Greece: Parliament passes law implementing Pillar Two rules

The Greek parliament enacted legislation incorporating the EU Pillar Two directive, into Greek law. Effective from 1 January 2024, the law aims to establish a minimum taxation level for multinational and large domestic groups within the EU. It mandates a 15% minimum tax rate on multinational enterprises with annual revenue exceeding EUR 750 million. The law introduces the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) to ensure compliance. Additionally, it implements a Qualified Domestic Minimum Top-Up Tax (QDMTT). Greek entities falling within scope must file top-up tax information returns and specific Greek tax returns. Safe harbor provisions include transitional Country-by-Country reporting, UTPR, and QDMTT. These measures provide relief during the initial years of implementation, aligning with EU directives but not yet considering OECD administrative guidance.

France: Interest paid to shareholders: First 2024 quarterly interest rate limit established

France’s Official Journal released the first quarterly average floating rate for 2024, setting it at 5.97%. This rate determines the maximum interest rate on loans from direct shareholders. Companies with fiscal years ending between 31 March 2024, and 29 June 2024, can now calculate their maximum deductible tax rate based on this quarterly rate. For fiscal years ending within this period, maximum rates range from 5.88% to 5.96%, depending on the end date. When dealing with related parties, an arm’s length interest rate applies, supported by a bank quotation or a transfer pricing study.

Luxembourg: Pillar Two law: Tax disclosure requirements

The Luxembourg Pillar Two law, effective for fiscal years commencing on or after 31 December 2023, requires companies falling under its scope to disclose information regarding their tax exposure. This includes the calculation of deferred tax assets (DTAs) and liabilities (DTLs) related to income tax implications. Companies must provide both qualitative and quantitative details in their financial statements, with DTAs and DTLs potentially disclosed in standalone annual accounts or consolidated financial statements. The law aims to ensure transparency and compliance with international accounting standards, although challenges may arise, particularly concerning the traceability of information across different jurisdictions.

Germany:

Federal tax court allows the transfer of trade tax NOL carryforwards to partnership

The German Federal Tax Court (BFH) allowed in its ruling dated 1 February 2024 the transfer of net operating loss (NOL) carryforwards for trade tax (TT) purposes from a corporation to a partnership in a hive-down transaction. The court confirmed that the NOLs were transferred to the partnership, providing clarity on the utilisation of TT NOL carryforwards in such transactions. The decision emphasised the importance of meeting the “business identity” requirement and shareholder identity at the partnership level. This ruling offers guidance for taxpayers engaged in similar transactions, stressing the need for careful tax analysis and structuring to ensure compliance and effective utilisation of NOL carryforwards.

Lower tax court rules on the tax deductibility of expenses related to merger transaction

The lower tax court of Bremen ruled that expenses for consolidating IT systems after a merger are immediately deductible for corporate income tax purposes, not qualifying as “costs for the transfer of assets.” This aligns with previous federal tax court principles, viewing such costs as operational decisions rather than directly related to the merger. The case underscores the importance of distinguishing between merger-related costs and post-merger integration expenses. While this ruling is beneficial for taxpayers, an appeal by tax authorities is pending.

Upper house of parliament approves business tax reform bill

The upper house of the German parliament approved the business tax reform bill, known as the “Growth Opportunity Act”. This bill includes changes to transfer pricing rules for cross-border financing arrangements, relaxation of minimum taxation rules for net operating loss carryforward, and changes to certain taxation rules for partnerships and depreciation methods. Additionally, measures such as a declining balance depreciation for moveable assets and an increase in the cost basis for research and development (R&D) tax incentives are introduced. The approved version reflects budget pressures, offering reduced tax relief compared to the original proposal. Further initiatives are anticipated to address the tax burden for businesses and stimulate growth.

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