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Netherlands Allows More Time To Pay Frozen Tax Debts

02/10/2020 00:00

The Dutch Government has announced that businesses may further delay payment of certain tax dues that were frozen in response to the COVID-19 pandemic.

Under a scheme put in place earlier this year, businesses were able to request an automatic three-month deferral of numerous taxes (income tax, the health insurance levy, corporate tax, payroll taxes, and VAT), providing a request was made by October 1, 2020.

Originally these amounts were to be repaid starting January 1, 2021, over a 24-month period. The Government has now announced that businesses will be allowed 36 months to pay the amounts and will be required to do so only from July 1, 2021.

Interest on tax debts will remain at 0.1% until December 31, 2021, the Government has confirmed.

Turkey Cuts Tax On Forex Transactions

02/10/2020 00:00

Turkey has reversed an increase to the country's banking and insurance transactions tax (BSMV) on foreign currency and gold purchases.

Under a Presidential Decision published in the Official Gazette on September 30, 2020, BSMV on foreign currency and gold purchases was lowered from 1% to 0.2%.

The tax was previously increased from 0.2% to 1% from May 24, 2020.

Certain transactions are exempt from the tax, including forex transactions between banks and authorized institutions, foreign exchange sales to the Treasury and the Ministry of Finance, and forex sales by banks to borrowers with foreign currency loans.

UAE Explains Updated Economic Substance Rules

01/10/2020 00:00

The United Arab Emirates Ministry of Finance has highlighted changes made to the territory's rules on economic substance.

The UAE adopted new economic substance regulations in 2019 in Cabinet Resolution No. 31 of 2019. These regulations provide that a company engaged in one of a number of specified sectors must have sufficient economic substance in the territory to access the territory's tax regime. The changes were in response to pressure from the EU on a number of territories, following recommendations from its EU Code of Conduct Group, and apply for financial years starting on or after January 1, 2019.

The key activities identified by the European Commission Code of Conduct Group are: banking, insurance, fund management, financing and leasing, shipping, intellectual property, collective investment vehicles, and holding companies that generate income from any of these key activities.

In August 2020, the UAE published Cabinet Resolution No. (57) of 2020, which replaced and repealed Cabinet Resolution No. 31 of 2019, overhauling the territory's economic substance regime.

In a statement released on September 23, 2020, the Ministry of Finance explained the main changes. MoF Undersecretary Younis Haji Al Khoori said: "This resolution resulted from constructive consultations undertaken by the UAE with its partners in the European Union and the OECD. This reaffirms the UAE's commitment to adhere to tax policies, apply international taxation standards, and address tax evasion."

The UAE Ministry of Finance stated:

"Under [Cabinet Resolution No. (57) of 2020], the UAE Federal Tax Authority (FTA) has been appointed as the National Assessing Authority for the purposes of the UAE Economic Substance Regulations. In this capacity, the FTA will be primarily responsible for assessing whether the Emirati establishments and companies have met the requirements of the Economic Substance Test. The regulatory authorities will continue to be responsible for the collection and verification of information regarding their Licensees and shall assist the FTA in carrying out its role as the National Assessing Authority."

"According to the resolution, the definition of a Licensee has been amended to be limited to juridical persons and unincorporated partnerships that are registered (whether by way of commercial/trade license or other form of permit) to carry out a Relevant Activity. Natural persons, sole proprietorships, and other business forms that are not juridical entities are no longer within the scope of the UAE economic substance regulations."

"The UAE Economic Substance Regulations provides a list of entities that are exempt from the requirements to file an ESR Report and meet the Economic Substance Test. The 'Exempted Licensees' include the UAE companies that are tax resident outside of the UAE and Investment Funds and their underlying SPVs / investment holding entities. Wholly UAE resident-owned businesses that are not part of a multinational group and that only carry out business activities in the UAE, as well as UAE branches of a foreign company – if the Relevant Income of the branch is subject to tax in the foreign jurisdiction - are also included. UAE companies that are majority (51 percent or more) owned by the UAE government are no longer exempt from the UAE Economic Substance Regulations."

"The definition of a 'Distribution and Service Centre Business' was also amended, and currently includes businesses that purchase raw materials or finished products from a foreign group company and distributes them to related or unrelated parties in the UAE or elsewhere, irrespective of whether such raw materials or finished products are imported into the UAE; and/or businesses that provide services to a foreign group company, without the previous requirement that the provision of services is in connection with the foreign group company's business outside the UAE."

Finally, the MOF statement clarified the definition of a "High Risk Intellectual Property Licensee" for the purposes of the regulations, as "an Intellectual Property Business that meets all the following conditions: the business did not create the Intellectual Property Asset; the business acquired the Intellectual Property Asset from either a connected person or in consideration for funding research and development by another person situated in a foreign jurisdiction; the business licenses sold the Intellectual Property Asset to a Connected Person, or earns separately identifiable income from a Foreign Connected Person in respect of the use or exploitation of the Intellectual Property Asset."

France To Cut Business Taxes

01/10/2020 00:00

French Minister of Finance Bruno Le Maire presented the 2021 Finance Bill to parliament on September 28, 2020, which includes provisions to reduced taxes on production and plans to reduce the corporate tax rate next year.

A statement released alongside the Finance Bill confirmed the Government's plans to lower the rate of corporate tax to 25% by 2022. It said the rate will drop to 27.5% for large companies and to 26.5% for companies with a turnover of less than EUR250m (USD293m) from 2021. The reduced rate of 15% is to be maintained for SMEs, it said.

As announced by the Government in early September, the 2021 Finance Bill will halve the burden of three local level taxes. These are the company value-added contribution (CVAE) and the businesses property contribution (CFE), which collectively make up the Territorial Economic Contribution (CET), and also the property tax on buildings (TFPB).

Currently, companies whose CET liability is greater than 3% of their added value can apply for CFE tax relief. The Finance Bill reduces the cap to two percent.

The Finance Bill also includes proposals to introduce a VAT group regime, enabling groups of companies to be represented by a single entity for VAT purposes and disregard (for VAT purposes) transactions between members.

Additionally, a further seven low-yield taxes will be abolished by the 2021 Finance Bill, following the repeal of 26 such taxes in 2019 and 20 in 2020.

UK Releases Construction VAT Reverse Charge Guidance

30/09/2020 00:00

On September 24, 2020, HM Revenue and Customs released in-depth guidance on the introduction of the VAT reverse charge mechanism on the supply of building or construction services.

The UK tax agency on September 24 released three guides: one general, in-depth guide titled "VAT Reverse Charge Technical Guide"; a guide on how to account for VAT for buyers ("How to use the VAT reverse charge if you buy building and construction services); and a guide for suppliers of building and construction services subject to the reverse charge ("How to use the VAT reverse charge if you supply building and construction services").

The new reverse charge for construction and building services is being introduced from March 1, 2021. Originally due to be in place from October 2019, the measure was previously delayed to October 2020.

Under the measure, a VAT-registered business that supplies certain construction services to another VAT-registered business for onward sale will be not be required to account for VAT, but must issue an invoice stating that the service is subject to a domestic reverse charge.

The recipient of the supply must account for the VAT due on the supply through its VAT return, instead of paying VAT to the supplier. The recipient may also recover that VAT amount as input tax, subject to the normal rules for claiming credit.

For businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their sub-contractors in writing that they are end users or intermediary suppliers.

By switching the obligation to account for VAT from the seller to the recipient, the reverse charge is intended to ensure that another trader's VAT is never passed up the supply chain, thereby eliminating the potential for the supplier to disappear without remitting the tax collected. The reverse charge has been found to be particularly effective in tackling missing trader fraud and other permutations of the scheme.

Unlike other types of reverse charge, the value of such reverse charge construction and building services will not count towards the VAT registration threshold.

Netherlands Invites Input On New Dividend Withholding Taxes

29/09/2020 00:00

On September 25, 2020, the Dutch Ministry of Finance launched a consultation on plans to introduce a withholding tax on dividend payments to low-tax jurisdictions.

The tax is due to apply to dividend payments to countries with a corporate tax rate of under 9%, as well as to jurisdictions on the European Union's blacklist of non-cooperative territories for tax purposes, even if the country has a tax treaty with the Netherlands.

Already, the Netherlands is to introduce withholding tax on interest and royalty payments to the same jurisdictions from January 2021.

The Government has previously said that it intends to work out the details of the dividend withholding tax before its terms ends in March 2021.

The consultation period concludes on October 23, 2020, and the Government expects to present legislation to parliament in the spring of 2021.

Belgium Launches Tax Filing Season For Non-Resident Individuals

25/09/2020 00:00

The Belgian Ministry of Finance has announced that non-resident taxpayers may now file their tax return electronically for the 2020 tax year.

Returns are due from Belgian taxpayers living overseas and those who are working in Belgium temporarily who have earned income from Belgium that is taxable under its domestic laws. The deadline for electronic filing is December 3, 2020.

The Ministry of Finance said that it will announce the deadline for the filing of paper tax returns shortly and will dispatch these in October 2020.

Germany Issues EU Presidency Tax Priorities

23/09/2020 00:00

On September 22, 2020, Germany provided further details about the government's tax policy priorities for its presidency of the European Union.

The new document fleshes out the tax proposals included in Germany's program for the presidency released earlier this year.

The document says the EU will seek to implement the new recommendations from the OECD on the taxation of the digital economy, including the reallocation of taxing rights and the introduction of an effective global minimum corporate tax.

While the OECD's recommendations are unlikely to be implemented in the EU before the end of Germany's six-month presidency on December 31, 2020, the document states that Germany wants use its presidency to "pave the way" for the introduction of uniform minimum tax rules.

Germany is also seeking to update the mandate of the Code of Conduct Group on Business Taxation, to "reflect its diverse responsibilities." Established in 1997, the Code Group was established to monitor harmful tax regimes in the EU, although its remit has since expanded to cover harmful tax regimes in third countries. In particular, Germany wants to update the Code Group's mandate so that it is more consistent with the final recommendations of the OECD's BEPS Action Plan, released in October 2015.

Additionally, Germany intends to take forward the European Commission's proposal to introduce a new Directive on Administrative Cooperation (DAC7), which will set out a framework for member states to automatically exchange the information they receive on the taxable activities of business users of online platforms. The German presidency will also seek to strengthen existing rules on administrative cooperation to allow for the introduction of joint tax audits.

Finally, Germany will continue to push for an EU financial transactions tax (FTT), based on the existing French rules. Under proposals issued in January 2020, this would entail a tax of no less than 0.2 percent being imposed on the purchase of shares in domestically listed companies with a market capitalization in excess of EUR1bn (USD1.2bn). 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.

According to the document, the German Presidency hopes to negotiate a political agreement between participating member states allowing for the legislative process to introduce an FTT to begin. 10 member states are still discussing the FTT on the basis of enhanced cooperation, a legislative mechanism used when the required consensus on proposed EU laws cannot be reached. These member states are Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia, and Spain.

UK To Collect Interest On Overdue Digital Services Tax

22/09/2020 00:00

The UK Government on September 16, 2020, tabled The Taxes (Interest Rate) (Amendment No. 2) Regulations 2020, which will enable HM Revenue and Customs to collect or pay interest on overpaid or underpaid digital services tax liabilities.

