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E-News from KPMG's EU Tax Centre

E-News from KPMG's EU Tax Centre

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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.

Infringement Procedures & Referrals to CJEU

Referrals to CJEU

Portugal

On September 28, 2018, a Portuguese court referred questions to the CJEU in the Canada case (C-613/18) concerning the compatibility with EU law of the Portuguese withholding tax on dividends distributed to foreign states. In the case of dividends distributed to the Portuguese State, only half of the income is subject to withholding tax. However, dividends received by the Canada Pension Plan, an autonomous Canadian government agency, are fully subject to Portuguese withholding tax. The referring court asked whether this difference in treatment infringes the free movement of capital.

State Aid

European Commission approves prolongation of the Netherlands’ tax support for maritime transport

On November 7, 2018, the European Commission approved, under EU State aid rules, the prolongation of a scheme supporting the maritime transport sector in the Netherlands. Under the scheme, companies employing seafarers on board wind-propelled commercial cruising vessels can benefit from a reduction in income taxes and social security contributions.

For more information, please refer to the European Commission’s press release.

European Commission approves prolongation of Belgium’s tax support for maritime transport

On November 6, 2018, the European Commission approved, under EU State aid rules, the prolongation until the end of 2022 of various Belgian support measures for maritime transport. The scheme encourages shipping companies to register their ships in Europe and so ensures higher social, environmental and safety standards.

For more information, please refer to the European Commission’s press release.

Appeals filed by ENGIE and Luxembourg against the European Commission’s State aid decision

On September 4, 2018 and August 30, 2018, respectively, the ENGIE group (ENGIE Global LNG Holding and Others v. Commission, T-525/18) and the Grand Duchy of Luxembourg (Luxembourg v. Commission, T-516/18), appealed the European Commission’s decision of June 20, 2018, that certain tax rulings granted by the Luxembourg tax authorities to GDF Suez (ENGIE) constitute illegal State aid.

For more information on the background of these cases, please refer to Euro Tax Flash 372.

EU Institutions

COUNCIL OF THE EUROPEAN UNION

ECOFIN discusses the Digital Services Tax and makes further revisions to the EU Blacklist

On November 6, 2018, the ECOFIN Council discussed the Digital Services Tax (DST) and the progress achieved so far in the negotiations, in particular with respect to the introduction of a sunset clause and the limitation of the scope of the DST. The Council also decided to further amend the EU blacklist of non-cooperative jurisdictions by removing Namibia from the list.

For more information, please refer to Euro Tax Flash 385.

EUROPEAN COMMISSION

The EU Joint Transfer Pricing Forum releases report on a coordinated approach to transfer pricing controls within the EU

In October 2018, the Joint Transfer Pricing Forum (JTPF), which assists and advises the European Commission on transfer pricing tax matters, issued a “Report on a coordinated approach to transfer pricing controls within the EU”. The report establishes best practices by issuing various recommendations for both taxpayers and tax administrations, and encourages closer cooperation in the field of transfer pricing controls.

For more information please refer to the JTPF Report (PDF 749 KB).

OECD

Ecuador signs instruments to enhance transparency and combat cross-border tax evasion

On October 29, 2018, Ecuador signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA) and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Policy note on taxation and digitalization published

In October 2018, the OECD published a policy note on taxation and digitalization. The note provides a summary of the OECD’s work on this matter and reiterates that work on a global consensus-based solution is on-going, while a number of jurisdictions are considering the introduction of unilateral interim measures.

For more information, please refer to the OECD’s policy note.

Local Law and Regulations

Belgium

New program on cooperative tax compliance started

A pilot project aimed at promoting and improving transparent relationships between large taxpayers and the Belgium tax administration will be launched by the end of 2018. The program expects full and timely transparency from participating taxpayers, together with the implementation of a Tax Control Framework. In return, the Belgian tax administration will commit to provide binding and non-binding decisions sooner, as well as designating a single point of contact and a follow-up team to discuss issues in a proactive manner. It is expected that the project will also be offered to small and medium-sized enterprises as of 2019.

For more information, please refer to the Ministry of Finance’s Brochure (PDF 648 KB).

