ESG from Transfer Pricing Perspective
This article analyses the impact of ESG on MNE tax management with a special focus on transfer pricing and business restructuring.
Tax Management and ESG
As stated by the UN, environmental social and corporate governance (ESG) is not only an issue that concerns individuals but also a strategic priority of multinational enterprises (MNEs), investors and governments as well. Following the UN initiative, European Commission has also introduced several directives regarding ESG. In this regard, ESG impacts MNES’ tax management in various ways.
For example, many governments provide tax incentives to encourage environmentally sustainable practices. For instance, companies utilising renewable energy sources may be eligible for tax advantages. These incentives encourage companies to adopt eco-friendly practices and alleviate their tax burdens.
Another area of impact is environmental regulations and carbon taxes. Numerous countries have implemented policies aimed at reducing greenhouse gas emissions such as the new EU Carbon Border Adjustment Mechanism (CBAM) and EU Emission Trading System revisions . Such regulations can result in higher taxation for high carbon-emitting companies or offer tax benefits to those with low carbon footprints. Carbon markets and emission trading mechanisms further integrate taxation with management of environmental impacts, requiring companies to adapt their tax strategies to take account of these measures aimed at improving their actions.
In corporate social governance, compliance with appropriate minimum wage requriemetns, anti-slavery policies and the communication of and compliance with published tax strategies requires MNEs to have appropriate procedures and appropriate resources to meet their corporate governance responsibilities.
As envisaged by the OECD and BEPs initiative, many countries have introduced domestic legislation designed to improve corporate governance specifically in relation to tax. The focus is ensuring that company boards are obliged to ensure that they pay the right amount of tax across their business and minimise the risk in case this is not happening. Many MNEs are leveraging tax control frameworks across their international business and reap the benefits of what good tax governance can provide as opposed to viewing it as a compliance burden.
Transfer Pricing and ESG
Transfer pricing regulations target arm’s length pricing related to the transfer of goods, services, or intellectual property rights between multinational companies in different countries. Although there may be different practices in different tax jurisdictions in terms of the application of the arm’s length principle, OECD Transfer Pricing Guidelines are the main reference source for the global transfer pricing standards.
ESG also influences transfer pricing due to the financial impact of ESG policies pursued by governments. For instance, the transfer of eco-friendly products or technologies may attract scrutiny from revenue authorities regarding the pricing structures used. In the same way, MNEs should be assessing their pricing structures against appropriate comparables to monitor compliance with transfer pricing requirements.
Business Restructuring and ESG
ESG considerations can significantly impact group business restructuring which must be consistent with the arm’s length principle (Chapter IX of the OECD transfer pricing guidelines). Companies adopting more sustainable practices may restructure their operations and supply chains to:
- reduce their carbon footprint; relocate production activities to avoid countries with low transparency on labour conditions
- develop new products more aligned with ESG targets
For example, a company might relocate manufacturing facilities closer to renewable energy sources or spend more R&D to develop its product portfolio to focus on environmentally friendly offerings.
There will be a range of tax and compliance requirements to consider such an exercise. Business restructuring, driven by ESG strategies, will certainly have transfer pricing consequences. Changes in the supply chain or location of operations may result in a shift in the financial outcomes and profit allocation in each tax jurisdiction. Companies must assess the tax consequences of their restructuring decisions to ensure compliance and optimise their tax positions. Although the OECD transfer pricing guidelines Chapter IX is an excellent starting point for assessing transfer pricing compliance, it does not currently cover ESG aspects of business restructurings . We expect additional changes that would take this into account in the near future.
Conclusion
The relationship between ESG and transfer pricing is both complex and a sensitive issue. MNEs must navigate the evolving tax landscape and consider ESG-related risk factors in their transfer pricing models. Managing environmental regulations, leveraging tax incentives, and ensuring fair transfer pricing practices at the same time may be difficult. Nevertheless a proactive approach to tax management and a strong commitment to ESG standards can lead to a harmonious alignment between a company’s financial goals and its ESG responsibilities.
- DIRECTIVE 2014 95 /EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22 October 2014 amending Directive 2013 34 /EU as regards disclosure of non financial and diversity information by certain large undertakings and group
- REGULATION ( EU)2020 852 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 18 June 2020 on the establishment of a framework to facilitate sustainable investment
- DIRECTIVE (EU) 2022 2464 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 December 2022 amending Regulation ( No 537 2014 Directive 2004 109 / Directive 2006 43 /EC and Directive2013 34 / as regards corporate sustainability reporting)
- Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Corporate Sustainability Due Diligence and amending Directive ( 2019 1937)
- REGULATION published for new EU Carbon Border Adjustment Mechanism (CBAM) and EU Emission Trading System revisions; CBAM transition period begins 1 October 2023
Spanish Supreme Court allows tax benefit to company directors
A Spanish Supreme Court Ruling on 20 June 2022 effectively reverses the decision by the Spanish tax authorities to remove the tax exemption for company directors for works carried out abroad(1). In its ruling, the Supreme Court considers that directors and board members can apply the exemption, provided that requirements set out in Article 7.p) […]
Tax transparency on allocation of group profits in the light of Public CbCR
Taxation has a key role for medium and large multinational companies in the process of developing a sustainable business model. Disclosure of complex tax information and transparency on profit allocation to group entities is key to this transformation process and will become a reality with new reporting standards and EU disclosure obligations. The Global Reporting […]
Don’t let Australian employment dream become employer’s nightmare
Since COVID-19, there has been a significant increase in demand for employees to work remotely from Australia for foreign employers. Such a relocation is often solely for the convenience of the employee to fulfil a dream of working in Australia or to return home. If you have an employee wishing to work remotely from Australia, you […]
Occasional and temporary provision and notification of services in Luxembourg
Companies established in a country of the European Union may undertake occasional and temporary activities in Luxembourg. Though such activities do not constitute a permanent establishment in Luxembourg, there are still certain formalities that need to be complied with such as: The notification of services is valid for 12 months and can be renewed […]
New OECD guidance on Amount B (BEPS 2.0) – where are we?
On 19th February, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting published its report on Amount B under Pillar 1, which intends to provide a simplified and streamlined approach to transfer pricing compliance for entities engaged in baseline marketing and distribution activities. This presents the opportunity for a simplified route for companies in […]
Beta Healthcare International Limited vs. Commissioner of Tribunal – A Battle Of Transfer Pricing Methods
On 9 February 2024, the Tribunal issued a ruling in the case KETAT 143 (KLR) between the appellant Beta Healthcare International Limited (Beta Kenya) and the respondent the Commissioner of Legal Services and Board Coordination (KRA). The matter in dispute was the appropriate transfer pricing method to apply to intragroup sales, with the KRA arguing […]
Tax control frameworks: an international perspective
Tax control frameworks (TCFs) are increasingly seen as an essential tax management and compliance tool for businesses of all sizes. Around the world, tax authorities are taking a stricter approach to taxation matters. At the same time, organisations like the OECD and the EU are introducing new guidelines and regulations to strengthen corporate compliance, including […]
VAT and transfer pricing adjustments: the worst of both worlds?
In due course, the EU Court of Justice (ECJ) may shed some light on the VAT intricacies of transfer pricing (TP) adjustments. In Arcomet, the Bucharest Court of Appeals asked the ECJ whether the amounts included in yearly equalisation invoices to ensure arm’s length pricing within a group constitute payment for VAT relevant services. Should […]
What effect do the Pillar 1 Amount B developments have on Transfer Pricing?
