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September 21, 2022
Global Tax Policy and Controversy Watch | September 2022 edition
In the spotlight
Boost in US IRS funding for enforcement
The recently enacted Inflation Reduction Act (IRA) will increase United States (US) Internal Revenue Service (IRS) funding by US$80 billion (b) over the next 10 years, with more than US$45b designated for enforcement and US$4.75b going toward technology modernization. This historic investment in rebuilding the IRS and its technology is ultimately intended to reduce the tax gap. In the coming months, the IRS is expected to release plans for hiring and training new employees across the organization.
See EY Global Tax Alert, Inflation Reduction Act boosts IRS funding for enforcement and modernization, dated 19 August 2022.
Chile and Colombia propose tax reform
Chile’s tax reform bill would decrease the corporate income tax rate from 27% to 25%, while increasing the 10% tax rate on gains from stock sales to 22% and introducing a 1.8% tax on the retained earnings of certain companies, among other items. Colombia’s tax reform bill would eliminate the reduced corporate income tax rates for certain activities and increase taxes on nonresident entities and individuals; it is expected to bring in revenue of COP25 trillion (t) for 2023 (approx. US$6.2b) and COP50t (approx. US$12.4b) by 2026.
See EY Global Tax Alerts, Chile’s Congress to discuss tax reform proposal, dated 11 August 2022 and New Colombian Government submits tax reform bill to Congress, dated 17 August 2022.
Argentina establishes one-time windfall corporate income tax
The one-time “windfall income tax prepayment” applies to companies that have extraordinary income derived from the general increase in international prices; application is not limited to the energy industry. The “windfall income tax prepayment” is creditable against the corporate income tax liability for tax year 2022 or 2023.
See EY Global Tax Alert, Argentine Tax Authority establishes one-time windfall corporate income tax prepayment, dated 19 August 2022.
Switzerland opens public consultation on BEPS 2.0 Pillar Two
The Swiss Federal Council opened the public consultation on the ordinance to temporarily regulate material aspects of the Pillar Two global minimum tax in Switzerland during a transition phase. The ordinance includes a Swiss top-up tax (a qualified domestic minimum top-up) and an international top-up tax (an income inclusion rule and an undertaxed payments rule) in line with the Pillar Two Model Rules.
See EY Global Tax Alert, Switzerland opens public consultation on material aspects of the OECD’s Pillar Two minimum corporate tax, dated 18 August 2022.
US IRS grants widespread penalty relief
The US IRS granted widespread penalty relief for 2019 and 2020 returns filed by 30 September 2022 and will refund penalties already paid.
See EY Global Tax Alert, US IRS gives widespread penalty relief for 2019 and 2020 returns filed by 30 September 2022, will refund penalties already paid, dated 29 August 2022.
Global Tax Controversy monthly flash news – latest article
Revenue authorities are expected to look more closely into employment taxes as global mobility and business travel re-emerge from lockdown. How can naming an employment tax leader help you to manage potential risks?
Read the article, It's time to think and act globally on employment tax risks.
Other news items
Transfer pricing updates in Cyprus and Poland
Cyprus issued guidance on documentation requirements generally in line with the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines regarding Master File and Local File requirements. Proposed legislation in Poland would withdraw the transfer pricing reporting obligations related to indirect transactions with tax havens and modify reporting obligations related to direct transactions with tax havens.
See EY Global Tax Alerts, Cyprus Tax Authority issues notification with respect to newly introduced transfer pricing rules and documentation requirements, dated 5 September 2022 and Poland proposes changes to transfer pricing regulations, dated 1 September 2022.
Belgium limits R&D tax credit
For the first time, Belgium is limiting the combined use of the Belgian research and development (R&D) tax credit and the payroll withholding tax exemption for R&D employees. It is not currently anticipated that a similar limitation rule would be applied to the R&D investment deduction, which could make that deduction more beneficial compared to the R&D tax credit for certain taxpayers.
See EY Global Tax Alert, Belgium limits R&D tax credit, dated 24 August 2022.
