E-News from the EU Tax Centre

E-News from the EU Tax Centre

Issue 57

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Latest CJEU, EFTA and ECHR

Austria – Finanzamt Linz (C-66/14)

On October 6, 2015 the Court of Justice of the European Union (CJEU) rendered its decision in the case C-66/14 concerning specific rules of the Austrian group taxation regime that allow an Austrian parent company to deduct goodwill amortization for the acquisition of a domestic subsidiary but deny this tax benefit for acquisitions in EU subsidiaries. The CJEU dismissed the first question referred on the grounds that the State aid compatibility bore no relation to the subject matter of the proceedings and underlined that the claimants would not be able to draw any benefit from a possible breach of EU State aid rules. This was contrary to the AG’s opinion which considered the outcome of the first question of relevance for the second question that addressed a possible infringement of the freedom of establishment. In this regard the CJEU held that the rules in question were in breach of EU law, as they hindered Austrian parent companies from exercising their freedom of establishment by deterring them from acquiring subsidiaries in other Member States. 

For more information, see Euro Tax Flash.

Belgium – Commission v Belgium (C-589/14)

On October 29, 2015 the CJEU rendered its decision in Case C-589/14 concluding that the Belgium provisions that levy withholding tax on interest payable on debts backed by Belgian securities if the securities are deposited or registered in an account with a financial institution established in another Member State or a state belonging to the European Economic Area (EEA) but exempt such interest from withholding tax if the securities are deposited or registered in an account with a financial institution in Belgium infringes the freedom to provide services. Otherwise the CJEU rejected the appeal. 

Infringement procedures & Referrals to CJEU

Infringement procedures – Reasoned Opinion

Poland

On October 22, 2015 the European Commission announced that it had requested Poland to amend tax rules which allow the deduction of contributions made to certain private pension accounts only if they are paid into accounts opened by Polish investment funds, exchange maker houses, insurance establishments, banks and pension funds, whereas contributions paid into similar financial products and institutions in other Member States and states of the EEA are not tax deductible. The European Commission considers such a difference in tax treatment to be contrary to the freedom to provide services and to the free movement of capital as set out in EU Treaties. The request was sent in the form of a reasoned opinion and may be followed by a referral to the CJEU if Poland fails to notify the Commission about measures taken for a correct application of EU law within two months.

For more information, see Press Release

Referrals to CJEU

Czech Republic, Luxembourg, the Netherlands, Poland, Romania and Sweden

In May this year the European Commission sent a reasoned opinion to 11 Member States, asking them to fully transpose the Bank Recovery and Resolution Directive (BRRD) into domestic law. The deadline for the transposition was December 31, 2014. As 6 out of the 11 Member States still have not implemented the EU rules, the European Commission decided on October 22, 2015 to refer them to the CJEU over failure to transpose the BRRD into domestic law. After being referred to the CJEU, Member States are facing daily penalty payments until full compliance.

The BRRD was adopted in spring 2014 as part of a regulatory framework to create a safer and sounder financial sector in the wake of the financial crisis. By requiring banks to prepare recovery plans to overcome financial distress and equipping authorities with a set of powers to intervene in operations and restructure banks if they face failure, the bail out of banks by taxpayers should be avoided in the future. 

For more information, see Press Release.

State Aid

Commission finds transfer pricing rulings granted to Starbucks in the Netherlands and to Fiat in Luxembourg to be incompatible with EU State aid rules

On October 21, 2015 the European Commission announced its final decisions on its State aid investigations into transfer pricing rulings issued by the Netherlands to Starbucks and by Luxembourg to Fiat Finance and Trade. The Commission confirmed its preliminary conclusion issued in June 2014 that the companies in question were granted a selective and unfair competitive tax advantage. In both decisions the method laid down in the tax rulings to calculate the taxable basis was considered to be “artificial and complex”, resulting in taxable profits which “do not reflect economic reality”. As a consequence, the Netherlands and Luxembourg are required to recover the aid from Starbucks and Fiat. The Commission has provided a specific methodology for calculating the recoverable amount and estimated it to be EUR 20-30 million for each company. The Member States as well as the companies in question can appeal against these decisions before the CJEU. The governments of both Member States emphasized that the granted transfer pricing rulings were fully consistent with international standards and announced that they will thoroughly analyze the decisions and consider their next steps. 

