International Tax Updates

The Norwegian Finance Ministry announced a proposal to tax foreign sea-farming companies on incomes generated across the entire Norwegian continental shelf. Currently, there’s no legislative basis for taxing such companies operating on the shelf. The continental shelf, a shallow seabed, falls under Norway’s sovereignty for the exploitation of natural resources, spanning over 2 million square kilometers.

 The proposal aims to extend taxation to foreign companies involved in sea farming and mineral extraction activities on the shelf, including taxing salaries of foreign employees. The proposal is open for public consultation until June 2024, with potential implementation in 2025 if approved.

In February 2024, the Lithuanian State Tax Inspectorate issued the guidance regarding the taxation of income acquired in 2023 from real estate sales. The guidance addresses essential aspects of real estate transactions, including the declaration and payment deadlines for income received in 2023 from real estate sales, the nontaxable holding period of 10 years on immovable property, taxation rules for sales made before the holding period ends, tax calculation methods, and documentation requirements.

Recently on March 2024, the Irish Revenue Commissioners issued Revenue eBrief No. 103/24, offering updated guidance regarding the payment and receipt of interest and royalties without the deduction of income tax. This guidance covers various topics such as withholding tax, interest payments to U.S. companies, and the tax treatment of companies operating under Hong Kong’s territorial system. One of the introduced updates involves implementing defensive measures regarding outbound payments of interest and royalties. Additionally, it includes offering further guidance on applying interest withholding tax to interest payments made to Irish partnerships and foreign tax-transparent entities

On March 2024, the French Official Gazette published Decree No. 2024-274, introducing measures to eliminate double taxation of profits derived from corporate tax on foreign businesses. Among others the measure include (i) allowance of deduction from total net results for distributed dividends and participation products for France-based legal entities, regardless of profitability; (ii) clarifying that profits or income from sales for France-based entities, aren’t considered when determining results for transferring shares of foreign entities, and (iii) France-based entities subject to corporate tax must justify including profits or positive income subtracted from the result of transferring or selling shares.

Portugal is updating the Nationality Law under Law 01/2024, which brings significant changes. The new provisions in the law include stricter national security and defense criteria, changes to the naturalization process for Sephardic Jews’ descendants, the implementation of biometric verification for data authenticity, and a change in the calculation of the required period of legal residence for nationality acquisition by naturalization.

In addition, individuals applying for Portuguese nationality must have legally resided in Portugal for at least five years, including the time since they applied for a temporary residence permit, rather than just when it was issued. This is especially important for foreign citizens awaiting residence permit approvals, particularly those seeking an investment residence permit (ARI).Furthermore, the Portuguese Nationality Law establishes criteria for Portuguese origins and the circumstances under which non-nationals can acquire citizenship, emphasizing the importance of genuine ties and a deep connection with Portugal, its traditions, culture, and values.

In March 2023, business organizations in Canada called upon Parliament to include significant tax changes within the budget bill. The Canadian Chamber of Commerce advocated for amendments that would eliminate retroactive components of proposed digital services taxes, while electrical corporations requested an exemption from limits on interest expense deductions. The Senate is now considering Bill C-59, which proposes a 3% tax on large internet corporations retroactive to January 1, 2022.

The United States has previously criticized Canada’s digital services tax for its impact on American firms. Furthermore, industry group Electricity Canada, pointed out how the bill’s Excessive and Financing Expenses Limitation (EIFEL) provisions would disproportionately burden private companies that rely on foreign financing.

In march 2024, Belgium introduced a reduced value-added tax (VAT) rate of 6% to property renovation projects, in purpose to boost the investment in rental properties. Belgium Finance Minister Vincent Van Peteghem said that the reduced VAT rate, which is now applicable to demolishing old properties and constructing new private houses on the same site, will now also apply to rental oriented demolition and reconstruction projects. To qualify for the reduced rate, the property must not exceed 200 square meters and must be rented out as primary residences for a minimum of 15 years following reconstruction. In General, Belgium’s VAT rate stands at 21%.

Australian treasurer Jim Chalmers, announced that the core minimum tax regulations will apply from January 1, 2024, pursuant to international standards. Australia seeks feedback on two sets of legislation implementing the 15% global minimum tax, aiming multinational corporations with annual global revenue exceeding EUR 750 million.