Bulgaria

Bill on mandatory transfer pricing documentation for large taxpayers published

According to a bill recently published by the Bulgarian Ministry of Finance, entities with a balance sheet of more than BGN 8 million and net sales revenue above BGN 16 million will be obliged to prepare additional transfer pricing documentation on transactions exceeding certain materiality thresholds, in particular when involving goods (BGN 400,000), services (BGN 200,000), intangible assets (BGN 200,000), financial assets (BGN 200,000), loans (BGN 2 million) and interest payments (BGN 100,000).

Croatia

Bill to implement EU Anti-Tax Avoidance Directive presented to Parliament

On November 2, 2018, a bill transposing interest limitation rules and controlled foreign company (CFC) rules in accordance with the EU Anti-Tax Avoidance Directive (2016/1164) into domestic law was presented to Parliament. The bill also proposes implementing a 20% withholding tax on interest, dividends, royalties and similar payments made to a resident of a country appearing on the EU list of non-cooperative jurisdictions for tax purposes. If adopted, the new rules will apply as of January 1, 2019.

Denmark

Tax Board ruling on the application of a PE provision under a tax treaty

On September 25, 2018, the Danish Tax Board rendered an advance ruling on the activities performed in Denmark by the correspondent of a German news agency. The Board concluded that such activities do not constitute a permanent establishment, as the correspondent’s responsibilities simply focus on gathering information that will then be processed by the editorial office in Germany.

France

First part of the 2019 Finance Bill approved

On October 23, 2018, the first part of the 2019 Finance Bill presented by the French government was approved by Parliament. Key amendments to the original bill include modifications to the reduced rate applicable to income derived from patents and the introduction of a safe harbor for tax-consolidated groups in respect of the interest deduction limitation rules.

Law on combating tax fraud adopted

On October 24, 2018, a law introducing additional measure to combat tax fraud was adopted, which includes:

  • a reinforcement of the reporting obligations for online peer-to-peer platforms;
  • the possibility for the French tax authority to publish the amount of tax avoided by companies through fraudulent behavior;
  • the introduction of administrative fines for advisors or intermediaries who deliberately help taxpayers commit tax fraud;
  • an amendment of the list of non-cooperative states or territories (NCSTs);
  • an extension of the reporting obligations of foreign accounts to inactive accounts for individuals, associations and non-commercial companies.

Finland

Publication of bill implementing CFC rules into domestic law

On November 1, 2018, the Finnish government presented a bill to transpose the EU Anti-Tax Avoidance Directive (2016/1164) into domestic law. If enacted, the bill will implement controlled foreign company (CFC) rules compatible with ATAD 1 as of January 1, 2019.

Gibraltar

Rules, Regulations and Guidance on Income Tax issued

In October 2018 several measures concerning income tax were issued, including new rules and guidance on tax rulings, as well as amendments to the definition of the term “artificial and fictitious” to bring it in line with EU requirements.

Greece

Guidance released on the ultimate beneficial ownership register

On October 29, the Greek tax authorities released two circulars clarifying due diligence and minimum documentation requirements.

Ireland

MLI approved by Irish government

On October 26, 2018, the Irish government approved the MLI by signing the instrument which will be submitted for approval to Parliament in the next few weeks.

Italy

New tax amnesty program

On October 23, 2018, a decree implementing a new amnesty program was published, which is expected to be converted into law by Parliament on December 22, 2018. The tax amnesty offers relief from certain penalties and interest if, in general, the taxes are paid in full. In some instances, the taxes could be paid in installments over a period of time.

For more information, please refer to KPMG’s TaxNewsFlash.

Tax-exemption requirements for real estate investment funds published

The Italian Revenue Agency issued two “statements of practice” in the form of tax rulings that set out the tax-exemption requirements for proceeds from an Italian real estate investment fund—specifically when the unit-holders are foreign partnerships that indirectly own the real estate investment fund units through fully-owned vehicles.

For more information, please refer to KPMG’s TaxNewsFlash.

Jersey

Draft bill on economic substance test presented to Parliament

On October 23, 2018, the government presented a draft bill to Parliament introducing an economic substance test for resident companies. The bill aims at addressing some of the concerns of the EU Code of Conduct Group.

