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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.

Latest CJEU, EFTA and ECHR

CJEU decision in the A-Fonds case

On May 2, 2019, the Court of Justice of the European Union (CJEU) rendered its decision in the A-Fonds case (C-598/17) concerning State aid as it relates to a Dutch dividend withholding tax refund claim. The CJEU ruled that the referring court is not competent to assess whether the residence requirement in the Dutch dividend withholding tax regime is compatible with the free movement of capital, insofar as granting a refund of the tax levied on a public entity would constitute State aid.

For more information, please refer to KPMG’s EuroTaxFlash

State aid

Invitation to submit comments on the in-depth State aid investigation into Luxembourgish tax ruling

On May 10, 2019, the European Commission published an invitation to submit comments on its in-depth State aid investigation into tax rulings on interest payment deductions granted by Luxembourg to a Finnish food and drink packaging company. Interested parties have until June 10, 2019, to submit their comments.

For more information, please refer to the invitation document (PDF 2,034 KB).

Commission’s State aid decision on Gibraltar’s corporate tax exemption regime for interest and royalties published

On May 7, 2019, the European Commission decision of December 19, 2019, on the State aid investigations into Gibraltar’s corporate tax regime was published in the Official Journal. The decision confirms the Commission’s preliminary view that Gibraltar’s tax exemption scheme for interest and royalties, as well as five tax rulings, constitute State aid incompatible with the internal market. As a result, Gibraltar must recover the aid from the beneficiaries.

For more information please refer to the KPMG’s EuroTaxFlash.

Commission’s non-confidential version of decision to open in-depth investigation into Luxembourgish tax rulings on fictitious interest payments published

On May 3, 2019, the European Commission published the non-confidential version of its decision on an in-depth investigation into tax rulings on interest payment deductions granted by Luxembourg. The case relates to three tax rulings granted to a Finnish multinational group, authorizing the deduction of fictitious interest payments on interest-free loans.

For more information, please refer to the non-confidential document (812 KB).

OECD

Multilateral Convention developments

On May 1, 2019, the Multilateral Convention (2016) (MLI) entered into force in respect of Ireland and Monaco. The MLI coverage of the bilateral treaties entered by the mentioned countries will depend on the final adoption positions taken by other countries. Furthermore, the MLI was approved by the President of Russia on May 1, 2019.

Local Law and Regulations

Austria

Cornerstones of tax reform announced

On April 30, 2019, the cornerstones of the next tax reform were announced by the Ministry of Finance. The reform includes a reduction of the corporate income tax rate from 25% to 23% in 2022 and a further reduction to 21% in 2023.

Belgium

Bill on tax provisions and other measures gazetted

On May 6, 2019, bill 54-3528 on tax provisions and other measures was published in the Official Gazette. The bill amends the Belgian withholding tax regime and includes a formal solution on how to identify the debtor of the withholding tax when the beneficiary is subject to the legal entities tax.

Denmark

Hybrid core capital deduction scheme repealed

On May 2, 2019, the Danish Tax Ministry announced the end of the hybrid core capital deduction scheme. The rules under the scheme provided banks a tax advantage by allowing them to deduct interest payments on hybrid capital instruments that qualified as core capital for financial regulatory purposes. The repeal of the rules will ensure that the Danish legislation does not grant unfair benefits in breach of State aid rules.

Germany

Draft bill on tax provision and other measures published

On May 8, 2019, the Ministry of Finance published a draft bill on tax measures in response to the CJEU decision in the EV v. Finanzamt Lippstadt case (C-685/16). The bill repeals the following: the requirements set out in current Section 9 No. 7 of the Business tax law relating to non-resident second tier companies, the requirement that distributed profits must derive from a company with active business activities, and the requirement of 15% uninterruptedly holding from the beginning of the financial year.

Guidance on tax treatment of income from online advertising

On April 3, 2019, the German Federal Ministry of Finance issued guidance providing that payments received by non-resident platform operators and internet service providers for the placement of online advertising on internet pages were not subject to withholding tax.

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

Guernsey, Isle of Man and Jersey

Guidance on the economic substance requirement legislation

On April 26, 2019, Guernsey, Isle of Man and Jersey issued “the Guidance on aspects in relation to the economic substance requirements.” The Guidance addresses the economic substance legislation and describes the activities that must be performed by each relevant sector in order to satisfy the economic substance requirements.

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

Iceland

Draft amendment on binding ruling and CbC reporting rules adopted

On May 7, 2019, a draft amendment to the Income Tax Act in relation to the country-by-country (CbC) reporting and to Law 91/1998 on tax binding rulings in tax matters was adopted by the parliament. The amendments entered into force immediately.

Bill on State aid rules published

On April 7, 2019, a new bill on State aid was published by the Ministry of Finance and Economic affairs. The bill implements Council Regulation 2015/1589 on State aid rules into the EEA Agreement and grants legal power to the EFTA Surveillance Authority to supervise State aid issues in Iceland.

Ireland

Manual on FACTA and DAC2-CRS guidance

On April 17, 2019, the Irish Tax and Customs Authority issued eBrief 078/19 announcing that an update of the Tax and Duty Manuals on filing guidance regarding FACTA and DAC2-CRS was published.

For more information please refer to the manuals on FACTA (PDF 5,478 KB) and on DAC2-CRS (PDF 5,888 KB).

Italy

Law Decree on urgent economic growth measures published

On April 30, 2019, Law Decree No. 34 on urgent measures for economic growth was published in the Official Gazette. The Decree includes amendments on the temporary enhanced depreciation regime, the corporate tax rate on income from qualified reinvested profits, and the patent box regime. The new rules entered into force on May 1, 2019.

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

Portugal

Law transposing ATAD rules published

On May 3, 2019, Law 32/2019 implementing the Anti-Tax Avoidance Directive (ATAD) was published in the Official Gazette. The Draft Law includes amendments to the interest limitation, controlled foreign corporation, exit taxation and general anti-abuse rules. Hybrid mismatch rules were not addressed but will be implemented at a later date.

United Kingdom

Digital services tax on large companies

On April, 2019, HM Treasury proposed a 2% tax on digital services. The proposed digital services tax is designed to tax the UK revenue associated with social media networks, search engines, and on-line marketplaces in which there is UK user participation. The tax would be effective for fiscal years beginning on or after April 1, 2020, and would apply to businesses that generate greater than GBP 500 million in global revenues from in-scope activities, and derive more than GBP 25 million in revenues from in-scope business activities linked to the participation of UK users.

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

Local Courts

Netherlands

Court decision on interest deduction payments on hybrid loans

On May 9, 2019, the Court of Amsterdam rendered its decision on cases 18/00018 and 18/00019 regarding interest deduction payments originating from hybrid debt instruments. The Court held that transfer pricing and financial instrument characterization rules do not prohibit interest deductions on hybrid loans. However, the deductions were denied under the Dutch “fraus legis” doctrine because the hybrid debt instrument was part of an abusive tax avoidance transaction that sole purpose was to create tax deductions and erode the Dutch tax base.

Norway

Decision on PE deductions on leasing assets and subcontracting employees

On May 9, 2019, the Norwegian Tax Appeals Tribunal rendered its judgement in case NS 218/2018 concerning permanent establishment deductions on assets leased and employees subcontracted to branches from a company’s foreign headquarters. The Court rejected the deductions, citing the OECD’s separate-entity approach. The separate-entity approach dictates that foreign branches must be treated and remunerated as if they were separate and independent enterprises.

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