECD said in March 2020: "All participants continue working towards reaching a political decision on the key components of a multilateral consensus-based solution at the G20/OECD Inclusive Framework on BEPS plenary meeting scheduled for July 1-2, 2020, in Berlin, Germany."

The OECD webcast will also provide an update to stakeholders on how it is seeking to support developing countries amid the COVID-19 pandemic.

COVID-19: UAE Extends VAT Deadline From April To May 2020

28/04/2020 09:00

The United Arab Emirates' Federal Tax Authority has announced changes to value-added tax filing and payment deadlines, for tax periods that ended on March 31.

The tax agency has provided that taxpayers may file value-added tax returns and pay the tax owing by the extended date of May 28, 2020, for the tax period that ended March 31, 2020. This applies to both monthly and quarterly filers.

The FTA said that is continuing to provide its full suite of services to taxpayers remotely.

France Announces Extra COVID-19 Tax Support For Hit Industries

28/04/2020 09:00

On April 24, 2020, the French Government announced that it has decided to extend tax and other financial support to companies in sectors most affected by the COVID-19 lockdown measures, including catering, tourism, events, sports, and cultural activities.

Specific tax measures include that small and very small enterprises in these sectors will receive an automatic deferral of social tax payments for the period from March to June 2020.

Medium-sized and large enterprises in these sectors will not benefit from an automatic deferral of their social contributions. However, they will be able to request to spread social tax payments over a longer period, as well as apply for tax debt cancellation. These applications will be considered by the tax authorities on a case-by-case basis.

The Government also intends to discuss with local authorities the possibility that the real estate contribution for companies (CFE) can be deferred, and tourist tax payments can be suspended for 2020.

German EU Presidency Will Focus On Tax Issues: Merkel

28/04/2020 09:00

On April 25, 2020, German Chancellor Angela Merkel said that Germany would attempt to seek agreement on a financial transaction tax and a minimum corporate tax when it assumes the presidency of the European Union in July 2020.

Merkel made the comments in a video podcast in which she emphasized the importance of a coordinated EU response to the current COVID-19 crisis.

"The question will be, where can we grow together better and maybe agree on certain things? For example, a financial transaction tax, minimum taxes, the question of joint emissions trading in the area of ships or aircraft," Merkel said of Germany's upcoming EU presidency, which is due to run from July 1, 2020, to the end of the year.

Earlier this year, Germany attempted to break the deadlocked negotiations on an EU financial transaction tax with a proposal for a 0.2 percent tax on the purchases of shares in companies with a market capitalization in excess of EUR1bn (USD1.1bn). The tax would also apply to depositary receipts issued domestically and abroad and which are backed by shares in these companies. Initial share offerings would be excluded from the FTT.

However, Austria, which is one of the 10 member states attempting to agree the terms of an EU FTT, has voiced its opposition to this proposal, warning that it will adversely affect retail investors.

Germany is also a strong advocate of a global minimum corporate tax, a proposal which also has wider support within the G7 group of nations.

Germany Explains COVID-19 Tax Refunds

27/04/2020 09:00

On April 23, 2020, the German Ministry of Finance confirmed that certain taxpayers suffering from liquidity problems due to COVID-19 can apply for a refund of advance tax payments made in 2019.

Under the measure, affected taxpayers will be able to claim back an amount of advance tax equal to 15% of their taxable income in 2019. There will be a cap of €1 million ($ 1.100 million), with those submitting joint assessments permitted to carry back up to EUR2m.

Affected taxpayers are considered to be those who have already reduced their 2020 advance tax payment to zero and expect to make a loss in 2020.

The measure applies to corporate income and income from property rentals.

Switzerland Extends COVID-19 Guarantee Scheme To Start-Ups

27/04/2020 09:00

The Swiss Federal Council has announced that it will expand a system of guarantees for SMEs to provide support for start-ups during the coronavirus pandemic.

In March, the Federal Council announced that SMEs affected by the pandemic could apply to their banks for bridging credit facilities representing a maximum of 10% of their annual turnover and no more than CHF20 milliona. Credits of up to CHF500,000 will be fully secured by the Confederation and zero interest will be charged. Bridging credits that exceed CHF500,000 will be secured by the Confederation to 85 percent of their value. The interest rate on these credits is currently 0.5 percent on the loan secured by the Confederation.

Companies with a turnover of more than CHF500m are not covered by this program.

On April 22, the Federal Council said that it will use this existing system of guarantees for SMEs to provide support for start-ups. It plans to create a new procedure for start-ups under the scheme by April 30.

The Confederation will guarantee 65 percent of a credit, and the cantons will guarantee the remaining 35 percent. It will be up to individual cantons to decide whether they wish to offer this guarantee facility to start-ups. If a canton decides to offer this measure, start-ups will be able to submit a guarantee application to the relevant cantonal office by August 31.

The State Secretariat for Economic Affairs, in consultation with interested cantons and the guarantee organizations, will by April 30 draw up the practical criteria for using the scheme. It will publish a list of participating cantons and relevant offices, as well as further details on the procedure.

Dutch Report On Reforming Tax Rules For Multinationals Published

20/04/2020 09:00

On April 15, 2020, a government-commissioned report on the taxation of multinationals was submitted to the State Secretary of Finance recommending various changes to make the Dutch tax system fairer while maintaining the jurisdiction's tax competitiveness.

The report was commissioned at the request of the lower house of parliament, the House of Representatives, and carried out by the Advisory Committee on the Taxation of Multinationals. The Advisory Committee's brief was to investigate ways in which the Dutch corporate tax base can be strengthened, and international tax mismatches eliminated, while not compromising the jurisdiction's attractiveness as a location for corporate headquarters.

