Click cover to download

(Subscriber-only password access)

Not a subscriber?

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

For companies, tax is a key area of focus and debate. Technological innovation, globalisation, new business and consumer demands, and new ways of living and working are all having an impact on the tax function. Tax leaders across the globe will need innovative strategies to address the challenges they face. Companies need to enhance their internal tax functions and elevate their tax professionals, placing them at the heart of strategic operations. By doing so, they can ensure that the tax function can add value to the organisation going forward.

UNITED STATES

Caplin & Drysdale

“In December 2023, the Internal Revenue Service (IRS) published a general legal advice memorandum (GLAM), which took the position that the interest rate on related-party borrowings must be adjusted to account for implicit support. The GLAM provides an example: if a group member would pay 10 percent interest based on its standalone credit rating, but a third party would lend to the subsidiary at 8 percent based on an expectation that the group parent would not allow the subsidiary to default, the arm’s-length rate on related-party borrowings is then 8 percent.”

UNITED KINGDOM

Slaughter & May

“The last 12-18 months were a period of relative quiet, following the disastrous mini budget. Endless tinkering around the edges of the tax framework has, however, continued. The previously announced higher main rate of corporation tax took effect from 1 April 2023. Partly in response to the move’s criticism, the generous 100 percent and 50 percent first-year capital allowances, and a temporary annual investment allowance of £1m, were made permanent. In absolute terms, some of these changes are projected to offset about two-thirds of the impact of the rate rise.”

REPUBLIC OF IRELAND

PwC Ireland

“The Organisation for Economic Co-operation and Development’s (OECD’s) Pillar Two rules came into force in Ireland from 31 December 2023. Pillar Two aims to ensure that in-scope businesses pay at least a 15 percent effective tax rate on their profits in each jurisdiction they operate in. The Pillar Two rules are a game-changer for both taxpayers and tax authorities. There are significant complexities associated with the implementation of the new rules that will require continued engagement between all stakeholders going forward. The Department of Finance also intends to introduce a foreign dividend exemption with effect from 2025.”

LUXEMBOURG

ATOZ Tax Advisers

“On 20 December 2023, the Luxembourg law transposing the Council Directive on ensuring a global minimum level of taxation for multinational enterprise groups and largescale domestic groups in the European Union (EU), which implements the Global Anti- Base Erosion rules known as Pillar Two, was passed. Moreover, on 24 May 2024, the Luxembourg parliament published a draft law which amends the minimum net wealth tax rules to address its unconstitutionality, as well as the participation exemption to introduce an optionality to the regime and the Luxembourg rules on partial liquidations following the recent Luxembourg case law on share classes redemptions.”

SPAIN

Ashurst LLP

“The first key development in Spain is a tax package approved for financial years 2023 and 2024 which charges windfall tax profits earned by credit entities and energy companies. It has temporarily limited the use of tax losses of group entities to 50 percent, with the possibility of carrying forward unused tax losses to each of the first 10 financial years starting on or after 1 January 2024, in equal parts. The new tax package has been strongly opposed by many credit entities and energy groups in scope, which argue that the way these contributions have been configurated is unconstitutional.”

ITALY

Deloitte

“Several significant tax measures are being implemented in the context of a comprehensive tax reform in the last year. Major changes are aimed at aligning domestic rules with international tax principles. These include reviewing tax residence rules for corporations and individuals, implementing Pillar Two provisions, and coordinating the controlled foreign corporation (CFC) rules.”

AUSTRALIA

Johnson Winter Slattery

“The Australian government sees excessive interest deductions as a significant risk and has updated Australia’s thin capitalisation rules, which limit debt deductions in certain circumstances. Broadly, Australia’s former thin capitalisation rules disallowed interest deductions on debt that exceeded a safe harbour amount determined as a proportion of the taxpayer’s assets. The new rules introduce an earnings-based ratio. Interest deductions may be denied where they exceed 30 percent of earnings before interest, taxes, depreciation and amortisation.”

SOUTH AFRICA

Cliffe Dekker Hofmeyr

“There have been a number of key developments pertaining to tax regulation in a South African context. Specific legislation has been introduced to grant taxpayers an accelerated allowance to the extent that renewable energy assets are acquired and implemented before 1 March 2025. These incentives relate to the use of assets in the generation of electricity in the form of wind power, solar energy, hydro power or biomass comprising organic wastes, landfill gas or plant material, and have been necessitated to curb loadshedding in a South African context.”

CONTRIBUTORS

Ashurst LLP

ATOZ Tax Advisers

Caplin & Drysdale

Cliffe Dekker Hofmeyr

Deloitte

Johnson Winter Slattery

PwC Ireland

Slaughter & May