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May 9, 2023
Global Tax Policy and Controversy Watch | May 2023 edition
European Parliament approves EU ETS reform and new EU CBAM
The European Parliament has approved key legislative elements of its "Fit for 55" package: EU Emission Trading System (EU ETS) reform and the new EU Carbon Border Adjustment Mechanism (CBAM). The EU ETS will be extended in the aviation and maritime sectors; a new ETS II will cover fuels for transportation; and heating and free allowances will be phased out starting in 2026. A transitional period will apply for EU CBAM from 1 October 2023 to 31 December 2026, with quarterly reporting obligations only; from 2026 onward, purchasing CBAM certificates will be required.
See Global Tax Alert, European Parliament approves EU Emission Trading System reform and new EU Carbon Border Adjustment Mechanism, dated 20 April 2023.
OECD releases fifth annual peer review report on BEPS Action 6 relating to the prevention of treaty abuse
On 21 March 2023, the Organisation for Economic Co-operation and Development (OECD) published the fifth annual peer review of the minimum standard on prevention of treaty abuse under Action 6 of the Base Erosion and Profit Shifting project. This reflects the first reporting on specific data points that were incorporated in the revised peer review methodology introduced in 2021.
See Global Tax Alert, OECD releases fifth annual peer review report on BEPS Action 6 relating to the prevention of treaty abuse, dated 5 April 2023.
Are your company officers personally liable for VAT and GST shortcomings? Increasingly, the answer is yes
Value-Added Tax (VAT) and Goods and Services Tax (GST) are levied in most jurisdictions worldwide. While these consumption taxes are ultimately borne by final consumers, they are collected, accounted for, and remitted by businesses throughout the supply chain. Proper reporting of these taxes is a key focus of tax administrations. Tax authorities, globally, are increasing their use of technology to identify risks and are imposing financial and other penalties for errors, omissions and fraud.
Read the latest Global Tax Controversy monthly flash news article, EY Global Tax Controversy Flash Newsletter (Issue 57) | Are your company officers personally liable for VAT and GST shortcomings? Increasingly, the answer is yes, dated 20 April 2023.
Australian Treasury releases Exposure Draft Bill on multinational tax transparency public country-by-country reporting
The Exposure Draft legislation and Explanatory Materials released by the Australian Treasury require certain large multinational enterprises to publish specified tax information on a country-by-country basis. The reporting entity would be required to publish the specified tax information on a government website in an approved form for income years commencing on or after 1 July 2023. The proposed amendments would apply to both Australian and foreign groups that meet the reporting requirements if any group member is resident in or maintains a permanent establishment in Australia.
See Global Tax Alert, Australian Treasury releases Exposure Draft Bill — Multinational tax transparency public country-by-country reporting, dated 12 April 2023.
Australian Treasury releases Exposure Draft Bill to deny deductions for certain payments to low-tax jurisdictions
The Exposure Draft legislation proposes to amend Australia's tax rules to limit deductions for certain payments in respect of intangible assets that significant global entities make, directly or indirectly, to associates in a low corporate tax jurisdiction. The proposed amendments would apply to payments made on or after 1 July 2023.
See Global Tax Alert, Australian Treasury releases Exposure Draft Bill to deny deductions for payments by significant global entities to low-tax jurisdictions relating to intangible assets, dated 4 April 2023.
Chilean appeals court considers taxability of Spanish resident's indirect transfer of Chilean company
On 14 April 2023, the Court of Appeals of Santiago, Chile, issued a ruling concluding that, under the terms of the Double-Tax Treaty between Chile and Spain, Chile would not have taxing rights under circumstances in which a Spanish resident indirectly transferred a Chilean company.
See Global Tax Alert, Chilean appeals court considers whether Chile can tax Spanish resident's indirect transfer of Chilean company, dated 27 April 2023.
Chilean government introduces amendments to the Mining Royalty bill
The Chilean government has introduced amendments to a bill the Senate is considering on taxation of mining royalties. The changes would: (i) require financial statements to be reported; (ii) include start-up and organization expenses in the taxable base of the margin component of the royalty; and (iii) cap the taxation of mining royalties at 48%.
See Global Tax Alert, Chilean government introduces amendments to the Mining Royalty bill, dated 25 April 2023.
Germany releases discussion draft on pending introduction of e-invoice
The Federal Ministry of Finance sent a long-awaited discussion draft to significant business associations on the introduction of mandatory business-to-business e-invoicing in Germany. The introduction of e-invoicing is planned for 1 January 2025.
See Global Tax Alert, German Finance Ministry releases discussion draft on pending introduction of e-invoice, dated 20 April 2023.
