In brief from international taxation [March 2024]

The UK has introduced rules against the abuse of the transitional safe harbour measure under Pillar 2. Germany has updated its compliance guidelines for virtual currency transactions, along with guidance on the criteria for determining a permanent establishment. Switzerland has launched limited qualified investor funds. Meanwhile, in Belgium, the Advocate General has confirmed the sufficient precision and clarity of DAC 6. Read our article for more news from the world of international taxation.

UK: Treasury provides update on implementation of OECD guidance on Pillar Two safe harbor

The UK Treasury announced that it will implement anti-abuse rules for the Pillar Two transitional country-by-country (CbC) reporting safe harbor, following guidance from the OECD/G20 Inclusive Framework on BEPS, released in December 2023. These rules target transaction-based tax avoidance and will be effective from 14 March 2024. The government will seek consultation on the implementation and include the rules in a future finance bill.


Draft guidance updated on compliance requirements for virtual currency transactions

The German Ministry of Finance updated its earlier draft guidance concerning compliance for virtual currency transactions, aiming to clarify the rules for taxpayers. The guidance requires accurate transaction reporting, distinguishing between centralized and decentralized platforms. Taxpayers must maintain transaction records and can face income estimates by tax authorities in the absence of sufficient data, though penalties can be waived under specific conditions. While providing insight into compliance expectations, challenges may arise regarding past transactions where data is inaccessible or the platforms are now defunct.

Tax authorities update guidance on criteria for a permanent establishment

The German Ministry of Finance issued updated guidance regarding the criteria for determining a permanent establishment (PE) under domestic tax law. The guidance clarifies that a home office used for remote working generally should not qualify as a PE. Key points include the requirement for a fixed place of business at the disposal of the enterprise, the distinction between a management-PE and other types of PEs, and the applicability of PE definitions under double tax treaties. The guidance aims to provide clarity for taxpayers, particularly regarding the treatment of home offices, while emphasizing the importance of factual analysis in determining PE status.

Switzerland: Limited qualified investor funds launched

Limited Qualified Investor Funds (L-QIFs) were launched in Switzerland. These funds, exclusively available to qualified investors, provide a swift and cost-efficient alternative to Luxembourg’s Reserved Alternative Investment Fund (RAIF). While not requiring approval from the Financial Market Supervisory Authority, L-QIFs must be managed by regulated fund managers. However, they are subject to Swiss withholding tax, which may deter international investors. The introduction of L-QIFs aims to enhance Switzerland’s competitiveness in fund and asset management, offering a favorable environment for collective investment schemes tailored to qualified investors.

Belgium: AG considers DAC 6 sufficiently precise and clear

The Advocate General (AG) provided an opinion regarding the validity of the DAC 6 Directive, in a case referred by the Belgian Constitutional Court (C-623/22). The case raised questions about the clarity and precision of DAC 6’s concepts and definitions, arguing they might infringe on the right to a fair trial and privacy. The AG’s opinion concludes that DAC 6 should not be annulled, asserting that while some concepts are broad, they do not hinder intermediaries’ ability to ascertain reporting obligations. Furthermore, the AG defends the restriction of legal professional privilege to lawyers under DAC 6, aligning with the directive’s objective of imposing reporting obligations on intermediaries.

OECD: Update to commentary on article 26 of model tax treaty approved

The OECD Council approved an update to the commentary on article 26 of the OECD model tax treaty regarding the exchange of information. The update clarifies that information obtained through administrative assistance can be utilized for tax matters concerning persons beyond the initial recipients. It also offers guidance on confidentiality, including taxpayers’ access to exchanged information affecting their tax situation and non-taxpayer-specific information generated from the exchanged data.

Cyprus: Annual company levy abolished

The president of Cyprus announced the abolition of the annual EUR 350 levy for companies registered with the Department of the Registrar of Companies and Intellectual Property. This decision is part of a broader set of economic measures to support businesses on the island.

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