Malta

Tax Guidelines on Distributed Ledger Technology (DLT) published

On November 1, 2018, guidelines on income tax, duties on documents and transfers and VAT treatment of transactions related to distributed ledger technology were issued by the Maltese Revenue.

For more information, please refer to KPMG’s TaxNewsFlash.

Norway

2019 State Budget presented to Parliament

The Norwegian government has presented its draft state budget plan for 2019.The key tax proposals include a reduction in the corporate income tax rate from 23% to 22% in 2019 and amendments to the interest deduction limitation rules and the tax residency rules.

For more information, please refer to KPMG’s TaxNewsFlash.

Portugal

Draft bill for the 2019 budget presented to Parliament

On October 15, 2018, the Ministry of Finance presented the draft bill for the 2019 budget to Parliament. The draft bill provides for financial institutions and other entities providing money transfer and payment services, including the Bank of Portugal, to exchange information about financial transactions with other tax authorities.

Spain

Draft bill to prevent tax fraud published

On October 23, 2018, the Ministry of Finance launched a public consultation on proposals to strengthen existing anti-tax fraud measures. The draft bill includes measures to:

  • transpose the exit taxation and controlled foreign company (CFC) rules contained in the EU Anti-Tax Avoidance Directive (2016/1164) into domestic law,
  • transpose the mutual agreement procedure rules of EU Tax Dispute Resolution Directive (2017/1852) into domestic law,
  • limit the scope of tax amnesties,
  • update the list of harmful tax regimes based on the work performed by the EU Code of Conduct and the OECD Forum on Harmful Tax Practices.

Sweden

Bill amending the automatic exchange of information legislation presented to Parliament

On October 18, 2018, the government presented a bill to Parliament amending the automatic exchange of information legislation. The amendments will bring the Swedish legislation in line with the OECD common reporting standards (CRS) and will take effect as of January 1, 2019.

The Netherlands

Bills amending the 2019 Tax Plan presented to Parliament

On October 25 and 26, 2018, the Ministry of Finance presented several bills to Parliament amending the 2019 Tax Plan:

  • As regards the implementation of interest limitation rules compatible with the ATAD, the application of the grandfathering clause for existing loans will be limited to existing loans financing long-term public infrastructure projects.
  • The withdrawal of the draft bill abolishing dividend withholding tax,
  • A gradual reduction of the corporate income tax rate to 22.55% in 2020 and 20.5% in 2021 (respectively 16.5% and 15% for taxable income up to EUR 200,000),
  • Transitional provisions shortening the period of the 30% ruling from eight to five years.

Public consultation on bill implementing ATAD2

The Dutch government launched an internet consultation at the end of October 2018 to give interested parties an opportunity to respond to a draft bill implementing the EU Anti-Tax Avoidance Directive (ATAD2) which addresses tax avoidance via hybrid mismatches in affiliated relationships.

For more information, please refer to KPMG’s TaxNewsFlash.

United Kingdom

Policy Papers released

On November 7 and October 29, 2018, the HMRC published several Policy Papers and guidance notes including:

  • Policy paper on changes to corporate interest restriction rules
  • Policy paper on controlled foreign company (CFC) rules and the ATAD
  • Policy paper on tax avoidance involving profit fragmentation for income tax and corporation tax.
  • Policy paper on changes to the definition of Permanent Establishment (PE) according to the BEPS Action Plan 7 recommendations;
  • Policy paper on changes for hybrid and other mismatches regime
  • Policy paper on minor modifications to the diverted profits tax;
  • Policy Paper on amendments to tax legislation if the United Kingdom leaves the EU without a deal

Synthesized texts of UK’s tax treaties released

On November 6, 2018, the tax administration published the synthesized text of the tax treaty between the United Kingdom and New Zealand (1983) (PDF 516 KB), as modified by the MLI. The document was jointly prepared and agreed to by the competent authorities of both jurisdictions.

Budget 2018 released

On October 29, 2018, the government presented the Budget for 2018. The key measure in the Budget is the introduction of a digital services tax of 2% on the revenues earned by large social media platforms, search engines and online marketplaces whose annual global revenues is at least GBP 500 million.

For more information, please refer to KPMG’s TaxNewsFlash.

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