Additionally, the government is looking for feedback on how these laws interact with existing tax regulations, such as hybrid mismatch rules and controlled foreign company rules. The draft legislation is open for discussion until April 16^th, 2024, and further changes to the current tax regulations are expected to come.

In the UK budget proposal, there’s a plan to change a tax rule that benefits wealthy foreigners living in the country. The Chancellor of the Exchequer, Jeremy Hunt, talked about it during a meeting with the Parliament’s Treasury Committee. As he stated in the meeting, the simplification of the tax system will include significant “Non-Doms” changes.
The current rule, known as the “non-domicile” tax loophole, allows wealthy foreigners to avoid paying tax on income they gain outside the UK. The proposed amendment includes the cancellation of this rule, and implement a tax regime where individuals are taxed on their foreign income once they have live in the UK for four years. .
According to Hunt, the “old” tax system is outdated and not efficient, and this new regulation is estimated to bring in about £2.7 billion per year for the UK government by 2028.

The European Commission is asking for feedback on the efficacy of the EU Directive (EU) 2017/1852 concerning tax dispute resolution mechanisms, aiming to facilitate the resolution of double taxation issues. Effective from July 2019, the Directive provisions a two-year deadline for Member States to resolve disputes arising from their tax agreements. In addition, it allows taxpayers to request an independent opinion or go to court if this deadline is missed.
The consultation, that took place in March 2024, aims to gather input on the process of filing complaints, the timeliness of authorities’ responses, and the effectiveness of resolving disputes within the two-year timeframe. .
This dispute resolution rule applies to both businesses and individuals. according to the commission, it’s covers a wider range of issues compared to previous methods, extending beyond transfer pricing and profit attribution to permanent establishments.
The commission will review the feedback and evaluate the effectiveness of the law, to be followed by a report on its performance.

As of April 2024, Poland will reintroduce a 5% value-added tax (VAT) on basic foods, such as meat, dairy, and cereal products, according to an announcement from the Polish Finance Ministry. This decision making follows the implementation of a temporary 0% VAT rate on these essential items in early February 2022, aiming to assist customers in managing rising inflation.
The reimposing of the 5% VAT is supported by the preliminary statistical data indicating that January’s inflation slowed to 3.9% year-on-year, the lowest since March 2021. The Ministry of Finance notes a significant decline in the annual growth rate of consumer prices for food and non-alcoholic beverages, down to 4.9% year-on-year. Moreover, the ministry predicts a downward trend for both inflation and the growth rate of food prices, supported by factors such as decreasing prices in global agricultural markets and a strong base effect from the previous year’s substantial increase in food prices.

In March 2024, the Finnish Parliament (Eduskunta) approved the consideration of a bill aimed at ratifying the Double Taxation Agreement (DTA) and its accompanying protocol with France. Signed on April 4, 2023, this DTA replaces the current 1970 DTA, introducing several key provisions, including: Prevention of double taxation on non-public service pensions,
Authorization for the source country to impose a 15 % withholding tax on portfolio dividends,
Shift the taxation methodology from the exemption method to the credit method and
Outline of rules regarding the taxation of permanent establishments (PEs).
The DTA complies with the OECD Model Tax Agreement, incorporating the minimum standards and recommendations outlined in the OECD base erosion and profit shifting (BEPS) project.

According to the nonpartisan Joint Committee on Taxation, the global tax deal, aiming to redistribute profits from major multinational corporations, could lead to an annual loss of US revenue ranging from $100 million to $4.4 billion.
This global deal, which was agreed upon by over 140 countries in 2021, comprises Pillar One, reallocating profits to market jurisdictions, and Pillar Two, establishing a 15% global minimum tax. Pillar Two has been enacted in numerous countries, but Pillar One remains pending.
The committee’s analysis, released ahead of a House Ways and Means subcommittee hearing, presents three simulations, indicating a projecting of $1.4 billion loss. Concerns are presented over Pillar One provisions, with bipartisan opposition to the deal’s aim of eliminating digital services taxes (DST), potentially impacting global GDP. DSTs, imposed by countries on large digital companies, prompted tariff threats from the US. Canada is proceeding with its DST plans, despite the agreement to delay implementation. The finalized treaty is expected this spring, with an extension granted to some countries to retain their DSTs until June.

