Click cover to download

(Subscriber-only password access)

Not a subscriber?

Click here to join the FREE mailing list and receive password access

The international tax system is in flux. In August, 138 tax jurisdictions within the Organisation for Economic Co-operation and Development (OECD)/ G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) – representing over 90 percent of global GDP – agreed on a global reform regarding the international tax system. The ‘Outcome Statement’, agreed upon at the 15th Inclusive Framework Meeting, involved intensive technical negotiations by delegates to continue to implement a two-pillar solution to address the tax challenges arising from the digitalisation of the economy. The OECD will also prepare a comprehensive action plan to support the fast and coordinated implementation of the reform and provide additional support and technical assistance to enhance the implementation capacity of developing countries.

UNITED STATES

Caplin & Drysdale

“The Supreme Court will likely overturn section 965, the 2017 statute that deemed US shareholders of controlled foreign corporations to have repatriated the earnings of up to the last 30 years, when it rules in Moore v. United States. The decision could have far-reaching implications if the court bases its decision on the conclusion that the Moores, who were minority shareholders in an Indian corporation, did not ‘realise’ the income. Other situations where income is not realised may include Subpart F, the global intangible low-taxed income (GILTI) regime, partnership taxation, S corporation taxation, the accumulated earnings tax, and others, many of which are central elements of the US income taxation statutory scheme.”

UNITED KINGDOM

Deloitte LLP

“In July 2023, the UK joined the cohort of jurisdictions that have been enacting legislation for an income inclusion rule and a qualified domestic minimum top-up tax in line with the Organisation for Economic Co-operation and Development (OECD) Pillar II global minimum tax rules. The rules take effect in the UK from 2024 and are a significant focus for multinationals with global revenues over the €750m revenue threshold as they get ready to comply. More generally, in April 2023 the headline rate of UK corporation tax increased from 19 percent to 25 percent, though additional measures were introduced to maintain the UK’s competitiveness.”

FRANCE

Herbert Smith Freehills

“The French Finance Act of 2023, adopted earlier this year, sought to encourage businesses, notably by introducing an increase in the ceiling for benefitting from the reduced corporation tax rate of 15 percent for small and medium-sized enterprises. In addition, the tax benefits reserved for young innovative companies – small or medium-sized companies incurring R&D expenditure amounting to at least 15 percent of their tax-deductible expenses – initially scheduled to run until 2023, have been extended to companies set up until 31 December 2025.”

LUXEMBOURG

ATOZ Tax Advisers

“On 28 March 2023, a draft law was presented to parliament which amends the Luxembourg General Tax Law, as well as some other laws on tax procedure, to simplify and modernise these rules. It aims to bring more certainty to taxpayers through the implementation of a procedure to obtain an advance bilateral or multilateral agreement on transfer pricing (TP) or clarification of the TP documentation to be provided to the Luxembourg Tax Administration (LTA) as part of the cooperation duty of taxpayers.”

SWITZERLAND

Burckhardt Ltd

“The international corporate tax landscape in Switzerland continues to be shaped by the implementation of the Organisation for Economic Co-operation and Development (OECD) Pillar II Minimum Global Tax. Not only internationally active companies that exceed the entry threshold, but also tax administrations are confronted with complex implementation issues. Due to the corporate tax reform in 2020 and the associated abolition of privileges for holding and domiciliary companies, the implementation of the minimum tax poses new challenges.”

SPAIN

Ashurst LLP

“In my view, the first key development in Spain has been the minimum corporate income tax (CIT) tax rate of 15 percent on the Spanish tax basis obtained by resident companies and permanent establishments in Spain of non-resident entities, which is only applicable to companies with a turnover of at least €20m, or to companies which are taxed under the tax grouping regime irrespective of their turnover. The second key development is a tax package approved for financial years 2023 and 2024 which will charge windfall tax profits earned by credit entities and energy companies.”

GERMANY

CMS Germany

“The Court of Justice of the European Union (CJEU) ruled that article 49 and article 54 of the Treaty on the Functioning of the European Union (AEUV) do not preclude a rule of a member state which results in a resident company not being able to deduct the permanent losses of a permanent establishment even if the member state of residence has waived its power to tax the income of that permanent establishment in a double tax convention (DTC). This removed the uncertainties that existed after Bevola and Jens W. Trock.”

AUSTRIA

Grant Thornton

“One of the most extensive developments affecting multiple tax fields is the Austrian Tax Amendment Act 2023. Developments include a new side-stream merger rule stipulating for a de facto tax deferral, a transitional provision for transferring hidden reserves of private foundations and an explicit legal provision for the attribution of dividends in the case of centrally deposited shares. These reforms, along with others, reflect a drive to enhance legal certainty and modernise Austrian tax law.”

ITALY

Deloitte

“The most important corporate tax development was the Italian parliament’s approval in August 2022 of the Enabling Law, which includes a set of general principles and criteria enabling the government to implement a full reform of the Italian tax system. The Enabling Law entered into force on 29 August 2023. From this date, the government will have approximately 24 months to execute the reform. The goals of the reform are essentially reducing the tax burden on corporations, enhancing legal certainty to reduce litigation, and attracting foreign investment.”

UNITED ARAB EMIRATES

FAME Advisory DMCC

“In the past few years, the United Arab Emirates (UAE) has brought forth significant tax reforms with a view to streamlining its tax system and bringing it in line with international best practices, while also diversifying its state revenue. As a historical milestone, on 31 January 2022 the Ministry of Finance of the UAE announced the introduction of a federal corporate tax regime for financial years starting on or after 1 June 2023, with a headline rate of 9 percent. The landmark announcement of corporate tax has brought forth a major change in the way businesses operate in the country.”

CONTRIBUTORS

Ashurst LLP

ATOZ Tax Advisers

Burckhardt Ltd

Caplin & Drysdale

CMS Germany

Deloitte

FAME Advisory DMCC

Grant Thornton

Herbert Smith Freehills