For more information on the topic join our webinar on 17th of September. One of the most debated topics in the international tax arena is Pillar 2, the global minimum corporate tax. Alongside this, work on Pillar 1 continues at full speed under the initiative of the OECD. In this article, we aim to provide […]
Implementing the right tax control framework
There are two main drivers for organisations looking for advice around tax control frameworks (TCFs). Sometimes it is a proactive strategy to check their tax affairs are in good shape or to better understand any potential liability risks, for example. Alternatively, they may already be aware of tax compliance issues they need to deal with […]
Peru – Chile double tax treaty: new interpretation guidelines from Peru’s Tax Administration radically affect the taxation of indirect disposals of shares
Background Under Peruvian Income Tax provisions, non-residents are levied on Peruvian-source income identified based on an all-exhaustive list. Capital gains arising from an indirect disposal of shares issued by a company incorporated in Peru qualify as Peruvian-source income. According to these rules, an indirect disposal occurs when shares of a non-resident company are sold, and […]
Using CbCR data as a Pillar 2 GloBE starting point
Designed to ensure that multinational enterprises (MNEs) pay a global minimum tax (GMT) of 15% in each jurisdiction where they operate and generate income, the Pillar 2 global anti-base erosion (GloBE) rules are now a reality for in-scope MNEs and very large groups with €750m consolidated global turnover. With some MNEs facing assessments as early […]
Is there a mandatory use of the median: Checkpoint Technologies Kenya Limited vs. Commissioner of Domestic Taxes
This is a case between the appellant Checkpoint Technologies Kenya Limited (CTK) and the respondent Commissioner of domestic taxes (Kenya Revenue Authority – KRA). The case illustrates that jurisdictions that implement transfer pricing rules applying the OECD guidelines will be held to account in line with those guidelines. In this case, KRA argued for a specific […]
The FIG regime: changes to the taxation of non-domiciled individuals in the UK
What is the issue? From 6 April 2025, the remittance basis of taxation for UK resident non-domiciled individuals will be abolished and will be replaced by a simplified Foreign Income and Gains (FIG) regime. There will also be changes to the way inheritance tax operates, so that it will be based on a test of residence […]
The current transfer pricing environment in the banking and asset management sector, and the importance of regular review
The financial services sector remains firmly in the spotlight of global tax authorities and prudential regulators. Whether it is HMRC in the UK or the Internal Revenue Service (IRS) in the US, understanding how money moves between regulated entities and overseas affiliates is a hot topic. In this respect, regular reviews of how arrangements are […]
How to develop a robust tax control framework for your business
Developing and implementing a tax control framework (TCF) is a strategy being adopted by an increasing number of companies around the world. There is no universal approach to developing a TCF. At Forvis Mazars, based on our wide experience working with a diverse range of companies to implement tax control frameworks, we take a structured, […]
Is a change of tax mindset now needed?
For Singapore and many other countries that have traditionally leant on financial incentives to attract foreign direct investments, the ambition of a 15% minimum global tax presented by Pillar 2 Global Anti-Base Erosion rules (GloBE) heralds a new challenge. While there is little doubt that having a fairer international tax system is a much-needed move, […]
New app from the Mexican Tax Administration Service designed to determine the monthly VAT returns automatically
The Mexican Tax Administration Service (SAT) continues to innovate and invest in technology and artificial intelligence to make it easier and more efficient for taxpayers to file their monthly tax returns. On February 1st, 2024, The Mexican Tax Administration launched a new online platform for filing the monthly Value Added Tax (VAT) returns, which will […]
A basic guide to understanding Pillar 2 GloBE minimum top-up tax rules
As in-scope organisations* embark on a new Pillar 2 Global Anti-Base Erosion (GloBE) journey, having a clearer understanding of how jurisdictions will enact the global minimum 15% tax rule is vital. Notably, while Pillar 2 GloBE sets out model rules on what jurisdictions need to achieve, there is an element of flexibility in how each […]
The benefits of having a tax control framework
Tax control frameworks are becoming increasingly common as companies seek to manage their taxation, compliance, and risk management obligations more effectively and efficiently. So, what is a tax control framework, and what are the benefits? A tax control framework is a set of processes and internal control procedures that ensure a company’s tax risks are […]
UK Spring Budget 2024
The UK Spring Budget on 6 March 2024 was relatively measured in its tax policy decisions, despite a background of falling inflation and rising tax receipts. Below are some areas of interest for globally mobile individuals, those with UK staff, and those with business and investment interests. Main measures affecting individuals Main measures affecting those […]
Italy – Extension of participation exemption (PEX) regime to non-resident (EU/EEA) companies/entities
The Italian Budget Law (Law issued on 30.12.2023, No. 213 – “Legge di Bilancio 2024”) established that Italian-source capital gains realised on disposal by EU or EEA resident entities without an Italian PE, where the disposal is of a substantial participation in an Italian company meeting certain conditions, will benefit from the participation exemption (PEX) […]
How much do you really know about your Pillar 2 disclosure obligations?
With jurisdictions still in the process of enacting local tax law to introduce Pillar 2 Global Anti-Base Erosion (GloBE) rules, groups in scope of the new regulations could be forgiven for taking a watch-and-wait approach. However, a general lack of awareness of how the rules impact entities is also hindering much-needed communication between the C-suite, […]
Dutch Supreme Court opens up new possibilities to deduct costs related to the sale of participations
Under the Dutch CIT rules, profits and capital gains related to participations are exempt for tax purposes. This also limits the deductibility of costs that directly relate to the acquisition or sale of such a participation. The exact determination of what costs are related to an acquisition is therefore regularly subject to discussion with the […]
The right tax approach: why companies need a tax control framework
Across the globe, an increasing number of companies are developing tax control frameworks to help them stay on top of their taxation, compliance and risk management obligations and objectives. These obligations are continually evolving, driven by a combination of both...
Ecological taxes: new updates in Mexico
Several Mexican states had imposed ecological taxes in order to encourage certain industries to reduce their polluting emissions. In addition, green taxes have recently been imposed as a consequence of the warning issued by the Mexico Climate Initiative (MCI) that Mexico’s carbon dioxide emissions could increase by up to 59.8% by 2050 if the country’s green […]
New agreement to avoid double taxation between Chile and the United States
This article discusses the effects generated by the agreement which avoids double taxation between Chile and the United States. After many years, this agreement came into force on December 19, 2023, when President Joe Biden signed it. The treaty applies from 1 February 2024 in respect of withholding taxes and applies for all other taxes […]
A basic guide to understanding Pillar 2 GloBE minimum top-up tax rules
As in-scope organisations* embark on a new Pillar 2 Global Anti-Base Erosion (GloBE) journey, having a clearer understanding of how jurisdictions will enact the global minimum 15% tax rule is vital. Notably, while Pillar 2 GloBE sets out model rules on what jurisdictions need to achieve, there is an element of flexibility in how each […]
Moving to Mexico: global mobility tax considerations
Since 2020, as a result of the COVID-19 pandemic, Mexico has become an attractive location for certain foreigners to work remotely. However, employers have to consider numerous tax and immigration factors for their employees working remotely from Mexico. According to Mexican legislation, an expatriate is a person who is legally authorised to carry out a […]
South Africa: certain foreign employers to be required to account for payroll taxes from 2024
Currently, the provisional tax system ensures that when a non-resident employer of individuals working in South Africa has no representative employer in South Africa, their employees’ tax obligation is settled in the form of a provisional tax payment by the employee, not the employer. The requirement for an employer to deduct and remit employees’ tax […]
IAS accounting requirements for Pillar 2: GloBE for periods ending 31 December 2023
Background to Pillar 2 (GloBE) Part of the ongoing work of the OECD to combat tax avoidance and targeted at low tax jurisdictions, the Pillar 2 – GloBE rules will apply to large organisations (>€750m of global revenue) with each country having its own rules implementing some form of 15% minimum tax, or otherwise risking […]
Expert tax relief in Sweden to be more advantageous
The Government of Sweden has submitted a bill extending the period for granting expert tax relief from five to seven years. If the Government bill is approved by Parliament, the extension will be in effect for eligible employees commencing work on 1 April 2023 or later. This article explains how the tax relief works and […]
Navigating the tax implications of remote work in Canada
As the working environment adapts to offer more flexibility with remote working options, understanding the tax nuances of cross-border remote working is becoming increasingly crucial. More than ever, employers are offering their teams the opportunity to work abroad for limited periods each year. Whether you’re a non-resident considering remote work in Canada, or an employer […]
The shares of a French non-commercial real estate company could be subject to Swiss Wealth tax
The proximity between Switzerland and France often leads to Swiss residents acquiring French real estate. The use of holding structures like French Non-Commercial Real Estate Companies (“Société Civile Immobilière – “SCI”) and their tax treatment under Swiss law have always been a delicate matter, particularly with regard to the classification of such shareholdings as securities […]
Significant changes to Dutch expat facility
On 19 September 2023, Dutch Parliament voted for several amendments to the 30%-ruling (exempting 30% of the pay of a foreign employee working in the Netherlands) from 1 January 2024. Upon the likely enactment, this will have an impact on the tax position of existing and future expats working in the Netherlands, reducing or limiting […]
Romania prepares to enact Pillar 2 Global Anti-Base Erosion (GloBE) rules
Initiated by the Organisation for Economic Co-operation and Development (OECD) the Pillar 2 GloBE rules aim to stop tax competition between countries and to limit the shifting of profits to low-tax jurisdictions. As a result, large multinational groups (MNEs) with global annual revenue exceeding €750m will need to pay a minimum 15% tax on income […]
Chile rejects tax reform bill
In July of 2022, Chile announced a new tax reform seeking to improve tax justice, address tax evasion and encourage economic growth to finance other structural reforms that expand social rights and promote productive and regional development. President Gabriel Boric defended it by saying that redistribution of wealth is key to address the ailments manifested […]
Green investments in Austria: new tax allowance introduced effective 2023
When the Austrian government – a coalition between the conservative People’s Party and the Green Party – presented their government program for 2020-2024, an “eco-social tax reform” was one of the key elements. The most recent measure has been the introduction of an investment allowance that especially incentivises “green investments”. The two main pillars of […]
Transfer pricing legislation in the Republic of Moldova
For the first time, the Republic of Moldova has introduced the Tax Code provisions on transfer pricing and the arm’s length principle. These measures are expected to apply from 1 January 2024, with an aim to bring local legislation closer to both the EU law and the recommendations of the Organisation for Economic Co-operation and […]
How is Portugal implementing the Directive (2009/125/EC) and contributing to the proposed objectives with Eco-design projects?