Similar investigations have been launched on tax rulings granted to Apple and Amazon by Ireland and Luxembourg, respectively. Their outcome is still awaited. 

For more information, see Euro Tax Flash.

CJEU fined Italy with EUR 30 million for failing to recover State aid

On September 17, 2015 the CJEU decided on the case Commission v Italy (C-367/14) and therein imposed a fine against Italy amounting to EUR 30 million for failing to recover State aid granted to companies in Venice and Chioggia between 1995 and 1997. The relief in the form of reductions of social security contributions was considered to be illegal as it was not limited to a specific sector but awarded to companies based on their “unusual location”. For every six-month period that Italy fails to recover the aid, an additional EUR 12 million will be due on top of the EUR 30 million. 

Commission opens in-depth investigation into Ireland’s air travel tax exemption for transfer and transit passengers

On September 28, 2015 the European Commission opened an in-depth investigation into the exemption for transfer and transit passengers from Irish air travel tax. This follows a judgment of the General Court (T-512/11) annulling the Commission’s decision that declared the tax measure in question not to constitute unlawful State aid. The Court argued that the Commission has failed to open the formal investigation procedure in order to gather any relevant information for assessing whether the disputed tax exemption was selective and to allow the applicant and other interested parties to present their observations.

For more information, see Press Release.

EU Institutions

EU Joint Transfer Pricing Forum publishes Program of Work for 2015-2019

On September 24, 2015 the European Commission published the Program of Work for 2015-2019 of the EU Joint Transfer Pricing Forum (JTPF). The JTPF assists the Commission in the area of transfer pricing and proposes non-legislative solutions for practical problems and an enhancement of transfer pricing practices across the EU. In the Program of Work for 2015-2019 the JTPF will focus on the increased importance of economic analysis in TP, the interaction between TP and company’s internal information systems and the spill-over effects of TP, especially on corporate tax.

Commission published Report on Tax Reforms in EU Member States

On September 29, 2015 the European Commission published the annual report on Tax Reforms in EU Member States. The report analyzes tax policy changes, indicates the trends in taxation within the EU and provides a detailed overview of recent tax reforms in Member States.

ECON Committee publishes report on EU–Switzerland agreement on automatic exchange of information

On September 30, 2015 the European Parliament Committee on Economic and Monetary Affairs (ECON Committee) published its report on the draft Council decision regarding the conclusion of the agreement on automatic exchange of information in tax matters, signed between the EU and Switzerland on May 27, 2015 (see Euro Tax Flash 250). Based on the report, the ECON Committee welcomes the agreement, but also believes that there would be room for improvement, for which amendments should be reflected in future similar agreements.

For more information, see the report by the ECON Committee.

EU Commission to launch Action Plan on Capital Markets Union

On September 30, 2015 the EU Commission reported that it has launched the Capital Markets Union (CMU) Action Plan. The CMU aims to tackle investment shortages by increasing and diversifying the funding sources for Europe’s businesses and long-term projects.For more information, see the Commission press release.

EU agreement on mandatory exchange of information on cross-border tax rulings

On October 6, 2015 EU finance ministers in the Economic and Financial Affairs (ECOFIN) Council agreed to introduce the automatic exchange of information on cross-border tax rulings. The agreed rules deviate from an earlier proposal, in particular, in regard to the following:

  • retrospective timeframe reduced to 5 years;
  • certain small and medium-sized enterprises excluded from the retrospective disclosure; and
  • European Commission to have limited rights to the information exchanged.

The detailed provisions are expected to be finalized before the end of 2015, to enable national implementation by the anticipated deadline of end 2016.

The members of the European Parliament’s Economic and Monetary Affairs (ECON) Committee expressed their dismay at the agreement’s limited scope and late entry into force in their report of October 13, 2015. The report was approved in the Committee by 49 votes in favor, 0 against and 6 abstentions.

