Corporate tax bytes
“Bytes” contains a summary of various tax developments affecting businesses.
- Bulgaria: The Council of Ministers submitted a proposal to parliament on 1 November for a temporary 33% windfall tax on companies in the crude petroleum, natural gas, coal and refinery sectors. The tax—called a “solidarity contribution” —would apply to a specified increase in the average of taxable profits for the 2018, 2019, 2020 and 2021 tax periods. The proposed tax is in line with the EU regulation in this area (see below).
- Canada: The government is requesting public comments on measures proposed in the 2022 Fall Economic Statement released on 3 November, in particular with respect to the implementation of the OECD’s model rules on income reporting by digital platforms and draft rules that would limit the deduction of interest in line with action 4 of the OECD BEPS project. Comments must be submitted by 6 January 2023.
- Croatia: The euro will become the official currency of Croatia on 1 January 2023 and the existing currency, the kuna, will cease to exist. As from that date, all documents (including invoices) and legal instruments will need to state amounts in euros and the Croatian National Bank will begin to publish the exchange rate list for the euro. Double reporting of prices of goods and services applies from 5 September 2022 to 31 December 2023 and certain changes in accounting will apply until the end of 2022.
- European Union: Sweden will assume the Presidency of the Council of the European Union on 1 January 2023, the position currently held by the Czech Republic.
The Council announced on 8 November that EU finance ministers have agreed on changes to the Code of Conduct for Business Taxation, the first revision of the code since it was adopted in 1997. The revisions expand the scope of tax measures that will be scrutinized when examining harmful tax practices within the EU to include “tax features of general application” that can affect the location of business activities in the bloc. Previously only preferential measures (e.g., special regimes or exemptions from the general taxation system) fell within the purview of the code, an EU instrument that promotes fair tax competition/ A regulation that applies as from 8 October contains temporary measures to address the soaring energy prices across the EU and their effect on the population. The regulation introduces measures to reduce the demand for electricity and redistribute surplus revenues derived by energy sector companies to final consumers. The regulation (i) imposes a temporary solidarity contribution tax on excess profits generated by fossil fuel companies; (ii) requires member states to reduce their gross electricity consumption by 10% and at least by 5% during certain peak hours (during the period 1 December 2022 and 31 March 2023); and (iii) imposes a cap on certain electricity generators.
- Finland: A public consultation was launched on 27 September on the potential introduction of a new tax on minerals mined in Finland. The tax, which would apply as from 1 January 2024, would be levied at a rate of 0.6% on the value of metal from metal ores and EUR 0.20 per tonne on other extracted metals. The consultation runs through 17 October 2022.
- Hungary: Starting in 2023, Hungarian taxpayers will be able to pay corporate income tax and local business tax in foreign currency; taxpayers have been able to pay advance corporate tax in foreign currency since 30 September 2022.
- Ireland: Guidance published by the Revenue Commissioners on 5 August and updated on 7 September confirms that certain digital services taxes (DSTs) incurred wholly and exclusively for a trade may be deducted in computing income of that trade for Irish corporation tax purposes. DSTs in the following countries are covered by the guidance: Austria, France, India (equalization levy), Italy, Kenya, Spain, Turkey and the UK. Taxpayers can inquire about the deductibility of DSTs in other jurisdictions by contacting the Irish Revenue.
- Myanmar: Guidance issued by the Internal Revenue Department (IRD) on 9 June 2022 requires taxpayers making payments to nonresidents to obtain advance approval on the application of withholding tax. Under 2020 guidance, taxpayers under the self-assessment system were permitted to make their own determination as to whether tax should be withheld on a payment to a nonresident for service contracts with a value of less than USD 100,000 (or the equivalent in another currency) without having to request upfront approval from the IRD for an exemption. However, the IRD has noticed that taxpayers have wrongly applied their understanding of the 2020 guidance and double taxation agreements, etc., resulting in failures to deduct tax, determining the wrong class of income in computing tax and assuming all service contracts with a value of USD 100,000 or the equivalent amount in another currency are exempt. As a result, the new guidance required taxpayers to obtain advance approval from the IRD before making payments to nonresident by submitting relevant supporting documents.
- OECD: A report released by the Global Forum on 9 November (Peer Review of the Automatic Exchange of Financial Account Information 2022) states that “significant global progress” on transparency and the exchange of tax information has been made, although it acknowledges further work is needed. The report presents peer reviews for the 99 jurisdictions that committed to the automatic exchange of information in 2017 and 2018.
- A new global tax transparency framework released on 10 October and presented to the G20 finance ministers on 12-13 October provides for the reporting and exchange of information between countries on crypto-assets.
- Portugal: The 2023 budget approved by parliament on 27 October will allow tax loss carryforwards to be carried forward indefinitely for tax years starting on or after 1 January 2023 (currently limited to five or 12 years), but only 65% of losses will be deductible (currently 70%). In addition, income derived from activities relating to cryptocurrency will become taxable as business or professional income at a rate of 28%. Capital gains derived from the transfer of crypto assets will continue to be exempt from tax where the assets are held for 365 days or more before the transfer date.
- Romania: Legislation has been passed to implement the EU public country-by-country reporting (CbCR) directive, with the CbCR rules applying early as from 1 January 2023. The directive must be transposed into the domestic law of EU member states by 22 June 2023, with the first financial year of reporting being the year commencing on or after 22 June 2024.