In the recent years, both consumers and businesses have become increasingly conscious of environmental issues. The latter have realised that it is not necessary to make large investments in order to achieve a significant reduction in their environmental footprint as a return on investment, often combined with a reduction in costs. One of the measures […]
Use of artificial intelligence for tax audits in Mexico
The Tax Administration Service (SAT) is an administrative authority in Mexico empowered to conduct audits of taxpayers with respect to their tax obligations. The primary objective of the SAT is to facilitate and encourage payment of the required taxes and to regulate the imposition of infractions and penalties derived from non-compliance. In the late 1990s, […]
US trust income: opinion of the French administrative Supreme Court clarifies French tax treatment
The French administrative Supreme Court rendered an opinion on 18 April 2023 regarding the French tax treatment of trust income in the French-US context. While this opinion clarifies an area of uncertainty, it certainly raises issues of double taxation which will not improve France’s tax attractiveness when dealing with the US trusts. France does not […]
Carbon Tax – Addressing the emissions outside of the EU
The climate and other environment-related challenges should be on every country’s agenda. At the EU level, reaching the objectives of the Paris Agreement remains at the core of the European Green Deal, with the need to urgently reduce greenhouse gas emissions (GHG) and limit the global temperature increase to 1.5 °C, in this century. Therefore, […]
ESG and financial transactions from a transfer pricing perspective
In 2021, the European Central Bank (ECB) published its final guide on climate-related and environmental risks for banks. It aimed at enhancing the industry’s awareness and preparedness for managing climate-related and environmental risks. The risks mentioned are commonly related to two main types: physical risk and transition risk. They have an impact on both economic […]
The French IP Box, an innovative scheme for software creators
The “new” regime of Article 238 of the French Tax Code (FTC) applies to patents in the strict sense, to other industrial property titles such as utility certificates and supplementary protection certificates attached to a patent, but also to software. As such, the regime of article 238 of the CGI applies to software protected by […]
Telework in Europe : the new official framework agreement on social security is out
Following our previous newsletter on this topic, we are now pleased to inform you that the expert working group consisting out of 20 different EU Member States has now officially published the “Framework Agreement on the application of Article 16 of Regulation (EC) No. 883/2004 in cases of habitual cross-border telework” (hereafter referred to as […]
Protecting reputation and managing communication on tax matters for ESG ratings and Pillar 2 disclosures
Over the last decade, the Organisation for Economic Co-operation and Development (OECD) and the European Union (EU) have made significant developments regarding tax transparency regimes and the exchange of information between tax authorities. However, these developments are being taken further in the drive for increased transparency and public availability of such information, particularly in relation […]
What is the future of taxation in Europe: questioning the usefulness of all anti-avoidance measures
Pillar 2, which is the Global Anti-Base Erosion Rules (GloBE) minimum tax project, and the BEFIT initiatives are considered likely to reduce some tax planning opportunities respectively at worldwide and EU levels, and thus reduce the need to address them through anti-avoidance rules. Therefore, it may be reasonable to consider whether all these anti-avoidance rules […]
What is the future of taxation in Europe: impact on multinational enterprises
Initiatives mentioned in the previous article already affect and will further affect multinational companies in a significant way. The first step for multinational companies to consider is how to build stakeholders’ understanding of the impact these changes in domestic legislation will have on the business. In the case of Pillar 2, for example, this means […]
What is the future of taxation in Europe: state of play for ongoing initiatives
The international tax landscape has undergone major changes over the past few years which is set to have a significant impact on the overall tax architecture. At both international and European Union (EU) levels, several initiatives have been pursued aimed at aligning tax collection with the location of economic activity and achieve a minimum level […]
Polish leap in digitisation – mandatory e-invoicing coming soon
Originally, mandatory e-invoicing was supposed to come into effect as early as 2023, but due to the complexity of the application of e-invoicing procedures and objections of entrepreneurs, the deadline was postponed until July 2024. Nevertheless, it should be kept in mind that this is not a distant prospect. As of 1 July 2024, the […]
The impact of rising interest rates on transfer pricing
With rising inflation and multiple key interest rate increases, multinational enterprises should consider reviewing the prices of their intercompany financing transactions, which may no longer align with the arm’s length principle. The quick rise in interest rates may have created significant divergence between the prices applied by a multinational enterprise on its intercompany financing transactions […]
South Africa ratifies MLI and develops synthesised DTAs
Adopting the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) has been an important development in the international tax landscape, having far-reaching effects on the double tax agreements entered into between countries. Even though not obliged to do so, South Africa opted to develop synthesised texts to […]
Preparing for the Carbon Border Adjustment Mechanism (CBAM)
Following the adoption of CBAM by the European Union (EU) parliament, businesses impacted will have a transition period beginning 1 October 2023. If your business imports goods and materials from outside the EU and is in scope of CBAM, you need to prepare as a matter of urgency. Businesses not yet covered by CBAM should […]
Lithuania’s tax exemption for reinvested profits
The investment project incentive has been a selling point for Lithuania to attract foreign direct investment (FDI) and establish new businesses in Lithuania. Using the investment project incentive, legal entities involved in investment projects can reduce their taxable profits by up to 100% of the actually incurred acquisition costs of fixed assets meeting certain requirements. […]
Where is the UK Diverted Profits Tax and the Profit Diversion Compliance Facility now?
On 7 February 2023, the UK tax authority HM Revenue & Customs (HMRC) released its Transfer Pricing and Diverted Profits tax statistics for the 2021 – 2022 tax year. The statistics clearly demonstrate that both transfer pricing and Diverted Profits Tax (DPT) continue to yield significant income for HMRC and that these areas are likely […]
How CARF, MiCA, and DAC8 will impact tax transparency in relation to the WEB 3 and other recent web developments
The development of new web communication systems such as WEB3 is making it very difficult for tax authorities to trace taxable transactions. However, measures proposed by the OECD and the European Union aim to provide a framework that will permit traceability of tax transactions. The technical characteristics of a crypto asset make it difficult for […]
Romania’s race to improve VAT collection rates
The Romanian tax authorities have introduced a series of measures in an attempt to reduce its VAT deficit and combat the impact of fraud on VAT collection. According to the European Commission VAT Gap Report, in 2020, VAT collection within the European Union (EU) increased by around 2% compared to the previous years. However, while […]
UK Spring Budget 2023: Focus on long-term growth
Everything everywhere The UK Chancellor delivered the 2023 Spring Budget on March 15. Focused on Enterprise, Employment, Education and Everywhere, the measures aim to encourage investment in the UK, increase labor market activity and foster innovation and creativity in the UK. The anti-recessionary measures are expected to have a positive effect across most industries for […]
Portugal makes changes to business R&D tax incentive system
The Portuguese Government is amending SIFIDE II, the tax incentive system for business research and development (R&D). The proposed changes reduce the tax benefits available to Investment Funds in favour of promoting direct investment in R&D. Created in 2011, SIFIDE II is the main Portuguese R&D policy instrument. Since 2018, Investment Funds dedicated to financing R&D […]
Crypto transactions become reportable under the DAC 8
The EU Commission has released its draft amendment to the Directive on Administrative Cooperation (DAC) regarding crypto assets (the DAC 8). The DAC 8 will extend the automatic exchange of information obligations to crypto transactions from 2026. Obligations under the DAC 8 will apply to EU and, most likely non-EU crypto-asset service providers and operators. […]
R&D tax incentives in Hungary and the Central and Eastern European region
The promotion of research and development activities is a priority for many Central and Eastern European (CEE) countries. It means businesses that carry out basic, applied research and experimental development (R&D) are eligible for a range of tax reliefs. In Hungary, the direct costs of R&D projects can be treated as tax-deductible expenses for corporate […]
ATAD3 update: significant amendments recommended by the European Parliament
The European Parliament proposes significant amendments to the Anti-Tax Avoidance Directive, commonly known as ATAD3. ATAD3 seeks to prevent the misuse of shell companies for tax purposes. Compared to the initial draft Directive, the proposed amendments may provide relief for international organisations. In essence, ATAD3 imposes increased reporting obligations and denial of tax benefits under […]
Tax treatment of US companies in Germany
Background The legal qualification and taxation of US companies in Germany, such as Limited Liability Companies (LLCs) or Subchapter Corporations (S-Corps), can be challenging. One example showing the differences in qualification and taxation can be seen in the different criteria applied for the qualification as a corporation versus a partnership for tax purposes. The ATAD […]
Mexico approves the Multilateral Instrument (MLI) to implement Tax Treaty Measures
On 12 October 2022, the Mexican Government approved the Multilateral Instrument (MLI) related to the application rules for double taxation agreements (DTAs) to prevent Base Erosion and Profit Shifting (BEPS). The rules were published in the Official Gazette of the Federation on 22 November 2022. Included in the Mexican Government’s reservations and notifications are […]
