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Corporate tax is a hot topic across many jurisdictions, particularly in the current geopolitical and economic climate. The coronavirus (COVID-19) pandemic and the Russian invasion of Ukraine have combined to create ongoing challenges for supply chains, alongside rising inflationary pressure. While existing economic difficulties are taking their toll, the introduction of new global taxation rules will also have an impact.

UNITED KINGDOM

Amanda Tickel

Deloitte LLP

“Increasing the attractiveness of the UK remains high on the government’s agenda. On the tax side, we saw, for example, the introduction of the ‘qualifying asset holding company’ tax regime to enhance the attractiveness of the UK as a location for asset management and investment funds. In March 2022, the UK government set out its vision for using the tax system to further boost growth and productivity and areas under active consultation include a long-term reform of tax depreciation rules to incentivise business investment in plant and machinery, and improvements to UK tax reliefs for research and development (R&D) expenditure.”

FRANCE

Bruno Knadjian

Herbert Smith Freehills (Paris) LLP

“The key developments over the last 18 months have been largely defined by court decisions. For instance, the French Supreme Tax Court has significantly amended, in several landmark decisions, the tax treatment of gains realised by French managers under management pay packages. Going forward, gains arising from equity linked instruments acquired by employees and directors are taxable as employment income and salary, rather than as capital gains, if such gains are essentially linked to the exercise of employment of the employee or manager.”

NETHERLANDS

Bart Le Blanc

Norton Rose Fulbright LLP

“During the global coronavirus (COVID-19) pandemic, specific tax payment deferral schemes and government subsidies were provided to many taxpayers. Now that these schemes and subsidies are no longer in place, the government is carefully considering how to deal with tax collections, where the aim is to avoid forcing taxpayers into bankruptcy while simultaneously avoiding subsidising taxpayers that should otherwise not survive. This is especially difficult now that the pandemic has been followed by war in Ukraine and sanctions imposed on Russia, both of which are impacting the global economy.”

LUXEMBOURG

Romain Tiffon

ATOZ Tax Advisers

“The last 12 months have seen a great deal of activity in terms of new tax legislation. On 22 December 2021, the EU Commission issued two significant directive proposals. The first proposal, known as the ‘Unshell Directive proposal’, lays down rules to prevent the misuse of shell entities for tax purposes. This proposal was heavily driven by the perception that some legal entities that lack or have minimal substance continue to be used for aggressive tax planning structures. This proposal aims to identify these entities by trying to determine minimum substance standards which, if not met, would lead to a denial of treaty and EU directive access to these entities.”

GERMANY

Björn Demuth

CMS Germany

“One of the most important developments in Germany is that new tax laws were implemented last year. There were new developments regarding real estate tax, whereby national and regional laws were implemented, as well as changes regarding real estate transfer tax in connection with company structures. Exit tax is also a big issue for wealthy private clients with corporate investments of more than 1 percent of a corporation. Also, a new ‘check the box’ regime for GmbH and Co KGs to pay corporate taxation – known as KöMoG – was amended. Rules surrounding the regime seem complicated and the practical use thus far has not been as intended.”

SWITZERLAND

Bastian Thurneysen

Burckhardt LTD

“The main focus has been on the implementation of the Organisation for Economic Co-operation and Development (OECD) Pillar 2 regulations. On 23 June 2022, the federal council proposed to regulate the implementation of the minimum tax at the federal level for the whole of Switzerland. It is envisaged that a ‘supplementary tax’ will be levied by the confederation. Seventy-five percent of the revenue from this supplementary tax is to go to the cantons and municipalities and 25 percent to the confederation. The 25 percent earmarked for the confederation is to be used to promote the business attractiveness of Switzerland.”

ITALY

Luca Bosco

Deloitte

“There have been several key pillars of regulation introduced in the last two years, including, notably, the introduction of several measures to mitigate the impact of the coronavirus (COVID-19) pandemic on the Italian economy and support the recovery phase. Italy is by far the largest beneficiary of the European Recovery Fund, receiving around €230bn. A significant portion of these funds has been utilised to subsidise large tax incentives plans, such as the ‘eco-bonus’ and various tax credits for research and development (R&D) activities and investments.”

GUYANA

Colin Ramsey

Ernst & Young Services Limited

“Over the last 12-18 months, there have been at least two national budgets announced by the government of Guyana. Based on those announcements, there have been no major adjustments to the tax rates and fundamental principles governing taxes in Guyana. Notwithstanding, it is instructive to note that Guyana introduced a Local Content Act, effective 31 December 2021, which contains a list of 40 specific industries to which local content rules are applicable in relation to the provision of goods and services to the oil & gas sector. In summary, the legislation prescribes the minimum threshold of expenditure which oil & gas companies and their subcontractors should incur with Guyanese companies.”

PEOPLE’S REPUBLIC OF CHINA

Gilbert Shen

CMS China

“Given the pressure from the sluggish economic outlook due to the coronavirus (COVID-19) pandemic, as well as the decrease of ‘demographic dividend’, the Chinese government has been promoting preferential tax policies to boost economic growth over the last 18 months. To alleviate the short-term economic pressure and to support small-scale market players, the government has pursued policies such as refunding uncredited input VAT, VAT exemption for small-scale VAT payers, reducing the effective corporate income tax (CIT) rate for small and low-profit enterprises, and increasing the pre-CIT super-deduction ratio of research and development (R&D) costs of “science and technology-oriented medium and small-sized enterprises”.

MONGOLIA

Onchinsuren Dendevsambuu

Onch Tax Services CTC LLC

“Mongolia’s legislature reformed its approach to tax legislation in March 2019. The new legislation came into force on 1 January 2020. The reform was much needed and greatly improved upon previous legislation. Specifically, the reform included the General Tax Act, the Corporate Income Tax Act and the Individual Income Tax Act. These acts replaced measures that had been in place since 2007 and 2008. With the reform, the new tax legislation introduced concepts that already exist in other jurisdictions, such as transfer pricing documentation, general anti-abuse rules (GAARs) and advance rulings.”

UNITED ARAB EMIRATES

Nirav Shah

FAME Advisory DMCC

“The tax landscape in the United Arab Emirates (UAE) has experienced a paradigm shift in recent years. The UAE, a country that has long attracted businesses from around the world owing to its tax-free hub status, is all set to introduce a 9 percent federal corporate tax regime in 2023. Last year, the UAE joined over 130 members of the base erosion and profit shifting (BEPS) Inclusive Framework in agreement of a landmark deal for major reform of the international tax system under a two-pillar solution to address the tax challenges arising from the digitalisation of the economy.”

CONTRIBUTORS

ATOZ Tax Advisers

Burckhardt LTD

CMS

Deloitte

Ernst & Young Services Limited

FAME Advisory DMCC

Herbert Smith Freehills (Paris) LLP

Norton Rose Fulbright LLP

Onch Tax Services CTC LLC