In the past years, the shift from cash transactions to digital exchanges has rapidly progressed, signaling a potential transition to a cashless future. Greece, whilst facing economic challenges and tax evasion, has taken a significant step by implementing a ban on cash transactions exceeding 500 euros (approximately $540) to combat tax evasion. This policy carries substantial fines, potentially doubling the transaction amount. Concurrently, Greece has adopted a “point of sale everywhere” approach, ensuring that digital transactions generate receipts, with real-time data provided to the Independent Authority for Public Revenue. Assuming compliance and adequate enforcement resources, this policy is anticipated to significantly improve tax collection efficiency and effectiveness.
The increased usage of digital transactions, partly driven by the COVID-19 pandemic, may have enduring consequences. In a near cashless future, the pandemic could be remembered for fundamentally reshaping the global economy and providing a long-term solution to a major source of tax fraud.

Germany’s ruling coalition is working on a stimulus package of approximately €7 billion ($7.6 billion) aiming to revive the country’s economy. Chancellor Olaf Scholz’s government aims to reduce the tax burden on companies and is working on securing parliamentary approval before the summer break. However, as the discussions are still in the early stages the package’s value could change. The German Ministry of Finance has refrained from commenting on the plans.
The current proposed stimulus is about 0.16% of Germany’s output this year. However, some economists suggest the country may need as much as €30 billion to overcome economic challenges, including high energy costs, exposure to the struggling Chinese market, and geopolitical tensions from Russia’s war on Ukraine.
The Economy Minister, Robert Habeck, recently lowered the growth forecast for 2024 to 0.2%, citing challenges, including a court ruling from last year that overturned the coalition’s budget strategies. The government is also seeking approval for a separate package, initially valued at €7 billion but now reduced to just over €3 billion, focusing on small- and medium-sized businesses. A meeting is scheduled for March 2024 to seek approval for this package in the upper house of parliament, Chancellor Scholz remains optimistic about the approval of the package, although in an altered version.

The Government of Spain is considering an alternative approach for energy companies where they can invest profits rather than paying a windfall tax. Energy Minister Teresa Ribera revealed in an interview plans for a new system, offering companies the choice to invest profits or contribute to the state through taxes. The government aims to implement this system in the upcoming weeks.
This temporary tax, which had its beginnings in 2023, as a relief measure for inflation, imposes a 1.2% levy on revenues of large energy companies. The mentioned tax has raised many concerns in the energy industry, and in response energy firms have demanded even more clarity on plans for the windfall tax. As a result, Repsol SA has announced plans to reduce investments in the country.
With the country’s strong production of renewable resources, Spanish energy prices have fallen in recent days. However, companies have nevertheless experienced a significant increase in income as a result of the Russian invasion of Ukraine.

In March 2024, Belgium officially announced the Royal Decree No. 2022041540, as published in the Belgian Official Gazette. This decree will take effect starting from 2025 and outlines two key provisions: Firstly, it specifies the implementation of a zero percent income tax rate on specific sources of income such as pension income, other replacement income, and unemployment income for taxpayers earning up to 10,160 euros (US$11,031). Additionally, it details an increase in the basic deduction from 236 euros (US$256) to 237 euros (US$257).

The UK’s annual finance bill, recently passed into law, includes global minimum tax changes, business tax breaks, and enhanced powers for the tax office. The global minimum tax, part of the OECD deal agreed by 140 countries so far, imposes a 15% tax on multinational enterprises. The law integrates OECD guidance supporting the application of the safe harbor, hence allowing companies to use country-by-country information, instead of accounting data to calculate the tax liability.
Additionally, the UK made the full expensing regime permanent, merged R&D tax breaks for large and small firms, and introduced a new credit for small R&D-intensive companies. Tax breaks for creative industries are now refundable expense credits. Other measures include extending grandfathering clauses for investment schemes and criminalizing continued promotion of tax avoidance schemes. In the course of March 2024, when Spring Budget will be presented by Chancellor of the Exchequer Hunt, further tax cut initiatives might be announced.

The Turkish Revenue Administration released Publication No. 504, clarifying the tax on income from selling property owned by an individual within five years of the purchase. The publication covers different topics, including, defining capital or commercial gains, taxation of capital gains from various property types, determining acquisition dates, filing electronic and paper tax declarations, 2023 income tax brackets and rules for claiming loss offset, deductions, and exemptions. This publication is useful for filing 2023 annual income tax returns.

