In brief from international taxation [June 2022]

The OECD continues to address the tax challenges arising from the interconnected digital world. Germany issues a decree on the income tax treatment of virtual currencies, while Sweden reconsiders its position on permanent establishments created by home offices. You can find more detailed information on these issues and other important news on international taxation in our article.

OECD: Comments on regulated financial services exclusion and tax certainty aspects under “Amount A” were published by OECD

As part of the ongoing work of the OECD/G20 Inclusive Framework on BEPS on a two-pillar solution to address the tax challenges arising from the digitalization of the economy, the OECD issued an announcement on 25 May 2022 on the publication of responses to its 6 May 2022 invitation for public comments on a consultation document on the regulated financial services exclusion under “Amount A” of Pillar One, i.e., the exclusion of revenues and profits from regulated financial institutions from the scope of Amount A.

The public comments are available and can be downloaded through the OECD website.

Additionally, in the period of 27 May 2022 till 10 June 2022 the OECD collected public comments on two consultation documents relating to tax certainty and “Amount A” under Pillar One:

  • Tax certainty framework for Amount A, which provides certainty for in-scope groups over all aspects of the new rules, including the elimination of double taxation.
  • Tax certainty for issues related to Amount A, which ensures that in-scope groups will benefit from dispute prevention and resolution mechanisms to avoid double taxation due to issues related to Amount A (e.g., transfer pricing and business profits disputes), in a mandatory and binding manner.

OECD: Reports on strengthening tax cooperation and addressing technological facilitation of SMEs’ compliance

A report prepared by the OECD at the request of the G7 German Presidency and published on 20 May 2022, Tax Co-operation for the 21st Century: OECD Report for the G7 Finance Ministers and Central Bank Governors, May 2022, Germany, addresses the implications of international tax developments over the last 10 years, including the October 2021 adoption of a two-pillar solution to address the tax challenges arising from the digitalization of the economy.

Additionally, on 20 May 2022, the OECD Forum on Tax Administration (FTA) published another report: Towards Seamless Taxation: Supporting SMEs to Get Tax Right, a report that addressed how developments in tax technology can make it easier for small and medium-sized enterprises and entrepreneurs (SMEs) to comply with tax obligations.

Germany: Ministry of Finance final decree on income tax treatment of virtual currencies

The German Ministry of Finance (MOF) on 11 May 2022 published its highly anticipated final decree on the income tax treatment of virtual currency transactions.

The first part of the decree provides an overview and explanation of certain key elements regarding the virtual currency environment, e.g., tokens, blockchains, wallets, initial coin offerings, staking, forks, lending, and airdrops. The second part provides guidance on the treatment of virtual currency and related transactions for income tax purposes. In particular, the decree also describes in what scenarios income derived from transactions with virtual assets would qualify as income from a trade or business, employment income, capital income, or other income.

Sweden: Tax Agency changes position on home office driven permanent establishments

On 13 May 2022, the Swedish Tax Agency released a revised statement (No. 8-1677220) on its view of when an employee working from a home office may create a permanent establishment (PE) in Sweden for a foreign company.

The new statement reflects a significant change in the Swedish Tax Agency’s view that should enhance the possibilities for individuals choosing to work from home and strengthen the ability of foreign companies to retain qualified employees by allowing employers to meet employees’ desires for a more flexible working environment without adverse tax implications and an increased administrative burden for the foreign company.

The Swedish Tax Agency’s revised view is that a home office:

  • should not be considered to be at the disposal of the foreign company if the work carried out from the home office is of a temporary nature; and
  • should be considered to be at the disposal of the foreign company if the company pays rent or otherwise compensates an employee for a space in their home from where they can work.

Although neither applicable domestic or international provisions regarding PE have changed, nor have there been any developments in case law, the updated statement may lead to fewer situations of home office working being deemed to create PEs.

Greece: Business growth incentives encourage collaborations and corporate transformations

On 24 May 2022, the Greek parliament passed Law 4935/2022 “Incentives for business growth through collaborations and corporate transformations and other provisions”, which introduces, inter alia, the following measures:

• A new tax regime for corporate transformations, which comprises the following:

− Exemption from corporate income tax (CIT) for small and medium-sized enterprises.

− Exemption from CIT on capital gains from the transfer of fixed assets.

− Tax exemption during the transformation process.

• A new tax incentive regime for “collaborations of persons”.

• Specific provisions for the deduction of expenses related to the acquisition of shares.

• Certain amendments to Development Laws, namely:

− Law 4935/2022 introduces an exemption from capital duty for transformations effected under the provisions of Law 1297/1972.

− Law 4935/2022 allows the transfer of tax losses to the new company under certain conditions, as well as an exemption from capital duty for transformations effected under the provisions of Law 2166/1993.

− Law 4935/2022 introduces an exemption from capital duty under certain conditions for transformations effected under the provisions of Law 4172/2013.

The legislation was published in the government gazette on 26 May 2022 and applies from that date.

France: Court rules on applicability of tax treaty with country of ultimate beneficial owner

The French Administrative Supreme Court ruled on 20 May 2022 that the tax treaty between France and New Zealand, where the ultimate beneficial owner of the income was located, was applicable, even though the French-source income passed through an intermediary/apparent beneficiary located in Belgium. The High Court ruled that the tax treaty between France and the country of a payment’s “true” beneficial owner is applicable regardless of whether the income passes through intermediaries.

The court’s position does not create a new obligation for the French tax authorities (FTA), as the FTA would not be required to identify the ultimate beneficial owner of a payment and, therefore, the applicable tax treaty. However, taxpayers should be able to claim the application of the tax treaty between France and the beneficial owner’s country, provided they supply necessary evidence regarding beneficial ownership.

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