Canada introduces excessive interest and financing expenses limitation rules
Following recommendations of the Base Erosion Profit Shifting (BEPS) report by the Organisation for Economic Co-operation and Development (OECD), Canada is introducing excessive interest and financing expenses limitation (EIFEL) rules. In general terms, EIFEL rules limit the amount of net interest and financing expenses that may be deducted in computing a taxpayer’s income to no […]
French landmark decision on the “beneficial owner” concept for tax treaty purposes
A landmark decision on beneficial ownership could significantly impact the French tax authorities’ approach to tax audits concerning royalties. In its decision on French company Sté Planet dated 20 May 2022, the French Administrative Supreme Court (Conseil d’État) ruled for the first time that when French-sourced royalties are paid to a foreign person who is […]
EU’s new SAFE initiative to bolster existing tax evasion measures
The European Commission (EC) launched an initiative on 6 July 2022 concerning the fight against tax evasion and aggressive tax planning. As a result, a public consultation introducing the Securing the Activity Framework of Enablers (SAFE) directive has now been held. The proposed measures could increase compliance costs for all those involved in providing tax […]
Tax considerations for M&A in Mexico
During 2020, the mergers and acquisitions (M&A) market underwent some challenges due to the COVID-19 contingency and plenty of transactions were put off. Nonetheless, during 2021 and 2022, the M&A market recovered, as evidenced by the number of Mexican entities across various industries and sectors being acquired. Mexico’s main market comprises small and medium-sized enterprises (SMEs), […]
Changes on the way for Ireland’s innovation-based tax incentives
OECD-led global tax reform has resulted in changes to two of Ireland’s key Foreign Direct Investment (FDI) offerings: the Research & Development (R&D) tax credit and the Knowledge Development Box (KDB). Proposals made under Ireland’s 2023 Budget have an eye on the impact of the OECD Pillar Two proposals, specifically the minimum 15% corporation tax […]
Making sales in Canada from abroad: a new indirect tax world
Prior to July 2021, if you were not carrying on a business in Canada you did not have to worry about Canadian sales taxes. Those sales were said to be out of jurisdiction for Canada and therefore by virtue of the applicable sales tax laws not subject to Canadian sales taxes. Well, those days are […]
Polish Deal’s tax complexity and worsening economic conditions force revisions
A package of significant tax legislation changes came into force in Poland with effect from 1 January 2022. Dubbed the Polish Deal, these changes were intended to ‘tighten up the tax system’ and deliver a more progressive tax framework. However, they primarily involved a greater burden on a large number of taxpayers, which has subsequently […]
ESG and tax: what does best practice look like?
There is currently a significant mismatch between the high importance the public places on companies paying the right amount of tax, and the lower emphasis that tax has in discussions on ESG. This mismatch provides an opportunity for businesses to differentiate themselves and create stronger relationships with stakeholders (whether suppliers, investors, customers or employees) on […]
Can Turkey make progress on transfer pricing audits?
National differences and approaches to transfer pricing are evident all over the world. In particular, tax jurisdictions in developed countries have now taken quite advanced steps in approaching complex transfer pricing situations from a technical debate perspective. Whereas in some countries, including Turkey, the concept of transfer pricing could be more advanced. Although Turkey has […]
Latest development of APA in China – simplified procedures of unilateral APA
Background The State Administration of Taxation (“STA”) has made a continuous effort to promote Advanced Pricing Arrangement (“APA”). On 26 July 2021, the STA issued STA Public Notice [2021] No.241 (“Bulletin 24”), which sets forth simplified procedures for unilateral APA for enterprises that meet certain conditions. On 29 October 2021, it also published the China […]
Proposed changes to the offshore regime for passive income in Hong Kong
Background To address harmful tax competition, the European Union (“EU”) requires Member States to refrain from introducing any new harmful tax measures and amend any laws or practices deemed to be harmful. Regarding non-EU jurisdictions, the EU has also evaluated their tax regimes against international tax standards and put in place a list of noncooperative […]
Chile looks to overhaul tax credit system
Chile introduced a new tax reform bill on 7th July 2022. The “tax reform towards a fiscal pact for social development and justice” was presented by the Chilean President and is currently progressing through the National Congress. In line with Chile’s ongoing plans to restructure the current system, the bill is aiming for a 4.1% […]
Taxation, sustainability and ESG in your business
ESG and sustainability are increasingly at the centre of business thinking about a more purpose driven approach to enterprise and therefore to attracting and retaining staff, clients, and capital. It is rarely out of the news one way or another with, as just one example, the gifting of the outdoor clothing company Patagonia to a […]
VAT alert in Croatia – change in tour operators’ margin scheme regulations for non-EU travel agencies
Starting from January 2021, Tour Operators’ Margin Scheme (TOMS) is no longer applicable to entities that have established their businesses or have a fixed establishment from which they render the services outside the European Union (EU). In this regard, non-EU companies should be aware of the new taxation approach applied to them under the TOMS […]
New CEE tax guide outlines fundamental changes and long-term trends
Providing information on taxation in 22 Central and Eastern European (CEE) states, the latest Mazars CEE tax guide analyses long-term taxation trends and fundamental tax regime changes in each country, both now and in previous years.
United States responds to Hungary’s global minimum tax veto
On 8 July 2022, the US Treasury Department announced that it would unilaterally terminate its 1979 bilateral treaty with Hungary. The decision follows Hungary’s veto of an EU directive implementing a global minimum tax.
The Google tax: The UK story, 7 years later
The Diverted Profits Tax (DPT), or what the media have dubbed the Google tax, was introduced in 2015 to dissuade and counteract contrived arrangements used by large multinational groups that divert profits from the UK and erode the UK tax base.
France is an innovation-friendly country offering many beneficial opportunities for European groups
credit. In the recently published 2021 OECD study (Measuring Tax Support for R&D and Innovation – OECD (oecd.org) France was ranked amongst the most favourable jurisdictions in Europe.
The impact of digital assets and cryptocurrencies decentralised finance on taxation in various jurisdictions
Digital assets and cryptocurrencies continue to evolve by offering new services and products such as Decentralized Finance (DeFi) and non-fungible tokens (“NFTs”), but is tax legislation also keeping up to date with the ever-changing world of digital assets and cryptocurrencies?
New Transfer Pricing Bill Passed in Israel
Transfer Pricing Bill in Israel passes third reading in June 2022 and is approved. What are the implications for businesses in Israel? In June 2022, the new transfer pricing bill was approved. This is another step towards the Israel Tax Authorities (ITA) efforts to streamline the ITA’s supervision and control of transfer pricing relating to […]
Mexico’s preferential domestic manufacturing regime for export supply chains
Did you know that in Mexico you can have a branch or a manufacturing relationship with a Mexican company in which the manufacturing process can be performed using your machinery, equipment, and inventory without the tax exposure of a permanent establishment and under a preferential customs regime? Below we’ll explain more about this tax regime, […]
Questions raised on Italy’s penalty protection regime
Following Italy’s new transfer pricing (TP) requirements1 introduced on 23 November 2020, there has been much discussion as to whether the taxpayer may benefit from penalty protection that also covers additional withholding tax otherwise due when the Italian tax authorities (ITA) perform adjustments that recharacterise the nature of a transaction. A Circular2 letter was then […]
Estate, gift and trust tax considerations for US domiciliaries and non-residents
Federal income versus transfer tax The US taxes its citizens and residents on their worldwide income but also levies a gift, estate and generation-skipping transfer tax (GSTT) on worldwide assets of both citizens and individuals domiciled in the US. A non-citizen is subject to US income tax when they become a resident. Transfer tax applies […]
Are you ready for the GloBE tax challenges?
On 14 March 2022, the OECD published a comprehensive commentary and illustrative examples of how implementing the Global Anti-Base Erosion Model Rules (GloBE rules) could look. In this blog, we discuss the GloBE rules and examine how the rules apply and filing requirements. On 20 December 2021, the OECD published model rules that member countries […]
New deadlines for reporting ultimate beneficial ownership to the Peruvian tax authorities
Legal entities and certain legal arrangements within the scope of Peru’s disclosure rules are obliged to implement suitable mechanisms allowing the collection and storage of data relating to the identity of their Ultimate Beneficial Owner (UBO). This information supports the data that must be shared with the Peruvian tax authorities by filing a UBO informative […]
Environmental tax pillar in the environmental, social, and governance system
The information regarding environmental taxes paid by an organisation, as well as the actions taken to mitigate the impact on the environment could be included in environmental, social, and governance (ESG) reporting. Environmental reporting in total is an important element for parties to consider when doing business. Along with environmental reporting, environmental taxes play a […]
India: Most Favoured Nation Clause causes controversy
India has signed double tax avoidance agreement (DTAA) treaties with several countries and entered into a protocol, inter-alia, containing the Most Favoured Nation (MFN) clause with 13 countries including France, Belgium, Spain, Sweden Switzerland, and the Netherlands. The MFN clause usually states that if, after date of entry into force of the tax treaty between […]
French landmark decision on foreign tax credit imputation for capital gains on shareholdings: an extension to dividends?