The report's recommendations, which the committee estimates will raise €600 millions ($652 millions) in additional tax revenue, are grouped into three categories, referred to as basic, additional, and compensatory measures, as follows:

Basic measures

  • Limit the offsetting of losses from previous years to a maximum of 50% of taxable profit above €1 million ($1.1 million), in combination with an unlimited loss carry forward period.
  • Limit the deduction of shareholder costs to a maximum percentage of taxable profit.
  • Investigate whether the deduction of royalties should be limited to a maximum percentage of taxable profit.
  • Limit the deduction of interest and shareholder costs (and possibly royalties) jointly up to a maximum percentage of taxable profit.
  • Make the existing CFC rules more effective.
  • Eliminate the arm's length principle where its application leads to a decrease in taxable profit in the Netherlands, provided there is no corresponding upward adjustment in the other jurisdiction.
  • Limit intra-group transfers of assets from foreign to Dutch related entities in cases where there has been insufficient taxation in the foreign jurisdiction.

Additional measures

  • Strengthen the earning stripping rules by reducing the deductibility of interest from 30 percent to 25 percent of EBITDA.
  • Limit the deduction of interest used to finance participations in foreign entities.
  • Extend the scope of the interest deduction limitation when equity is converted to debt to royalty and rental payments.
  • Limit the deductibility of all types of intra-group payments received in a low-tax jurisdiction.
  • Extend the existing CFC measure to cover active as well as passive income.
  • Introduce non-conditional withholding taxes on interest and royalties.
  • Introduce a national digital services tax.
  • Introduce tax measures to encourage companies to increase wages and employment.

Compensatory measures

  • Reduce the corporate tax rate.
  • Allow costs associated with the buying and selling of a participating interest to be deducted.
  • Reduce the preferential tax rate under the innovation box regime.

UK Digital Tax Guidance Needed On Scope, Liability: CIOT

17/04/2020 09:00

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."

Netherlands Publishes Guidance On BEPS MLI

08/04/2020 09:00

On April 6, 2020, the Dutch Ministry of Finance published guidance material on the application of the BEPS Multilateral Instrument and its effect on Dutch tax treaties.

The MLI was developed through negotiations involving more than 100 countries and jurisdictions. The MLI enables countries to modify their existing tax treaties to include measures developed under the OECD/G20 BEPS project without having to individually renegotiate these treaties. The instrument will implement minimum standards to counter treaty abuse, prevent the artificial avoidance of permanent establishment status, neutralize the effects of hybrid mismatch arrangements and improve dispute resolution mechanisms.

The new document provides a brief overview of the Multilateral Instrument, including background to the MLI, how the MLI works, and when the MLI applies.

Additionally, the document provides a list of the tax treaties to which the MLI applies, and from when these changes apply, as at April 1, 2020. This list will be updated quarterly.

EU VAT Changes On Vouchers To Take Effect

27/12/2018 00:00

Significant changes to the way that businesses should account for value-added tax on vouchers will become effective on January 1, 2019.

The overhaul to the rules is intended to simplify the tax treatment of vouchers, especially where they can either be used domestically or more widely in the EU. The changes are also intended to prevent either the non-taxation or double taxation of goods or services which relate to vouchers.

The measure does not apply to vouchers issued before January 1, 2019, for which existing rules will continue to apply. The tax treatment of discount vouchers or money-off tokens will be unchanged.

Under current legislation, a customer is deemed to be receiving two supplies: a voucher; and an underlying supply of goods or services. The law changes make clear that, for VAT purposes, there will no longer be a separate supply of a voucher; only the supply of the underlying goods or services, which will be provided in exchange for the voucher at a later date.

Typically, under current rules, with single purpose vouchers, any VAT due is paid when the voucher is issued or subsequently transferred (but not when it is redeemed). With credit vouchers, any VAT due is paid when the voucher is redeemed, whereas with retailer vouchers any VAT due is paid when the voucher is transferred after issue and when it is redeemed.

The new rules will simply refer to single purpose vouchers and multi-purpose vouchers.

The new Vouchers Directive prescribes that, where the VAT treatment attributable to the underlying supply of goods or services can be determined with certainty already upon issue of a single-purpose voucher, VAT should be charged on each transfer, including on the issue of the single-purpose voucher. The actual handing over of the goods or the actual provision of the services in return for a single-purpose voucher should not be regarded as an independent transaction.

For multi-purpose vouchers – simple defined as one which is not a single purpose voucher – VAT should be charged when the goods or services to which the voucher relates are supplied. Against this background, any prior transfer of multi-purpose vouchers should not be subject to VAT.

Member states have had until December 31, 2018, to transpose the EU Vouchers Directive into national law (Council Directive (EU) 2016/1065 of 27 June 2016 amending Directive 2006/112/EC).

Greece To Cut Corporate Tax

26/12/2018 00:00

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.

UK Legislates To Close Insurance VAT Loophole

20/12/2018 00:00

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.

France To Levy Digital Tax Starting Jan 2019

19/12/2018 00:00

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.

IRS Issues Proposed Regulations On BEAT

17/12/2018 00:00

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.

Ukrainian Corporate Tax Reform Plans Shelved

13/12/2018 00:00

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.

Belgium Reminds Traders Of Upcoming VAT Deadlines

12/12/2018 00:00

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.

ECJ Rules UK Can Unilaterally Ditch Brexit Plans

11/12/2018 00:00

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.