The Recovery Package in the context of tax changes
Following the Government announcement on the Recovery Package, the related amendment to the tax regulations was published. Below we summarise a selection of the most important changes in this area.
Austria’s government proposes a taxation of cryptocurrencies at a 27.5% tax rate. In the United Kingdom, large businesses will be required to prepare transfer pricing documentation. You can find more detailed information on these issues and other important news on international taxation in our article.
Austria: Taxation of cryptocurrencies for individuals
Austria’s government introduced a draft tax reform bill, which envisages (among other things) taxation of cryptocurrencies at a 27.5% tax rate. If approved, the income from cryptocurrencies in Austria shall be subject to taxation at the same tax rate as other capital assets as of 1 March 2022.
The new tax regime shall apply only to cryptocurrencies purchased after 28 February 2021. The sale of cryptocurrencies purchased before that date (“old assets”) will be considered a speculative transaction within one year from acquisition and will be subject to a progressive income tax rate of up to 55%.
Under the presented proposal, both current income and capital gains from cryptocurrencies shall be subject to taxation. Capital gains from the sale of cryptocurrencies in exchange for a fiat currency (e.g. EUR) shall be calculated as the difference between the sales proceeds and the acquisition costs. Details on the determination of acquisition costs and sales proceeds will be regulated in a separate decree from the Ministry of Finance. On the other hand, the exchange of one cryptocurrency for another will not constitute a taxable transaction, provided that the investor subsequently does not “cash-in” the cryptocurrency for a fiat currency (e.g. EUR).
It is uncertain whether stablecoin transactions will be included in the new tax regime. However, non-fungible tokens likely would not be subject to the new tax regime since they are not interchangeable.
UK: New transfer pricing documentation & summary audit trail requirements
The UK government has announced a new requirement for large businesses to maintain a master file, local file transfer pricing documentation as well as a supporting summary audit trail from April 2023. The requirement will apply to groups subject to country-by-country reporting requirements, i.e. multinationals with an annual turnover of EUR 750 million or more. The new legislation will require the transfer pricing files to be prepared, but only submitted to the tax authorities upon request.
The government intends to closely align its documentation requirements and administrative guidance with OECD standards (esp. BEPS action 13 final report) and focus only on material related party transactions; UK-UK transactions do not need to be included unless they pose a “material UK tax risk”. In addition, a short summary audit trail will be required to outline the work undertaken by the business in arriving at transfer pricing conclusions. The summary should increase transparency over how a business conducted its analysis and allow the tax authorities to assess the level of assurance provided by the documentation.
EU: European Commission remarks on Tax Matters at the European Parliament
On 30 November 2021, Paolo Gentiloni, the European Commissioner for Economy, introduced European Commission (“EC”) remarks on Tax Matters to the European Parliament. He evaluated the European Union as an important actor in the fight against tax evasion and avoidance. However, Gentiloni has also reiterated what steps ought to be taken in 2022, i.e. making the recent global achievements on tax fairness operational, continuing the fight for tax fairness, and working on climate goals (namely, Carbon Border Adjustment Mechanism and revised Energy Taxation Directive).
In regard to the OECD Inclusive Framework agreement (Pillar 1 and 2), he has stated that the EC intends to implement Pillar 2 via an EU Directive, while the way for the implementation of Pillar 1 within the EU is not clear yet.
EU: Infringements package of the European Commission
The latest Infringements package of the European Commission (“EC”) issued on 12 November 2021 indicates cases where the Commission is pursuing legal action against EU member states for failing to comply with their obligation. In the taxation area a formal notice is to be sent to Croatia, Denmark, and Lithuania for failing to correctly transpose the VAT e-commerce package into national law and to Spain due to incompliant withholding tax rules on royalty payments received by non-resident taxpayers. The EC also announced that it is closing previous 46 infringement procedure cases, where the issues with the member states were solved without a need to pursue the procedure further.
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