A new Double Taxation Agreement (DTA) has been signed between the Turkish Revenue Administration and the state of Azerbaijan replacing the 1994 Double Taxation Agreement currently in force between the two countries. This agreement will enter into force after the approval of the DTA by the parliaments of both states. The main purpose of the new DTA is to create possibilities and favorable conditions for investors, including but not limited to cooperation in tax collection, taxing rights, and exchange of information.

Speakers at the Tax Foundation Europe seminar, voiced their concerns on possible tensions between Europe and the US over taxes on digital profits if the global tax deal’s Pillar One faces delays. Pillar One governs the allocation of profits for tax purposes among the world’s largest multinationals based on market presence jurisdictions, rather than headquarters. Stakeholders at the seminar voiced their concerns that the OECD’s Pillar One proposal is uncertain, and in case it stalls, alternatively the revival of Digital Service Tax could prompt new US retaliation. As highlighted by European Commission, the EU’s priority is to increase tax revenue and balance their tax mix regime to meet growing public investments needs.

The Swedish Tax Agency on February 2024, following Statement No. 8-2785199, has clarified VAT rules for business transfers. The statement establishes that the transfer of business assets is not considered a delivery of goods or services unless deductible tax is owed or a refund is granted. Additionally, it highlights that the right of deduction is tax-exempt for outgoing transactions, regardless of tax status, and does not require deduction restrictions. Similarly, it clarifies that transferring a mixed-activity business is not considered a supply of goods or services under certain conditions. Lastly, it is stipulated that assets, aside from current assets, are exempt from tax liability if the taxable individual can demonstrate that the input tax was not entirely deductible at the time of acquisition.

The Austrian Federal Ministry of Finance clarified cross-border commuter tax exemptions in a recent decision posted online by the Federal Finance Court in February. The decision was presented about a case regarding an Austrian citizen working in Switzerland, who was sent to the U.S. by his employer to work for a month from March 28, 2021, to April 27, 2021. He claimed a tax exemption on the U.S. income. The tax office denied it, and the Austrian citizen appealed. The Federal Finance Court ruled that the exemption was not valid as the foreign activity in the U.S. did not last for more than one continuous month, as mandated by Austria’s Income Tax Act. The one-month prerequisite would have been fulfilled on April 28, 2021, after the taxpayer’s return.

Recently this month, Austrian Federal Ministry of Finance published online the Federal Finance Court Decision No. GZ. RV/7100381/2023, clarifying the taxation of losses from capital assets. The taxpayer, involved in share transactions, argued that the denial of loss deduction violated constitutional principles of equality and fairness.
The Tax Authority countered that the losses didn’t qualify as extraordinary burdens under the law and in addition an income extrapolation error in the taxpayer’s 2020 assessment was identified.
The Federal Finance Court sustained the Tax Authority’s decision, stating that the losses weren’t extraordinary burdens, the loss deduction exclusion was in line with constitutional principles, and the income tax assessment was revised to correct the income extrapolation error.
[Austria, Federal Ministry of Finance, 02/14/24]

A recent OECD report explains new rules that make it easier to simplify transfer prices proceedings for specific transactions under the 2021 global tax deal, called Amount B. These rules intent to simplify how companies value their transactions, particularly for basic marketing and distribution deals.
OECD stated: “This framework is expected to reduce transfer pricing disputes, compliance costs, and enhance tax certainty for tax administrations and taxpayers alike,” … adding “Low-capacity jurisdictions facing limited resources and data availability will especially benefit from the administrative simplification provided by Amount B.”.
The report and outlines situations in which a distributor falls under the scope of Amount B, including instances where the distributor engages in additional non-distribution activities, like manufacturing.
Furthermore, the report addresses the transfer pricing needs of “low-capacity” countries by simplifying the approach for certain distributors through Amount B rules. However, concerns arise about potential mismatches when one country opts for Amount B while the other does not. For example, OECD acknowledges India’s reservations due to undefined terms and the risk of losing out on higher margins.
The Inclusive Framework plans to finalize the list of low-capacity jurisdictions by March 31, with the Amount B approach applicable from January 2025. The report’s content is now part of the OECD Transfer Pricing Guidelines.