The Supreme Administrative Court of the Czech Republic recently ruled on the tax assessment of a payment for leasing an unequipped aircraft to a non-resident. Italy and Switzerland have enacted specific regulations related to Pillar Two of the OECD tax reform, while in Japan, discussions on compliance with this reform are set to continue this year, with implementation anticipated next year. Portugal has issued guidance on the obligations of digital platform operators within the framework of DAC 7. These represent just a few of the latest developments in the field of international taxation – find more details in our article.
Czech Republic: Aircraft rental – the Supreme Administrative Court on the interpretation of double taxation treaties and the application of commentary
The Supreme Administrative Court (SAC) addressed the tax assessment of payment for leasing an unequipped aircraft to a non-resident in its December ruling, 10 Afs 27/2023-83 (comparing Article 8 with Article 12 of the double taxation treaty). The key focus was on the approach to the interpretation of international treaties and the application of the OECD Commentary. According to the SAC, the OECD Commentary on the Model Treaty serves as an interpretative tool but should not be mistaken for a source of law. The relevant commentary is the commentary which existed at the time of concluding (negotiating) the relevant treaty (the so-called static approach), with later commentaries serving as supplementary tools as long as they align with and enhance (rather than contradict) the original commentary. Furthermore, the SAC relied on the subsequently enacted double taxation treaty with the relevant country as a guide for interpretation, explicitly including the lease of an unequipped aircraft under Article 8. Consequently, the SAC concluded that Article 12 applies in the absence of such an agreement. Therefore, in this particular case, the state of the source of the income would also be entitled to taxation, subjecting the relevant income to withholding tax in the Czech Republic.
Portugal: DAC 7: Guidance published in relation to obligations of digital platform operators
In late December 2023, Portugal published two government ordinances, No. 455-D/2023 and No. 455-C/2023, that outline registration and reporting obligations for digital platform operators following the implementation of DAC 7. Effective from 30 December 2023, these ordinances provide guidance on the model form for registration (Modelo 61) and XML file structure for reporting. Platform operators must register through the online finance portal, with an authentication process. “Excluded platform operators” must demonstrate annually that they lack reportable sellers. Reporting platform operators in multiple EU states must disclose their chosen jurisdiction for fulfilling obligations. The first DAC 7 reporting deadline for digital platform operators is 31 January 2024.
Belgium: Draft law mandating B2B e-invoicing as from 1 January 2026 submitted to Parliament
The Belgian government has submitted a draft law to Parliament, proposing mandatory business-to-business (B2B) electronic invoicing (e-invoicing) starting from 1 January 2026. The law aims to require structured e-invoices for domestic transactions among VAT-registered entities in Belgium, utilizing the Pan-European Public Procurement Online (PEPPOL) framework as the preferred electronic exchange format.
Germany: RETT guidance on ownership attribution could result in double taxation
The German tax authorities have clarified through a decree their interpretation of recent real estate transfer tax (RETT) court decisions, introducing new criteria for assessing RETT-triggering events. The guidance focuses on ownership attribution and identifies scenarios where multiple entities may be considered owners of the same real estate simultaneously, potentially leading to double RETT taxation. The decree introduces the concept of “fictitious real estate-holding entities”, impacting transactions involving changes in ownership within shareholding structures.
The decree’s complexity poses challenges for taxpayers, requiring careful analysis and planning for future transactions involving German real estate. Despite controversy and constitutional doubts, the decree’s principles are binding on tax authorities, inviting increased scrutiny. The overall complexity of RETT rules, compounded by this decree, emphasizes the urgent need for comprehensive reform, as proposed by the Ministry of Finance.
Legislative decree containing international tax reform measures is in force
Italy has enacted a legislative decree (No. 209/2023) effective from 1 January 2024, introducing international tax reform measures. The decree focuses on determining corporate tax residence, amending the controlled foreign company (CFC) regime, and promoting the reshoring of economic activities to Italy through a tax incentive. Changes to the CFC regime include a simplified effective tax rate test for audited foreign entities and an optional substitute tax at a 15% rate. The reshoring incentive provides a partial exemption from corporate income tax for relocated activities, subject to conditions and potential recapture if activities move out of Italy. The legislative decree also transposes the EU Pillar Two directive, but the reshoring incentive awaits approval from the European Commission under EU state aid rules.
Penalty protection regime introduced for hybrid mismatch assessments
The Italian government has approved a legislative decree, effective from 29 December 2023, introducing a penalty protection regime for Italian corporate taxpayers within multinational enterprise groups. The regime allows the preparation of “anti-hybrid documentation” to prevent tax penalties in cases of assessments related to the complex Italian rules on hybrid mismatches. Without penalty protection, taxpayers face administrative and potentially criminal penalties for violations of anti-hybrid rules. The regime is applicable until the tax return filing deadline for 2023, and taxpayers must disclose the existence of anti-hybrid documentation. Penalty protection is conditional on meeting disclosure and documentation requirements, offering a cooperative approach between taxpayers and tax authorities.
Government approves legislative decree implementing Pillar Two rules
The Italian Council of Ministers approved the legislative decree implementing Pillar Two rules, transposing the EU directive for a global minimum tax. Effective from 1 January 2024, the decree introduces a national top-up tax (qualified domestic top-up tax – QDMTT) on profits of corporations and permanent establishments with revenues exceeding EUR 750 million. The income inclusion rule (IIR) and QDMTT apply from 31 December 2023, with the undertaxed profits rule (UTPR) effective from
31 December 2024. The QDMTT calculation uses Italian GAAP or IFRS, with filing obligations for Italian entities within specified deadlines, subject to penalties.
Japan: Tax reform proposals for 2024 announced
The Ministry of Finance in Japan has presented tax reform proposals for 2024, encompassing both domestic and international measures. The aim is to address persistent deflation through initiatives like individual income and inhabitant tax credits, adjustments to incentives for salary increases, and the introduction of an “innovation box”. Additionally, efforts will continue to align with the OECD’s Pillar Two initiative globally. The proposals also cover the taxation of foreign businesses operating on digital platforms in Japan. These suggestions will undergo discussions and potential amendments throughout 2024, with enactment and implementation anticipated in the 2025 fiscal year.
France: 2024 finance bill adopted by Parliament
The 2024 finance bill in France, adopted on 21 December 2023, encompasses key tax provisions. Notable aspects include transposing the EU Pillar Two directive and implementing a 15% global minimum taxation for multinational enterprises. It extends the cap on market revenue for electricity producers until 31 December 2024 and introduces a tax credit (C3IV) to boost investments in the green industry. Changes in tax consolidation and distribution regime align with recent CJEU decisions. Additionally, a new tax on the exploitation of long-distance transport infrastructures begins on 1 January 2024. The bill strengthens transfer pricing rules, adjusts local taxes, and introduces new provisions like electronic invoicing and criminal offenses related to tax evasion facilitation.
Switzerland: Pillar Two to be implemented in a gradual approach
Switzerland will adopt the global minimum tax, Pillar Two, gradually. Starting 1 January 2024, a national top-up tax (QDMTT) will be imposed on Swiss corporations and permanent establishments. The international top-up tax (IIR and UTPR) for profits of foreign subsidiaries might be introduced on 1 January 2025. The decision aligns with Switzerland’s approval in a 2023 public vote. The Federal Council’s move allows for transitional safe harbors for country-by-country reporting (CbCR) over the next three years.
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