The UK introduced its DST on April 1, 2020, at a rate of 2%. It applies to revenue generated by search engines, social media platforms, and online marketplaces, to revenues from those activities that are linked to the participation of UK users. It applies only to groups that generate global revenues from in-scope business activities in excess of GBP500m (USD659m) per year. Businesses do not have to pay tax on their first GBP25m of UK taxable revenues.

The new Regulations, which are expected to enter into force on October 14, 2020, provide for the following rates of interest on overpaid or unpaid DST:

  • The rate of interest will be the reference rate less 0.25%, or 0.5% if greater, for DST paid before the required due date;
  • The rate of interest will be the reference rate less 1%, or 0.5% if greater, for overpaid DST;
  • The rate of interest will be the reference rate plus 2.5%, for underpayments of DST liability.

In all cases, the reference rate is the official bank rate as determined by the most recent meeting of the Monetary Policy Committee of the Bank of England.

UAE To Allow Loans Secured By Movable Property

22/09/2020 00:00

The United Arab Emirates has released a new law that would allow businesses to use movable property to secure bank and commercial loans.

The UAE Government said Federal Law no. 4 of 2020, on Securing Interest with Movable Property, would enable companies operating in various business sectors, especially SMEs, to benefit from their movable properties to secure their bank and commercial loans. The move, it said, is intended to strengthen the UAE's global competitiveness and the ease of doing business there.

The UAE is considering the creation of an electronic registry in the country to record assets to ensure project financing. This register would allow the use of tangible and intangible movable property to secure loans, the Government said.

Cyprus Adds To Guidance On Calculation Of NIDs

21/09/2020 00:00

The Cyprus Tax Department has released ten-year government bond yield rates for five new territories, to support businesses in calculating claims for Cyprus's Notional Interest Deduction. The rates are for Bermuda, Denmark, Jordan, Portugal, and Switzerland.

Background

The NID concession was introduced in 2015 to provide tax relief for businesses using equity, rather than debt, to finance their investments.

The NID deduction is available to Cyprus tax-resident companies and permanent establishments of non-Cyprus tax resident companies which carry on business.

The NID is an annual deduction which is calculated as: the Reference Interest Rate (RIR) multiplied by New Capital (NC) that belongs to the company that is used for carrying on the company's activities. The deduction is capped at 80% of a company's taxable income, potentially enabling companies to reduce the corporate tax rate they face in Cyprus from 12.5% to 2.5%.

The RIR is fixed for each tax year and is the 10-year government bond rate of return (on December 31 of the immediately prior tax year) of the State in which the NC is invested by the business plus a three percent premium. From January 1, 2020, this three percent premium was increased to a five percent premium.

As a minimum, the lowest rate that the RIR may be is the Cyprus 10-year Government bond rate of return plus the applicable premium.

The RIR is based on the yield on bonds in the official currency of the relevant state of investment. Where the asset is denominated in a currency other than the official currency of the relevant State of investment (e.g. an investment is made in an asset located in State A denominated in the currency of State B) and the relevant State of investment has issued bonds in that other currency (e.g. State A has issued Government bonds denominated in B-currency) then the RIR will be based on the yield on bonds in that other currency.

Tax agency announcement

To support businesses to calculate the quantum of the NID, the Government has now released 10-year bond rates for Bermuda, Denmark, Jordan, Portugal, and Switzerland. For Estonia, it said there was no available government bond as at December 31, 2019.

France Lowers Threshold For Tourist VAT Refunds

21/09/2020 00:00

France has cut the amount that non-EU tourists must spend to claim back the VAT on their purchases.

Previously, VAT refunds would be available for those spending more than EUR175. Under the change, VAT refunds will be available where a non-EU taxpayer purchases goods for EUR100.01 or more from participating retailers, subject to compliance with the other requirements.

The change was introduced in Order of July 23, 2020, published in the French Official Gazette on September 17, 2020.

Cyprus, US To Begin Exchanging CbC Reports

18/09/2020 00:00

Cyprus has announced that a deal for the exchange of country-by-country reports between the territory and the US is expected to become effective and cover reporting years starting on or after January 1, 2020.

Secondary filing of CbC reports in Cyprus will therefore be necessary for reporting years starting on or after January 1, 2019, and before January 1, 2020.

On the obligation to notify the Cypriot authorities of which entity will file a report, the Cyprus tax authority said: "Where notifications for reporting fiscal years starting on or after January 1, 2019, and before January 1, 2020, have been filed in Cyprus by Cypriot Constituent Entities of MNE Groups which are affected by this announcement, such notifications must be revised (if required) in accordance with this announcement. If such notifications are revised by December 31, 2020, no penalties will be imposed for the Reporting Fiscal Year starting on or after January 1, 2019, and before January 1, 2020."

Netherlands Cancels Corporate Tax Rate Cut

17/09/2020 00:00

The Dutch Government has decided to cancel a planned decrease in the corporate tax rate in its 2021 Tax Plan.

The Tax Plan, announced on September 15, 2020, maintains the headline corporate tax rate at 25%. This reverses a previous proposal, announced in November 2019, to reduce corporate tax to 21.7 percent in 2021. However, corporate tax for small companies will be cut from 16.5% to 15% as previously planned. This will apply from 2021 on profits up to EUR245,000 (USD290,000), up from EUR200,000 currently. This threshold will increase further, to EUR395,000, in 2022.

The Tax Plan will reduce the scope for companies to offset losses from 2021, while the rules surrounding hybrid mismatch arrangements will be tightened. The Government also intends to explore changes that will make the tax treatment of debt and equity more equal, which could entail a strengthening of the limitation on the deduction of interest expenses.

The Tax Plan also includes plans for a carbon tax from January 1, 2021, at an initial rate of EUR30 per tonne. This will apply to industrial production and waste incineration and will increase at a rate of EUR10.56 per year until 2030, when the tax will reach EUR125 per tonne of carbon dioxide emitted.

A key personal income tax measure in the Tax Plan is a proposal to increase the tax rate on savings and investment income ("box 3" income) from 30 to 31 percent from 2021. However, a tax exemption will be provided for savers with assets of up to EUR50,000. Further, the basic income tax rate will fall from 37.35 to 37.10 percent in 2021.

Finally, the tax allowance for self-employed taxpayers will be reduced at a faster rate than originally planned so that it reaches EUR3,240 in 2036, instead of EUR5,000 by 2028. However, the Government says that the effect of this measure will be offset by improvements to the employment tax credit and changes to the income tax rate.

Switzerland To Draft New Customs Tax Act

16/09/2020 00:00

On September 11, 2020, the Swiss Federal Council launched a consultation on proposals for the total revision of the customs system.

In 2018, Switzerland began the "DaziT program" to modernize the Federal Customs Administration (FCA). Under the initiative, which will run until 2026, customs, tax, and duty collection processes are being simplified, harmonized, and fully digitalized. The aim is to strengthen the competitiveness of Switzerland as a business location and to increase security at the border.

The FCA will ultimately be transformed into a new organization, the Federal Office for Customs and Border Security.

Alongside the creation of the new organization, Switzerland is redrafting its Customs Act into a new Customs Tax Act and developing a new legal framework for the new authority. Among other things, the new Customs Tax Act will standardize all processes for the collection of taxes and for the control of the cross-border movement of goods and people by the new authority. Once revised, the Act will more concisely govern customs duties, the determination of these duties, and penalty provisions.

The consultation will close on December 31, 2020.

Russia's Cabinet Approves Maltese DTA Amendments

15/09/2020 00:00

Russia's Government has approved wording for a draft Protocol that it will seek to conclude with Malta, to revise their double tax agreement to increase withholding tax rates at source for cross-border dividends and interest income.

The terms are set out in Russian in Order No. 2291 of September 9, 2020, which has been approved by Russia's Cabinet.

In line with the Protocol signed with Cyprus on September 8, 2020, Russia will seek to increase the withholding tax rate on dividends and interest income to 15%. A reduced five percent rate will apply in exceptional circumstances, the Russian Government said.

Russia is reviewing its network of double tax agreements to identify those agreements that do not permit taxation at source of dividends and interest income at at least a 15% rate. Malta and Luxembourg have already agreed to amend their pact with Russia and negotiations are said to be ongoing with the Netherlands. The Russian Government has said it intends to launch similar negotiations with Switzerland and Hong Kong.

EU Expecting COVID-19 Dent In 2020 VAT Collections

14/09/2020 00:00

The European Commission has published its latest VAT gap report, which show that EU countries lost an estimated EUR140bn (USD165.7bn) in VAT revenues in 2018, down EUR1bn in nominal terms on the year prior.

The "VAT gap" measures the difference between revenues that could theoretically be collected in EU member states and the revenues actually collected. It is a measure of the effectiveness of VAT enforcement and compliance measures in member states, estimating revenue lost to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies, and miscalculations.

Paolo Gentiloni, the Economy Commissioner, said: "Today's figures show that efforts to shut down opportunities for VAT fraud and evasion have been making gradual progress – but also that much more work is needed. The coronavirus pandemic has drastically altered the EU's economic outlook and is set to deal a serious blow to VAT revenues too."

The 2018 VAT gap of EUR140bn equates to a total revenue loss across the EU of 11 percent. The Commission said the pace at which member states are closing the VAT gap has slowed but it is expected to still have declined in 2019. However, as a result of the COVID-19 pandemic, the Commission is expecting a considerable increase in the VAT gap in 2020, to about EUR164bn or 13.7%.

In 2018, the Policy Gap remained stable. This is the amount of revenue that is lost due to reduced rates, zero rates, and exemptions. For the EU overall, the average Policy Gap level was 44.24%. Of this, in 2018, 10.07 percentage points were due to the application of various reduced and super-reduced rates (the Rate Gap) and 34.17 were due to the application of exemptions without the right to deduct.

In 2018, Romania again recorded the highest national VAT gap, at 33.8%. It was followed by Greece (30.1%) and Lithuania (25.9%). The smallest gaps were seen in Sweden (0.7%), Croatia (3.5%), and Finland (3.6%). In absolute terms, the highest VAT gaps were recorded in Italy (EUR35.4bn), the UK (EUR23.5bn), and Germany (EUR22bn).

21 countries saw their VAT gaps decrease compared with 2017. The most significant drops were in Hungary, Latvia, and Poland. At the other end of the scale, the largest increase in the national VAT gap was in Luxembourg, and there were marginal increases in Lithuania and Austria.

In July 2020, the Commission announced plans for a Tax Action Plan. It intends to propose changes to the VAT Directive, with the objective of moving towards a single EU VAT registration system. It will present a legislation proposal to amend outdated VAT provisions on financial services, and will update the VAT rules for the platform economy.

Cyprus, Russia Agree Tax Hike On Cross-Border Dividends, Interest

11/09/2020 00:00

Russia's Ministry of Finance has announced that it signed a Protocol to amend its double tax agreement with Cyprus on September 8, 2020.

The Protocol will increase the withholding tax at source to 15% for dividends and interest income. The Ministry said ratification should be completed by the end of this year so that the provisions of the Protocol may apply from January 1, 2021.