Ghana's new laws affect individuals and businesses
These laws, effective 3 April 2023, increase the duty on certain excisable products, revise the income tax rates applicable to individuals and how the motor vehicle benefit is quantified, and introduce withholding tax on the realization of assets and liabilities. In addition to consolidating laws subject to administration by the Ghana Revenue Authority, the new laws also unify the unrelieved loss regime, revise the treatment of foreign exchange losses, and introduce a new growth and stability levy applicable to entities.
See Global Tax Alert, Ghana's new laws introduce new taxes affecting individuals and businesses, dated 26 April 2023.
Hong Kong proposes safe harbor rules for onshore equity disposal gain
A consultation paper proposes conditions for a safe harbor rule under which onshore disposal gains on equity interests will be accepted as being nontaxable capital gains in Hong Kong. The related legislative amendments are expected to be enacted later in 2023 with effect from 1 January 2024.
See Global Tax Alert, Hong Kong proposes safe harbor rules for onshore equity disposal gain, dated 1 May 2023.
Ireland launches consultation on EU Minimum Tax Directive
The Irish Department of Finance has released a Feedback Statement on the transposition of the EU Minimum Tax Directive and launched the next phase of Ireland's consultation process on the implementation of the BEPS 2.0 Pillar Two framework.
See Global Tax Alert, Ireland launches consultation on EU Minimum Tax Directive and proposed legislative approach, dated 5 April 2023.
Italy announces draft legislative framework for major tax reform
The Italian Council of Ministers approved a set of general principles and criteria for a full reform of the Italian tax system, which the Parliament will finalize by issuing a law that will enable the government to implement the reform in detail. The draft framework is aimed at reducing the tax burden of corporations and individuals, increasing the degree of legal certainty, reducing litigation, improving the relationship between tax authorities and taxpayers, and outlining a system capable of attracting foreign capital.
See Global Tax Alert, Italy announces draft legislative framework for major tax reform, dated 14 April 2023.
Kenya issues VAT Regulations
Kenya has updated its VAT regulations to provide new tax filing requirements for the taxation of electronic, internet and digital marketplace supplies.
See Global Tax Alert, Kenya issues VAT (Electronic, Internet, and Digital Marketplace Supply) Regulations, 2023, dated 18 April 2023.
Luxembourg provides details on draft transfer pricing provisions
The Luxembourg Government recently submitted to Parliament draft legislation to introduce and modernize some tax procedural rules, including by requiring taxpayers with related enterprises to provide, upon request, specified documentation on their transfer pricing policy and imposing a specific procedure for requesting a bilateral or multilateral advance pricing arrangement (APA).
See Global Tax Alert, Luxembourg provides details on new draft transfer pricing provisions, dated 26 April 2023.
Luxembourg submits draft law to amend procedural tax rules
The Luxembourg Government recently submitted to Parliament draft legislation to introduce and modernize certain tax procedural rules, including a procedural framework for bilateral or multilateral APAs and a requirement for related enterprises to document their transfer pricing policy and amendments to rules on the applicable procedure in tax controversy matters.
See Global Tax Alert, Luxembourg amends some procedural tax rules, dated 7 April 2023.
Fee on changes in ownership of Russian subsidiary — implications for US multinationals
Since December 2022, the Russian Government Commission has imposed a "contribution" fee on any change in ownership of a Russian subsidiary at 10% of the transaction price. In March 2023, the fee was changed to 5% of the fair market value of the Russian subsidiary. The fee is sometimes referred to as an "exit tax" but technically is not a tax in the form in which it was proclaimed by the Russian Governmental Commission. US persons whose divestment of assets in the Russian Federation will require payment of this fee require a license from the US Treasury prior to payment.
See Global Tax Alert, Russian authorities require exiting foreign companies to pay 'contributions' at 5% or 10% of market value — implications for US multinationals, dated 20 April 2023.
Rwanda gazettes new Tax Procedures Law
The Government of Rwanda has enacted a new Tax Procedures Law (Law) applicable to taxes without a specific tax procedure. The Law repealed the Tax Procedures Law No 026/2019 and all prior legal provisions that are contrary to the Law. The Law was gazetted on 31 March 2023 and immediately came into force.
See Global Tax Alert, Rwanda gazettes new Tax Procedures Law, dated 17 April 2023.
Saudi Arabia approves amendments to the Transfer Pricing Bylaws to include zakat payers as part of covered entities
Saudi Arabia has announced the approval of amendments to the transfer pricing bylaws on how transfer pricing compliance rules should be implemented for zakat payers. Zakat payers are expected to comply with these new requirements from 1 January 2024.
See Global Tax Alert, Saudi Arabia approves amendments to the Transfer Pricing Bylaws to include zakat payers as part of covered entities, dated 11 April 2023.
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Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor