E-News from KPMG's EU Tax Centre | KPMG | GLOBAL

E-News from KPMG's EU Tax Centre

E-News from KPMG's EU Tax Centre

E-News 70

1000

Chairman of KPMG's EU Tax Centre

KPMG in the Netherlands

Contact

Related content

Flags waiving in the sky

>> Go back to the E-News homepage

KPMG’s EU Tax Centre helps you understand the complexities of EU tax law and how this can impact your business, enabling you to better predict how rules will develop and how to leverage opportunities and minimize risks arising from EU tax law.

E-News provides you with EU tax news that is current and relevant to your business. KPMG's EU Tax Centre compiles a regular update of EU tax developments that can have both a domestic and a cross-border impact. CJEU cases can have implications for your country.

Latest CJEU, EFTA and ECHR

CJEU decision on Eqiom and Enka case (C-6/16)

On September 7, 2017, the Court of Justice of the European Union (CJEU) rendered its decision in the Eqiom and Enka case (C-6/16). The case concerned the refusal by France to grant an exemption from withholding tax on dividend distributions by a resident subsidiary to its parent company located in the EU, which is controlled by shareholders in third States. The exemption was refused on the grounds of preventing tax evasion or abuse. The Court ruled that the French rules are contrary to Article 1(2) of the Parent-Subsidiary Directive and the EU freedom of establishment.

For more information, please refer to Euro Tax Flash 333.

CJEU decision in Austria v. Germany case on the interpretation of ‘income from debt-claims with participation in profits’ (C-648/15)

On September 12, 2017, the CJEU rendered its decision in the Republic of Austria v Federal Republic of Germany case (C-648/15), concerning a dispute between two Member States brought before the CJEU pursuant to Article 273 of the Treaty on the Functioning of the European Union (TFEU). The case concerns the interpretation of the phrase ‘income from debt-claims with participation in profits’ within the meaning of Article 11(2) of the Convention for the avoidance of double taxation with respect to income and capital between Austria and Germany. The CJEU ruled that it does have jurisdiction to rule in this dispute and that the disputed phrase must be interpreted as excluding income from certificates such as those at issue in this case, i.e. income which varies only in the event of losses incurred by the debtor.

For more information, please refer to Euro Tax Flash 334.

CJEU decision in the Trustees of the Panayi Settlements case (C-646/15)

On September 14, 2017, the CJEU rendered its decision in the Trustees of the Panayi Settlements case (C-646/15). The case concerns the compatibility with EU law of a UK tax imposed as a result of trustees of a UK trust becoming resident outside the UK. The key question was whether the trust could rely on the fundamental freedoms to challenge the exit tax. The CJEU concluded that the trust could rely on the fundamental freedoms and that the contested tax infringes the freedom of establishment, but is justified by the need to preserve the allocation of powers of taxation between Member States. However, the Court decided that, by only allowing the immediate payment of the tax due without the possibility of deferral, the disputed measure goes beyond what is necessary to achieve that objective and is therefore not proportionate and constitutes an unjustified restriction on the freedom of establishment.

For more information, please refer to Euro Tax Flash 336.

CJEU decision in The Trustees of the BT Pension Scheme case (C-628/15)

On September 14, 2017, the CJEU rendered its decision in the case of The Trustees of the BT Pension Scheme v. UK (C-628/15). The case concerns the refusal by the UK to grant a tax credit to resident shareholders receiving UK sourced dividends, when those dividends originate from foreign sourced profits. The key question was whether the shareholders, as UK resident trustees, could rely on the fundamental freedoms. The CJEU ruled that the free movement of capital is applicable and that EU law requires a Member State to provide remedies to resident shareholders who have been unduly deprived of the benefit of a tax credit in respect of such dividends where they would have obtained a tax credit in the case of dividends that originate from domestic profits. The CJEU further considered that the circumstances of the case at hand, and in particular the tax exempt status of the shareholders, do not alter its conclusions.

For more information, please refer to Euro Tax Flash 337.

Infringement procedures & referrals to CJEU

Infringement procedure

Reasoned Opinion sent to Belgium in order to amend its taxation rules on interest income from foreign bonds

On October 4, 2017, the European Commission sent a reasoned opinion (second stage of the infringement procedure) to Belgium with respect to its taxation of interest income from bonds. Under Belgian rules, the tax treatment of interest on fixed income bonds differs depending on whether the interest is derived from Belgian or foreign bonds. For Belgian bonds that are registered in the Belgian liquidation system and sold in Belgium, the holding period of such bonds is taken into account, provided they have been held for less than a full fiscal year. On the contrary, the income from comparable foreign bonds is calculated as if the bonds had been held for a full fiscal year. The European Commission argues that this difference in treatment constitutes an obstacle to the free movement of capital.

European Commission closes infringement procedure against Germany and Greece regarding their respective inheritance tax rules

On October 4, 2017, the European Commission announced that the infringement procedures against Germany (regarding inheritance tax rules on special maintenance allowances) and Greece (on inheritance tax treatment of bequests to non-profit organizations and for primary residence) were closed as both countries had amended their legislation.

Referrals to CJEU

Netherlands

On October 12, 2017, the 's-Hertogenbosch Court of Appeal ruled that the refusal to grant a refund of dividend withholding tax to a German savings bank is incompatible with the free movement of capital, as such a refund would have been granted to a comparable Dutch resident public company exempt from tax. However, the Court also observed that the Dutch tax exemption granted to public companies have previously been classified as incompatible State aid by the European Commission and therefore asked the CJEU to clarify whether its findings are compatible with EU State aid rules.

Sweden

On October 5, 2017, a reference was made to the CJEU by the Swedish Supreme Administrative Court for a preliminary ruling in a case involving the offsetting at the level of a Swedish parent of losses realized in an indirectly held Spanish subsidiary. Under the Swedish rules, it is possible for a Swedish company to use the losses of a directly held subsidiary within the EU/EEA, provided that the loss is final (certain conditions apply) and that the loss-making company has been liquidated. It is also required that the group has no business activities left in the loss state following the liquidation. The Swedish Court asked for clarification from the CJEU as to whether the conditions foreseen by the Swedish legislation in such a case are in line with the freedom of establishment, in particular with respect to the direct holding requirement, as well as certain prerequisites on the “finality” of the loss (i.e. especially due to limitations in the subsidiary state).

Germany

On June 21, 2017, reference was made to the CJEU by the German Federal Finance Court for a preliminary ruling in the case of Finanzamt B v. A-Brauerei (C-374/17). The German Court asked whether the German tax legislation on real property transfer tax amounts to illegal State aid, when such tax is not charged on an acquisition that would be otherwise taxable, in the event that certain conditions regarding the legal entities involved are fulfilled.

Netherlands

On March 27, 2017, two references were made to the CJEU by the Dutch Supreme Court for a preliminary ruling in the cases of X v. Staatssecretaris van Financiën (C-157/17) and Köln-Aktienfonds Deka v. Staatssecretaris van Financiën (C-156/17). The Supreme Court asked in essence whether and under which conditions the free movement of capital requires the Netherlands to grant a non-resident investment fund a refund of withholding tax levied on Dutch sourced dividends, when such a refund is granted to a Dutch resident “fiscal investment institution”, which is also required to distribute the proceeds of its investments to its shareholders or participants on an annual basis.

State Aid

EFTA Surveillance Authority approves expansion of Norwegian tax and social security refund scheme for seafarers

On September 14, 2017, the EFTA Surveillance Authority announced that it approved the extension of a Norwegian aid scheme granting tax refunds to seafarers until 2026. The EFTA concluded that the scheme constitutes State aid which is compatible with the functioning of the EEA Agreement.

EU Institutions

COUNCIL OF THE EUROPEAN UNION

Adoption of the Dispute Resolution Directive

On October 10, 2017, the Council of the European Union adopted EU Directive 2017/1852 on tax dispute resolution mechanisms. The Directive lays down the rules for a mechanism to resolve disputes between Member States when those disputes arise from the interpretation and application of agreements on the elimination of double taxation and will apply to complaints submitted after July 1, 2019 on questions relating to the tax year starting on or after January 1, 2018.

For more information on the text, please refer to Euro Tax Flash 326.

EU Finance Ministers discuss the European Commission’s strategy for digital taxation

On October 10, 2017, a meeting was held by the EU Finance Ministers (ECOFIN), during which the following issues were discussed with respect to the taxation of the digital economy:

  • The Estonian Presidency reiterated that this is a priority within the EU and that there is an agreement among Member States on the fact that the underlying issues should be addressed.
  • Both the European Commission and the Presidency underlined that they favor a solution at global level (OECD/G20), but that they stand ready to move forward at EU level if insufficient progress has been made by the relevant international bodies.
  • Work is on-going based on the suggestions made by the European Commission, including with respect to an equalization tax.
  • Both the European Commission and the Presidency hope that they will have a far-reaching consensus at the next ECOFIN meeting on December 5 and that they will be able to present a common EU position at international level.

This meeting follows on from a first informal ECOFIN meeting held in Tallinn on September 15 and 16, 2017, during which the EU Finance Ministers had already discussed the challenges raised by the digital economy, as well as the subsequent publication of a communication on taxation of the digital economy by the European Commission on September 21, 2017.

During the initial discussions a so-called “equalization tax” was accepted as a potential solution by some Member States.

For more information, please refer to Euro Tax Flash 335.

EUROPEAN COMMISSION

Communication on taxation of the digital economy

Following the informal meeting of the EU Finance Ministers (ECOFIN) held in Tallinn on September 15 and 16, 2017, the European Commission published a Communication on September 21, 2017 on a fair and efficient tax system in the European Union for the digital single market. The document presents the critical challenges in taxing businesses that provide services digitally and proposes both long-term – a fundamental reform of the international corporate tax framework – and short-term solutions, such as the introduction of an equalization tax on turnover, a withholding tax on digital transactions or a levy on revenues generated from the provision of digital services or advertising activity.

For more information, please refer to Euro Tax Flash 338.

Brexit: paper discussing transition period in customs matters

On September 21, 2017, the European Commission published a position paper on customs related matters needed for an orderly withdrawal of the UK from the EU. The position paper discusses certain topics to be covered by the Withdrawal Agreement between the EU and the UK, including the customs status of goods, where the movement starts before the withdrawal date and ends on or after the withdrawal, the administrative cooperative procedures that should be continued after the withdrawal date and the settlement of customs duties collected during the transitional period.

EU Joint Transfer Pricing Forum presents summary record of 50th meeting

The European Commission has recently published the summary record of the 50th meeting of the EU Joint Transfer Pricing Forum (JTPF), which was held in Brussels on June 22, 2017. The aim of the meeting was to discuss and finalize the report on the use of economic valuation techniques in transfer pricing, which is expected to be approved in written procedure before the next JTPF meeting on October 26, 2017.

EUROPEAN PARLIAMENT

ECON Meeting on CCTB and CCCTB Proposals and taxation of the digital economy

On October 10, 2017, a meeting was held by the Committee on Economic and Monetary Affairs (ECON) during which it debated the proposal for a Common Corporate Tax Base (CCTB) and the proposal for a Common Consolidated Corporate Tax Base (CCCTB). This package aims at strengthening the Single Market and also at countering practices of corporate aggressive tax planning, including the taxation of the digital economy.

OECD

Activation of the automatic exchange relationships under the CbC MCAA

On October 11, 2017, the OECD announced the activation of automatic exchange relationships under the multilateral competent authority agreement (MCAA) on the exchange of country-by-country (CbC) reports. Over 1,000 automatic exchange relationships have thus been established among jurisdictions committed to exchanging reports as of mid-2018, including those between EU Member States under EU Council Directive 2016/881/EU. Updates will be published on the OECD website.

For more information, please refer to KPMG’s Tax NewsFlash.

Public comments released on discussion drafts on BEPS Action 7 and BEPS Action 10

On October 6, 2017, the OECD published the comments received on the discussion drafts related to BEPS Actions 7 (Preventing the Artificial Avoidance of Permanent Establishment Status) and 10 (Assure that transfer pricing outcomes are in line with value creation). A public consultation on these two discussion drafts will be held on November 6 and 7, 2017 at the OECD Conference Centre in Paris.

Meeting outcome on effective delivery of BEPS outcomes

On September 29, 2017, the OECD issued a release following a meeting of tax commissioners from 50 countries on effective delivery of the BEPS outcomes, automatic exchange of information, and tax certainty and with respect to collaboration on taxing users of the sharing economy.

For more information, please refer to KPMG’s Tax NewsFlash.

First peer reviews released on implementation of BEPS minimum standards

On September 26, 2017, the OECD announced the release of the first “peer reviews” on the efforts made by Belgium, Canada, the Netherlands, Switzerland, the United Kingdom, and the United States in implementing the BEPS minimum standards for improving tax dispute resolution mechanisms. The reports concluded that the six countries “performed well” in various MAP areas and include over 110 recommendations. In a second stage, each jurisdiction’s efforts to address any shortcomings identified will be monitored.

For more information, please refer to KPMG’s Tax NewsFlash.

IT guidelines released for various exchanges of tax information

On September 20, 2017, the OECD announced new information technology and guidelines to support technical implementation of the exchange of tax information by tax authorities under the common reporting standard, on country-by-country reporting, and in relation to tax rulings.

For more information, please refer to KPMG’s Tax NewsFlash.

Update on CRS exchanges

On September 14, 2017, the OECD published an update on Common Reporting Standard (CRS) exchanges indicating that 49 countries would start the exchange in September 2017 and another 53 countries in 2018.

Report on tax policy reform published

On September 13, 2017, the OECD published the Tax Policy Reforms 2017 – OECD and Selected Partner Economies report, which provides a comparative overview of the tax reforms implemented across the 35 OECD member states and Argentina and South Africa in 2016.

Guidance released on country-by-country reporting

On September 6, 2017, the OECD announced the release of new guidance intended to provide greater certainty to tax administrations and multinational entity groups on the implementation and operation of country-by-country reporting under BEPS Action 13.

For more information, please refer to KPMG’s Tax NewsFlash.

Local Law and Regulations

Belgium

Program law containing measures to close gaps in tax treatment of trusts and tax haven companies

On October 3, 2017, the government reached an agreement on a new program law that includes new tax measures to close gaps in the tax treatment of trusts and companies that are located in tax havens. One of the measures is to treat distributions by trusts as deemed dividend distributions, which are subject to a 30% withholding tax, whereas such distributions, as a rule, are currently not taxable. The new measure will apply as from September 17, 2017.

Circular letter on exit taxation

On September 11, 2017, the Belgian tax authorities published Circular Letter No. 2017/C/58, which provides further guidance on the amended exit tax provisions implemented on December 8, 2016 pursuant to the EU Anti-Tax Avoidance Directive 2016/1164. Companies and individuals, which terminate their Belgian business, but continue to use the corresponding assets in a business established in the EEA, may choose between an immediate and a spread payment of the exit tax charge. The circular explains the procedural aspects of claiming a spread payment and lists situations that trigger an immediate payment, e.g. where certain assets would leave the EU.

Bulgaria

Proposed amendments to the Tax and Social Security Procedural Code

On October 2, 2017, the Bulgarian government submitted several amendments to the Tax and Social Security Procedural Code to the parliament. The main tax measures proposed include:

  • The implementation of EU Directive 2016/2258 as regards access to anti-money laundering information by the tax authorities; these changes should apply from January 1, 2018.
  • The introduction of a liability for unpaid taxes and social security contributions for procurators in certain circumstances, and
  • Some amendments to the country-by-country reporting requirements for entities whose group's consolidated revenue does not exceed the threshold calculated in the local currency of the jurisdiction of the ultimate parent company.

Czech Republic

Country-by-country reporting implemented

On September 19, 2017, an amendment to Czech law implementing country-by-country reporting was published, together with an accompanying decree, including a report template and instructions on its completion. The tax administration also published a list of “frequently asked questions” confirming that permanent establishments and branches do not have to file either the notification or the country-by-country report.

For more information, please refer to KPMG’s Tax NewsFlash.

Denmark

Legislation on reporting obligations submitted to parliament

On October 4, 2017, several bills introducing additional measures to curb tax avoidance were submitted to the parliament. Among other things, the bills propose to introduce new disclosure requirements for financial companies and provisions authorizing the tax authorities to access information reported under the anti-money laundering legislation (effective on January 1, 2018), as well as an automatic tax reporting obligation for employers, banks and public authorities (effective on January 1, 2019).

Annual reporting on transfer pricing adjustments published

On August 30, 2017, the Danish tax authorities published their annual report of transfer pricing statistics, trends, and forecast, which reveals an all-time record of downward income adjustments.

For more information, please refer to KPMG’s Tax NewsFlash.

Finland

Transfer Pricing guidance on intra-group services and arm’s length mark-up

On October 6, 2017, the Finnish tax administration issued a bulletin setting out its policy concerning the transfer pricing treatment of intra-group services and how to determine the arm’s length mark-up. This guidance follows a decision of the Supreme Administrative Court.

For more information, please refer to KPMG’s Tax NewsFlash.

Tax proposals for autumn 2017 announced

On September 8, 2017, the Finnish government announced that several tax measures will be submitted to the parliament in autumn 2017, including draft legislation to implement the regulations required under the Protocol to the Tax Information Exchange Agreement signed by the EU with Andorra, Liechtenstein, Monaco and San Marino, as well as the implementation of the Savings Directive Agreement between the EU and Switzerland.

France

Tax Proposals in 2018 draft budget

On September 27, 2017, the French Government published the draft budget for 2018, which in conformity with President Macron’s campaign platform, includes certain tax measures aimed at increasing the competitiveness of companies established in France. The main proposals are the following:

  • Progressive reduction of the corporate income tax rate to 25% by 2022
  • Repeal of one of the interest deductibility limitations.
  • Reduction of the withholding tax rate applicable to capital gains realized by non-resident companies from the sale of a substantial participation in France.
  • Replacement of the net wealth tax by a new “real estate wealth tax”.
  • Introduction of a 12.8% income tax rate with respect to dividends, interest, capital gains and income from life insurance contracts received on or after January 1, 2018.
  • Reduction of the withholding tax rate applicable to certain investment income paid to non-resident individuals.

For more information, please refer to KPMG’s Tax NewsFlash.

French President Macron reveals his vision for the future of Europe

On September 26, 2017, French President Emmanuel Macron held a major speech at the Sorbonne University in Paris, spelling out his vision for a reformed Europe. During his speech, he called for the introduction of an “equalization” tax on the turnover generated in Europe by digital companies, as well as for the implementation of an EU-wide FTT, either modeled on the French tax on financial transactions or based on the UK stamp duty.

End of voluntary disclosure program by end of 2017

On September 15, 2017, the French government announced the end of the voluntary disclosure program, which was started in 2013 and allowed individual taxpayers who spontaneously disclosed their unreported foreign assets to benefit from a mitigation of the applicable penalties. As a result of the entry into force of the automatic exchange of financial information as from September 30, 2017, the program will be terminated by December 31, 2017.

Germany

Completion of the legislative process concerning anti-patent-box provisions

On June 4, 2017, the Law to Counter Harmful Tax Practices in Connection with the Licensing of Rights (Anti-Patent-Box Law) was promulgated in the Federal Law Gazette and has thus entered into force, in principle, on June 5, 2017.

Further information can be found on KPMG’s Tax NewsFlash.

Greece

Automatic exchange of financial information – Draft Law on applicable fines

On October 9, 2017, a draft bill on the automatic exchange of financial information and the Mutual Assistance Procedure was submitted to the parliament. The draft bill determines the applicable fines to Greek financial institutions for late, incorrect or non-filing of information.

Country-by-country reporting – Ratification of the OECD MCAA

On October 4, 2017, a new law was approved reflecting ratification by Greece of the OECD multilateral competent authority agreement on the exchange of country-by-country reports. Under the amended law, the deadline for disclosing undeclared income has been extended from September 31, 2017 to October 31, 2017. The additional tax for adjustments filed between June 1, 2017 and October 31, 2017 will be 12%.

For further information, please refer to KPMG’s Tax NewsFlash.

Cases subject to tax audits for 2017

On September 15, 2017, the Public Revenue Authority issued new guidance on which cases may be subject to tax audits in 2017 that was subsequently amended on October 4, 2017. The document reflects a recent judgment from the Greek Supreme Administrative Court, ruling that the extension of the five-year statute of limitations of pending tax cases through consecutive laws is unconstitutional.

List of 2017 reportable jurisdictions under Common Reporting Standard

On September 12, 2017, the Public Revenue Authority published a circular defining the participating and reportable jurisdictions for the automatic exchange of financial account information under the OECD Common Reporting Standard. The circular also clarifies that Section 9(1)(v) of Bill 4170/2013 on the automatic exchange of financial accounts applies between Greece and the other EU Member States.

Guidelines on automatic exchange of financial information

On September 4, 2017, the Public Revenue Authority published a circular providing guidance on the automatic exchange of financial information as provided by the EU Directive 2011/16 (on administrative cooperation in the field of taxation) and by the Multilateral Competent Authority Agreement on Automatic Exchange of Information. On September 15, 2017, a second circular was issued providing an extension of the deadline for the filing of the requested information for 2017 until September 25, 2017 (instead of September 15). The deadline for the filing for 2018 and onwards remains the same (May 31).

Country-by-country reporting - New provisions on the Greek Procedural Tax Code

On August 24, 2017, the Public Revenue Authority published a circular making known the new provisions of the Greek Procedural Tax Code on automatic exchange of country-by-country reporting between EU Member States and summarizing their purpose as amended through Law 4484/2017. The circular also mentions that a second circular will be issued, providing extensive guidelines on the application of the new provisions.

For further information, please refer to KPMG’s Tax NewsFlash.

Guidelines on Mutual Agreement Procedure under EU Arbitration Convention

On August 23, 2017, the Public Revenue Authority issued a circular providing guidelines on the Mutual Agreement Procedure under the EU Arbitration Convention (90/436). The circular, which also applies to pending MAP requests, provides details on the scope, the implementing conditions and the process of the MAP under the EU Arbitration Convention. In addition, it provides the MAP request form to be filed by Greek tax residents.

Guernsey

On October 9, 2017, the government presented a Budget for 2018. The tax measures proposed include the extension of the 10% company intermediate rate to the provision of regulated investment management services to individual clients. The management of open-ended and closed-ended collective investment schemes and associated vehicles will not fall within the scope of the proposal.

Hungary

Draft law on transfer pricing documentation requirements (BEPS Action 13) published

In September 2017, the Hungarian government published draft legislation, which includes amended transfer pricing documentation requirements further to BEPS Action 13 (Master and Local file). The new requirements should apply to financial years beginning on or after January 1, 2018.

Ireland

Tax Provisions in budget 2018

On October 10, 2017, the Irish government announced the details of the budget 2018. Information on the business tax measures included can be found in KPMG’s Tax NewsFlash.

Ireland’s reaction to the European Commission’s decision on the recovery of State aid granted to Apple

On October 4, 2017, after the European Commission announced its decision to refer Ireland to the CJEU for failure to recover up to EUR 13 billion in tax benefits deemed by the Commission as illegal state aid in August 2016, the Irish government released a statement, expressing its regret with respect to the Commission’s action.

Dividend withholding tax guidance published

On September 27, 2017, the Irish Revenue published an online guide on dividend withholding tax. The guide includes information on the exemption and refund procedure for residents and non-residents.

The guide is available here.

Tax and Duty Manual published on review of tax rulings

On September 15, 2015, the Irish Revenue published a new Tax and Duty Manual, which sets out the Revenue’s policy on the maximum validity period of its opinions and confirmations (rulings). In particular, the Manual states that the general five-year validity period may become shorter under certain circumstances, such as a change in the facts and circumstances on which the ruling is based or in the relevant legislation and practice. As a consequence, a ruling can be reviewed at any time, with a view to amendment or withdrawal, in the light of changes on the relevant facts, or where the Revenue decides to reconsider its position. The Manual also states that rulings may be subject to disclosure with other tax authorities in accordance with EU and OECD initiatives.

The full text version of the Manual can be read here.

Recommendations for changes to corporation tax; 12.5% rate continues

On September 12, Ireland released a report on Review of Ireland’s Corporation Tax Code, which makes a number of recommendations for future changes to Ireland’s corporate income tax regime. Ireland’s 12.5% corporate income tax rate is to be continued. The report’s recommendations for changes to Ireland’s regime largely reflect commitments that Ireland has made as part of multilateral measures to enact further protection against base erosion and profit shifting (BEPS).

For further information, please refer to KPMG’s Tax NewsFlash.

Belated implementation of a central register of beneficial owners

In accordance with the Fourth Anti-Money Laundering Directive, Irish incorporated companies and other legal entities have been required since November 15, 2016 to create and maintain a beneficial ownership register. This register was a first step in preparation for disclosure on a central register, which was to be established by June 26, 2017. The timing of the obligation to disclose beneficial ownership information to a central register has now been extended to autumn 2017. It is expected that, once introduced, companies will be given three months to submit the required information to the central register.

For further information, please refer to KPMG’s Tax NewsFlash.

Italy

Clarification of automatic exchange of information and foreign branch exemption

In August 2017, the following amendments were published by the Italian Ministry of Finance and the Italian tax authorities:

  • Ministerial Decree of August 9, 2017 amending, for example, the decree which enacted implementing rules with respect to automatic exchange of information as required by EU Directive 2014/107/EU
  • Protocol No. 2017/165138 of August 28, 2017, providing details and information on the foreign branch exemption option, which had been introduced in September 2015.