For more information, see Euro Tax Flash and the ECON Committee press release.

EU Commission to launch public consultation on CCCTB

On October 8, 2015 the EU Commission launched a public consultation to help identify the key measures for inclusion in the relaunch of the proposal for a Common Consolidated Corporate Tax Base (CCCTB). The consultation is part of the implementation of the EU Commission’s Action Plan for Fair and Efficient Corporate Taxation, launched in June this year. It will close on January 8, 2016.For more information, see Euro Tax Flash.

Commission updates list of non-cooperative countries for tax purposes

On October 12, 2015 the European Commission updated the consolidated version of the lists of third country non-cooperative tax jurisdictions from the EU Member States, as referenced in the Commission’s Action Plan for Fair and Effective Taxation of June 2015. The update reflects changes in assessments of the tax “good governance” standards of these third countries and revisions to national lists.

For more information, see TaxNewsFlash-Europe

Proposal for Council decision on amendments to the Savings Agreement with San Marino

On October 22, 2015 the Council published a proposal for amendments to the Savings Agreement with San Marino to ensure it is in line with EU and international developments following adoption of the proposal to repeal the EU Savings Directive (2003/48/EC) from January 1, 2016.

For more information, see the Proposal for a Council Decision.

Liechtenstein and European Union sign agreement on automatic exchange of information in tax matters

On October 28, 2015 Liechtenstein and the EU signed an agreement under which Liechtenstein and the 28 EU Member States will automatically exchange information about the financial accounts of each other’s residents, starting in 2017 for information collected in 2016. The EU and Switzerland signed a similar agreement on May 27, 2015 (see Euro Tax Flash 250). The EU is also finalizing its negotiations for the same purpose with Andorra and Monaco.

In line with the signed agreement, the Liechtenstein Ministry of Finance announced that a bill to ratify the amending protocol to the EU-Liechtenstein Savings Directive Agreement had been submitted to the parliament.

For more information, see the press release by the Council of the EU.

OECD

Final outputs of OECD BEPS project presented

On October 5, 2015 the Organisation for Economic Cooperation and Development (OECD) presented the final package of measures for a comprehensive, coherent and coordinated reform of the international tax rules, as a result of its Base Erosion and Profit Shifting (BEPS) project. The package was under discussion by G20 Finance Ministers at their meeting on October 8, 2015. The OECD/G20 provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to be artificially shifted to low-tax or no-tax environments, where little or no economic activity takes place. Initiated by the G20 Leaders, the package presents 15 actions to put an end to international tax avoidance, structured around three fundamental pillars: introducing coherence in the domestic rules that affect cross-border activities, reinforcing substance requirements in the existing international standards, and improving transparency as well as certainty for businesses and governments.

Following delivery of the BEPS measures to G20 Leaders during their annual summit on November 15–16, 2015, the focus will shift to implementation of the measures and a framework for monitoring them.

For more information, see TaxNewsFlash-BEPS and the OECD webpage

Local Law and Regulations

Belgium

Federal government finalizing a draft bill based on CJEU case law

The Belgian federal government is reported to be finalizing a draft bill containing several tax measures. Following the decision by the Court of Justice of the European Union (CJEU) in the Commission v Belgium (C-296/12) case (see E-News 40), the draft bill provides for an enlargement of the scope of tax benefits for supplementary pension savings to payments made with an institution established in the EEA.

Moreover, following the Tate & Lyle Investments (C-384/11) ruling by the CJEU, the draft bill provides for amendments to the withholding tax treatment of portfolio dividends paid by Belgian companies to foreign parent companies. The draft bill proposes to reduce the withholding tax rate applied to these dividends down to a level equaling the hypothetical tax due by a Belgian parent company in a corresponding situation. In addition to those established in the EEA, the reduced withholding tax rate is proposed to apply also to parent companies established in tax treaty countries if the treaty contains an exchange of information provision. Even though Belgium in practice already reimburses withholding tax on dividends paid by Belgian companies to foreign parent companies, the Belgian legislation has not yet been amended in line with the CJEU decision.