The Russian Government confirmed the agreement contains concessions agreed earlier with the Cypriot Government. An earlier statement from the Cypriot Government, in relation to withholding tax on interest and dividends, said that the two parties had agreed: "[...] the reduction of the said withholding tax (to nil or five percent as appropriate) of regulated entities, such as pension funds and insurance undertakings as well as listed entities with specific characteristics. Additionally, exemption from the said withholding tax applies on interest payments from corporate bonds, government bonds, and Eurobonds. The Cypriot side has also secured the maintaining of zero withholding tax on royalty payments."

Russia is reviewing its network of double tax agreements to identify those agreements that do not permit taxation at source of dividends and interest income at least a 15% rate. Malta and Luxembourg have already agreed to amend their pact with Russia and negotiations are said to be ongoing with the Netherlands. The Russian Government has highlighted that it intends to launch similar negotiations with Switzerland and Hong Kong.

France Enhances COVID-19 Tax-Free Bonus Scheme

10/09/2020 00:00

The French tax authority has announced that it will modify and extend a scheme that allows employers to pay workers tax-free bonuses.

As part of the Government's fiscal response to COVID-19, firms can pay an exceptional bonus to workers that is exempt from income tax and social security contributions. The scheme, which expired on June 30, 2020, will be extended to bonuses paid out until December 31, 2020.

Subject to complying with the rules, firms can offer a tax-exempt bonus of EUR1,000 (USD1,180) to employees. Under changes to the scheme, this cap has been increased to EUR2,000 if a profit-sharing arrangement is established by the end of the year and before any payment is made.

A tax-free bonus may be paid only to those employees whose average monthly income in the past 12 months was not more than three times the minimum wage.

Among other conditions, the exceptional bonus must also not replace pay and must be paid in addition to any bonuses agreed as part of a salary agreement or employment contract.

UK Reviewing VAT Group Rules

09/09/2020 00:00

The UK Government has recently issued a call for evidence from UK VAT groups on future policy reform.

Multinationals typically form VAT groups to simplify administration of VAT within a group and to benefit from transactions between individual members being outside the scope of VAT. Another benefit is that forming a VAT group speeds VAT recovery, as input tax credits can immediately be set off against the output tax liability of another group member, rather than having to apply and wait for a VAT refund.

VAT groups file a single VAT return through the group's representative member, which is also responsible for making VAT payments and receiving refunds.

The purpose of the call for evidence - titled "VAT Grouping - Establishment, Eligibility, and Registration" – is to gather the views of businesses that utilize VAT grouping provisions, and other interested parties, on how these affect them and the wider business environment.

The Government said the exercise is intended to gather information and views on the current UK provisions, and views on provisions that have been adopted by other countries. It is intended that responses received will feed into future policy direction.

This call for evidence will examine three distinct areas of VAT grouping:

  • The establishment provisions;
  • A proposal for compulsory VAT grouping; and
  • Grouping eligibility criteria for businesses currently not in legislation, including limited partnerships.

From November 1, 2019, the eligibility criteria to join a VAT group was extended to include individuals, partnerships and Scottish partnerships, provided they control all other members of the VAT group. Although grouping eligibility criteria is examined in the call for evidence, the UK Government said evidence is only being sought on the eligibility of particular bodies rather than eligibility in general.

The document references the impact of two rulings on UK groups: the European Court of Justice's ruling in Skandia America Corp. (USA), Filial Sverige v. Sweden (case C-7/13), released on September 17, 2014, and the European Court of Justice's ruling in Larentia + Minerva mbH & Co. KG v. Finanzamt Nordenham (C-108/14), released on July 16, 2015.

Following on from an earlier consultation immediately after the Skandia ruling, the UK Government is again seeking views on how the Skandia ruling has impacted UK VAT groups. In particular, the consultation considers the UK's application of "whole establishment" provisions, under which all "fixed establishments" (or "branches") of the eligible person, whether in the UK or abroad, are considered to be part of a single eligible person.

This contrasts with other countries' "establishment only" provisions, which the UK does not utilize. These provide that where an entity has fixed establishments in multiple jurisdictions, it is only the establishment in the country in which the VAT group is based that can be part of that VAT group.

Respondents have been asked to comment on the impact of the potential adoption of "establishment only" provisions and the benefits of the UK's current "whole establishment" provisions.

France Planning EUR20bn In Business Tax Cuts

08/09/2020 00:00

The French Government has announced proposals to cut taxes on production by EUR20bn (USD23.7bn) in 2021 and 2022.

Tax cuts worth EUR10bn per year will be introduced with effect from January 1, 2021.

Namely, the Government will halve the burden of three local level taxes. These are the company value-added contribution (CVAE) and the businesses property contribution (CFE), which collectively make up the Territorial Economic Contribution (CET), and also the property tax on buildings (TFPB).

Companies whose CET liability is greater than 3% of their added value can apply for CFE tax relief. The package reduces the cap to 2%.

The measures were included in an economic stimulus plan unveiled by the Government on September 3, 2020. They will be included in the Finance Bill for 2021, which is due to be presented to the Council of Ministers by the end of September 2020, before being considered by parliament in early October.

Belgium Confirms Upcoming Filing Dates For Individuals

04/09/2020 00:00

The Belgian Ministry of Finance has confirmed that the deadline for submitting personal income tax returns for flat-rate taxpayers is December 11, 2020.

The December 11, 2020, deadline applies to returns submitted both electronically and in paper format.

The ministry also confirmed that the deadline by which farmers' representatives must submit an online declaration has been extended to January 11, 2021.

The following deadlines apply for non-resident persons' individual income tax returns: November 5, 2020, if submitted in paper format, or December 3, 2020, if submitted via Tax-on-web either personally or through an agent.

Malta Releases Guidance On EU Anti-Tax Avoidance Directives

04/09/2020 00:00

Malta's Commissioner for Revenue on August 31, 2020, published guidelines on domestic regulations to implement the EU's Anti-Tax Avoidance Directives.

The EU has so far released two Anti-Tax Avoidance Directives, known as ATAD 1 and ATAD 2. These included provisions member states were required to adopt as part of an EU-wide response to the recommendations of the OECD on tackling tax base erosion and profit shifting.

ATAD 1 contained five legally binding anti-abuse measures, which all member states were required to apply against common forms of aggressive tax planning.

ATAD 1 included an interest limitation rule; an exit tax, a general anti-abuse rule, controlled foreign company (CFC) rules; and measure to tackle hybrid mismatch arrangements. With the exception of the exit tax rules, these measures were required to be in place by January 1, 2019.

ATAD 2 meanwhile introduced new provisions that member states were required to put in place from January 1, 2020, alongside ATAD 1's exit tax. ATAD 2 was intended to ensure that hybrid mismatches of all types cannot be used to avoid tax in the EU, even where the arrangements involve third countries. ATAD 2 addressed hybrid mismatches with regard to non-EU countries, given that intra-EU disparities were already covered by the first ATAD.

Anti-hybrid rules are designed to prevent multinationals from accessing unfair advantages by using hybrid mismatch arrangements to exploit differences in the tax treatment of an entity or financial instrument under the income tax laws of two or more countries.

The new guidelines provide practical explanations of how to apply the rules regarding limitations on deductions for interest expenses, the operation of the exit tax, and the CFC rules.

The exit tax is intended to eliminate tax advantages for companies that develop intangible assets in the EU but move them to low or no tax territories before they generate taxable income. It is intended to enable member states to tax the value of the product before the intellectual property is shifted elsewhere.

Turkey Cuts VAT On Education Services

03/09/2020 00:00

Turkey has temporarily lowered the rate of VAT on the supply of education and training services.

Presidential Decision No. 2913, published on August 30, 2020, provides that education and training services will be subject to VAT at 1% in the period from September 1, 2020, to June 30, 2021.

Normally, these services are taxed at the 8%t VAT rate.

The measure applies to services provided within the scope of the Law on Private Education Institutions No. 5580, Social Services Law No. 2828, and Decree Law No. 573 on Special Education.

Germany Releases New VAT Manual For 2019/20

03/09/2020 00:00

On September 2, 2020, the German Ministry of Finance (BMF) announced that the official value-added tax manual for 2019/20 has been published online.

The manual provides information on all VAT compliance matters. It is intended to support taxpayers and their agents to navigate German legislation, secondary legislation, and guidance, by bringing together all excerpts relevant to a VAT subject matter in one place, with citations for where the provisions can be found in German law.

The official VAT manual is also published annually in printed format.

France Extends COVID-19 Tax Deals For Cross-Border Workers

02/09/2020 00:00

The French Ministry of Finance confirmed on August 31, 2020, that several tax agreements applying to cross-border workers during the COVID-19 crisis have been extended.

According to the ministry, the special tax agreements with Belgium, Germany, Luxembourg, and Switzerland, which clarify the tax situation of cross-border workers unable to travel to their normal place of work, have been extended until December 31, 2020.

In summary, the agreements provide that remunerated days spent working from home as a direct result of the health crisis, which would otherwise have been spent at a place of work in the other jurisdiction, will be considered to have been exercised in that other state.

As recently announced by the Luxembourg Government, France's Ministry of Finance also confirmed that, as agreed by the two states on July 16, 2020, the COVID-19 epidemic constitutes a case of force majeure for the purposes of the two countries' double tax agreement. Therefore, days worked by a frontier worker in their state of residence owing to COVID-19 restrictions on movement will not be counted towards the 29-days rule in the 2018 France-Luxembourg double tax treaty.

Under the 29-day rule, workers resident in one contracting state but employed in the other contracting state are considered taxable in the latter state when undertaking remunerated work in the state of residence, provided time spent working in the state of residence does not exceed 29 days in a year.

The suspension of the 29-day rule will also apply until December 31, 2020.

UAE To Further Expand Digital Tax Stamps Regime

02/09/2020 00:00

The United Arab Emirates has set out its plans to expand its tax stamps regime for the marking of tobacco products.

From January 1, 2019, all types of imported and locally manufactured and traded tobacco products were required to feature a digital tax stamp. On May 1, 2020, the UAE banned imports of unmarked cigarette packets, and on August 1, 2020, extended this ban to all unmarked tobacco products across all local markets.

The UAE then expanded the scope of the regime to cover all producers and importers of all types of water pipe tobacco and electronically heated cigarettes, with a ban on imports taking effect from March 1, 2020. The UAE tax authority has now confirmed that there will be a ban on supplying, transferring, storing, and possession of water pipe tobacco and electrically heated cigarettes in the UAE if they do not carry a digital tax stamp from January 1, 2021.

Further, the tax authority has launched a new mobile application, "FTA DTS", that can be used by taxpayers to check the authenticity of digital tax stamps, to tackle counterfeit goods and smuggling.

France Expands COVID-19 Tourism Sector Support Scheme

27/08/2020 09:00

The French Government is extending its COVID-19 financial support package for the tourism sector to various additional business types.

Under an amendment to the Finance Bill for 2020, micro-enterprises and SMEs in the hotel, catering, cultural, events, sports, and air transport sectors were provided with social contribution exemptions, providing certain turnover-based thresholds are met.