Further information on the branch exemption regime can be found in KPMG’s Tax NewsFlash.

Jersey

Presentation of the Budget for 2018

On October 3, 2017, the government presented a draft Budget for 2018. The tax measures proposed include a broadened definition of qualifying financial services companies to benefit from the reduced 10% corporate income tax rate, as well as a 20% tax rate for qualifying larger corporate retailers.

Regulations on automatic exchange of financial information amended

On October 17, 2017, amended regulations on Common Reporting Standard will enter into force, according to which reporting financial institutions will no longer be able to use, as an alternative to a definition in the Common Reporting Standard, a definition contained in another international agreement. In addition, records will have to be kept for at least five years.

Luxembourg

Circular No. 60 on Mutual Agreement Procedure published

On August 28, 2017, the Luxembourg Tax Authorities published a circular setting out the procedure for the implementation on the mutual agreement procedure in Luxembourg’s Tax Treaties. The circular includes information on:

  • access to the MAP
  • competent authority
  • scope of the MAP and
  • documentation requirement.

Malta

Presentation of the Budget for 2018

On October 9, 2017, the government presented its budget for 2018. The tax measures proposed include, as part of the government’s efforts to tackle tax evasion and unfair competition, an increase in the applicable penalties for settlement agreements both in and out of court.

For more information on the Budget, please refer to KPMG’s Tax NewsFlash

Introduction of notional interest deduction rules

On October 5, 2017, the Ministry of Finance introduced notional interest deductions rules by way of a legal notice. According to the rules, undertakings will be able to claim, as of 2018, a deduction for the amounts that are deemed to be payable by way of interest on risk capital. The legal notice also provides further guidance on the mechanism to calculate the applicable deductions.

Netherlands

Tax measures included in coalition agreement

On October 10, 2017, the new Cabinet released a coalition agreement, reflecting the measures the Dutch government intends to implement, and while it does not replace the bills in the “2018 Tax Plan”, some of the measures will result in amendments or additions to the 2018 Tax Plan, the most important of which are the following:

  • The corporate income tax rate will be reduced progressively from the current 20% (on profits up to EUR 200,000) and 25% (on profits over EUR 200,000) to 16% and 21%, respectively, by 2021.
  • Limitations on the ability to carry-forward losses will be introduced.
  • A blacklist of non-cooperative jurisdictions will be introduced.
  • The dividend withholding tax will be abolished, except for abuse situations and in case of distributions to low tax jurisdictions.
  • A withholding tax on interest and royalties on outbound financial streams to countries with a very low tax rate (low tax jurisdictions) will be introduced.

For more information, please refer to KPMG’s Tax NewsFlash

Publication of answers to parliamentary questions on implementation of 2015 hybrid instrument provision under Parent Subsidiary Directive

On September 29, 2017, answers to parliamentary questions on the implementation of the 2015 hybrid instrument provision under the EU Parent-Subsidiary Directive were published by the Ministry of Finance. According to the Ministry, the provision provides that the exemption will be denied to the extent that the dividends distributed were deductible at the level of the EU subsidiary.

Tax Measures for 2018 presented

On September 19, 2017, the Minister of Finance presented the 2018 Tax Plan to the lower house of the parliament. The tax plan includes the following measures:

  • “double business motive” test for the deduction of interest on loans taken out with (ultimately) third persons has been introduced,
  • anti-avoidance measure with regard to liquidation losses has been amended, and
  • provision to prevent a loss resulting from the write-down of a claim from being taken twice by a group of companies has been introduced.

For more information, please refer to KPMG’s Tax NewsFlash.

Updated decrees on standard conditions for mergers

On September 15, 2017, the Dutch government issued a decree updating the standard conditions for different kind of mergers, which applies retrospectively from September 6, 2017. The decree brings the updated conditions into line with the new innovation box regime, which was introduced by the 2017 Tax Plan.

Decree on taxation of hybrid instruments published

On September 9, 2017, the Dutch government issued a decree that provides information on the treatment of hybrid financial instruments with respect to corporate income tax and withholding tax. The decree aims to clarify the qualification of certain hybrid financial instruments as debt or equity for tax purposes and focuses on the taxation of perpetual and long-term loans. The decree is effective retroactively as from August 29, 2017.

Tax measures expected to be submitted by the Dutch government

On September 8, 2017, the Minister of Finance published Letter No. 2017-0000178342, which provides an overview all financial and tax-related legislation that he expects to be submitted by the government to the lower house of parliament during the period from September to December 2017. The letter includes the following measures:

  • Implementation of the Council Directive 2016/2258 with respect to the access of tax authorities to anti-money-laundering information.
  • Multilateral Instrument (MLI) Treaty.
  • Proposal to implement a register of ultimate beneficial owners.

Furthermore, the Dutch government submitted a legislative proposal with regard to the Dutch Dividend Withholding Tax Act, on which further details can be found in Meijburg Tax News.

Norway

Presentation of the Budget for 2018

On October 12, 2017, the government presented its Budget Proposal for 2018 to the parliament, which includes a reduction of the standard corporate income tax rate from 24% to 23%. For companies in the financial sector the rate will remain 25%.

Poland

Regulation on transfer pricing documentation in force

From October 3, 2017, a new Regulation on the scope and content of transfer pricing documentation for corporate taxpayers is in force. The regulation is based on the OECD Transfer Pricing Guidelines.