 

Extension of certain interest withholding tax exemptions to EEA countries

On October 1, 2015 a decree extending the withholding tax exemption for interests to EEA countries was published in the Belgian Official Gazette. Through the decree, the exemption is extended to cover withholding tax on bonds, debentures and other similar securities, as well as withholding tax on bearer shares given in open custody to a bank or registered in a securities account. The decree is a response to a notification from the European Commission, questioning the compatibility of the Belgian system with the EU freedom of establishment. The new decree will be applied as of December 1, 2015.

Bulgaria

Bill to amend tax laws for 2016

On October 13, 2015 the Bulgarian Council of Ministers submitted the draft bill to amend tax laws for 2016 to the parliament for voting. The draft bill provides for the national implementation of the amendments to the EU Parent-Subsidiary Directive, so that the tax exemption on profit distributions received from a subsidiary would be limited to profits that are not tax deductible for the subsidiary. Based on the draft bill, Bulgaria would also regard as taxable income the receipt of dividends that resulted in a decrease of the taxable base at the level of the distributing entity. Dividend distributions resulting in tax avoidance are covered by the general anti-avoidance rules in the Bulgarian tax legislation.

Furthermore, the draft bill provides for the implementation of the EU Commission Guidelines for Regional State Aid 2014–2020. Regional development in the form of tax relief could be granted only after receiving an advance approval from the tax authorities. New qualification criteria for State Aid are also introduced in the draft bill. 

Finally, the draft bill contains a new definition of jurisdictions with a preferential tax regime, following the latest developments in tax avoidance measures proposed by the Organisation for Economic Co-operation and Development (OECD), the European Commission and the G20. The new definition would cover jurisdictions that have or allow no information exchange and have tax rates lower than 60% of the Bulgarian corporate income tax rate. The list of such jurisdictions would be compiled by the Ministry.

Denmark

Budget for 2016 – Country-by-Country Reporting

On October 6, 2015 the budget for 2016 was presented to the Danish parliament. Among other proposals, the budget provides for the incorporation of country-by-country reporting obligations to the national legislation. The obligations would cover reporting for income and taxes paid, and they would apply to multinational enterprises with a consolidated turnover of at least DKK 5.6 billion. Furthermore, it is proposed that Danish subsidiaries of foreign-based groups would have to submit a country-by-country report under certain conditions.For further information on the proposed country-by-country reporting, see TaxNewsFlash-Transfer Pricing.

 

Action plan for tax administration

On September 25, 2015 the Danish Ministry of Taxation published its action plan for the tax administration and another document entitled “Tax administration out from the crisis”. The documents list problems recently faced by the tax administration and set out key solutions to them, such as allocating more resources to the tax administration, especially in order to control and handle withholding tax requests, and establishing a special anti-avoidance department to combat international tax criminality and fraud. According to the documents, specific attention will be given to investigating withholding tax fraud and refund claims made in connection with manufactured dividends.

Finland

Draft bill to implement amendments to Parent-Subsidiary Directive

On October 1, 2015 the Finnish government submitted to the parliament a draft bill implementing the amended EU Parent-Subsidiary Directive into the national legislation. Pursuant to the proposed legislative text, dividends received by a Finnish-resident company from an EU-/EEA-resident company would no longer be tax exempt for the receiving company if the dividends had been tax deductible for the distributing company. Moreover, the tax exemption would not be granted to an arrangement or a series of arrangements whose main purpose or one of the main purposes is to obtain a tax advantage that contradicts the object or purpose of the exemption and which is not genuine (i.e. not put into place for valid commercial reasons or not reflecting economic reality), taking into account all relevant facts and circumstances.

If passed by the parliament, the amendments enter into force on January 1, 2016.