Denmark proposes 6% cultural contribution levy on EU-based digital streaming platforms
The Danish Minister of Culture has published a draft bill that would introduce a cultural contribution levy of 6% on the turnover generated by Danish and European Union-based digital streaming platforms and services in Denmark. The Danish Government intends that the proposed levy be consistent with the agreement under Pillar One of the BEPS 2.0 project regarding digital services taxes and other unilateral measures.
See EY Global Tax Alert, Denmark publishes draft bill introducing a cultural levy of 6% on turnover generated by Danish and EU-based digital streaming platforms and services in Denmark, dated 26 August 2022.
El Salvador enacts tax amnesty program
The program allows taxpayers to comply voluntarily with their overdue tax and customs obligations and is in force until 1 November 2022.
See EY Global Tax Alert, El Salvador enacts tax amnesty program, dated 30 August 2022.
New Ethiopian investment incentives regulation
The new investment incentives regulation aims to expand the coverage of investment incentives and hence boost investment in Ethiopia.
See EY Global Tax Alert, Ethiopia issues new investment incentives regulation, dated 22 August 2022.
Germany issues guidance on withholding tax for software development services
The Ministry of Finance guidance on the withholding tax treatment of remuneration paid to nonresidents for software development services addresses changes in German copyright law and for the first time sets forth the official view on when withholding tax obligations will arise in cross-border software development projects involving German principals.
See EY Global Tax Alert, German Ministry of Finance issues official guidance on withholding tax for software development services, dated 22 August 2022.
Ghana issues 2022 Mid-year Budget Review Statement
Ghana’s Minister for Finance and Economic Planning presented the 2022 Mid-year Budget Review Statement of the Government of Ghana to Parliament, outlining five tax measures to be implemented by the Ghana Revenue Authority to improve the Government’s fiscal outlook.
See EY Global Tax Alert, Ghana issues 2022 Mid-year Budget Review Statement, dated 9 August 2022.
Hong Kong Court holds limited liability partnerships are entitled to intra-group stamp duty relief
The Court adopted a purposive interpretation approach, rejecting the narrow interpretation of the Collector of Stamp Revenue that limited liability partnerships could not meet the association requirement for eligibility for the intra-group stamp duty relief. Taxpayers should review their organization structure to determine if they qualify for this relief in an internal group restructuring.
See EY Global Tax Alert, Hong Kong Court holds limited liability partnerships are entitled to intra-group stamp duty relief, dated 15 August 2022.
DSTs deductible in Ireland
The Irish Revenue Commissioners published guidance confirming that specified digital services taxes (DSTs) incurred wholly and exclusively for the purposes of a trade are deductible in computing income of that trade for Irish corporation tax purposes.
See EY Global Tax Alert, Ireland publishes updated guidance on tax deductibility of Digital Services Taxes, dated 9 September 2022.
New Zealand proposes cross-border changes
The Bill contains anticipated policy and remedial changes that would have wide-ranging impacts across a multitude of sectors. Highlights include proposals to extend the Goods and Services Tax rules for electronic marketplaces to the platform or gig economy and to amend the rules governing employers’ withholding obligations for cross-border employees and the income tax consequences of corporate dual residence.
See EY Global Tax Alert, New Zealand proposes various changes to tax rules around the gig and sharing economy, taxation of cross-border employees, dual corporate residency, and more, dated 5 September 2022.
Poland proposes changes to shifted profits tax
The broad bill, which would mostly implement recent tax reform, includes proposals for multiple changes to the 19% shifted profits tax that applies to Polish entities and to entities with a permanent establishment in Poland.
See EY Global Tax Alert, Poland proposes additional changes to shifted profits tax, dated 12 September 2022.
New UK trading scheme for products from developing countries
Effective in 2023, a new trading scheme in the United Kingdom (UK) will apply zero and reduced tariffs to hundreds of additional products imported from 65 developing countries.
See EY Global Tax Alert, UK announces new trading schemes to cut tariffs on goods from developing countries, dated 5 September 2022.
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