For more details please refer to KPMG’s Tax NewsFlash.

New version of draft corporate income tax bill

On October 4, 2017, a new version of a draft bill to amend Poland’s corporate income tax law was submitted to the parliament. Compared to the original draft version of the bill (presented in July 2017), certain measures have been liberalized, including the rules for thin capitalization and the taxation of intangible services.

For more details please refer to KPMG’s Tax NewsFlash.

Proposals for new special economic zones with enhanced tax benefits

In September 2017, the Polish Ministry of Development proposed a new system of special economic zones, which would provide an exemption from income tax throughout Poland, under certain conditions. The proposal, which would apply from the first quarter of 2018, and without an expiration date (unlike the current system of zones) is subject to legislative approval.

For more details please refer to KPMG’s Tax NewsFlash.

Portugal

Transposition of fourth Anti Money Laundering Directive and Mutual Assistance Directive amendment into domestic law

In August 2017, two amendments in Portuguese Tax Law were published:

  • Law No. 83/2017, which amends the Mutual Assistance Directive and also partly transposes the fourth Anti-Money Laundering Directive into Portuguese Law, was issued on August 18, 2017 and enters into force on August 19, 2017
  • Law No. 89/2017, which introduces a central register of ultimate beneficial owners, was published on August 21, 2017 and enters into force on November 19, 2017.

Slovakia

Amendments in Slovakia’s Tax Act from January 1, 2018

On August 16, 2017, the Slovakian government approved a bill amending the Income Tax Act, which will become effective as of January 1, 2018. The main amendments are the following:

  • Introduction of definitions of “beneficial owner of income” and “digital platform”
  • Extension of the definition of “tax residence”
  • Extension of the definition of “permanent establishment” in accordance with the recommendations of BEPS Action 7
  • Introduction of the modified nexus approach for patent box regimes.

Further details on potential amendments in Slovakia’s Tax Act can be found in KPMG’s Tax Newsflash.

Transposition into domestic law of EU Anti-Tax Avoidance Directive and Mutual Assistance Directive amendments approved by government

On August 16, 2017, the Slovakian government approved two bills implementing:

  • EU Council Directive 2016/2258 amending EU Council Directive 2011/16 as regards access to anti-money-laundering information by the tax authorities. The bill is expected to be effective from January 1, 2018, with some exceptions.
  • EU Council Directive 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market. The bill is expected to be effective from January 1, 2018, with some exceptions.

Spain

New form for reporting related party transactions

On August 30, 2017, a new form for reporting related-party transactions and transactions involving parties located in countries or territories identifies as “tax havens” has been added to the reporting requirements for corporate taxpayers. The order retroactively applies to tax periods starting from January 1, 2016.

For more information, please refer to KPMG’s Tax NewsFlash.

Sweden

Guidance on mandatory automatic exchange of information

On September 25, 2017 the Swedish Tax Agency published updated guidance on the automatic exchange of information on financial accounts under the common reporting standard and on the mandatory automatic exchange of information in tax matters required under the EU Mutual Assistance Directive.

Switzerland

Country-by-country reporting effective December 1, 2017

On September 29, 2017, the Swiss Federal Council adopted an ordinance on the international exchange of country-by-country reports of multinational entities. The ordinance will come into force on December 1, 2017.

For more information, please refer to KPMG’s Tax NewsFlash.

Tax Proposal 2017: consultation process started

On September 6, 2017, the Swiss Federal Council released a draft to start the consultation process with respect to the federal tax bill, commonly referred to as “Tax Proposal 17”. The consultation will end on December 6, 2017, with the dispatch to parliament foreseen in spring 2018. There are no significant changes in the consultation draft compared to the outline from June 2017.

For more information, please refer to KPMG’s Tax NewsFlash.

United Kingdom

Criminal Finances Act 2017 – HMRC guidance

On September 30, 2017, Part 3 of the Criminal Finances Act 2017 (corporate offences of failure to prevent facilitation of tax evasion) came into force. According to the new legislation, corporations and partnerships may be criminally liable if they fail to prevent their employees, agents, or others who provide services on their behalf from criminally facilitating tax evasion. The government has published guidance on what corporations and partnerships can do to prevent the criminal facilitation of tax evasion.

For more information, please refer to the government’s press release and KPMG’s Tax Newsflash.

Brexit referendum: European Union (Withdrawal) Bill 2017-19 – report published

On September 28, 2017, the first report on the European Union (Withdrawal) Bill 2017-19 was published by the House of Lords Delegated Powers and Regulatory Reform Committee. The report emphasizes the "excessively wide law-making powers" the Bill gives to Ministers. It finds that "Ministers should not have the power to impose taxation by statutory instrument, and in no circumstances should fees and charges be levied by tertiary legislation".

Draft legislation for Finance Bill 2017 to 2018 published

On September 13, 2017, HMRC published the draft legislation for Finance Bill 2017 to 2018, which will be available for consultation until October 25, 2017, and should be confirmed on November 22, 2017. Only eight measures were published, including:

  • A new interest-withholding tax exemption for debt traded on a multilateral trading facility operated by a recognized stock exchange regulated in a European Economic Area territory.
  • Changes to the UK bank levy, which could impact groups that have non-UK entities or non-UK permanent establishments of UK entities.
  • Clarifications on how partnerships are taxed.
  • Anti-avoidance provisions related to payments and benefits from offshore trusts.