These exemptions apply to employer contributions paid or deferred during the period from March 1 to June 30, 2020 (for employment periods from February to May) for businesses with fewer than 250 employees.

The new measures extend the scheme to the following businesses:

  • souvenir shops;
  • shops in shopping malls and airports;
  • translation services providers;
  • certain water transport services providers;
  • sports betting companies; and
  • music labels.

France, Luxembourg Extend Cross-Border Worker Tax Deal

27/08/2020 00:00

Luxembourg and France have agreed to extend an agreement that eases tax residency rules for cross-border workers affected by COVID-19 restrictions.

Under the 2018 France-Luxembourg double tax treaty, workers resident in one contracting state but employed in the other contracting state are considered taxable in the latter state when undertaking remunerated work in the state of residence, provided time spent working in the state of residence does not exceed 29 days in a year.

In response to COVID-19, the two states agreed on July 16, 2020, that days worked by a frontier worker in their state of residence owing to COVID-19 restrictions on movement will not be counted towards the 29-days rule in the treaty.

Luxembourg's Ministry of Finance announced on August 25 that both countries have agreed to extend the validity of the agreement to December 31, 2020.

Luxembourg, Belgium Extend COVID-19 Cross-Border Worker Tax Deal

26/08/2020 09:00

Luxembourg and Belgium will extend the duration of an agreement that clarifies the tax rules for cross-border workers affected by COVID-19 restrictions.

The agreement concerns cross-border workers working from home due to the restrictions on movement imposed to contain the spread of COVID-19. The agreement was signed on May 19, 2020, and was originally due to lapse on June 30, 2020. It was then extended to cover the period to August 31, 2020.

On August 24, 2020, Luxembourg and Belgium agreed to extend the agreement to December 31, 2020.

The agreement means that, for the purposes of Article 15, paragraph 1, of the Belgium-Luxembourg double tax treaty, remunerated days spent working from home as a direct result of the health crisis, which would otherwise have been spent at a place of work in the other jurisdiction, will be considered to have been exercised in that other state.

Austria Gazettes Law For COVID-19 Tax Relief Package

26/08/2020 00:00

Austria has published in its Official Gazette legislation to give effect to tax relief measures included in a recent COVID-19 economic stimulus plan, which among other measures extends the temporary 55% top rate of personal income tax.

Under the plan, the 55% rate of tax for incomes above EUR1m (USD1.1m) will be extended until the end of 2025. Originally, this temporary tax hike was due to expire at the end of 2020. The lowest tax bracket will be reduced from 25% to 20%.

The plan also provides for a loss carry back facility, such that taxpayers may carry back a maximum of EUR5m in losses incurred in 2020 to offset against income declared in 2018 and 2019.

Additionally, ministers agreed that businesses can depreciate up to 30% of the book value of capital assets each year, from July 1, 2020. This measure has no expiry date.

Further the October 1, 2020, deadline for the payment of deferred taxes is automatically extended to January 15, 2021.

The Economic Strengthening Act 2020 (KonStG 2020) was published in the Federal Law Gazette I No. 96/2020.

German FM Scholz Optimistic About 2020 Digital Tax Consensus

26/08/2020 00:00

German Finance Minister Olaf Scholz is optimistic that an international agreement on taxing the digital economy will be reached this year.

Addressing the media following a two-day meeting of German-speaking finance ministers in Vienna, Scholz said that he is "confident" that an agreement will be concluded by the fall of 2020.

Scholz added that a multilateral agreement would help to defuse tensions between certain countries with regards to country-level digital services taxes.

Under pillar one of its digital tax work, the OECD is formulating new rules that would allocate some taxing rights to market jurisdictions, regardless of whether a supplier of digital services has a physical presence there. However, in June 2020, the United States, which disagrees with the current approach, withdrew from these negotiations.

Nevertheless, the G20 said at the end of its July meeting that it is expecting the OECD to submit a "blueprint" for new global digital tax rules at the G20's next meeting in October.

US-Swiss Agreement Published On Mandatory Binding Arbitration

25/08/2020 09:00

The US Internal Revenue Service (IRS) has released the text of an arbitration agreement between the US and Switzerland, in Internal Revenue Bulletin 2020-35, published August 24.

The Competent Authority Arrangement sets out how US and Swiss authorities will resolve double tax disputes where discussions under the Mutual Agreement Procedure fail to resolve the dispute in a timely manner.

Paragraph 6 of Article 25 of the US-Switzerland double tax agreement provides for the appointment of an arbitration panel where the two countries cannot resolve a dispute under paragraphs 1 through 5 of Article 25 of the convention (Mutual Agreement Procedure). Paragraph 7, added by a subsequent Protocol to the agreement, provides for mandatory binding arbitration.

The release of the text of the Arrangement follows recommendations from the OECD that countries add provisions to their treaties to enable taxpayers to have an issue heard by an arbitration panel where there has not been a resolution to the dispute for two years to three years. It recommended that governments also release comprehensive guidance.

Most states are adding such provisions by adopting the BEPS Multilateral Instrument. However, the US, which already has provisions for such arbitration with Switzerland, has elected to not sign the BEPS MLI and negotiate with states on a bilateral basis.

The MAP is intended to provide certainty to taxpayers that double tax disputes will be resolved in a timely manner and that double taxation will be eliminated. Enhanced Mutual Agreement Procedure (MAP) arbitration provisions are included in Part IV of the MLI, which countries may choose to adopt on a voluntary basis. Where Part IV applies to a covered tax agreement, provisions in Article 19 of the MLI will provide that a taxpayer will be able to request arbitration with respect to an unresolved MAP case when the competent authorities are unable to reach a resolution within a period of two or three years.

In the case of the US-Switzerland deal, a request for mandatory binding arbitration may be sought when a case remains unresolved after two years.

The new notice from the IRS sets out when taxpayers can request binding arbitration and the rules regarding the appointment of an arbitrator and their conduct. It includes examples of the documentation that should be completed.

The guidance provides that requests for competent authority assistance must comply with the requirements of Revenue Procedure 2015-40 or the US equivalent guidance in "Factsheet on the mutual agreement procedure" of May 2018, or any applicable subsequent guidance.

UK Treasury Rules Out Digital Tax Repeal

25/08/2020 00:00

The UK Government has dismissed speculation that it will repeal its digital services tax in a bid to secure a post-Brexit free trade agreement with the United States.

The UK Treasury released a statement dismissing claims made in the Mail on Sunday that the UK Chancellor Rishi Sunak had concluded that the tax was "more trouble than it is worth".

In a widely published response, the Treasury said: "We've been clear it's a temporary tax that will be removed once an appropriate global solution is in place, and we continue to work with our international partners to reach that goal."

The UK carried through on its pledge to introduce a digital services tax from April 1, 2020, despite pressure from the US Government. Previously the US Government said it would consider levying tariffs on UK-made goods in response but has yet to announce such measures.

The DST applies to revenue generated by search engines, social media platforms, and online marketplaces, to revenues from those activities that are linked to the participation of UK users. It applies only to groups that generate global revenues from in-scope business activities in excess of GBP500m (USD659m) per year. Businesses will not have to pay tax on their first GBP25m of UK taxable revenues.

In July, the leaders of the US Senate Finance Committee called on the US Trade Representative to "explore all available options to respond appropriately" to the UK's tax, with committee Chairman Chuck Grassley (R-IA) and ranking Democrat Ron Wyden (D-OR) saying at the time that the tax unfairly discriminates against US businesses, damages efforts to achieve a multilateral digital tax solution, and could potentially derail efforts to conclude a free trade agreement between the US and the UK.

France Launches COVID-19 Tax Settlement Scheme For SMEs

20/08/2020 00:00

France's General Directorate of Public Finance has launched a scheme that allows small companies to request a specific settlement plan for the payment of their taxes.

The scheme, included in Decree No. 2020-987 of August 6, 2020, is aimed at micro-, small- and medium-sized firms and sole traders particularly affected by the economic consequences of COVID-19.

Those claiming the relief must have started their business activity no later than December 31, 2019, and must be up to date with their tax reporting obligations. They must employ fewer than 250 employees on the date the claim is made. Their turnover for the last financial year must not have exceeded EUR50m and they must not have a balance sheet total in excess of EUR43m.

These same conditions apply to those subject to tax under the Article 233A tax consolidation regime.

The applicant must also attest to having requested from their private creditors a deferral of payment or additional financing facilities, excluding loans guaranteed by the state, for the payment of debts owed and payable between March 1, 2020, and May 31, 2020.

The settlement plan covers VAT and withholding tax due for the months of February to April 2020, which should have been paid from March to May 2020. It also covers balances of corporate tax and contribution on added value (CVAE), which was due to be paid between March and May 2020.

Tax debtors will be allowed up to 36 months to pay the tax debts.

UK Issues Final Loan Charge Guidance

20/08/2020 00:00

The UK tax authority has published final guidance on the Loan Charge regime, following the enactment of amendments in the UK Finance Bill 2019-21.

Background

The Loan Charge applies to individuals who have directly entered into disguised remuneration (DR) schemes. Specifically, it is intended to bring within the charge to tax tax-avoidance arrangements that enabled users to avoid income tax and national insurance contributions by taking salaries in the form of a loan. In reality, this loan would never be paid back.

The Loan Charge came into effect on April 5, 2019, and was to apply to all loans made since April 6, 1999, if they were still outstanding on April 5, 2019, and the recipient had not settled the tax due.

Amid concerns from lobby groups and lawmakers as to whether the charge was lawful, the Government commissioned an independent review of the loan charge in September 2019. The Government responded to the findings of the review with the announcement of a package of changes on December 20, 2019.

It decided that the Loan Charge will apply only to outstanding loans made on, or after, December 9, 2010. In addition, the Government said the Loan Charge will not apply to outstanding loans made in any tax years before April 6, 2016, where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take action (for example, by opening an enquiry).

New Loan Charge Guidance

On August 13, 2020, HMRC released an update to its policy paper "HMRC issue briefing: settling disguised remuneration scheme use and/or paying the loan charge". It also released guidance for tax agents in "Disguised remuneration settlement terms 2020", discussed in detail below.

According to the policy paper, depending on a taxpayer's circumstances, some taxpayers may be required to act before September 30, 2020.

HMRC noted most people who have used DR schemes will fall into one of five main groups, depending on their circumstances:

  • Customers who have settled with HMRC and are not due a refund (for whom no further action is needed in relation to the loan charge);
  • Customers still settling with HMRC (action required by September 30, 2020, to avoid the Loan Charge);
  • Customers who have not settled and will pay the loan charge (these persons must file a 2018-19 tax return by September 30 and pay their 2018-19 liability in full or agree a time to pay arrangement);
  • Customers who have settled and are due a refund or waiver following the independent review (HMRC will contact these persons);
  • Customers who no longer have to pay some, or all, of the loan charge but have not settled all of their use of DR schemes (these persons should refer to the August 2020 guidance for tax agents, discussed below).

The policy paper sets out how HMRC will engage with taxpayers to secure a settlement. It says taxpayers who provided the necessary information about their scheme use by April 5, 2019, and who work with HMRC to conclude a settlement by September 30, 2020, will be able to settle under terms published in 2017 and keep clear of the Loan Charge. These terms will be withdrawn after September 30, 2020, the guidance says.