In a decision “Air Liquide” dated 15 November 2021, the French Administrative Supreme Court (Conseil d’Etat) ruled for the first time that French resident companies realising capital gains upon the alienation of eligible participation (titres de participation – generally presumed for a 5% interest held for a minimum two-year period) in a foreign company are […]
The proposed new EU “Unshell” directive
On 22 December 2021, the European Commission published a number of Directives impacting a wide variety of corporate structures and taxpayers. One of these Directives is “laying down rules to prevent the misuse of shell entities for tax purposes and amending Directive 2011/16/EU’’, commonly referred to as ATAD3 or the Unshell Directive (see here) (hereinafter […]
Tax compliance and incentives during martial law in Ukraine
A crucial number of Ukrainian companies (including subsidiaries of international enterprises) experienced negative business and financial impacts as a result of the Russian invasion of Ukraine which started on 24 February 2022. The urgent relocation of staff to other regions of Ukraine and abroad, interruption of access to internal databases, IT systems, and paper documents […]
A new tax treaty between France and Belgium: Transfer of tax residence and sale of shares
The currently applicable double tax treaty between France and Belgium was concluded in 1964 and then amended many times until 2009. After several years of negotiations, Belgium and France finally signed a new double tax treaty (hereafter, the “new Treaty”). The 1964 Treaty remains applicable until the new Treaty has been ratified by the French […]
Corporate income tax changes in Poland for 2022
As of January 1, 2022, significant changes concerning the Polish tax system called the Polish New Deal came into force. These amendments also include Corporate Income Tax (CIT). Changes in withholding tax The major changes concern: Implementation of pay and refund mechanism (mechanism introduced in 2019 and suspended until the end of 2021) as the basic mechanism of […]
Turkey issued the first legislation in relation to the Mutual Agreement Procedure (MAP)
With Law No. 7338 on Turkish Tax Procedure Law (TPL) and Amending Certain Laws (“Law No. 7338”) published in the Official Gazette dated October 26, 2021, a domestic regulation was made for the first time regarding the mutual agreement procedure (MAP) in Turkey. The Turkish Revenue Administration (TRA) aims to eliminate uncertainties regarding the application […]
Swiss VAT: a system similar to the EU and yet with many differences
The Swiss and European VAT systems are similar in many respects, but there are also differences that can lead to serious adverse tax consequences. Switzerland, for the most part, follows unilaterally the same broad lines as neighboring countries, thus trying to avoid VAT mismatches. However, when European countries have transposed the EU Directive they have […]
New double tax treaty between France and Belgium: nothing is set in stone for French real estate
In this blog post we focus on the situation of individuals residing in Belgium who hold real estate property located in France, looking specifically at the changes introduced by the new Treaty. National provisions have not been changed by this new Treaty, so additional French and Belgian taxes thus remain fully applicable
What US taxpayers need to know about changes to R&E expenditures tax law
One item that has so far failed to make headlines amongst the many changes in the Tax Cuts and Jobs Act of 2017 (“TCJA”), is the treatment of research and experimental (“R&E”) expenditures under Section 174. This is likely because the change in treatment was not applicable until tax years after December 31, 2021, which […]
International tax outlook from the UK
International business everywhere will have been affected by the devastating events in Ukraine, with a knock-on impact on energy, supply chains, consequent inflation and the impact of sanctions. This comes with significant developments in the international tax landscape, which also requires attention. This article discusses the tax landscape from a UK perspective, considering domestic and […]
What to expect from South Africa’s advance pricing agreement programme
A proposed model for establishing an advance pricing agreement (“APA”) programme in South Africa (“SA”) was issued by the South African Revenue Authority (“SARS”) during December 2021. This article highlights some notable aspects of this proposed programme, by comparing it to those of other jurisdictions. An APA is an agreement between a taxpayer and a […]
Takeaways from the latest edition of the OECD Transfer Pricing Guidelines
On 20 January 2022, the Organisation for Economic Co-operation and Development (OECD) released the 2022 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TPG). This blog provides a summary of the revised Chapters of the OECD TPG, and highlights what tax advisors and taxpayers need to know. The revised […]
Transfer pricing: is Africa ready for advance pricing agreements?
Advance pricing agreements (“APAs”) could provide taxpayers and revenue authorities with some certainty during the unprecedented times that we are living in. The African APA landscape is however underdeveloped, but some recent developments in South Africa (“SA”) indicate that this may be changing. On 18 December 2020, the Organisation for Economic Co-operation and […]
New tax rules in Luxembourg impacting cross-border workers and PEPPs
Guidelines on the taxation of cross-border workers during the Covid-19 pandemic and an update on PEPP as defined in the latest budget laws in Luxembourg.
The benefits of VAT Groups in Poland
From 1 January 2022, VAT taxpayers will be able to create a VAT Group in Poland. The act implementing this “Polish Deal” introduced the separate institution of a VAT Group, previously unknown in the Polish tax system, enabling consolidated VAT accounting within a capital group. What are the benefits of establishing a VAT Group in Poland?The creation […]
New income tax relief supporting innovation of enterprises in Poland
The package of tax changes known as the “Polish Deal” introduces several new tax reliefs aimed at supporting the innovation of enterprises, as well as extending the scope of some reliefs that already exist. These changes should increase Poland’s attractiveness as a location from which to undertake R&D activities. The new incentives may be used […]
New transfer pricing requirements in Italy
On 26 November 2021, the Italian tax authorities (“ITA”) issued the final version of Circular Letter no.15/E (the “Circular”), providing clarification on the new transfer pricing requirements introduced by Measure no. 360494 (“New Measure”) on 23 November 2020. This article analyses the most important amendments to the transfer pricing documentation rules in Italy, and what […]
Nigeria’s simplified compliance regime for non-resident suppliers
Many tax jurisdictions encounter difficulties exercising their tax legislation against taxpayers who do not reside in their jurisdictions. The adoption of a simplified registration and collection mechanism is one of the approaches suggested by the OECD to address these difficulties. The simplified compliance regime is more appropriate for business-to-consumer (B2C) transactions as most B2C customers […]
Proposed new EU “UNSHELL” Directive will impose penalties on entities
On 22 December 2021, the European Commission published a proposal for a Directive to prevent the misuse of shell entities for tax purposes (described as “Unshell Directive” or also referred to as ATAD III). The draft Directive aims at identifying and penalising entities that do not maintain sufficient substance within the EU. Additional reporting requirements […]
R&D and innovation tax incentives
Many jurisdictions around the world offer generous tax credits and other incentives to companies that invest in R&D and innovation activities. Incentives are one of the key factors that management considers when deciding where a company should invest in innovation. Companies will also look into specific talent offerings, economic structure, education systems, and culture, amongst […]
MNEs subject to 15% minimum tax rate from 2023: main OECD provisions and EU implementation proposals now available
The OECD two-pillar approach In October 2021, the OECD’s 137 Inclusive Framework members agreed to adopt a two-pillar approach to address the tax challenges of the digital economy. Pillar I provides for new profit allocation and nexus rules for MNEs with a turnover greater than EUR 20 billion and profit before tax margins of 10% […]
Changes to Belgian special tax status expected in 2022
The Belgian government has approved a draft bill in which changes for the new Belgian special tax status for foreign executives and specialists are embedded. The limited duration of the tax benefits, the minimal remuneration threshold, and the ‘30%-rule’ are the most profound changes. The changes will be effective from January 1, 2022. As a […]
Greece’s beneficial tax regime for foreign residents
In December 2020, Greece introduced tax incentives to attract foreign tax residents. Specifically, the provisions of Article 5C of the Greek Income Tax Code (ITC), which came into force on 1 January 2021, stipulate that foreign employees or foreign freelancers becoming Greek tax residents can enjoy a 50% tax exemption from income derived in Greece […]
Improved tax flexibility for Belgian / Luxembourg cross-border workers
Due to the Covid-19 pandemic, many Belgian tax residents working in Luxembourg were no longer able to travel since remote working/home working was recommended or mandatory, based on governmental rules. As such, ‘the 24-day rule’ (whereby taxation of days working in Belgium are treated as fully taxable in Luxembourg and not in Belgium, provided the […]
Impact of the UK’s new Health and Social Care Levy Bill on expatriates
In response to the unprecedented spending on public services during the recent pandemic, the UK government has introduced a 1.25% health and social care levy applicable to every person liable to National Insurance Contributions (NIC), including self-employed individuals and internationally mobile employees (IMEs). Where employees are concerned, employers will also be required to pay the […]
BEPS 2.0: The future impact on businesses in Singapore
Rapid digitalisation and globalisation have led to significant changes in business operations. The digital economy has also uncovered vulnerabilities in the basic rules that have governed global taxation in the past, creating opportunities for profits to be “shifted” to lower-taxed jurisdictions, and sparking debates surrounding a ‘fair’ allocation of taxing rights. Against this backdrop, the […]
Criminalisation of tax litigation in France
Many jurisdictions have refined and improved their legislative defenses against tax avoidance in recent years, making the penalties for tax fraud even tougher.
