Corporate Tax News Issue 65 - February 2023

Corporate tax bytes

  • Africa: The African Tax Administration Forum (or ATAF, is an African network whose mission includes improving the tax systems in Africa and contributing to global dialogues) has released a suggested approach for implementing the qualified domestic minimum top-up tax (QDMTT) under the OECD BEPS 2.0 initiative to assist member states that wish to enact the QDMTT, along with draft legislation and explanatory notes that take into account the specific needs and challenges of African jurisdictions.
  • Albania: The general anti-avoidance rule was amended in legislation published in December 2022 to allow the tax authorities to disregard an arrangement or series of arrangements between taxpayers where the purpose of the arrangement is to obtain a tax advantage or benefit and the burden is on the tax authorities to demonstrate abuse.
  • Argentina: Fifteen jurisdictions have been removed from the list of noncooperative jurisdictions, effective 27 January 2023 (Bosnia and Herzegovina, Botswana, Cabo Verde, Eswatini, Jordan, Kenya, Liberia, Maldives, Mauritania, Mongolia, Montenegro, Namibia, Oman, Paraguay and Thailand). A noncooperative jurisdiction in Argentina is one that has not concluded an exchange of information agreement with Argentina, and there still are 80 countries on Argentina’s list.
  • Austria: The bills introducing a temporary energy crisis contribution for fossil fuels and a contribution for electricity that implements an EU regulation in this area were published in the official gazette on 29 December 2022 and entered into force on 30 December (for prior coverage, see the tax alert dated 24 November 2022).
  • British Virgin Islands: The tax authorities issued a press release on 20 January to announce that they are making improvements to the government database. Among the planned changes are automation of the administration of all taxes and licenses, allowing taxpayers to submit registration forms electronically, allowing taxpayers to inquire about the status of pending claims and facilitating communications between taxpayers and the tax authorities.
  • Cayman Islands: The anti-money laundering (AML) regulations have been updated to add new record-keeping requirements that apply to transfers of virtual assets and a new section on reporting obligations of supervisory authorities.  
  • Croatia: The law transposing the DAC 7 directive into Croatian law was published on 22 December 2022 and applies as from 1 January 2023. DAC 7 requires digital platform operators (within and outside the EU) to collect and report prescribed information on sellers offering goods or services on their platforms, with the information then automatically exchanged among the member states. 
  • Dominican Republic: The tax authorities have clarified that gross interest payments made by a resident company on foreign loans are subject to a 10% withholding income tax.
  • European Union: In a meeting of the Council of the European Union held on 14 February 2023, Finance Ministers approved changes to the EU list of noncooperative jurisdictions for tax purposes. Four jurisdictions—British Virgin Islands, Costa Rica, Marshall Island and Russia—are added to Annex I. Four jurisdictions are removed from Annex II—Barbados, Jamaica, North Macedonia and Uruguay, with Albania, Aruba and Curaçao added to that list. Hong Kong, Malaysia and Qatar have been granted an extension of the deadline to complete their reforms. Annex I includes countries that have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement needed reforms. Annex II, known as the “state of play” list, reflects ongoing engagement with certain countries and their commitments to amend their tax legislation. The next update of the noncooperative jurisdiction list will take place in October 2023. 
  • France: The finance law for 2023 was published on 30 December 2022 and became effective on 1 January 2023 (for prior coverage of the measures, see the article in the November 2022 issue of Corporate Tax News). The main measures affecting businesses include the introduction of a temporary solidarity contribution of 33% levied on the excess profits of energy companies (implementing the EU regulation in this area); reduction of the company added value contribution or CVAE by 50% (with the CVAE abolished as from 2024); and an increase in the maximum profits subject to the 15% reduced corporate income tax rate applicable to small and medium-sized businesses from EUR 38,120 to EUR 42,500.
    A decree released on 3 February 2023 updates the domestic list of noncooperative jurisdictions to include Anguilla, Bahamas and Turks and Caicos Islands (the latter two jurisdictions as from 1 May 2023). There are now 14 jurisdictions on France’s noncooperative jurisdiction list (American Samoa, Anguilla, Bahamas, British Virgin Islands, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, Turks and Caicos Islands, U.S. Virgin Islands and Vanuatu).
  • Germany: Starting in 2023, applications for an exemption from withholding tax or for a refund of withholding tax must be submitted electronically to the German federal tax office.
  • Ireland: Taxpayers that wish to continue to rely on tax rulings (i.e., opinions or confirmations) issued by the Irish tax authorities in calendar year 2017 with respect to transactions or the whole of part of any period after 1 January 2023 must request an extension or renewal of the ruling before 31 March 2023.
