International - Corporate tax bytes

  • Barbados: The budget proposals for fiscal year 2023/24, announced on 14 March 2023, include a plan to introduce transfer pricing legislation in the next year. Additionally, the country is expected to finalise its position on Pillar Two within the next six months.
  • Belgium: The European Commission has referred Belgium to the Court of Justice of the European Union because the country failed to correctly transpose the EU Anti-Tax Avoidance Directive (ATAD) into its domestic law. In a press release dated 20 April 2023, the Commission stated that Belgium’s law does not allow a taxpayer to deduct tax already paid by a controlled foreign company (CFC) in its state of residence, which violates the ATAD. The ATAD allows the EU member state where a parent company of a multinational enterprise is located to tax profits made by a CFC in another EU member state when the tax paid by the CFC is less than 50% of what would be paid in the parent company’s member state.
  • British Virgin Islands: Revised rules on economic substance were published by the International Tax Authority on 24 February 2023. The changes reflect recent amendments to other legislation and clarify certain terms and reporting obligations.
  • China: The government announced on 24 March 2023 that the super deduction rate for research and development (R&D) expenditure is increased from 75% to 100% for all eligible sectors, retroactive to 1 January 2023.
  • Czech Republic: The government published a draft law on 15 May that would implement the EU minimum taxation directive. Once approved the law would apply as from 31 December 2023
  • European Union: The Carbon Border Adjustment Mechanism (CBAM) regulation was signed on 10 May 2023 (for prior coverage, see the article in the April 2023 issue of Indirect Tax News). The transitional phase of the CBAM will become operative on 1 October 2023, with the first reporting period for traders ending on 1 January 2024. A challenge has been filed about the legality of the EU global minimum taxation directive. The applicant, known as “VF” has requested an annulment ruling from the General Court based on various grounds, including that the directive excludes from its scope income from a shipping activity covered by EU member states' tonnage tax regimes authorised under state aid rules and does not set out transitional measures for taxpayers that made substantial investments relying on a national tonnage tax regime. The EU Foreign Subsidies Regulation (FSR) that entered into force on 12 January 2023 creates a new regime designed to combat distortions of competition in the EU internal market caused by foreign subsidies. The FSR introduces mandatory notification and approval requirements for acquisitions of significant EU businesses and large EU public tenders and grants extensive power to the European Commission powers to launch ex officio investigations starting from 12 July 2023. The notification requirement will apply as from 12 October 2023.  
  • G7: In a communique released on 13 May, the G7 finance ministers re-emphasized their commitment to the “swift global implementation” of the two-pillar solution.
  • Guernsey, Jersey, Isle of Man: The islands have issued a joint statement announcing they have reached agreement on a joint approach to the Pillar Two framework. The islands will introduce an IIR and a domestic minimum tax that will apply as from 2025.
  • Hong Kong: A consultation was launched on 6 April on potential refinements to the foreign-source income exemption regime that became effective on 1 January 2023 (for prior coverage, see the article in the November 2022 issue of Corporate Tax News). It is proposed to include foreign-source gains from the disposal of assets other than shares and equity interests within the scope of covered assets. The consultation period runs through 6 June 2023.
  • Kenya: Finance Bill 2023, presented to parliament on 3 May, includes the following proposals: introduction of a 3% digital assets tax on persons deriving income from the transfer or exchange of digital assets; limiting the application of the 30% of EBITDA restriction on deductible interest expense to foreign loans; reduction of the income tax rate on branches/permanent establishments from 37.5% to 30% and the imposition of a tax on repatriated profits; and clarification of the circumstances in which a constituent entity of a multinational enterprise will be required to file a country-by-country report (click here for a comprehensive analysis of the bill by BDO in Kenya).
  • Lithuania: Parliament has adopted a draft law that will introduce a temporary solidarity contribution on certain banks in the country (i.e., banks whose deposits exceeded EUR 400 million as at the end of 2022). The contribution will be payable for 2023 and 2024 at a rate of 60% on net interest income that exceeds the average net interest income in the previous four years and increased by 50%. The president still must sign the law for it to become effective.
  • New Zealand: A draft law published on 18 May 2023 would implement the global minimum tax. The multinational top-up tax will consist of an IIR and UTPR, as well as a domestic income inclusion rule for domestic groups. The IIR is expected to apply as from 1 January 2024 and the UTPR as from 1 January 2025.
  • Nigeria: The tax authorities released an “Outcome Statement” on 13 April 2023 in which they revealed that the country will now commit to participate in the OECD’s two-pillar solution to address the tax challenges of the digitised economy and that aims to ensure large multinational enterprises pay a minimum level of tax on the income arising in each jurisdiction in which they operate. Nigeria previously had indicated it would not participate (for prior coverage, see the Bytes item in the February 2023 issue of Corporate Tax News).
  • Oman: The 10% withholding tax on interest paid outside Oman is suspended until further notice. A previous suspension was effective until December 2022.
  • Qatar: The tax authorities have extended the filing deadline for tax returns for taxable year 2022 for one month from 30 April 2023 to 31 May 2023. However, the extension does not apply to companies operating in the petroleum and petrochemical industries and taxpayers that have different accounting periods for the taxable year.
  • Saudi Arabia: Four new special economic zones (SEZ) situated in strategic areas of Saudi Arabia were launched on 13 April and this was followed by the issuance of a brochure setting out the benefits of investing in the country, the specific focus of each zone and the incentives offered. Incentives include a 5% corporate income tax rate for up to 20 years, a 0% withholding tax on the repatriation of profits from SEZ to foreign countries, and VAT and customs duty exemptions.
  • South Africa: New rules governing objections and appeals, which take effect 10 March include an extension of the period to file an objection, i.e., taxpayers have 80 business days (rather than the previous 30 days) from the date of assessment or delivery of the South African Revenue Service’s reasons to object to an assessment.
  • Switzerland: The country will hold a referendum on 18 June 2023 on a constitutional amendment that would allow the government to introduce the global corporate minimum tax. A draft federal ordinance released in August 2022 would include the introduction of a top-up tax in the form of a QDMTT, an IIR and a UTPR.
  • Uganda: Legislation has been published for the introduction of a 5% digital services tax that applies to nonresidents deriving income from the provision of digital services to a customer in Uganda.
  • United Arab Emirates: A recent ministerial decision provides details on the general transfer pricing requirements (i.e., documentation requirements in accordance with OECD guideline, including preparation of a master file and a local file).
  • United Kingdom: On 18 April 2023, the UK tax authorities published updated guidance to the R&D tax relief (for an analysis of the guidance and changes, see the insight prepared by BDO in the UK.
  • United States: The U.S. Internal Revenue Service (IRS) issued guidance on 12 May 2023 on a clean energy tax credit boost for companies that source materials in the U.S. The guidance describes rules the IRS intend to include in upcoming proposed regulations regarding the domestic content bonus credit requirements and related recordkeeping and certification requirements. The guidance also describes a safe harbour regarding the classification of certain components in representative types of qualified facilities, energy projects or energy storage technologies.
    On 2 May, the IRS released proposed regulations under Internal Revenue Code (section 367(d)) related to intangible property repatriations to the U.S. Under the proposed regulations, the section 367(d) inclusion to an original transferor is terminated when a transferee foreign corporation repatriates intangible property to a qualified domestic person and the U.S. transferor meets certain filing requirements. However, the proposed regulations apply only to subsequent transfers of intangible property that occur on or after the date on which the proposed regulations are finalised.

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