June’s news from International Taxation brings information about new tax measures in Germany and Belgium which were introduced with the aim to combat abuse and unfair tax competition. Further, it informs about tax administration guidance published in Italy (in respect to the newly implemented sugar tax) or in Finland (with respect to the cross-border loss relief). Read more below!
Germany: Legislative proposal on combatting tax avoidance and unfair tax competition
On 10 June 2021, the German parliament approved the legislative proposal on combatting tax avoidance and unfair tax competition. The new legislation shall encourage states and territories that do not meet recognised standards in the areas of transparency in tax matters, unfair tax competition and the implementation of the BEPS minimum standards to make adjustments towards implementation and compliance with international standards in this field of taxation. The legislative proposal, among other things, introduces a restriction on withholding tax relief under tax treaties for companies with individual shareholders residing in “blacklisted” jurisdictions who hold a direct or indirect a participation of more than 10% in the company that claims withholding tax relief.
European Commission: June infringements package
On 9 June 2021, the European Commission (“EC”) published the package summarising the areas in which Members States fail to comply with obligations under EU law. In the area of taxation, for example, the EC concludes that Bulgarian tax treatment of “undertaxed subsidiaries” infringes the ATAD Directive or that Germany failed in the implementation of required national measures fully implementing the exit tax rules of ATAD 1 and ATAD 2 Directives. Other infringements were identified in the VAT exemption regime of Greece or vehicle taxation rules in Malta which are incompatible with Article 110 of the Treaty on the Functioning of the EU.
Italy: Implementing rules for Sugar Tax
Since 1 January 2022, the sugar tax (i.e. a tax on sweetened drinks) shall be effective in Italy. Now the Ministry of Economy and Finance has issued a Ministerial Decree providing implementing rules. The Decree defined the persons liable for the payment of the sugar tax levied on transactions of qualifying sweetened drinks, the related registration and refund procedures and other applicable administrative obligations. In case of sale of sweetened drinks to consumers or resellers in Italy carried out by the producer, the producer will be liable for the sugar tax payment. If sweetened drinks are produced on behalf of a third person, resident or non-resident in Italy, who subsequently carries out relevant sales to consumers or resellers in Italy, the person liable for the sugar tax payment will be the third person. Direct sales to consumers established in other EU Member States and exports are exempt.
Belgium: Introduction of Financial Anti-Abuse Measures
On 27 May 2021, Belgium officially adopted a bill on various financial anti-abuse measures. Among them, the rules for the Belgian banks, which in their control function obtain information that provides indications that companies or certain special vehicles including asset management companies, companies providing investment advice, investment companies, management companies for collective investment, managers of alternative institutions for collective investment, credit institutions, reinsurance companies and payment institutions enable or further tax fraud by third persons, have to notify a court. Special rules have also been introduced for government bodies involved in combatting money laundering, which have to notify the treasury administration about any discrepancy they reveal concerning beneficial owners of certain entities and their registration in the UBO-register. The new measures will become effective after their publication in the Official Gazette.
Denmark: Changes to CFC legislation
The bill implementing articles 7 and 8 of the European Union Anti-Tax Avoidance Directive (EU) 2016/1164 (2016) (ATAD) was adopted by the Danish Parliament on 3 June 2021. The adopted bill will enter into force on 1 July 2021 and will apply to Danish taxpayers with a fiscal year that commences on or after 1 July 2021. The key features of the new CFC rules are applicable to cases in which more than one third of the subsidiary’s annual income is deemed CFC income or to cases of both legal and economic control (i.e. a CFC relationship exists if the parent company holds more than 50% of the shares or is entitled to more than 50% of the profits of the foreign entity) or to domestic subsidiaries.
Finland: Guidance on Final Cross-Border Loss
On 2 June 2021 the Tax Administration has issued guidance on group deduction that enables Finnish parent companies to set off final losses made by their foreign subsidiaries established in other EEA states. The Cross Border Loss Relief was introduced with effect from 1 January 2021. The losses of a subsidiary are not treated as losses of the parent company, but the parent company is granted a group deduction that corresponds to the final loss made by its EEA subsidiary. The guidance explains that the parent company may claim the group deduction in its tax return if the procedures dissolving the subsidiary have been finalised during the tax year 2021 or later.