The Court of Justice of the EU reached a decision in the disputes of the European Commission with Hungary and Poland. The Netherlands proposes to introduce a conditional withholding tax on dividends from 2024. American president Joe Biden introduced a US corporate income tax reform. Taxation changes are also taking place in Germany or Slovenia. We bring you a selection of news and planned tax changes abroad.
The Court of Justice of the European Union (ECJ) issued its decision in the cases of European Commission v Hungary (Case C-596/19 P) and European Commission v Poland (Case C-562/19 P). The ECJ held that the advertisement tax introduced by the Hungarian government and the retail sector tax introduced by the Polish government do not infringe European Union (EU) State aid law as the member States may establish a system of taxation that they deem the most appropriate (including the element of progressive rate taxation).
The Ministry of Finance published a draft bill on the modernisation of the corporate income tax law (Entwurf eines Gesetzes zur Modernisierung des Körperschaftsteuerrechts). Key elements of the draft bill are: introduction of an option for partnerships to be treated as corporate entities for tax purposes, simplification concerning the group taxation regime, internationalisation of the reorganisation tax act (change of approach in case of company’s transfer of residence to a non-EU/EEA state) and recognition of currency exchange losses for tax purposes related to loans granted to substantial shareholders (more than 25% shareholding).
The Federal Cabinet (Bundesregierung) approved the draft bill on the implementation of the EU Anti-Avoidance Directive. The draft bill is aimed at implementing the rules on hybrid mismatches as included in the Anti-Tax Avoidance Directive (2016/1164) (ATAD) and in the Amending Directive to the 2016 Anti-Tax Avoidance Directive (2017/952) (ATAD 2) and to adapt some domestic provisions in order to fully comply with Articles 5, 7 and 8 of the ATAD. The draft bill shall generally take effect from 1 January 2022. The rules on hybrid mismatches shall take effect retroactively from 1 January 2020 (subject to approval within further legislation procedure).
On 1 April 2021, the Multilateral Convention (MLI) entered into force in respect of Germany. Germany signed the convention on 7 June 2017 and deposited its final MLI Position on 18 December 2020, including the 14 tax treaties that it wishes to be covered by the MLI (among others the treaty with the Czech Republic).
The Ministry of Finance has published official guidance on the DAC VI rules application implementing Directive 2018/822 of 25 May 2018 (DAC VI) amending Directive 2011/16/EU with respect to mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements.
The Netherlands proposes conditional WHT on dividends from 2024 which should apply to i) dividend payments to related companies established in “low-tax jurisdictions” (i.e. jurisdictions with a statutory tax rate on profits below 9%), or ii) in situations of abuse, i.e. where artificial arrangements are employed to avoid the imposition of Dutch dividend withholding tax. The conditional WHT on dividends should therefore follow similar provisions on interest and royalties which took effect from 1 January 2021.
Due to the COVID-19 pandemic, Slovenia has extended the deadlines for submitting financial statements, corporate income tax returns and tax returns on income from business activities until 30 April 2021 (i.e. by one month). Additionally, the Slovenian government extended the emergency tax measures referring to deferral and instalment payments of taxes. The extension is valid for a period of 3 months, i.e. until 30 June 2021.
A Fact Sheet which outlines President Biden’s plan for US corporate tax reform was released at the end of March 2021. Corporate tax changes should include especially:
- increasing the corporate tax rate from 21% to 28%,
- reinforcing the global minimum tax for US multinational corporations (GILTI),
- encouraging other countries to adopt strong minimum taxes on corporations,
- replacing the base erosion and anti-abuse tax (BEAT) with a new more strict regime,
- enacting a 15% minimum tax on large corporations’ book income,
- increasing budget and resources of the US Internal Revenue Service (IRS) to support their, activities within tax audits and collection of taxes.