For more information, please refer to KPMG’s Tax Newsflash.

HMRC issues reports on the Diverted Profit Tax

On September 13, 2017, HMRC published two reports on the implementation of the Diverted Profit Tax:

For more details please refer to KPMG’s Tax NewsFlash.

Local Courts

France

Constitutional Court Decision: 3% tax imposed on distributions of dividends held unconstitutional

On October 6, 2017, the French Constitutional Court ruled in its decision No. 2017-660 that the 3% tax imposed on distributions of dividends is unconstitutional. Prior decisions of the French Constitutional Court and of the CJEU have already limited the scope of the tax or had declared the tax to be in contradiction to the EU Parent-Subsidiary Directive. Litigation is still pending before the CJEU with respect to this tax.

For more information, please refer to KPMG’s Tax Newsflash.

Constitutional Court Decision: Absence of possibility to carry over unused foreign tax credits ruled in line with Constitution

On September 28, 2017, the French Constitutional Court ruled in its decision No. 2017-654 QPC that the provisions of Article 220(1) (a) of the General Tax Code, which prohibit the carry-forward of unused tax credits, are in line with the Constitution. The Court ruled that:

  • The particular rules preventing the carry-forward of tax credits apply to all companies irrespective of whether they realize profits or losses and irrespective of the source of the income. Therefore, the principle of equality before the law is not violated.
  • The property right cannot be invoked as withholding taxes are not installments on French corporate income tax and, thus, are not refundable; and
  • The legislator is not obliged to consider foreign taxes in order to determine the French tax.

Administrative Supreme Court eases offsetting of foreign tax credits against French corporate income tax

The French Administrative Supreme Court ruled on June 26, 2017 that foreign withholding taxes paid by French companies may be offset against the corporate income tax due in France, irrespective of whether the latter was computed at the standard rate or at a reduced rate. This decision constitutes a major change in the Court’s previous case law, which had previously held that foreign tax credits relating to income taxed at the standard rate could not be offset against tax calculated at a reduced rate.

Germany

Federal Tax Court: Transfer of reserve to a foreign PE denied

On June 22, 2017, the German federal tax court (BFH) ruled that it is not possible to transfer certain reserves to a foreign PE within the European Union. Under German law, the tax on capital gains realized upon the sale of certain assets may be deferred by ‘transferring’ those gains to newly acquired assets. The prerequisite for this is that the “replacement” assets form part of a domestic PE. In this context, the CJEU ruled in 2015 that the German legislation is incompatible with EU law (C-591/13), and the law was subsequently amended to provide an option between immediate taxation of the reserve and a spreading of the tax over five years. In the case at hand, the taxpayer transferred a reserve from the disposal of real property created in prior years to real property in Hungary, which did not belong to a domestic PE of the taxpayer. The Court denied the transfer and ruled that neither the tax deferral nor the five-year period give rise to objections under EU law.

For more information, please refer to KPMG’s Tax Newsflash.

Federal Tax Court: Taxation of payments of CFC taxed earnings

On April 26, 2017, the German federal tax court (BFH) ruled that the general non-deductibility of business expenses of 5% is not only applicable to dividend payments that fall under the general exemption for dividends, but also with respect to tax-exempt dividend payments of a foreign company that have already been subject to CFC taxation in Germany.

For more information, please refer to KPMG’s Tax Newsflash.

Netherlands

Court of Appeal: refusal to refund dividend withholding tax to a German savings bank incompatible with the free movement of capital; Referral to the CJEU on compatibility with State aid rules

On October 12, 2017, the 's-Hertogenbosch Court of Appeal issued its decision in the joined cases 14/00640 to 14/00645 regarding a refund of dividend withholding tax to a German investment fund. The Court held that the German fund is not comparable to a Dutch tax exempt “fiscal investment institution” but that its sole unit holder, a German savings bank not subject to corporate income tax in Germany, has to be regarded as an exempt public entity. As a consequence, the refusal to refund the tax to the savings bank is incompatible with the free movement of capital.

However, the Court also observed that the Dutch tax exemption granted to public companies had already been classified as incompatible State aid by the European Commission with respect to different years. Therefore, the Court requested a preliminary ruling from the CJEU concerning the compatibility of its findings with EU State aid rules.

UK

First-tier Tribunal: scheme notifiable under the rules on disclosure of tax avoidance scheme

On September 11, 2017, the UK First-tier Tribunal issued its decision in the case Root2tax Ltd and Root3tax Ltd v. Revenue and Customs. Under the scheme in question, a key employee of a small company, such company and a third party would enter into a pre-conceived arrangement involving betting on the stock market. Such an arrangement would result in the employee receiving from his employer a significant sum which, as betting winnings, is tax exempt, rather than in the form of taxable employment income. HMRC considered that the scheme is reportable under the Disclosure of Tax Avoidance Scheme rules, which requires promoters to inform HMRC about tax avoidance schemes they design and sell. The Tribunal agreed with HMRC that the scheme amounts to "arrangements" that are notifiable.

Connect with us

 

Request for proposal

 

Submit