South African approach to BEPS and transfer pricing in light of Covid-19
The South African (“SA”) tax regime is being strengthened by the implementation of base erosion and profit shifting (“BEPS”) action 4, relating to the limitation of interest deductions, but extra borrowings by businesses to deal with Covid-19 has caused the Government to defer its introduction. This article highlights some aspects relating to the implementation of […]
The Anti-Tax Avoidance Directive II: Will other jurisdictions follow the UK’s lead?
ATAD II is the EU translation of BEPS Action 2, the part which is focused on the ability of taxpayers to design situations of double non-taxation or heavily reduced taxation by exploiting hybrid mismatches. They apply to mismatches between the EU Member States, the UK, Mexico, Australia, New Zealand, and third countries. This legislation has […]
Tax updates in the context of the digital economy
Key milestones are being reached in the digital economy in 2021. In this post, we review the most recent legislation and provide insight on how to keep up with the tax aspects of this fast-developing topic. Digital commerce is increasing globally as the world becomes ever-more interconnected. More and more companies are exclusively active in […]
EU Carbon Border Adjustment Mechanism: ensuring your supply chain is compliant
In July 2021, the European Commission presented its ambitious Fit for 55 legislation package, which supports its commitment to reduce net greenhouse gas emissions within the EU by at least 55% by 2030 (compared to 1990). From an international trade point of view, the most important part of the package is the Carbon Border Adjustment […]
Key transfer pricing considerations for startups
Startups and entrepreneurship are concepts that have recently grown more important globally. To put it simply, startups are entrepreneurial companies that are generally established to offer solutions to any problem and exhibit rapid growth potential. In many countries, the importance of technology-oriented startup business models is gradually increasing, and a rising number of “unicorns”[1] are […]
Is the new two-pillar solution to address tax challenges suitable for African countries?
This new solution is expected to reallocate more than $100bn of profit annually to market jurisdictions. However, this raises the question, to what extent emerging economies, and more specifically, African countries, will be entitled to levy taxes on profits generated by multinational enterprises from their markets? This source and others are sorely needed by these […]
Recent Tribunal ruling on the taxation of ESOPs (Employee Stock Option Plans) in India
In accordance with OECD guidelines, the taxability of ESOP in India depends on where employment is exercised and the period of service for which ESOP has been granted.
Tax vendor due diligence is an attractive tool in the M&A transaction process
Background – the current market The disruptive effect of the Covid-19 pandemic and the economic recovery currently underway in many jurisdictions has driven strong momentum in the M&A market in recent months. Among the factors that drive this demand may be the need to enhance growth, diversify, raise finance or refocus on core activities. Commercial and […]
Tax issues arising from corporate amalgamations in Hong Kong
In June 2021 Hong Kong finalised legislation codifying the Inland Revenue Department’s tax assessment practice relating to corporate amalgamations. For qualifying companies, it is possible to elect (within one month of the amalgamation) for special tax treatment for pre-amalgamation losses, succession to business assets, amongst other areas. While the new legislation provides greater certainty on […]
Compliance bulletin helps businesses in Mexico
Mazars experts around the world deliver tailored services in audit, accounting, tax, financial advisory, consulting, and legal services. In Mexico, local experts have created a compliance dashboard with news items to help guide businesses as they navigate issues related to finance, tax, legal, and labour updates. With the global economy recovering from Covid-19, new government-required procedures […]
Spotlight on Tax Lawyer Tifphani White-King
The latest edition of the Bloomberg spotlight series focuses on Tifphani White-King, the U.S. National Tax Practice Leader for Mazars in the U.S. and a member of the Mazars Global Tax Leadership Team. White-King shares the tax code changes she would most like to see, the best financial advice she ever received, and what she […]
The globalisation of the German Reorganisation Tax Act through the Corporate Modernisation Act
Many countries have their own versions of tax-free or tax-neutral reorganisations. We are seeing instances where such domestic legislation now is subject to amendment with some added or bonus enhancements to these laws. What follows below are some recent changes to the German restructuring tax code provisions. We aim to continue to highlight more countries […]
The future of renewable energy taxation: considerations on EU competitiveness
A public debate in the European Union on environmental issues is heating up. It emphasises the urgency to develop environmental policies to mitigate climate change and opens a discussion on the revision of energy taxation rules currently in place. In its May 2021 review of the Energy Taxation Directive, the EU Commission analysed the impact […]
Switzerland is an attractive business hub. What is their secret?
Choosing a business location involves many considerations, with tax being only one of them. Nevertheless, tax is a consideration. Below is a note commenting on the attractions of Switzerland as a business location. There may of course be other locations that should be considered. Switzerland attracts global business, research, and innovation, and maintains the high ground […]
Agreement on OECD pillar 1 and 2 proposals (as refined by the US initiative)
As of 13 July, 132 of 139 jurisdictions (including Bermuda, Cayman Islands, BVI, Switzerland, and the Bahamas) agreed to the OECD Pillar 1 and 2 proposals as refined by the US initiative. The seven that did not were: Ireland, Estonia, Hungary, Barbados, Kenya, Nigeria, Sri Lanka. The OECD press release can be found here and […]
Changes in UK government revenues, and the impact of Covid-19 on environmental and digital services taxes
Total UK Government receipts for 2020/21 were £795bn, £34bn down on the previous year (see here). In this article, we focus on how the environment and the digital economy contribute to this result and the future implications. In future articles, we will consider how other jurisdictions are reacting to developments in this area. The £34bn […]
Tax aspects of opening a business hub in Asia
The Asian Development Bank has forecast that developing Asia’s growth is forecast to rebound to 7.3% in 2021 and 5.3% in 2022. This compares to 4.2% and 4.4% respectively for Europe (see here) and 6.9% and 3.6% for the US (see here). Businesses already with a footprint in the Asian region will be gearing up their operations to deal with the region’s expected […]
Recent developments in the concept of a permanent establishment in Chile
International taxation is based on residence as the point of connection of a subject with a given territory. However, today’s world is characterized by open economies competing to attract many companies and governed by technology. Apart from the tax connection point represented by the tax domicile in a given country, another element relevant when taxing […]
Migrants and refugees have employment rights and obligations in Uruguay
As Covid restrictions begin to lift there will inevitably be increased movement of workers across borders. This brings back into focus a range of global mobility and tax considerations for businesses and individuals. Examples include work permits, visas, payroll and social security amongst other issues. Below is a snapshot of some pints concerning Uruguay to […]
Challenges of global mobility – focus on Mauritius
Global mobility is a significant advantage in a world where all countries are connected by monetary flow, means of transports and digital communication. A comprehensive global mobility strategy takes time, teamwork, and careful thought. The main challenges faced when designing a global mobility program are payroll, tax issues and laws, and compensation among others. It […]
Special Purpose Acquisition Company (SPAC) – Is this tax vehicle a blank check?
Is it a bird? Is it a plane? Why is a SPAC considered a ‘high flying’ concept and what tax issues need to be considered to reap the benefits and avoid the pitfalls of a SPAC transaction? In this article, we provide a brief overview of SPACs, the particular tax issues relevant to the US […]
G7 Global tax agreement
The finance ministers of the G7 have issued a news brief indicating their agreement on global tax reform that “….will mean the largest multinational tech giants will pay their fair share of tax in the countries in which they operate….”. This consists of two parts: global firms with at least a 10% profit margin would […]
The latest transfer pricing updates on Europe, Asia and America
This article identifies the different types of documentation requirements in three macro-areas (i.e., Pan Europe, Asia-Pacific and America) and it explains the thresholds used for the different taxpayers’ obligations. In addition, it provides an overview of the administrative penalties imposed. The countries analysed in the article are the following: Pan European: France, Germany, Hungary, the […]
Updated OECD guidance on the impact of Covid-19 for cross border workers
In April 2020 the OECD issued guidance on the impact of Covid-19 on double taxation agreements (DTA) and their application to cross border workers. In January 2021 they updated this guidance. This guidance is necessary as some cross-border workers have been stranded in a country that is not their normal residence, and double taxation could arise without applying a practical approach to the […]
The new great debate: minimum global corporate income tax?