France

Finance bill for 2016 – Country-by-country reporting, BEPS provisions

On September 30, 2015 the government submitted the Finance Bill 2016 to the parliament. The Bill provides that large enterprises will have to annually submit an abridged version of their transfer pricing documentation to the French tax authorities. The parent company of a tax group will have to submit the documentation for each company in the group, and the submitted documentation will have to contain the country or countries in which related companies that own intangible assets are established.

Furthermore, the government specified that France is working on the development of the multilateral‎ instrument to implement the tax treaty related BEPS initiatives. This instrument is planned to be adopted in 2016.

For more information, see TaxNewsFlash-Europe.

 

Details on refund procedure for social security contributions on investment income

On October 20, 2015 the French tax administration published a press release concerning the refund of social security contributions on investment income paid by taxpayers who are affiliated with a French social security regime. The publication follows the CJEU decision (C-623/13) in the De Ruyter case, and the follow-up decision by the French Supreme Court (see E-News 56).

Pursuant to the press release, social security contributions on investment income may be reclaimed, under certain conditions, by taxpayers who are not affiliated with the French social security regime but who are affiliated with the social security regime of another EU/EEA Member State or Switzerland. Claims may generally be made for social security contributions paid on or after January 1, 2013, and they must be accompanied with supporting documents providing proof of the payment of the social security contributions, the identity of the taxpayer and the affiliation of the taxpayer to a social security regime in another EU/EEA Member State or Switzerland.

Greece

Draft budget for 2016

On October 5, 2015 the draft budget for 2016 was presented to the Greek parliament. The budget provides, inter alia, for an increase in corporate income tax rates and the implementation of certain anti-avoidance measures.

Guernsey

Budget proposal for 2016

On September 29, 2015 the Minister for Treasury & Resources presented the budget proposal for 2016. The budget will subsequently be subject to a debate in the States meeting. Pursuant to the proposal, the corporate tax rates will remain at 0% (company standard rate), 10% (company intermediate rate) and 20% (company higher rate), but the company intermediate rate will be extended to the provision of custody services to unrelated third parties. The coverage of the company higher rate will also be subject to certain extensions.

For more information, see the budget proposal.

Ireland

Budget proposal for 2016

On October 13, 2015 the budget for 2016 was presented to the Irish parliament by the Minister of Finance. The proposal contains details concerning the research and development (R&D) tax incentive known as the “Knowledge Development Box” which would provide for a 6.25% corporation tax rate on profits arising from certain intellectual property assets that are the result of qualifying R&D activity carried out in Ireland. A document entitled “Update on Ireland's International Tax Strategy 2015” was published as part of the budget. The document confirms that the 12.5% corporation tax rate will not be affected by the OECD BEPS reports, and that country-by-country reporting will be introduced in Ireland in accordance with the OECD standard. In addition, it was confirmed that the Knowledge Development Box regime will comply with the OECD-initiated "modified nexus" approach.

Following the publication of the budget, the Finance Bill 2015, containing both measures announced in the budget and those not included in it, was published on October 22, 2015. The Bill proposes, inter alia, national implementation of a general anti-abuse provision, arising from the amended EU Parent-Subsidiary Directive. Consequently, the benefits of the Directive will not be granted to an arrangement or series of arrangements that are not genuine and are only made to obtain the benefits of the Directive. The Bill also provides for national implementation of the Common Reporting Standard on the Automatic Exchange of Financial Information which has been incorporated into the EU Directive on Administrative Cooperation.

For more information, see TaxNewsFlash-Europe and a dedicated budget webpage by KPMG in Ireland.

Italy

Legislative decree provides for amendments to corporate taxation

A legislative decree (no. 147) providing for new measures aimed at promoting the growth and internationalization of Italian enterprises was issued on September 14, 2015. Pursuant to the decree, dividends directly or indirectly distributed by a company resident in a jurisdiction included in the statutory controlled foreign corporation (CFC) blacklist are fully taxable in the hands of their Italian recipient, unless the income has been already taxed in the hands of the Italian recipient under the applicable CFC rules. The same tax treatment also applies to capital gains realized on the disposal of a direct or indirect participation in a company residing in a blacklisted jurisdiction.