Those unable to pay the Loan Charge, even after spreading it out over three years, may contact HMRC to negotiate an affordable payment plan. Those with an income of less than GBP50,000 that have no disposable assets may access a five- or seven-year payment plan without having to provide detailed financial information.

HMRC concluded: "Customers who do not wish to settle the tax due in respect of their DR schemes under our published terms have the option of taking their case before the tribunals and courts. HMRC's view is that DR schemes are a clear example of tax avoidance that do not achieve the intended tax advantage, which we are duty-bound to pursue."

"As the litigation process could take between one and 10 years, customers who adopt this course of action risk paying additional legal costs and interest."

"We will continue to progress and settle open enquiries into DR under our existing powers, including schemes that are now out of scope of the loan charge. This approach was endorsed by the independent review."

Disguised Remuneration Settlement Terms 2020

According to HMRC, the newly released 2020 settlement terms include the main features:

  • customers agree to pay Income Tax, National Insurance contributions, late payment interest, and, where relevant, Inheritance Tax charges; and
  • penalties for making an inaccurate Self Assessment return will only be charged on an exceptional basis for years up to 2018 to 2019.

According to HMRC, the main differences with the 2017 terms are:

  • Under these terms all statutory late payment interest must be paid;
  • Tax will be charged where a director's settlement liability is paid voluntarily by the employer company, and the director does not 'make good' the tax charge. This is to cover the benefit of having their tax bill paid by their employer;
  • For corporate employers, Corporation Tax relief on Income Tax and National Insurance contributions included within settlements will be allowed at a later date than under the 2017 terms. Corporation Tax relief for any contributions into arrangements such as an employee benefit trust made on or after April 1, 2017, may also be restricted to a later date or denied, because the law was amended from this date, HMRC said.

UAE Issues Guide On E-Commerce VAT Obligations

19/08/2020 00:00

The United Arab Emirates' Federal Tax Authority has released a new guide on the value-added tax rules for e-commerce and the digital economy.

Announcing the release of the E-Commerce VAT Guide (VATGEC1), the FTA highlighted that VAT is due on such supplies where they are used or enjoyed in the UAE. Non-resident suppliers must register for VAT as soon as they make supplies to UAE-resident consumers.

The guidance clarifies how the VAT law applies to the supply of goods and services provided through electronic means and how businesses should account for that VAT. The guide also sets out how businesses should determine the place of supply.

The guide states that all goods and services purchased through online sites are subject to 5% VAT if the place of supply is in the UAE, except for goods that are specifically exempt from VAT under the UAE's VAT law.

Overseas sellers transacting with consumers in the UAE should register for value-added tax as soon as they make their first supply, and collect and remit tax for business-to-consumer transactions. The reverse charge mechanism applies for business-to-business supplies of non-resident sellers, under which the UAE-based taxable person who receives the supply will be required to account for the VAT.

The guide sets out input tax recovery rules, when VAT is due, the rules where supplies are made through agents, and the scope of VAT on electronically supplied services.

Malta Extends Deadline To Establish Fiscal Unity

18/08/2020 00:00

Malta's Commissioner for Revenue (CfR) has announced an extension to the deadline for applying for fiscal unity for the 2020 year of assessment.

The August 31, 2020, deadline has been pushed forward to September 30, 2020, the CfR announced on August 14, 2020. This deadline is relevant for taxpayers whose basis year for the 2020 year of assessment ended on December 31, 2019.

Malta began accepting applications to under its new Fiscal Unity regime starting August 1, 2020.

Malta introduced the fiscal unity regime via Legal Notice 110 of 2019. Under the regime, a group can form a fiscal unit with a subsidiary, or subsidiaries, in which the principle taxpayer owns at least a 95% shareholding at the end of the preceding year of assessment. When a fiscal unit is formed, transactions between entities within the unit are disregarded for tax purposes (except transactions involving immovable property) and the income of the unit is taxable in the hands of the principle taxpayer only.

Entities must not have outstanding tax balances or outstanding filings under the Income Tax Acts, the Value Added Tax Act, or the Final Settlement System Rules to form a fiscal unit.

Typically, taxpayers seeking to register a fiscal unit should do so within six months of the end of their basis year ending. More time is being allowed for the 2021 year of assessment for businesses whose financial year ended on July 31, 2020, or earlier. Applications for these taxpayers will be accepted until January 31, 2021.

Registration of the fiscal unit should be done through the online profile of the principal taxpayer, through the CfR income tax portal.

Russia Turns Sights To Switzerland, Hong Kong Treaties

17/08/2020 00:00

Russia's double tax agreements with Hong Kong and Switzerland are next on the radar for authorities in Russia, who are seeking to ensure the country can subject to at least 15% withholding tax outbound dividends and interest payments.

In televised comments during a meeting with Russian Prime Minister Vladimir Putin, Deputy Prime Minister Alexei Overchuk said authorities are reviewing Russia's network of double tax agreements to identify those that do not permit taxation at source at at least a 15% rate.

Already, the Russian Government has negotiated to increase withholding tax rates in the agreement with Cyprus, having earlier threatened to withdraw from the deal. After reaching that compromise, Russian Deputy Finance Minister Alexey Sazanov said: "In the coming month, we also plan to complete negotiations with Luxembourg and Malta on the same terms as we offered Cyprus."

The Russian Ministry of Finance further stated: "Russia is also awaiting an official response from the Netherlands to directed proposals to revise the tax agreement in the coming weeks. If the Netherlands agrees to negotiate, they will be offered the same conditions as the Republic of Cyprus."

In his televised comments, Overchuk said the Russian Government has yet to receive a response from the Dutch Government but would follow up with it if necessary.

Unilever Concerned By Possible Dutch Exit Tax

14/08/2020 00:00

Unilever may scrap plans to overhaul its company structure if an exit tax proposed by a Dutch opposition party is passed.

Unilever has been owned through two separately listed companies, a Dutch NV and a UK PLC, since its formation in 1930. In June 2020, Unilever announced plans to unify its group legal structure under a single parent company. This was to be achieved through a cross-border merger, by means of which Unilever NV would be merged into Unilever PLC, based in the UK. Unilever PLC would continue to be incorporated in the UK and would remain UK tax resident.

Unilever disclosed in a prospectus issued on August 10, 2020, that potential changes to Dutch tax law could mean that the boards decide not to proceed with the unification proposal. The prospectus noted that a proposal for an exit tax has been introduced in the Dutch parliament by opposition party GroenLinks.

Unilever said that the measure would impose "an exit tax on certain types of transactions where, effectively, a company which is tax resident in the Netherlands and with consolidated net revenues of at least EUR750m moves to a 'qualifying state.'" This, Unilever estimates, would result in a tax bill of some EUR11bn.

Unilever noted that the passage of the bill is at present uncertain. The boards will proceed with their proposals, provided that unification remains in their best interests, the prospectus states.

Previously Unilever had considered instead unifying its structure in the Netherlands. The Netherlands had proposed abolishing tax on dividends and introducing a withholding tax on dividends paid to low-tax jurisdictions. However, in October 2018, after Unilever's board voted against the proposal, the Government dropped those plans and instead decided to target a greater reduction to its corporate tax rate.

Under existing rules, holding cooperatives are generally not subject to dividend tax in the Netherlands, unlike BVs and NVs. The Government had previously intended to abolish this difference but at the same time exempt distributions from dividend tax in cases where shareholders in a holding cooperative, BV, or NV, reside in the European Union/European Economic Area, or a jurisdiction with a tax treaty with the Netherlands, subject to a minimum five percent holding threshold.

Cyprus, Russia Reach Double Tax Agreement Compromise

13/08/2020 00:00

Russia and Cyprus have announced that they have resolved a dispute concerning the two countries' double tax agreement.

Earlier this month, the Russian Ministry of Finance announced that it would terminate the Russia-Cyprus double tax agreement, after negotiations broke down on a revision to increase tax on cross-border dividends and interest income.

In an August 3 statement, the Russian Ministry of Finance disclosed it had been engaged in discussions with its Cypriot equivalent entity with a view to amending the pact to introduce withholding tax of 15 percent at source on dividends and interest income. The Russian Ministry disclosed that the Cypriot side put forward its own proposal, which was not accepted, with the Ministry considering it would result in continued erosion of the Russian tax base. It then announced that it would terminate the treaty.

Meetings were then scheduled between Cyprus and Russia for August 10-11, 2020. It was disclosed by both states on August 10, 2020, that the two countries had agreed a compromise.

A statement from the Cypriot Government said, in relation to withholding tax on interest and dividends, that: "The Cyprus side secured, among others, the reduction of the said withholding tax (to nil or five percent as appropriate) of regulated entities, such as pension funds and insurance undertakings as well as listed entities with specific characteristics. Additionally, exemption from the said withholding tax applies on interest payments from corporate bonds, government bonds, and Eurobonds. The Cypriot side has also secured the maintaining of zero withholding tax on royalty payments."

The Cypriot Government said a Protocol to the agreement would be signed in the fall, which would apply from January 1, 2021.

Russian Deputy Finance Minister Alexey Sazanov said in a Finance Ministry statement that Russia would no longer seek to terminate the agreement. He stated: "In the coming month, we also plan to complete negotiations with Luxembourg and Malta on the same terms as we offered Cyprus."

The Russian Ministry of Finance further stated: "Russia is also awaiting an official response from the Netherlands to directed proposals to revise the tax agreement in the coming weeks. If the Netherlands agrees to negotiate, they will be offered the same conditions as the Republic of Cyprus."

France Clarifies Eligibility For COVID-19 Property Tax Reliefs

13/08/2020 00:00

The French Government has listed the businesses that may exceptionally benefit from a two-thirds reduction in local property tax.

In Article 11 of the Third Amending Finance Act (Act no. 2020-935 of July 30, 2020), the French Government announced that local governments could decide to grant, with state financial support, a two-thirds reduction in the Contribution Fonciere des Entreprises (CFE). CFE is a local property tax that is levied based on a business's turnover and the rental value of real estate assets.

The tax relief is being offered, at the discretion of local governments, to companies that were not in financial difficulty on December 31, 2019, but have been significantly affected by COVID-19 and are active in the tourism, hotel, catering, sport, culture, air transport, or events industries. Companies whose annual turnover is EUR150m or more are specifically excluded.

The relief is in addition to previously announced advance payment deferrals for businesses.

The French Government has now clarified the exact activities that businesses must be engaged in to be eligible to access the relief, in Decree no. 2020-979, published in the Official Gazette on August 6.