The new U.S. Secretary of Treasury, Janet Yellen, has garnered this week’s tax spotlight with her support and request for the world to support a minimum global corporate income tax. This would apply to the largest and most profitable businesses (numbering around 100), with the suggestion that the minimum rate to be applied to be […]
Why Czech Republic’s tax system is attractive for expatriate employees?
Tax reform continues to come in waves across the globe. One common theme of many reforms is tax breaks for low to mid wage earners and surprising tax hikes for high wage earners. This trend seems to be consistent with the latest out of the Czech Republic. New changes to the Czech tax law effective […]
How to attract private capital to fund the new American Jobs Plan?
On March 31, 2021, the Biden administration released The American Jobs Plan, which detailed, among other critical items, the need for infrastructure improvements to enhance America’s competitiveness and to create well-paid American jobs. For this to be successful in attracting needed private capital, the existing regulations concerning Real Estate Investment Trusts (REIT) and Foreign Investment in […]
Impact of Covid-19 on personal income tax and permanent establishments in Singapore (Part 2)
The Covid-19 pandemic has resulted in unprecedented disruptions across multiple countries and economies in the world. In addition to adversely affecting the world economy, the restrictions placed on travel could have personal income tax implications for individuals and permanent establishment risks for businesses. This article provides an insight into the tax considerations in respect of the current crises with focus on the Singaporean personal income tax regime and the possible creation of permanent establishment risk. Permanent Establishment considerations […]
Impact of Covid-19 on personal income tax and permanent establishments in Singapore (Part 1)
The Covid-19 pandemic has resulted in unprecedented disruptions across multiple countries and economies in the world. In addition to adversely affecting the world economy, the restrictions placed on travel could have personal income tax implications for individuals and permanent establishment risks for businesses. This article provides an insight into the tax considerations in respect of the current crises with a focus on the Singaporean personal income tax regime and the possible creation of permanent establishment risk. Taxation […]
Tax reclaim opportunities regarding withholding taxes in Germany
As a result of a number of recent cases there are tax reclaim opportunities for non-German investors in German companies that have suffered withholding taxes (WHT), subject to meeting certain conditions. Points to consider A complete or partial WHT relief may now be possible: i) where there is no Double Taxation Treaty (DTT) in place […]
Governmental proposal for redraft of German “Anti-Treaty Shopping Provision”
Background On January 20, 2021, the German government published a draft law for the Gesetz zur Modernisierung der Entlastung von Abzugsteuern undder Bescheinigung der Kapitalertragsteuer (Act for modernization of the relief of withholding taxes and the certification of capital gains tax, AbzStEntModG). Among other things, this draft contains a new wording proposal of the so-called “Anti-Treaty Shopping” provision in Sec. 50d (3) German Income Tax Act (ITA), in order to comply with European law requirements. Sec. 50d (3) […]
Transfer Pricing: Is Africa ready for advance pricing agreements?
Advance pricing agreements (“APAs”) could provide taxpayers and revenue authorities with some certainty during the unprecedented times that we are living in. The African APA landscape is however underdeveloped, but some recent developments in South Africa (“SA”) indicate that this may be changing. On 18 December 2020, the Organisation for Economic Co-operation and […]
Brexit impact on in/outbound payments
When the UK finally left the EU ended on 31 December 2020, the application of provisions that have been beneficial to cross-border payments within the EU ceased, or will cease to apply. The elimination of withholding taxes, formerly part of these provisions, means companies with cross-border dividend, interest and royalty payment flows to or from […]
Is your business eligible to claim support under Government Covid and business recovery support schemes?
Government’s around the world have acted to help support individuals and businesses to get through to Covid pandemic. Mazars Covid-19 global tax and law tracker provides an overview of the measures different jurisdictions have put in place and there is a range of information and webinars at the above link. In this article we focus […]
New German tax developments regarding intellectual property (IP)
Decree of the Federal Ministry of Finance dated 11 February 2021 – Remuneration of the temporary transfer and the disposal of rights which are entered in a German public register. Further information on German tax developments relating to intellectual property (IP) registered in Germany has been released by the German Authorities. This helps to clarify how the German taxing right can apply to non-German users or vendors of this IP. This […]
DAC 7: EU Proposed changes to information reporting by digital platforms
On 25 November 2020, the Council of the European Union unveiled its updated draft of proposed EU Directive 2011/16 on administrative cooperation. The proposed directive marks the seventh amendment to the directive on administrative cooperation (DAC), earning itself the DAC 7 nickname. The proposed DAC 7 originally unveiled on 15 July 2020, forms part of […]
Avoiding tax traps when relocating
Relocation is a factor that can drive M&A transactions and many jurisdictions use various strategies to attract or retain businesses, whether that be on tax, regulation, creation of critical business mass, or other reasons. There may be many non-tax reasons for enterprises to relocate, but there will always be tax consequences to consider. In this article, we outline the possible tax traps and opportunities for this type of activity. Main tax traps The main tax issues in business relocations, which can amount to traps if not fully taken into account in […]
Covid-19 and the impact on taxation of individuals and permanent establishments in Nigeria
world. In addition to adversely affecting the world economy, the restrictions placed on travel could have personal income tax implications for individuals and permanent establishment risks for businesses.
DAC 6 developments, deadlines, and the question of legal privilege
While the first reporting deadlines for most EU members expired on 31 January 2021 and respectively 28 February 2021, there are still questions outstanding about whether intermediaries are obliged to report arrangements to tax authorities, or if they can use the right to waiver due to professional privilege. In 2020, countries across Europe implemented into […]
Changes to interest deduction limitation rules
The EU Anti-Tax Avoidance Directive (ATAD), contains five legally binding anti-abuse measures, which all EU member states are required to apply against common forms of aggressive tax planning. The Directive includes an exit tax, a general anti-abuse rule, controlled foreign company rules, measures to tackle hybrid mismatch arrangements, in addition to an interest limitation rule. We […]
EU-UK social security protocol and its implications
On 24 December 2020, a draft protocol on social security co-ordination for EU-UK cross border working arrangements that start from 1 January 2021 was published. The draft protocol contained an article covering detached workers, i.e. employees who normally work in one EU member state/the UK who are sent to work in the UK/an EU member […]
Corporate income tax reform: tax loss relief limited to 50% of annual profits
The Dutch government has provided further details concerning a potential reform of the tax loss relief rules in the corporate income tax regime. The proposed amendment will mean that losses can be set off indefinitely from 1 January 2022, but the number of losses that can be set off will be capped. The government had […]
European VAT rules for non-EU Business-to-Consumer exporters to EU countries will change from 1 July 2021
This article will provide you with an update on new VAT rules that will impact companies who sell goods (online) to consumers in the EU. As of July 2021, new VAT rules will enter into force in the EU. If a company sell goods (online) to consumers in the EU, the new rules will most […]
Africa is gearing up to fight base erosion and profit shifting
The African continent boasts a beautiful and diverse array of countries offering a wide range of valuable natural and human resources to the world economy. The past decade has seen significant foreign investments in African jurisdictions, ranging from massive investments in Mozambique’s gas reserves to tech companies capitalising on the technical excellence offered by software […]
OECD recommendations on comparability analysis during Covid-19 (Part 2)
Covid-19 has brought unprecedented social and economic challenges that will durably impact the world economy. Specifically, the pandemic has surrounded the Multinational Enterprises (MNEs) with many issues to be managed such as: insufficient cash flows, unpredictable profitability, unreliable third-party data (which is at the heart of arm’s length principle), non-operative supply chains, import/export limitations, possible […]
OECD recommendations on comparability analysis during Covid-19 (Part 1)
Covid-19 has brought unprecedented social and economic challenges that will durably impact the world economy. Specifically, the pandemic has surrounded the Multinational Enterprises (MNEs) with many issues to be managed such as: insufficient cash flows, unpredictable profitability, unreliable third-party data (which is at the heart of arm’s length principle), non-operative supply chains, import/export limitations, possible […]
Developments in transfer pricing documentation
(Updated 30 March 2021) Recent developments in transfer pricing documentation requirements should prompt MNCs to reassess management of cross border tax compliance. With a focus on protecting tax revenues in straightened economic times, many jurisdictions are focussing on transfer pricing compliance and raising awareness of documentation requirements and penalties for non-compliance. This indicates the groundwork […]
Shining the spotlight on more rigorous Transfer Pricing behaviour
While 2020 is a year we may all wish to forget, changes made during the year on Transfer Pricing (TP) give us some clues as to the primary drivers of TP behaviour in 2021. These clues include US guidance from the Internal Revenue Service (IRS) on TP documentation, highlighting the penalty risks; OECD work and […]
Making sense of tax systems in a digitalised world
How do we develop a global tax system that takes into account business innovation and the digitalised economy, yet is fair to all stakeholders? It’s a debate world governments continue to grapple with as they consider radical reforms to adapt century-old tax rules to the 21st-century digital economy. It’s also a question we put to […]
Mazars provides comments on the OECD proposals for taxation of the digitalized economy
Mazars has submitted comments in response to the Organisation for Economic Co-operation and Development’s (“OECD”) public consultation on its proposal for taxation of the digitalized economy, released last October. The proposals The OECD project refers to challenges associated with, and proposals to address, the taxation of the digitalized economy. It includes proposals for reforming international […]
Transfer pricing guidelines on financial transactions – have captives been caught?