Furthermore, the Italian legislation contains a separate blacklist for cost deduction. The decree provides that expenses related to transactions between Italian-resident persons and enterprises resident in a blacklisted jurisdiction are only deductible up to their fair market value, unless the resident person proves that the relevant transaction had a genuine business purpose and that it actually took place.

Finally, the decree provides for certain amendments to the Italian CFC regime. All the aforesaid rules are effective as from the 2015 tax year.

 

Tax ruling and tax litigation procedures amended

Legislative decree no. 156, providing for a new “tax ruling” system, was issued on October 7, 2015. The new system will be applied as of year 2016. Under Italian tax law, tax rulings are generally requested by taxpayers from the tax authorities so as to clarify the tax treatment of a certain transaction or the interpretation of the tax legislation. The new system includes new classifications for tax rulings, and provides rules for when a request for a tax ruling is mandatory and when it is optional. The new system also revises the timing for a taxpayer to file a tax ruling application and the time period for the tax authorities to respond.

For more information, see TaxNewsFlash-Europe.

 

Ministerial decree published on patent box regime

On October 20, 2015 the Ministerial Decree, issued on 30 July 2015, was published in the Italian Official Gazette. The decree provides for implementing rules for the patent box regime previously introduced by the Stability Law 2015 of December 23, 2014. Under the new patent box regime, 50% of income derived from the exploitation or direct use of qualifying intellectual property (IP) is exempt from corporate income tax and regional tax on productive activities. However, the exemption is reduced to 30% for the 2015 tax year and to 40% for the 2016 tax year. Moreover, capital gains arising from the sale of qualifying IP are not taxable if at least 90% of the proceeds are reinvested in qualifying R&D activities within the following two tax years.

The decree provides details on persons that may opt for the new regime, qualifying IP, qualifying R&D activities and the calculation of qualifying income under the regime, as well as on the need to activate a ruling procedure in order to benefit from the regime.

For more information, see TaxNewsFlash-Europe.

 

Draft Stability Law for 2016

On October 15, 2015 the Italian Council of Ministers approved the draft Stability Law for 2016. The tax measures provided in the Law include a decrease of the corporate income tax rate from 27.5% to 24% as from tax year 2017.

Lithuania

Draft legislation to implement amendments to Parent-Subsidiary Directive

On September 3, 2015 the Lithuanian Ministry of Finance issued a proposal to amend the Law on Corporate Income Tax. The proposal aims at implementing the amended provisions of the EU Parent-Subsidiary Directive regarding taxation of dividends in cases where the only or one of the main goals of the transaction is to achieve a tax benefit and where the transaction is performed without commercial reasons reflecting economic reality. Furthermore, the proposal provides that dividends will not be tax exempt for the receiving parent entity if they are tax deductible for the subsidiary.

For more information, see Tax, Legal and Accounting Newsletter published by KPMG in Lithuania.

Luxembourg

New proposed tax measures for 2016

On October 14, 2015 the Luxembourg government submitted two draft laws to the parliament. The Budget Bill for 2016 provides for the repeal of the current intellectual property (IP) regime (subject to transitional rules) and the introduction of a temporary tax amnesty for individuals. A new IP regime will be introduced in a separate bill to bring the current regime in line with the “modified nexus” approach suggested by the OECD.

Another bill submitted by the government proposes to amend, among other things, the net worth tax regime. The provisions in the Income Tax Act that concern the alternative minimum tax will be abolished and replaced by provisions on alternative minimum tax under this regime. Pursuant to the new provisions, securitization companies, venture capital companies and pension-saving associations and companies will generally have to pay a minimum net worth tax based on the amount of their taxable net worth and its proportion to their total balance sheet amount. This amendment results from an action brought by the European Commission against the Luxembourg minimum corporate income tax regime that was considered discriminatory.

All in all, these bills reflect the political will of the government to both implement BEPS / EU compliant measures and improve the competitiveness of the Luxembourg tax system.

For more information, see Luxembourg Tax News.

