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October 19, 2022
2022-5995

Global Tax Policy and Controversy Watch | October 2022 edition

In the spotlight

EU Member States agree on electricity revenue cap and solidarity contribution of fossil fuel sector

The European Union (EU) Energy Ministers reached a provisional agreement on a new regulation introducing emergency measures to mitigate high energy prices and the risk of supply shortages in Europe. The two tax-related measures include a revenue cap on inframarginal electricity producers and a temporary solidarity contribution over the profits of companies in the crude petroleum, natural gas, coal, and refinery sectors.

See EY Global Tax Alert, EU Member States politically agree on electricity revenue cap and solidarity contribution of fossil fuel sector, dated 3 October 2022.

Key highlights

ECOFIN adopts revised list of non-cooperative jurisdictions for tax purposes

The EU Finance Ministers adopted a revised list of non-cooperative jurisdictions for tax purposes. Anguilla, the Bahamas, and Turks and Caicos Islands were added to Annex I (the so-called “black” list). Armenia and Eswatini were added to Annex II (the so-called “gray” list), while Bermuda and Tunisia were removed.

See EY Global Tax Alert, ECOFIN adopts revised list of non-cooperative jurisdictions for tax purposes; Pillar Two Directive not on the agenda, dated 4 October 2022.

The Netherlands, Ireland and the UK release budget packages

The Netherlands budget proposal includes a proposed increase in the step-up corporate income tax rate from 15% to 19% and proposes to start applying the 25.8% headline corporate tax rate to taxable profits above €200,000. See EY Global Tax Alert, Netherlands Budget Proposals: Key legislative developments for 2023 and 2024, dated 20 September 2022.

Ireland’s budget includes measures worth €6.9 billion for 2023 and an additional €4.1 billion in one-off expenditures to provide support for rising energy prices. See EY Global Tax Alert, Ireland announces Budget 2023, dated 29 September 2022.

The United Kingdom’s (UK) mini-budget included a Growth Plan that has evolved. See EY Global Tax Alerts, UK Government updates income tax proposal from its mini-Budget, dated 21 September 2022 and UK Chancellor reverses most of the Growth Plan tax measures, dated 18 October 2022.

US IRS accepting new applicants for the 2023 CAP program

The United States (US) Internal Revenue Service’s (IRS) Large Business and International division announced that it is accepting new applications for its Compliance Assurance Process program for tax year 2023. The application period is 15 September 2022 through 15 November 2022.

See EY Tax Alert, LB&I accepting new applicants for the 2023 CAP program, dated 21 September 2022.

Updates to MAP processes may increase taxpayer participation

With cross-border controversy growing at a rapid pace, companies need to be aware of options to resolve tax controversy disputes. The Mutual Agreement Procedure (MAP) is one avenue that companies may consider.

See the latest Global Tax Controversy monthly flash news article, EY Global Tax Controversy Flash Newsletter (Issue 50) | Updates to MAP processes may increase taxpayer participation, dated 13 September 2022.

News items

OECD holds public consultation meeting on Progress Report on Amount A of Pillar One

The OECD held a public consultation meeting on the Progress Report on Amount A of Pillar One. Three panels discussed key elements of the proposed design for Amount A, including the marketing and distribution profits safe harbor, the approach for eliminating double taxation with respect to Amount A and other aspects of the rules.

See EY Global Tax Alert, OECD holds public consultation meeting on Progress Report on Amount A of Pillar One, dated 19 September 2022.

Australian Treasury releases consultation paper on BEPS 2.0 two-pillar global agreement

The consultation paper poses 40 questions regarding design of the two-pillar global agreement and the Australian implementation of the Global Anti-Base Erosion (GloBE) Model Rules. Comment submissions are due by 1 November 2022.

See EY Global Tax Alert, Australian Treasury releases consultation paper on BEPS 2.0 two-pillar global agreement, dated 4 October 2022.

Denmark proposes taxation of dividends paid to foreign states

If the proposal is enacted, dividends paid by Danish companies to foreign states and institutions that are an integrated part of foreign states will be subject to a 27% withholding tax that may be reduced to 22% (or lower if provided under a tax treaty) through a reclaim procedure. The proposal would apply to dividends paid to foreign states as of 1 March 2023 and thereafter.

See EY Global Tax Alert, Denmark proposes taxation of dividends paid to foreign states, dated 28 September 2022.

El Salvador’s Tax Authority publishes list of tax havens for 2023

The annual guide sets out a list of countries, states or territories that are considered to be preferential tax regimes, low or no tax jurisdictions, or tax havens for Salvadoran tax purposes. Payments or amounts credited to individuals or entities located in tax havens from taxpayers domiciled in El Salvador are generally subject to an increased withholding tax rate of 25%.

See EY Global Tax Alert, El Salvador’s Tax Authority publishes list of tax havens for 2023, dated 30 September 2022.

France to implement new VAT e-invoicing requirements from 1 July 2024

The French Parliament has adopted mandatory e-invoicing and real-time reporting reform for Value-Added Tax (VAT). E-invoicing will apply to all transactions between entities subject to VAT and the transmission of transaction data with effect from 1 July 2024.

See EY Global Tax Alert, France to implement new VAT e-invoicing requirements from 1 July 2024, dated 19 September 2022.

German Government issues draft of cross-border transfer of function rules

The draft is intended to align the existing Order Decree Law with recent legal changes to the cross-border transfer of function rules, but also includes some aspects where the rules would be further tightened beyond the recent legal changes and the existing Order Decree Law.

See EY Global Tax Alert, German Government issues draft order decree law on cross-border transfer of function rules, dated 29 September 2022.

Spanish Tax Authority issues FAQs regarding new plastic packaging tax

The Frequently Asked Questions (FAQs) provide guidance on certain questions around scope, exemptions, thresholds, certification, and tax base for the new tax on non-reusable plastic packaging that is effective 1 January 2023.

See EY Global Tax Alert, Spanish Tax Authority issues FAQs regarding new plastic packaging tax, dated 28 September 2022.

Spain approves legislation on mandatory electronic invoicing

The law will make electronic invoicing mandatory in commercial transactions between companies and professionals. The law is to become effective one year after its regulations are published for companies with annual turnover above €8 million, and two years after publication for other companies.

See EY Global Tax Alert, Spain approves legislation on mandatory electronic invoicing, dated 5 October 2022.

Taiwan relaxes requirement to submit withholding tax statement from a Foreign Institutional Investor

Taiwan’s Ministry of Finance issued a press release that a Foreign Institutional Investor may be exempted from providing physical withholding tax statements when reclaiming withholding tax refunds in accordance with the reduced tax rate under an income tax treaty, effective immediately.

See EY Global Tax Alert, Taiwan relaxes requirement to submit withholding tax statement from a Foreign Institutional Investor when applying ex-post for reduced tax rate in accordance with an income tax agreement, dated 15 September 2022.

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