UK: Draft guidance on the implementation of Pillar Two published

Draft guidance on the implementation of the income inclusion rule and qualified domestic minimum top-up tax has been released in the UK. The guidance outlines the scope and administration of these taxes based on the OECD/G20 Pillar Two model rules. The draft guidance is currently open for consultation until 12 September 2023.

The implementation of these taxes is part of the Finance (No. 2) Bill 2022-23 currently going through parliament.

Netherlands: Bill for Minimum Tax Rate Act 2024 presented to parliament

The Dutch parliament has been presented with a bill for the Minimum Tax Rate Act 2024, which aims to implement the OECD/G20 Pillar Two global minimum tax rules into domestic law. The bill is intended to enter into force on 31 December 2023.

The proposed legislation would require multinational and domestic groups with annual revenue of EUR 750 million or more to pay a minimum tax rate of 15% in each jurisdiction they operate. The bill closely aligns with the OECD and EU Pillar Two rules and includes an income inclusion rule, undertaxed profits rule, and a qualified domestic minimum top-up tax. The latter ensures that low-taxed Dutch entities within in-scope groups are subject to a local top-up tax.

Guernsey, Jersey, Isle of Man: Common approach to Pillar Two implementation

The governments of Guernsey, Jersey, and the Isle of Man are adopting a common approach to the implementation of the OECD’s Pillar Two framework regarding the global minimum tax.

These jurisdictions intend to implement an “income inclusion rule” and a domestic minimum tax, which will, broadly, impose a 15% effective tax rate from 2025 for those entities that are in-scope – i.e., entities in multinational groups with annual consolidated revenue of at least EUR 750 million and therefore the majority of businesses in Guernsey will not be within the scope of the rules, and will continue to be subject to Guernsey’s established “zero/ten” corporate tax regime.

Geneva: Municipal business tax to be replaced by CIT increased rate

The Geneva Parliament has approved a project that includes in particular (i) abolishment of the Swiss canton’s municipal business tax, (ii) increase of the effective corporate income tax rate to 14.7% (currently 14%) and (iii) compensation mechanism between the canton and the municipalities in order for the latter to be compensated for the abolishment of the municipal business tax.

The aforementioned changes would most probably be effective from 1 January 2024.

Vietnam: MLI ratified

Vietnam has ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting with the OECD. The convention will enter into force for Vietnam on September 1, 2023, and it will affect 75 tax treaties that Vietnam wishes to be covered.

Spain: Clarification on tax loss and tax credit carry forwards in tax groups

The Spanish tax agency issued guidance clarifying the use of tax loss carry forwards and tax credit carry forwards within tax consolidated groups for corporate income tax purposes.

The guidance specifies rules for allocating and applying limits to pre-consolidation losses and credits. It highlights the importance of considering the proportion of losses and credits generated by each individual entity within the group when offsetting taxable income. Similar principles apply to pre-consolidation tax credit carry forwards.

France: CJEU rules former French tax consolidation scheme infringes freedom of establishment

The CJEU ruled that the French legislation providing a dividend exemption only for French resident parent companies that have opted for tax integration with French resident subsidiaries violated the EU principle of freedom of establishment.

The case concerned the reimbursement of French corporation tax on dividend income received from subsidiaries in EU member states. The CJEU clarified that the same benefit should apply to French parent companies regardless of their tax consolidation status, as they incur costs associated with owning subsidiaries. The French rules restricting the neutralisation of the 5% add-back for resident companies that have not chosen tax consolidation with resident subsidiaries were deemed an unjustified restriction of EU law.

Portugal: New tax regime for startups and scaleups introduced

The Portuguese government has introduced a legislative proposal to establish a new tax regime for equity-based incentive plans offered by startup or scaleup companies that qualify as innovative companies or SMEs. The regime aims to attract innovative companies and employees by allowing certain income from stock options to be taxed at a deferred rate and a reduced effective tax rate, subject to specific conditions.

The regime became effective retroactively from January 1, 2023, and may also apply to stock option plans approved until December 31, 2022.

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