Netherlands

Draft legislation to amend “fiscal unity” regime

On October 16, 2015 a bill to amend the “fiscal unity” regime was presented to the Dutch Lower House. The bill is a response to the findings of the CJEU (see Euro Tax Flash 229) and subsequent judgments by the Amsterdam Court of Appeals that held that parts of the Dutch fiscal unity regime were in breach of the EU freedom of establishment.

In anticipation of this bill, the Deputy Minister of Finance already issued a policy statement in late 2014 that allowed, under certain conditions, both a fiscal unity of “sister companies” of an EU- or EEA-resident parent company, and that of a domestic parent company and domestic sub-subsidiaries held through one or more EU- or EEA-resident intermediate holding companies.The bill is intended to codify this policy statement and provide more details on the amended regime.

The bill would also facilitate the inclusion of Dutch permanent establishments of EU- or EEA-resident companies in a fiscal unity, and tighten the ownership requirements.

For more information, see TaxNewsFlash-Europe.

Norway

Budget for 2016

On October 7, 2015 the budget for 2016 was presented to the Norwegian parliament. The corporate tax measures proposed in the budget include the reduction of the corporate income tax rate (currently 27%) down to 25% as of 2016 and down to 22% as of 2018. The budget also proposes to tighten the deduction limitations for intra-group interest expenses, so that the deductible portion would be limited to 25% (currently 30%) of the tax EBITDA.In order to tackle non-taxation in the case of so-called ‘hybrid mismatches’, the budget provides that the exemption method would no longer be applicable in the taxation of the recipient company if the income is deductible for the paying company. Finally, the budget proposes to increase the maximum costs for which a tax credit for research and development (R&D) costs is granted.

Poland

New R&D tax incentives

On September 16, 2015 the President signed legislative amendments introducing new research and development (R&D) tax incentives. The introduced incentives are significantly less generous than the initial proposal by the President, as they provide for tax benefits amounting to 30% of payroll expenses of R&D employees and 10% – 20% of other qualifying expenses. The amendments will enter into force on January 1, 2016. The current incentive (“new technology deduction”) will be abolished.

For more information, see TaxNewsFlash-Europe.

 

Implementation of amendments to Parent-Subsidiary Directive and country-by-country reporting

On October 9, 2015 Poland’s lower house adopted the Senate’s amendments to legislation that would amend the provisions related to the tax exemption for dividends paid between related companies. The legislation introduces an “anti-abuse clause” that would apply with respect to dividend payments and other profit distributions made by a subsidiary to a parent company. According to the adopted amendments, the exemption would not apply to arrangements that are artificial and whose main purpose is to obtain a tax advantage. An arrangement would be deemed artificial if it was carried out without justifiable business or economic reasons, in particular when shares of the dividend distributor company are transferred or the company generates income which is further transferred through a dividend distribution or another method of profit distribution. Assuming that the legislation is signed by the President and enacted, the provisions would be effective as of 2016.

In the same session, the lower house also adopted the Senate’s amendments to legislation that would introduce the country-by-country reporting. The new provisions provide, inter alia, that Polish entities with annual consolidated revenues exceeding EUR 750 million would be required to prepare and submit to the tax authorities a country-by-country report on a yearly basis. The report would contain information on the amount of income received and tax paid by the entity and the locations of business activity of its subsidiaries and foreign permanent establishments. The new provisions would enter into force as of January 1, 2017.

For more information, see TaxNewsFlash-Europe and Transfer Pricing Alert by KPMG in Poland.

Spain

Income tax treatment of intangible assets and goodwill amended

Under law officially published on July 20, 2015 the corporate income tax treatment of intangible assets and goodwill is amended. Currently, classification of intangible assets is based on their useful lives, so that intangible assets with limited useful lives (e.g. patents) must be amortized within such period, while those with unlimited useful lives (e.g. purchased goodwill) may not be amortized. Under the amended regime, this distinction is revised, so that all intangible assets are presumed to have limited useful lives and, therefore, have to be amortized. The new rules will enter into force at the beginning of 2016.

For more information, see TaxNewsFlash-Europe.

