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June 12, 2024 Global Tax Policy and Controversy Watch | June 2024 edition Key highlights EU Member States reach political agreement on FASTER European Union (EU) Member States reached political agreement on the Directive on Faster and Safer Relief of Excess Withholding Taxes (FASTER). Member States have until 31 December 2028 to transpose the Directive into national law. The Directive includes three building blocks: (i) a common EU digital tax residence certificate; (ii) a choice between, or combination of, a "relief at source" system and a "quick refund" system; and (iii) common reporting. The Royal Decree of 15 May 2024 was published on 29 May, starting the countdown for multinational enterprises and large-scale domestic groups in scope of Pillar Two to file a Pillar Two Notification Form, with submissions due on 13 July 2024 (at the earliest). The information required to complete the Pillar Two Notification Form is extensive. Additionally, on 2 May 2024, the Belgian Parliament approved a bill further aligning Pillar Two legislation with the Agreed Administrative Guidance. News items EU has not yet reached agreement on VAT in the digital age proposal On 14 May 2024, the Economic and Financial Affairs Council (ECOFIN) of the EU met to discuss changes to the EU Value Added Tax (VAT) rules as part of the VAT in the digital age (ViDA) initiative, based on a revised proposal for a Council Directive issued on 8 May 2024. However, the Ministers did not reach agreement on the changes and discussions will continue with a view to reaching a compromise that all 27 Member States can approve. Australia delivers 2024-25 Federal Budget Proposals include a new Significant Global Entity penalty, broadening of the capital gains tax regime for foreign residents, funding to extend Australian Taxation Office compliance programs and deferring some previously announced measures. Argentina applies 17.5% tax on purchases of foreign currency for dividend and profit distributions The tax must be determined on the total amount of the transaction and collected at the time the debit of the subscription is made. The subscriber must pay the tax, but the financial entity through which the subscription is made shall act as collection and settlement agent. Belgium modernizes investment deduction regime and enhances IP regime New rules update the investment deduction regime and modernize the list of qualifying assets and technologies and corresponding rates. The new rules enter into force on 1 January 2025. Belgium also amended its intellectual property regime or Innovation Income Deduction (IID) regime, allowing taxpayers to choose not to deduct the full amount of IID and to carry forward the excess as a nonrefundable tax credit, effective from assessment year 2025. This is particularly relevant for taxpayers in scope of the Pillar Two rules. Canada enacts some business income tax measures and advances others On 28 May 2024, amended Bill C-59, the Fall Economic Statement Implementation Act, 2023, became substantively enacted. The Act includes the excessive interest and financing expenses limitation rules, carbon capture, utilization and storage and clean technology investment tax credits, the substantive Canadian-controlled private corporation measure, hybrid mismatch arrangement rules and changes to the General Anti-Avoidance Rule. On 2 May, Bill C-69, Budget Implementation Act, 2024, No. 1, received first reading in the House of Commons. Bill C-69 contains certain tax measures announced in the 2024 federal budget and the 2023 federal fall economic statement, as well as various other tax measures that were previously released in draft legislation in 2023 such as the Pillar Two rules. Further, Canada's proposed changes to capital gains inclusion rate and stock option deduction could cause stock options and capital gains to be taxed at a higher effective rate than under the current rules. Colombian Tax Authority issues new ruling on significant economic presence On 30 April 2024, the Colombian Tax Authority issued Ruling No. 100208192-305, addressing the significant economic presence (SEP) rules. Generally, provided certain conditions are met, nonresidents who sell goods and/or provide certain digital services to customers and/or users located in Colombia may create SEP and will be subject to Colombian income tax either through (i) a 10% withholding tax, or (ii) a 3% income tax to be filed annually, calculated on the gross income in Colombia. The rules entered into force as of 1 January 2024. Dominican Republic grants automatic extension for filing CbCR Taxpayers covered by the Country-by-Country Report (CbCR) obligation will now have until 30 August 2024 to submit the CbCR for fiscal year 2022. The CbCR requirement generally applies to taxpayers that are the Ultimate Parent Entity or a Constituent Entity of a Multinational Group with consolidated annual revenue equal to or higher than 38.8 billion Dominican pesos (DOP38.8b) (i.e., €750m according to the 2015 exchange rate established in Notice 18-22) and are tax resident in the Dominican Republic. Finland's VAT increase could make VAT rate the second highest in the EU The Finnish government announced in its April 2024 budget session an increase in the standard VAT rate from the current 24% to 25.5%. Certain reduced VAT rates of 10% and 14% are unchanged, but the items subject to them will partially change. The Insurance Premium Tax rate will also increase to 25.5%. Ghana Revenue Authority issues multiple administrative guidelines on Income Tax and VAT One guideline directs taxpayers to obtain and retain VAT invoices as proof of expenses incurred for tax deductibility purposes. The other provides direction to taxpayers on applying the VAT flat rate for real estate purposes. Greece transposes Pillar Two into domestic law The legislation includes a Qualified Domestic Minimum Top-up Tax (QDMTT) and an Income Inclusion Rule (IIR) effective for fiscal years starting from 31 December 2023 and an Undertaxed Profits Rule (UTPR) effective for fiscal years starting from 31 December 2024. Honduran Tax Authority launches its new Virtual Office The new Virtual Office launched by the Tax Authority is designed to enhance the taxpayer experience by enabling the submission of tax procedures and files online. This new platform replaced the existing system on 3 June 2024. Kenya proposes tax changes under the Finance Bill, 2024 The bill proposes various changes to the Income Tax Act; VAT Act, 2013; Excise Duty Act; Tax Procedures Act, 2015; and Miscellaneous Fees and Levies Act, among other non-tax statutes. The High Court in Kenya issued a decision in favor of an oil marketing company, affirming that the tax laws do not explicitly provide for additional customs duties on product gains. The decision also emphasized that tax statutes are to be strictly interpreted and there is no room for imputing anything the National Assembly has not legislated into statute. Pakistan implements amendments to tax appeals system Effective 16 June 2024, Pakistan made significant changes to the tax appeals procedures in cases involving federal income tax, sales tax and federal excise tax. The changes aim to streamline the tax appeals process, encourage the use of Alternate Dispute Resolution and establish clearer rules and timelines for resolving tax disputes. Saudi Arabia clarifies requirements and procedures for excise tax refund Saudi Arabia released a tax bulletin explaining the procedures for claiming tax refunds related to the disposal of excise goods. Taxpayers registered as importers and manufacturers should review the bulletin and assess their eligibility to claim a refund related to the disposal of excise goods unfit for human consumption, in compliance with the Excise Tax Law and its Implementing Regulations. Singapore Revenue Authority announces GST InvoiceNow requirement The Inland Revenue Authority of Singapore (IRAS) announced on 15 April 2024 the adoption of InvoiceNow, which will allow Goods and Services Tax registered businesses to transmit invoice data directly to the IRAS using InvoiceNow solutions. A Constitutional Court decision, published in the Official Gazette dated 19 April 2024, concludes that Turkiye's "additional tax" conforms with the Constitutional Law in Turkiye. Responding to a lower court's objection to the additional tax as retroactive, and thus unconstitutional, the Court ruled that laws may be applied retroactively due to events that deeply affect society, such as unforeseen natural disasters. Furthermore, the Court concluded that the rule is not otherwise unconstitutional. In Notice 2024-36, the IRS and Treasury Department released guidance on Round 2 of the IRC Section 48C(e) program to allocate the remaining US$6b in investments in eligible qualifying advanced energy projects.
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