The list includes the following activities:

  • Travel agencies, tour operators, other reservation services, and related activities;
  • Cable cars and ski lifts;
  • Tourist trains and railways;
  • Transportation of passengers on rivers, canals, and lakes;
  • Coaches and tourist buses;
  • Maritime and coastal passenger transport;
  • Currency exchange offices;
  • Casinos;
  • Approved tax refund operators;
  • Saunas, steam baths, and solariums;
  • Hotels and similar accommodation;
  • Camp sites and parks for caravans or recreational vehicles;
  • Catering services;
  • Rental and leasing of recreational and sporting goods, including rental of pleasure boats;
  • Teaching of sports and leisure activities and cultural education;
  • Sports, recreation, and leisure activities;
  • Production of motion pictures, videos, and television programs;
  • Screening of audiovisual productions;
  • Performing arts;
  • Certain artisan crafts;
  • Museums, historic sites, and monuments and similar tourist attractions;
  • Botanical and zoological gardens and nature reserves;
  • Tour guides;
  • Photographic activities;
  • Air transport of passengers;
  • Fairs, trade shows and exhibitions;
  • Modeling agencies; and
  • Cross-Channel transport.

COVID-19: Italian Firms Allowed More Time To Pay Deferred Taxes

12/08/2020 09:00

The Italian Government will allow tax payments that were deferred during the COVID-19 lockdown to be paid in instalments over a two-year period.

The Government will permit tax payments that were suspended in March, April, and May to be paid in instalments. Half of the total owed should be paid in either a lump-sum by September 16, 2020, or in up to four monthly installments, with the first installment due by September 16, 2020. The remaining 50% of the tax owed can be paid in up to 24 monthly installments. Penalties and interest will not be charged in such cases.

Malta, Luxembourg Agree To Russian DTA Changes

12/08/2020 00:00

The Russian Government has disclosed that both Luxembourg and Malta have agreed to change their double tax agreement with Russia to increase withholding tax rates on cross-border dividends and interest income.

The announcement follows the Russian Government's decision to terminate its double tax agreement with Cyprus after talks on the same collapsed.

Russian President Vladimir Putin has instructed Russian authorities to renegotiate those double tax agreements that do not enable Russia to impose withholding tax at source of 15% on outbound dividends and interest income.

Russia's Deputy Minister of Finance, Alexey Sazanov, was quoted widely by Russian media as stating that Luxembourg and Malta agreed in principle to the treaty amendments.

Belgium Redrafts Tax Form For New COVID-19 Tax Break

11/08/2020 00:00

The Belgian Government has released a new form for SME corporate taxpayers to access tax reliefs for investments, which were enhanced in response to COVID-19.

The changes were introduced in the law of July 15, 2020, which included a third round of COVID-19 economic stimulus measures. The package included an additional 25% deduction for SMEs investing in fixed assets in the period March 12 to December 31, 2020.

Further, the law extended to two years the length of time businesses can carry forward such deductions if they cannot be fully utilized in the first year, for fixed assets acquired in 2019, from one year presently.

Following the changes, the Belgian tax authority has amended Form U 275 (deduction for investments). The Belgian tax agency is encouraging taxpayers to amend already filed U 275 filings, where appropriate, to take advantage of the changes.

France, Italy Sign COVID-19 Cross-Border Worker Tax Agreement

06/08/2020 09:00

France and Italy have signed an agreement to clarify the tax treatment of cross-border workers' income during the COVID-19 pandemic.

The agreement provides for an exceptional concession for workers who would typically carry out work in the other state but are now unable for COVID-19-related restrictions on movement. It states that days worked at home in the state of residence, on behalf of an employer located in the other contracting state, are considered as days worked in the state in which the person would have carried out their employment in the absence of COVID-19 measures.

The agreement relates to paragraphs 1 and 4 of Article 15 of the 1989 double tax agreement between France and Italy. The provisions of the agreement take effect for income earned from March 12, 2020, until August 31, 2020. It may be extended if both states agree.

Russia To Terminate Cyprus Double Tax Agreement

06/08/2020 00:00

The Russian Ministry of Finance has announced that it will seek to terminate the country's double tax agreement with Cyprus, after negotiations broke down on a revision to increase tax on cross-border dividends and interest income.

In an August 3 statement, the Russian Ministry of Finance disclosed it had been engaged in discussions with its Cypriot equivalent entity with a view to amending the pact to introduce withholding tax of 15% at source on dividends and interest income.

The Russian Ministry disclosed that the Cypriot side put forward its own proposal that was not accepted, with the Ministry considering it would result in continued erosion of the Russian tax base.

The Ministry said they would "facilitate tax-free withdrawal from the territory of the Russian Federation through Cyprus jurisdiction of significant financial resources of Russian origin."

The Ministry said termination of the agreement will deliver on calls from Russian President Vladimir Putin to ensure that payments of income overseas to low-tax territories should be taxed at least at a 15% rate.

The Ministry said: "The existing tax agreement with Cyprus provides very attractive conditions in terms of taxation. The rate for the payment of dividends to Cyprus can be reduced to 5% or 10%, and interest on loans to 0%. This is more than two times less than the corresponding rate in Russia (13-15%)."

"The Ministry of Finance proposed to colleagues in Cyprus to raise rates to 15% on both dividends and interest, but the negotiations were unsuccessful: the partners tried to dilute the effect of the initiative for the Russian treasury as much as possible with various exceptions. The Russian department was forced to begin the procedure for submitting a federal law on denunciation to the State Duma."

Turkey Temporarily Reduces VAT Rates

04/08/2020 09:00

On July 31, 2020, a presidential decree was published in Turkey's official gazette providing for a temporary value-added tax cut across numerous sectors.

Under the measure, VAT is reduced from 18% to 8% on weddings and associated services, property maintenance and repair services, various other repair services, tailoring services, and dry cleaning services, among others.

Additionally, the rate of VAT is reduced from 8% to 1% on accommodation, catering, and museum, theatre, and cinema admissions.

The VAT reductions will apply until December 31, 2020.

EU To Amend VAT Rules For Trade With Northern Ireland

04/08/2020 09:00

The European Commission has proposed changes to the EU's VAT rules in respect of Northern Ireland, in preparation for the end of the Brexit transition period with the UK.

The proposed amendment to the EU VAT Directive would introduce a special identification number for businesses in Northern Ireland. This would mean that EU VAT provisions can be properly applied to goods, in line with the Protocol on Ireland/Northern Ireland, agreed as part of the Withdrawal Agreement on the UK leaving the EU.

Under the Protocol, EU VAT legislation will continue to apply when it comes to goods traded in Northern Ireland. Goods sold and transported from Northern Ireland to the EU, and vice versa, will be treated the same as cross-border supplies of goods within the EU, including for VAT exemptions and deductions.

These provisions will not apply to supplies of services in Northern Ireland, which will be subject to UK VAT rules after the transition period ends. Supplies of goods and services made elsewhere in the UK will also be subject to UK rules for VAT.

The Commission said that these changes to the VAT Directive will require some IT adjustments from member states. It urged member states to rapidly agree to the proposal, so that it can be implemented as quickly as possible.

The VAT provisions in the Protocol are due to enter into force on January 1, 2021.

Work is ongoing on similar legal changes in the field of excise duties.

Austria To Apply Personal Income Tax Cut In September

03/08/2020 09:00

The Austrian Government has confirmed that a personal income tax cut approved by the Cabinet last month will be introduced in September.

On June 30, the Cabinet approved a tax plan, which featured a cut to the lowest income tax rate from 25 to 20 percent. According to the Ministry of Finance's announcement, the change will be introduced on September 1, 2020, and apply retroactively from January 1, 2020. Taxpayers will therefore receive backdated refunds of tax paid since January in September.

The lowest rate of income tax currently applies to income from EUR11,000 (USD12,970) to EUR18,000.

The cabinet also approved on June 30 the extension until the end of 2025 of the temporary 55 percent rate of tax on incomes above EUR1m. Originally, this temporary tax hike was due to expire at the end of 2020.

Germany To Provide Personal Income Tax Relief

30/07/2020 09:00

On July 29, 2020, the German Federal Cabinet approved a draft tax law including personal income tax relief measures.

Among the measures in the EUR12bn (USD14bn) package is an increase in the income tax exempt allowance from EUR9,408 to EUR9,696 in 2021 and to EUR9,984 in 2022.

Additionally, personal income tax brackets will be increased in 2021 and 2022 to counteract wage inflation. The extent of these increases will be based on the results of a report on the matter due to be published in the autumn of 2020.

The child tax allowance will also be raised in 2021, from EUR7,812 to EUR8,388.

UAE Sets Out COVID-19 VAT Input Tax Recovery Rules

30/07/2020 09:00

The United Arab Emirates Federal Tax Authority has released a statement clarifying input tax recovery for COVID-19-related expenses.

The statement follows an online virtual workshop for tax agents. During the workshop, the FTA clarified the criteria and procedures for recovering input tax incurred for specific expenses, including those related to the COVID-19 pandemic, marketing and entertainment expenses, vehicle expenses, and events "beyond taxation control."

The Authority clarified that with regard to the expenses associated with COVID-19, such as sterilizing workplaces and the testing of employees, these are considered general expenses. The FTA stated: "Input tax is recoverable in the event that the supplies and services made by the business are themselves taxable. In the event that the business is making taxable supplies only, the input tax is fully refundable. However, in the event that the business is making taxable and tax-exempt supplies, the input tax will be partially refundable." The FTA also stated that input tax cannot be recovered on the expenses of testing employees' families unless the employee bears the cost.

Italy To Extend VAT Split Payment Mechanism For B2G Supplies

30/07/2020 00:00

On July 24, 2020, a Council Implementing Decision was published in the official journal of the European Union authorizing the extension of Italy's value-added tax split payment mechanism scheme, applicable to contracts with public sector entities.

The mechanism, introduced in 2017, is an anti-tax evasion measure that requires government departments to pay the VAT payable under a contract directly to the state, rather than to the supplier.

The Italian Government applied for the scheme to be extended but with a narrower scope, in a letter registered with the Commission on December 4, 2019. However, in a letter registered on March 27, 2020, Italy requested that the scheme be extended in its existing form.

The Implementing Decision allows Italy to extend the scheme until June 30, 2023.

UK Considering New Online Sales Tax

28/07/2020 00:00

Alongside a review into the reform of the business rates system (commercial property tax) in the UK, the Government is looking at possible taxes that could replace or supplement the regime, including a new tax on online sales.

In a call for evidence on reform of business rates, the Government said COVID-19 may have made previously considered policy alternatives to business rates more attractive.

The call for evidence states: "Some stakeholders continue to advocate for alternative or complementary systems of taxation to business rates, as highlighted by the Treasury Select Committee's 2019 report. More recently, COVID-19 and associated public health measures have significantly affected how non-domestic property can be used. COVID-19 has also, in the near-term, increased the use of online shopping. It is too soon to tell what the lasting impact of COVID-19 might be on the non-domestic property market."

"The government will need to strike the right balance between continuing to raise the revenue necessary to fund essential public services and supporting the economic recovery. Therefore, the Government is again seeking views on the case for the introduction of alternative taxes to either replace or complement the business rates system. Any move towards the introduction of a new tax would be a long-term proposition."

On options, the Government's report revisits previously proposed alternative taxes, or changes to existing taxes, including an online sales tax, or increased rates of VAT or corporation tax. The Government acknowledged, though, that, "each proposal has potentially significant challenges, some practical or administrative, and others more fundamental."

"In light of the advantages of property taxes set out above, this call for evidence focuses on an alternative means of taxing non-residential property as a potential replacement for business rates and, due to the prevalence of concerns about online retail trends and divided public opinion, an online sales tax."