In February of this year, the Organisation for Economic Co-operation and Development (OECD) released guidance for multinational enterprises (MNE’s) and tax authorities, on applying the arm’s-length standard to controlled financial transactions. The guidance, which the OECD plans to include in the next publication of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TPG), […]
TRACE made it to the EU Commission’s agenda. Yet another burden approaching? Or an opportunity?
On 24 September 2020, the European Commission published Communication COM (2020) 590 (final) regarding the action plan in respect to the Capital Markets Union. Action 10 of this plan envisages a EU legislative initiative by Q4 2022 to introduce a common, standardised, EU-wide system for withholding tax relief at source, based on the OECD Treaty Relief and Compliance Enhancement (“TRACE”) Implementation Package. What is this […]
The impact of Covid-19 tax regulations on M&A transactions
In this article, we will focus on the impact of Covid-19 tax regulations in relation to M&A transactions. In particular, we will address the impact of several incentives that need to be addressed when transferring a company. Covid-19 Regulations Many countries have introduced Covid-19 related tax and other government incentives. These can – roughly – be broken into three categories: (i) extension of payment for taxes, (ii) a subsidy for wages (and sometimes […]
Home office: new tax and social security implications in France
With the Covid-19 crisis, working from home is expected to become the “new normal”. 2020 marks the end of many tax holidays with respect to home working arrangements within and between certain countries. We have already featured some general comments on the implication of remote working in previous blog posts; and we will regularly feature […]
Remote Worker – “necessity” or “choice”?
During the first wave of Covid-19 back in the spring of 2020, many employers found themselves dealing with the issue of “remote workers” in significant volumes, for the first time. When “working from home”, means working from home in another part of the city or the country then the issues are more likely to be […]
State tax telework developments
It seems right now that most countries around the world are busy regulating certain telework arrangements cross border with a keen focus on taxation rights. The U.S. is no different. In fact, the U.S. has the matter pending before its highest Court for review. A decision will not only impact the states named but obviously […]
Brexit implications for international private clients
Now that we are a couple of weeks into the new year, we are seeing lots in the press and media on Brexit’s impact to the business community. But what about the people behind the business – the individuals. At Mazars, we have been educating clients on the future of Brexit from both an entity […]
Another ‘Google’ tax hits this week – this time in Spain
Following the path of other developed countries (e.g., France, United Kingdom, Italy), Spain enacted last October a brand new “tax on certain digital services” that will come into effect on 16 January 2021. Background of a tax (not so new) The origin of this tax can be found in Action 1 of the BEPS report […]
Important tax developments for digital economy
Over the past few years, the digital economy has become a hot topic around the world. The international community has made substantial progress towards reaching a consensus-based and long-term solution to prevent tax challenges arising from the digitalisation of the economy. Seeking to keep working towards an agreement by mid-2021, the Organisation for Economic Co-operation […]
OECD guidance about the transfer pricing implications of the Covid-19 pandemic
The OECD released its guidance on the transfer pricing implications of the Covid-19 pandemic on 18 December 2020. This guidance was eagerly awaited by many MNEs whose statutory accounts will be closed by the end of the year, and which need to adjust their 2020 transfer pricing policies to reflect the financial impact of the […]
The UK fiscal environment for international business following Brexit
Following the UK’s spending review statement of 25 November, there is now greater clarity on how the UK economy will be taken forward into 2021 following the Covid-19 pandemic and exit from Brexit transition. Despite incurring record UK government borrowing this year of around £395bn, the significant further borrowing to fund investment during the recovery […]
VAT to-do list 2021
From a general VAT perspective, the coming year of 2021 will be a turbulent one and will create a lot of work for businesses operating in an European environment. Below are the key VAT aspects to consider before the end of the year. 1. Restructuring of supply and service chains during the pandemic Covid-19 has […]
French landmark decision fighting against “commissionaire” arrangements in the digital economy
After the French government enacted a 3% digital services tax on gross income, it is now the French Administrative Supreme Court which rendered a landmark decision for international groups providing digital services in France by strongly extending the definition of permanent establishment in the presence of commissionaires. This new case law remains also relevant for […]
Permanent establishment through a management company
BEPS 2.0 continues to call into question what indeed is a permanent establishment (PE). We all know that ‘bricks and mortar’ is almost ‘a ghost of Christmas past’ and states are now focused more on activities that have the potential to create nexus or PE status. This is certainly the underpinning of the sweeping world […]
South Africa and others: broadening the tax base by clamping down on “white collar schemes”
Near-term objective of the South African Revenue Service confirmed: “Remaining focused on international taxes, particularly aggressive tax planning using transfer pricing.” The South African (“SA”) economy, like many others, has been severely impacted by the Covid-19 pandemic. A recent speech by the country’s Finance Minister painted a dire picture of a country that is, in […]
Tax holiday checklists: make your list and check it twice, especially for withholding tax changes
Generally speaking, year-end is that time of year when we clean up all open items in the current year and head into the new year with a fresh outlook and perspective. This also applies to tax. You cannot be blind to the overwhelming number of tax checklists published to help individuals, in particular, get their tax affairs […]
Welcome (bienvenidos, willkommen, karibu, bienvenue) to a world of tax incentives
The pandemic has led to many people choosing to relocate. Many are leaving densely populated cities to work remotely to where they feel are more desirable locations for themselves and family. Others are holding steadfast to their crowded city dwellings. Either way, geographies are challenged to retain (or welcome) existing residents and newcomers. Many are […]
DAC6 tightens the reigns on M&A deals across the globe
EU Directive 2018/822 or DAC 6 (acronym of “Directive on Administrative cooperation”) is in the minds of many European tax practitioners. In this article we will set out its importance for the European M&A market. Beyond this mysterious acronym, the European Union is pursuing its efforts to prevent tax fraud and tax evasion (and thus create legal and business ” fairness […]
The new year brings new social security challenges post- Brexit
What is the issue? With Brexit talks still ongoing, employers should be planning for the impact of a hard Brexit on social security coverage and benefit provision for their employees who travel between the UK and EU (including EEA & EFTA countries and Switzerland) for work. HMRC’s October employer bulletin provided a welcome update on […]
Is patience growing thin for a unified approach to digital taxation?
The global economy is experiencing digital transformation at a blistering pace with the rise of e-commerce. The digital economy permeates all aspects of life including how we eat, sleep, breathe, and communicate. It has immense impact on the world’s economic landscape touching all industries and sectors from aviation to wholesale trade. The digital economy is […]
The impact of Covid-19 on transfer pricing
The Covid-19 pandemic has far-reaching consequences, and will have serious implications on transfer pricing for many multinational enterprises (“MNEs”). This is particularly challenging for businesses to manage due to the current lack of guidance from the OECD. With this guide, we review the impact of Covid-19 on: • Transfer pricing treatment of government aid • […]
ICAP 2.0 – A solution to aggressive tax audits for MNEs during Covid-19
Governments damaged by the Covid-19 pandemic are likely to be taking a more aggressive approach in tax field audits on multinational enterprises (MNEs), at least until after their respective economy is on its way to recovering from the impacts of the pandemic. The OECD launched a pilot of the International Compliance Assurance Programme (ICAP) on […]
Welcome to ‘Let’s talk global tax’
We warmly welcome you to ‘Let’s talk global tax’, Mazars’ global tax blog. We have launched this blog to keep readers up-to-date on the latest tax regulations, market developments, topical debates and news from around the world. Our blog will provide updates on all areas of tax, including global mobility, employment tax, VAT & indirect […]
The future of joint tax audits beyond Covid-19
The current restrictions imposed by multiple countries to combat the Covid-19 pandemic have limited the possibilities for conducting external tax audits. However, the current pandemic and its consequences for the world economy highlight again that the number of internationally active companies is increasing. This has a significant impact on the future of tax audits. Coordinated […]
Which documents are required for VAT-exempt intra-community transport of goods within the EU?
Since 1st January 2020, the VAT “quick fixes” brought several amendments to the EU VAT legislation; one of the most important amendments being stricter rules for the justification of the VAT exemption for intra-community supplies of goods. As cross-border VAT fraud is primarily linked to the exemption for intra-community supplies, it is necessary to clearly […]