  • Korea: The global minimum tax under OECD Pillar Two was introduced on 31 December 2022 in the “Law for the Coordination of International Tax Affairs, making Korea the first country to codify the GloBE rules. The rules basically follow the OECD model rules and include a 15% minimum tax that will apply to multinationals with consolidated revenue of at least EUR 750 million during two of the prior four business years, as well as an income inclusion rule and “supplementary rules for income inclusion,” the latter of which is called the under-taxed payments rule in the OECD model rules. There is no qualified minimum top-up tax. The Pillar Two rules generally will apply to fiscal years beginning on or after 1 January 2024 (with exceptions for certain calendar year taxpayers).
  • Liechtenstein: Liechtenstein will introduce the OECD global minimum taxation under Pillar Two, as well as a “GloBE Act” for tax years starting in 2024. The minimum tax will take the form of a “supplementary tax,” which would kick in where a domestic company does not pay at least a 15% minimum tax rate. A public consultation is expected to be launched in March 2023. 
  • Luxembourg: As from 1 January 2023, expenses incurred during business trips are reimbursed based on actual expenses or on per diems.
  • Malaysia: The Inland Revenue Board issued revised technical guidelines on 29 December 2022 that adds an economic substance requirement for taxpayers to qualify for the foreign-source dividend income exemption (for prior coverage, see the article in the February 2022 issue of Corporate Tax News). As a result, foreign dividend income received in Malaysia by a resident company, resident LLP and resident individual in relation to a partnership business in Malaysia during the period 1 January 2022 through 31 December 2026 is exempt from tax provided the dividends have been subject to tax in the country in which the income arises; the headline tax rate in the source country (i.e., the highest corporate tax rate in that country in the year the dividend is taxed) is not less than 15%; and the taxpayer complies with the economic substance requirements. Examples of economic substance include having an adequate number of employees with relevant qualifications and incurring an adequate amount of operating expenditure to carry out the activities in Malaysia.
  • Nigeria: The Minister of Finance reiterated during a panel discussion at the World Economic Forum in Davos, Switzerland that Nigeria will not participate in the global tax reform efforts under BEPS 2.0.
  • Sweden: On 19 January, the government proposed the introduction of a temporary tax on the extraordinary profits of electricity producers that would be imposed at a rate of 90% on the extraordinary profits on electricity sold at more than SEK 1,957 per MWh. If approved, the extraordinary profits tax would apply during the period 1 March – 30 June 2023. The law would implement the EU regulation of 6 October 2022 (for prior coverage, see the item in the Corporate Tax Bytes column in the November 2022 issue of Corporate Tax News).
  • United Arab Emirates: A decree-law released on 9 December 2022 (Decree-Law No. (47) of 2022) sets out the tax treatment of companies and businesses under the new corporate tax law that will apply for financial years starting on or after 1 June 2023 (for prior coverage, see the article in the May 2022 issue and the article in the February 2022 issue of Corporate Tax News). The decree-law clarifies various issues relating to the application and operation of the corporate tax, but more clarifications and guidance are expected in the form of cabinet decisions and regulations. See also the free zone and PE articles in this issue.
  • United Kingdom: A consultation is being held during the period 13 January – 13 March 2023 on the potential consolidation of the R&D expenditure credit (RDEC) and the small and medium enterprise R&D relief into a single simplified regime. The consultation was presaged in the Autumn Statement when the Chancellor announced that the government would reform the R&D tax reliefs to ensure taxpayers’ money is spent as effectively as possible to support innovation, improve the competitiveness of the RDEC and to take a step towards a simplified, single relief based on the RDEC scheme.
  • United States: Aliens leaving the U.S. are required to report information on digital assets received, sold, exchanged or disposed of, as well as any financial interest in digital assets and pay the expected tax on the income. Updated instructions (to Form 1040-C, the form used by departing aliens) issued by the Internal Revenue Service on 6 February 2022 indicate that a new question on digital asset transactions is included in Form 1040-C.
    The IRS released Notice 2023-11, dated 3 January 2023, which temporarily relaxes a number of reporting requirements for certain foreign financial institutions (FFIs) that continue to be unable to obtain and report U.S. taxpayer identification numbers for certain pre-existing accounts as defined in an applicable Model 1 intergovernmental agreement (IGA). Based on the notice, if certain requirements are met, the U.S. Competent Authority will not deem a Model 1 FFI to be in significant noncompliance with its reporting obligations solely because of a failure to report U.S. TINs on pre-existing accounts for calendar years 2022–2024 (for an analysis of the notice, see the tax alert dated 25 January 2023). 
    The U.S. Treasury Department and the IRS on 29 December 2022, released information (in the form of a white paper, two notices and an FAQ) on the clean vehicle provisions of the Inflation Reduction Act. The new guidance provides greater clarity to consumers and businesses that, 1 beginning January 2023, are able to access tax benefits from the law’s clean vehicle provisions (for prior coverage, see the tax alert dated 25 January 2023).
  • Zambia: The 2023 budget, which applies as from 1 January 2023, revises the definitions of a multinational enterprise group and ultimate parent entity to bring them in line with the OECD model rules on country-by-country reporting.