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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.

Philippines To Soon Launch Tax Amnesty

12/19/2018 12:00:00 AM

Lawmakers in the Philippines have endorsed plans for a tax amnesty scheme that will cover estate taxes, general taxes, and delinquent accounts, covering liabilities up to December 31, 2017.

The Senate on December 13, 2018, ratified the bicameral conference committee report on the bill. I t now requires signature from President Rodrigo Duterte to become law.

Taxpayers will be allowed one year to regularize their general tax affairs, and two years to settle estate taxes. Taxpayers can opt to either pay two percent of total assets or five percent of net worth, the Government said.

It said: "The bill also covers an amnesty on delinquencies. Taxpayers can avail of 40 percent of the basic tax for delinquencies and assessments which have become final and executory, 50 percent for cases subject of final and executory judgment by the courts, and 60 percent for those subject of pending criminal cases."

Disclosures will be treated confidentially and those making disclosures will be immune from prosecution and penalties, it added.

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.

Canadian Tax Regime To Be Enhanced From 2019

12/26/2018 12:00:00 AM

Canada's small business tax rate will be reduced from 10 percent to nine percent from January 1, 2019, as part of a suite of new year tax changes.

The rate was previously reduced from 10.5 percent in January 2018.

The federal Government said that, thanks to this reduction, the combined federal, provincial, and territorial average income tax rate for small business will be 12.2 percent. It said this rate is the lowest in the G7 and the fourth lowest among members of the OECD. The measure should save small businesses up to CAD7,500 (USD5,556) in federal taxes a year.

The taxation of non-eligible dividends – generally dividends distributed from corporate income taxed at the small business rate – will be adjusted to reflect the reduction in the small business rate.

Canada's Fall Economic Statement also included new write-off and investment incentives, to be effective from January 1, 2019.

The Government will allow businesses to immediately write off the full cost of machinery and equipment used for the manufacturing and processing of goods, as well as the full cost of specified clean energy equipment. It will introduce an Accelerated Investment Incentive, to allow businesses of all sizes and in all sectors to write off a larger share of the cost of newly acquired assets in the year the investment is made.

Other tax changes taking effect in 2019 include:

  • Measures to limit the ability of Canadian-controlled private corporations holding significant passive investments to benefit from the small business tax rate, and to restrict Canadian-controlled private corporations from obtaining refunds of taxes paid on investment income while distributing dividends from income taxed at the general corporate rate;
  • As part of the phase-out of the accelerated capital cost allowance rate for mining, the percentage of the additional allowance that a taxpayer can claim will be reduced from 80 percent to 60 percent;
  • Eligible oil and gas corporations will generally no longer be able to treat the first CAD1m of Canadian Development Expenses as Canadian Exploration Expenses when renounced to shareholders under a flow-through share agreement;
  • The tax exemption for insurers of farming and fishing property will be eliminated; and
  • The goods and services tax/harmonized sales tax (GST/HST) treatment of investment limited partnerships will be brought into line with the GST/HST treatment of other investment plans such as mutual funds, segregated funds, and pension plans.

EU VAT Changes On Vouchers To Take Effect

12/27/2018 12:00:00 AM

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).