"Given that an online sales tax would be unlikely to raise revenue sufficient to replace business rates, we expect that any such tax would exist alongside business rates."

The report says: "Some commentators argue that the business rates system creates a distortion within the retail sector, favouring online retailers that can operate without the high-value properties that are a feature of more traditional retail. This has led to proposals that the government should levy a tax on companies based on their online sales, and that this could be used to fund business rates reductions for retail properties."

The report adds: "There is also a risk that an online sales tax could, subject to its scope, be distortive and incentivise the bundling together of certain online purchases of goods and services; any new tax should maintain purchasing neutrality and not incentivise this consumer behaviour."

Calling for input on the measure, the Government appears to express its support, stating: "Historical trends in online retail sales, and the more recent increases driven by COVID-19, suggests that while an online sales tax would not replace business rates, it could still provide a sustainable and meaningful revenue source for the government."

"While the scope of an online sales tax would need further consideration, it could be levied on the revenues that businesses generate from online sales to UK customers, and focused on sales in direct competition with those carried out through physical premises. Given divided opinion on this idea, the government is seeking evidence on the potential effects."

Input is sought by September 18, 2020.

UAE Issues VAT Guidance On Exported Services

24/07/2020 09:00

The United Arab Emirates' Federal Tax Authority has released VAT Public Clarification no. 019, clarifying the rules surrounding the zero-rating of exported services.

The guidance is intended to explain the FTA's interpretation of domestic VAT law relating to the residency and location of the recipient of services and specifically the conditions that must be satisfied in order for a supply of services cross-border to be zero-rated.

Under Article 31(1)(a)(1) of the Executive Regulation on VAT, a supply may only be zero-rated where the recipient of services does not have a place of residence in an Implementing State (one of the Gulf Cooperation Council states that has introduced VAT in line with the regime in the UAE) and is outside the UAE at the time the services are performed.

The guidance highlights that the UAE does not recognize any other state as an "Implementing State" for the purposes of VAT. Therefore, the zero rate will apply where the recipient does not have a place of residence in the UAE.

According to the guidance, in determining whether these conditions are met, the supplier must consider all available facts in order to identify the residency status and the location of the recipient. Where the recipient has multiple establishments, the supplier must also determine which establishment of the recipient is most closely related to the supply.

The 11-page Public Clarification, released in English and Arabic, provides the FTA's views regarding the interpretation of these two conditions and includes examples.

Luxembourg And France Sign COVID-19 Cross-Border Worker Agreement

24/07/2020 09:00

On July 16, 2020, Luxembourg and France signed agreements intended to clarify the taxation of frontier workers affected by the COVID-19 virus.

Under a clarificatory agreement signed pursuant to the 2018 France-Luxembourg double tax treaty, workers resident in one contracting state but employed in the other contracting state are considered taxable in the latter state when undertaking remunerated work in the state of residence, provided time spent working in the state of residence does not exceed 29 days.

Under a special agreement also signed on July 16, the competent authorities of both states consider that the COVID-19 outbreak constitutes a case of force majeure.

In practice, this means that the 29-day rule will not be taken into account if a frontier worker is required to work in their state of residence due to restrictions imposed to contain the spread of COVID-19.

UK Confirms Plans To Expand Making Tax Digital

24/07/2020 09:00

The UK Government has announced plans to expand its Making Tax Digital project from 2022.

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.

The UK Government has now announced that VAT-registered businesses with a taxable turnover below GBP85,000 (those who have voluntarily registered) will be required to follow Making Tax digital rules for their first return starting on or after April 2022.

The Government has also announced plans to roll out MTD for income tax for accounting periods starting on or after April 6, 2013. This will impact businesses, self-employed people, and landlords.

US Businesses Urge Against Starting A Digital Tax 'Trade War'

23/07/2020 09:00

The United States Council for International Business has called on US authorities to focus its efforts on working with other countries to arrive at an international tax solution to the digitalized economy, rather than tackling countries' unilateral responses.

On June 2, 2020, the United States Trade Representative announced the launch of investigations into digital services taxes (DSTs) that have been adopted or are being considered by several of America's trading partners - namely, by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.

The USTR said that the investigations will be conducted under Section 301 of the 1974 Trade Act, which gives the USTR broad authority to investigate and respond to a foreign country's action which may be unfair or discriminatory and negatively affect US commerce. The US is concerned the taxes are extraterritorial, tax turnover and not profits, and "penalize" particular technology companies for their commercial success, affecting US taxpayers in particular.

The USCIB's Vice President for Taxation Policy, Carol Doran Klein, said, while "the DSTs under investigation are a poor choice to address the tax issues arising from digitalization of the economy and will work against the economic recovery they are intended to help fund", she urged US authorities "to work cooperatively to find an appropriate multilateral solution to taxing the digitalizing economy that does not unduly burden US interests and fosters certainty for business."

The USCIB provided comments to the United States Trade Representative (USTR) regarding the Section 301 investigations. It stated: "Because a balanced-negotiated solution that addresses the tax challenges arising from the digitalization of the economy is preferable to increasing trade tensions, USCIB urges USTR to strive to achieve such a multilateral solution. USCIB members are concerned about the discriminatory and distortive implications which these enacted and proposed DSTs represent. USCIB members also believe that tariffs are rarely appropriate, should only be considered after following appropriate procedures and be appropriately targeted, and should not interfere with economic recovery from the COVID pandemic."

The USCIB said many of its members had expressed "deep concern" about the potential cost of tariffs involving over 30 countries - both Section 301 tariffs and possible retaliatory tariffs - to US businesses, consumers, and the broader economy.

"USCIB urges USTR to diversify its tools for enforcement and use them strategically in service of an optimal outcome for the entire US business community in these cases," the USCIB stated. Its submission lists a number of alternative measures and efforts the US could pursue to arrive at a balanced resolution in bilateral and multilateral talks.

The USCIB did, however, state its belief that there are certain hallmarks of the DSTs under investigation that suggest they are discriminatory or unreasonable. "These hallmarks," according to the USCIB, "include:

  • application only to nonresidents;
  • a high-monetary threshold for application, which may substitute for a rule explicitly applying the tax only to non-residents;
  • a gross-basis tax that is intended as a substitute for a net basis tax on net income, particularly if the rate of tax is high, and the tax is likely to result in double or multiple taxation;
  • the proportionality of the tax to total system profits; and
  • the procedure followed in adopting the tax, with the taxes adopted with little opportunity for comment."

The European Commision Finally Reaches A Deal On The Recovery Fund

22/07/2020 09:00

After a five days summit, EU leaders have finally reached a deal meant to reconstruct the economies streaked by the pandemic.

Disagreements concerning access to the aid package had turned the negotiations into one of the longest-ever summits.

The European Commission has agreed to an €1.8 tr fund which should be distributed across the bloc in the next seven years. It comprehends  the €1.1tr seven-year budget (Multiannual Financial Framework - MFF) and a special €750bn emergency package.

This landmark agreement, even if scaled-down from the first recommendations, will allow the European Union Commission to borrow funds directly from the financial market. They will then be distributed as €390bn in grants and €360bn in loans to help the most affected members states recover from the coronavirus pandemic. Italy and Spain are expected to be the main recipients.

In order to have access to their share of the funding, which will be available in the next three years, each member state needs to prepare a national spending and investment plan, showing commitment to reform their economies and meet key criteria based on unemployment and income per person.

However, the package will now face technical negotiations by members and it will need ratification by the European Parliament.

Malta Extends Individual Tax Deadlines

20/07/2020 09:00

Malta's Commissioner for Revenue has extended the deadline for submitting personal income tax returns and payment to August 31.

Maltese individual taxpayers are typically required to file a tax return on a self assessment basis by June 30 and pay the required tax.

The extended deadline applies for both taxpayers who file by post and online.

UK Launches Reviews Into Capital Gains Tax, Post-COVID-19 Tax Reform

17/07/2020 09:00

The UK's Chancellor, Rishi Sunak, has indicated that changes to the UK's capital gains tax regime may be on the horizon, having commissioned a report into the future of the tax from the Office for Tax Simplification.

According to the Government, the review will look into aspects of the taxation of chargeable gains in relation to individuals and smaller businesses.

Sunak said in his letter to the OTS: "This review should identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent. In particular, I would be interested in any proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to other types of income."

Separately, according to the Chartered Institute of Taxation, the House of Commons Treasury Committee is due to launch an inquiry into tax reform after the pandemic.

Italy Explains Tax Break For COVID-19 Changes To Workplaces

17/07/2020 09:00

On July 10, 2020, the Italian tax authority issued a ruling to explain the rules concerning tax credits for expenditure on adapting workplaces to prevent the spread of COVID-19.

According to the ruling, businesses can claim 60% of their expenditure on adapting workplaces as a tax credit. The credit can be claimed for qualifying expenditure, up to a cap, in the period from January 1 to December 31, 2020.

The tax credit can be claimed by businesses in certain sectors, including, among others: tourism and accommodation; catering and bars; sports and entertainment venues; leisure and cultural activities; and spas, gardens, and zoos.

The ruling (Ruling of 10 July 2020, released in Italian) defines the criteria and method of application of the tax credit.

Applications to take advantage of the tax credit may be submitted as late as November 30, 2021.

Germany Issues FAQs On Temporary VAT Cut

17/07/2020 09:00

On July 16, 2020, the German Ministry of Finance posted answers to frequently asked questions on its website with regards to the temporary value-added tax cut.

Introduced to stimulate the economy, the standard rate of VAT was cut from 19% to 16% for the period from July 1 to December 31, 2020. The reduced 7% rate was also cut, to 5%, for the same period.

The FAQs provide guidance in cases where services or goods are delivered over a long period of time, such as construction services.

The FAQs also deal with contractual issues, down payments, orders placed with suppliers in other EU member states, and the tax rules for tobacco products, among other matters.

Belgium Issues Circular On COVID-19 Teleworking Tax Relief

17/07/2020 09:00

The Belgian Finance Ministry has released guidance on a COVID-19 tax relief measure on offer for employer-paid expenses for teleworking.

The circular confirms that employers can pay, tax free, an amount of EUR129.48 (USD147.80) per month to employees to cover costs associated with remote working. This amount was EUR126.94 prior to April 1, 2020. These amounts are deductible for companies.

The allowance applies to all workers, including civil servants and government employees.

Employers must be able to show that the allowance is intended to cover specific costs, and that the amount was spent on such costs. These costs include office expenses, such as the fitting out and use of a home office, computer and printing equipment, basic supplies, such as water and electricity, maintenance costs, and insurance, among other things.

Employees must work at home at least five days per month to qualify for the allowance. Those on part-time contracts are also entitled to the full allowance.

US Announces Tariffs On French Goods In Response To DST

14/07/2020 09:00

The Office of the US Trade Representative has announced that the US will impose additional duties of 25 percent on imports of certain French products from next year in response to the country's decision to introduce a digital services tax (DST).

The US considers that France's DST "is unreasonable or discriminatory and burdens or restricts US commerce." The duties will take effect on January 6, 2021, unless France and the United States reaches a compromise on the measure in the meantime.

The products attracting the additional duties mainly include cosmetics, soaps, and handbags.

The French DST is a three percent tax on the revenue of digital companies providing advertising services, selling user data for advertising purposes, or performing certain intermediation services. Companies with global revenues of EUR750m (USD847m) or more and French sales of at least EUR25m 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. However, earlier this year, the Government suspended collection of the DST until December 2020, in a bid to stop the US from applying retaliatory tariffs of up to 100 percent on certain French goods.

UK Announces COVID-19 Tax Breaks To Stimulate Economy

09/07/2020 09:00

In a bid to reinvigorate the UK economy, Chancellor Rishi Sunak has announced plans to slash the VAT rate for the hospitality sector and offer temporary stamp duty relief.

The VAT rate will be lowered from 20% to 5% temporarily, during the period July 15, 2020, until January 12, 2021. It will apply to both eat-in and takeaway food and non-alcoholic drinks, to overnight accommodation, and admission to theme parks, zoos, and cinemas.

Further, the Government has announced that it will increase the threshold for the application of the nil rate of Stamp Duty Land Tax (SDLT) to properties worth up to GBP500,000 (USD629,325). This is an increase from GBP125,000 presently. It affects transactions taking place between July 8, 2020, and March 31, 2021.

A 5% rate will apply on the portion from GBP500,001 to GBP925,000; a 10% rate applies on the portion from GBP925,001 to GBP1.5m, and a 12% rate applies on the value above GBP1.5m.

The 3% higher rate for purchases of additional dwellings applies on top of the revised standard rates.

For new leasehold sales and transfers, the nil rate band, which applies to the "net present value" of any rents payable for residential property, is also increased to GBP500,000 from July 8, 2020, until March 31, 2021.

The Government said companies as well as individuals buying residential property worth less than GBP500,000 will also benefit from these changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.

COVID-19: Malta Extends DAC6 Reporting Due Dates

08/07/2020 09:00

Malta has announced its decision to defer reporting under the EU's sixth Directive on Administrative Cooperation, on tax schemes, for six months.

The sixth EU Directive on Administrative Cooperation (DAC6) entered into force on July 1, 2020. It introduces a new EU mandatory disclosure regime for certain cross-border transactions that could potentially be used for aggressive tax planning.

In June, the European Council agreed to allow EU member states the option to defer by up to six months the time limits for the filing and exchange of the required information.

Malta's Commissioner for Revenue intends to publish guidance within the coming months to help businesses in their preparations to meet their reporting obligations.

German EU Presidency Releases Tax Agenda

07/07/2020 09:00

The newly instated German presidency of the European Union will focus on introducing internationally agreed tax rules for digital companies, according to the presidency's policy agenda.

"The OECD (Organisation for Economic Co-operation and Development) is currently drafting reform proposals that are intended to address in an effective manner the tax challenges arising from the digital transformation and which comprise the introduction of a minimum global effective tax rate," the document notes.

"Following the conclusion of negotiations, we want to press ahead with implementing the results in the EU," it adds.

Additionally, the document reveals that the German presidency is committed to the introduction of a financial transaction tax (FTT) at European level.

The 10 EU member states negotiating towards a final legal text for a financial transaction tax have made little progress on the proposals since a draft FTT was released by the European Commission in 2011. However, in order to break the deadlock, the German Government announced its support for a 0.2% tax on the purchases of shares in companies with a market capitalization in excess of EUR1bn (USD1.1bn), with initial share offerings excluded from the tax.

The German presidency also proposes to revise the directive on administrative cooperation in order to "tackle tax evasion in an effective manner."

Germany assumed the six-monthly rotating presidency of the EU on July 1, 2020. Its term will end on December 31, 2020.

Austria And Italy Sign Frontier Worker Tax Agreement

07/07/2020 09:00

Austria and Italy have signed an agreement clarifying the tax rules for frontier workers who are working at home due to the COVID-19 pandemic.

Under the agreement, taxpayers usually commuting to their place of work over the frontier, but currently working in a home office due to measures to prevent the spread of COVID-19, will still be taxed in their state of residence as provided for under Article 15 paragraph 4 of the double tax treaty between Austria and Italy.

The agreement was signed by the Italian Government on June 24, 2020, and by the Austrian Government on June 26, 2020.

The agreement entered into force on the day after the last of the signatures by the competent authorities. It applies to employment exercised between March 11, 2020, and June 30, 2020.

The agreement will be automatically extended on a monthly basis (i.e from the end of one calendar month to the end of the next), unless it is terminated by the competent authority of one of the contracting states at least one week before the beginning of the following calendar month.

European Council Agrees To Start Lifting Travel Restrictions For Residents Of Some Third Countries

06/07/2020 10:00

From 1 July, EU member states should start lifting travel restrictions for residents of some third countries

The list of countries includes: Algeria, Australia, Canada, Georgia, Japan, Montenegro, Morocco, New Zealand, Rwanda, Serbia, South Korea, Thailand, Tunisia, Uruguay. China would be added only after confirmation of reciprocity. In particular, these countries must meet the following criteria:

  • number of new COVID-19 cases over the last 14 days and per 100.000 inhabitants close to or below the EU average (as it stood on 15 June 2020)
  • stable or decreasing trend of new cases over this period in comparison to the previous 14 days
  • overall response to COVID-19 taking into account available information, including on aspects such as testing, surveillance, contact tracing, containment, treatment and reporting, as well as the reliability of the information and, if needed, the total average score for International Health Regulations (IHR). Information provided by EU delegations on these aspects should also be taken into account.

Residents of UK, Andorra, Monaco, San Marino and the Vatican should be considered as EU residents for the purpose of this recommendation.

For countries where travel restrictions continue to apply, the following categories of people should be exempted from the restrictions:

  • EU citizens and their family members
  • long-term EU residents and their family members
  • travellers with an essential function or need, as to say:
    • Healthcare professionals, health researches and eldery care professionals
    • Frontier workers;
    • Seasonal workers in agriculture;
    • Transport personnel;
    • Diplomats, staff of international organisations, military personnel and humanitarian aid workers and civil protection personnel in the exercise of their functions;
    • Passengers in transit;
    • Passengers travelling for imperative family reasons;
    • Persons in need of international protection or for other humanitarian reasons respecting the principle of non- refoulement.

Source: Council of the European Union

UK Issues COVID-19 Guidance On Interest Expense Deduction Regime

02/07/2020 09:00

HM Revenue and Customs has released an update to guidance on the UK's interest deduction limitation rules for corporate groups regarding the appointment of a reporting company.

The UK's Corporate Interest Restriction only applies to individual companies or groups of companies that will deduct over GBP2m in net interest or financing costs in a 12-month period.

Under the regime, a company or group must calculate the maximum amount of net interest and financing costs they can deduct in a period of account, using either the "fixed ratio method" or the "group ratio method".

If a company or group's net interest and financing costs are restricted, the taxpayer should generally appoint a reporting company within 12 months of the end of the period of account. They must submit a full Corporate Interest Restriction return.

Using the fixed ratio method, the interest allowance is the lower of:

  • 30 percent of the company's or group's UK taxable profits before interest, taxes, capital allowances and some other tax reliefs; or
  • the company or group's worldwide net interest expense.

To use the alternative group ratio method, the taxpayer must:

  • appoint a reporting company; and
  • elect to use the method in a Corporate Interest Restriction return.

Using the group ratio method, the interest allowance is the lower of:

  • the ratio of the company or group's worldwide net interest expense owed to unrelated parties, to the company or group's overall profit before tax, interest, depreciation, and amortisation, multiplied by the company's or group's taxable UK profits before interest and capital allowances; or
  • the company's or group's worldwide net interest expense owed to unrelated parties.

The reporting company is responsible for submitting their company or group's Corporate Interest Restriction return. A return is required including when there's no interest restriction, until the company revokes the appointment of a reporting company.

Those companies or groups who intend to deduct less than GBP2m may carry forward unused interest allowances for up to five years by filing a full return for the relevant period of account.

Owing to COVID-19, HMRC said it would accept elections by email while temporary measures are in place to stop the spread of COVID-19.

In a July 1, 2020, update to its guidance, HMRC made changes to the process taxpayers should follow if they have missed the deadline for appointing a reporting company. It sets out how companies who missed the deadline to appoint a reporting company owing to COVID-19 may request that HMRC do so instead.

German Parliament Approves COVID-19 Tax Package

02/07/2020 09:00

Both houses of the German parliament have now approved the €130bn ($146bn) COVID-19 economic stimulus plan, which includes numerous tax relief measures.

The stimulus plan includes the following main tax changes:

  • A reduction in the standard rate of value-added tax from 19% to 16% for the period from July 1 to December 31, 2020. The reduced 7% rate will also be cut, to 5%, 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 €5m in losses in 2020 and 2021 (up from €1m). For joint filers, the limit will be set at €10m;
  • 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 €1m 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.

Belgium Extends COVID-19 Cross-Border Worker Tax Deals

02/07/2020 09:00

Belgium has extended agreements with France, Germany, Luxembourg and the Netherlands clarifying the tax rules for frontier workers working from home due to COVID-19.

The agreements are designed so that remunerated days spent working from home as a direct result of the health crisis, which would otherwise have been spent at a place of work in the other jurisdiction party to the agreement, will be considered to have been exercised in that other state.

These agreements can be extended on a monthly basis if both parties agree. According to the Belgian Finance Ministry, the validity of the agreements with France, Germany, Luxembourg and the Netherlands has been extended to August 31, 2020.

UK's COVID-19 VAT Payment Deferral Scheme Ends

02/07/2020 09:00

HM Revenue and Customs (HMRC) has released guidance for businesses following the end of the VAT payments deferral scheme on June 30, 2020.

The guidance advises those UK VAT-registered businesses that deferred VAT payments between March 20 and June 30, 2020, that they must now:

  • set-up cancelled Direct Debits in enough time for HMRC to take payment after June 30;
  • continue to submit VAT returns as normal, and on time; and
  • pay the VAT in full on payments due after 30 June.

Any VAT payments a taxpayer has deferred between March 20 and June 30 should be paid in full on or before March 31, 2021.

EU Approves Italian COVID-19 Tax Breaks

30/06/2020 09:00

The European Commission has approved under state aid rules four Italian tax schemes to support companies and self-employed workers affected by the coronavirus outbreak.

Italy notified the Commission under the Temporary Framework for state aid four measures with an overall estimated budget of €7.6bn, which waive certain taxes and provide tax credits for companies and self-employed workers.

The Italian Government will provide a partial waiver of the regional tax on production activities (IRAP) for companies and self-employed workers with revenues not exceeding €250m in 2019. Banks and other financial institutions are excluded from the scheme. There will be an exemption from the municipal tax (IMU) for touristic properties used for commercial purposes.

Tax credits will be made available to support the adaptation of production processes and workplaces to reduce the risk of spreading COVID-19. Tax credits will also be made available for certain companies and self-employed workers (depending on the level of revenues) in relation to rents and leases for non-residential properties and business leases for the period between March and June 2020.

The Commission concluded that the measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of an EU member state, in line with state aid rules.

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.