 

Amendments to General Tax Law

On September 22, 2015 the Spanish Official Gazette published legislation partially amending the General Tax Law. In response to Council Regulation laying down application rules for Article 93 of the EC Treaty, the amended legislation provides for a specific and detailed procedure for enforcement by the Spanish authorities of European Commission decisions on State Aid. The procedure may be commenced even where the affected assessments are final, but a 10-year statute of limitation period is established for the tax authorities to recover aid.

Furthermore, the amended legislation provides for suspension of economic or judicial procedures if a mutual agreement procedure (MAP) has been initiated in accordance with a tax treaty provision. Pursuant to the amended legislation, the suspension will continue until the MAP has been finalized.

For more information, see Tax Alert by KPMG in Spain.

Sweden

Proposal to implement amendments to Parent-Subsidiary Directive

On October 6, 2015 the Swedish government submitted to the parliament a legislative proposal implementing the amended EU Parent-Subsidiary Directive into the national legislation. Pursuant to the proposed legislative text, dividends received by a Swedish-resident company from an EU-/EEA-resident company would no longer be tax exempt for the receiving company if the dividends had been tax deductible for the distributing company. Moreover, the withholding tax exemption on dividends paid to non-residents would no longer be granted to an arrangement or a series of arrangements whose main purpose or one of the main purposes is to obtain a tax advantage that contradicts the object or purpose of the exemption and which is not genuine (i.e. not put into place for valid commercial reasons or not reflecting economic reality), taking into account all relevant facts and circumstances.

The amended legislation also enables requesting advance rulings on withholding tax treatment from the Swedish tax authorities. The amendments will enter into force on January 1, 2016.

UK

Informal consultation on automatic exchange of financial account information

On September 17, 2015 the UK tax authorities launched an informal consultation on the guidance notes for the automatic exchange of financial account information. The guidance covers the incorporation of the Common Reporting Standard (CRS) into EU law by the EU Directive on Administrative Cooperation. Once finalized, it is intended to incorporate amended and updated versions of the existing guidance on the Foreign Account Tax Compliance Act (FATCA) and the Crown Dependencies and Overseas Territories (CDOT) arrangements for automatic exchange of tax information. Moreover, it provides additional guidance for UK-specific issues, including where there are differences among the CRS, FATCA, and CDOT rules.

For more information, see the draft guidance notes by the UK tax authorities.

 

Punitive 45% corporation tax rate on restitution interest

On October 21, 2015 the UK government published its amendments to the UK Summer Finance Bill, together with explanatory notes. One of the amendments imposes a corporation tax charge at 45% on compound restitution interest awarded under a claim relating to the payment of tax on a mistake of law or unlawful collection of tax. The UK tax authorities will withhold this tax from a payment of restitution interest when made. This may be regarded as targeting potentially large repayments of tax for breaches of EU law on which compound interest may be payable (currently contested through the courts). The proposed amendment risks undermining the principles of certainty and the rule of law and might generate more EU litigation.

For more information, see TaxNewsFlash-Europe, the government amendments and explanatory notes.

Local Courts

Netherlands

AG concludes that 30% ruling does not clearly and systematically overcompensate

On September 29, 2015 Advocate General (AG) Niessen of the Dutch Supreme Court gave a further opinion in the case following the decision by the Court of Justice of the European Union (CJEU) in Sopora v Staatssecretaris van Financiën (see Euro Tax Flash 246). In its decision, the CJEU ruled that the criterion laid down in the Dutch legislation, according to which employees from abroad with specific expertise were eligible for a tax relief (‘30% ruling’), provided that they resided more than 150 kilometers from the Dutch border, did not violate EU law, unless it systematically gave rise to a net overcompensation of the extra expenses actually incurred by the foreign employees. This was left for the Dutch court to examine.

Based on legislative documentation and his model calculations, the AG suggested that the Supreme Court reject the taxpayer's appeal, and decide that, in spite of overcompensation to certain small groups of taxpayers, the 30% ruling does not generally provide for any systematic and clear overcompensation.

For more information, see TaxNewsFlash-Europe.

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