In Brief from International Taxation [October 2020]

The Australian Treasurer introduced new rules for the loss carry-back system and an amendment to the regime of asset write-offs. Denmark tax authorities additionally assessed taxes to drivers providing internet-based driving services. ECJ gives an opinion on utilising company cars by employees. On 1 October, new regulations for the offsetting of tax overpayments came into force in Russia. The final guidance clarifying stock attribution rules was published in the USA. The Permanent Court of Arbitration has sided with telecoms giant. The European Commission appealed against the General Court’s ruling of 15 July 2020 on the Apple state aid case in Ireland.

Australia: Introduction of tax cuts for 2020

The Treasurer has proposed several changes in the 2020 Federal Budget including temporary loss carry-backs and an increase in access to asset write-offs. It is proposed that eligible companies will be allowed to carry back tax losses from the 2019/20, 2020/21 and 2021/22 years to offset previously taxed profits in 2018/19 or later income years. The temporary loss carry-back will be available to corporate tax entities with an annual turnover below AUD 5 billion.

With respect to asset write-offs, an instant asset write-off is currently available to businesses with an annual turnover of below AUD 500 million for purchases of business assets costing AUD 150,000 or below on or before 31 December 2020. The budget change extends the instant asset write-off to businesses with an annual turnover below AUD 5 billion. These businesses will be allowed to immediately deduct the cost of eligible capital assets acquired on or after 6 October 2020 and first used or installed by 30 June 2022. The asset cost cap of AUD 150,000 remains.

For businesses with an annual turnover exceeding AUD 50 million, the write-off will apply to new assets and improvements to existing eligible assets. For businesses with an annual turnover below AUD 50 million, the write-off will also apply to second-hand assets.

Denmark: Additional taxation of Uber drivers

The Danish tax authorities have announced that they will make additional assessments of income derived by individuals providing rides using an Internet-based driving service platform, such as Uber. The tax authorities inspected tax returns based on information received from the Dutch tax authorities under an international exchange of information programme. They investigated 7,500 rides provided by approximately 2,400 persons in 2016 and 2017. For 99% of the inspected drivers, this resulted in additional tax assessments being made. The expected additional tax revenue is approximately DKK 59 million.

ECJ opinion on the use of company cars by employees

On 17 September 2020, Advocate General (AG) of the Court of Justice of the European Union (ECJ) opined, contrary to the view of the German government, that if a company provides an employee with a vehicle for which the employee does not pay compensation (nor does he waive part of his salary or perform additional work) for the transfer of the vehicle, such activity cannot be viewed as providing a service for consideration. Furthermore, if the company vehicle is provided (even partially) for the private needs of the employee for consideration and for a period exceeding 30 days, this constitutes a lease of a means of transport under the EU VAT Directive (2006/112).

Russia: New regulation for the offsetting of tax overpayments

The Federal Tax Service (FTS) clarified that starting from 1 October 2020, overpaid federal, regional or municipal taxes may be offset against any type of tax, with one exception. Overpaid social security contributions may not be offset against taxes and vice versa. However, tax refunds are only possible if no arrears of any other tax, penalties or fines exist.

The USA issue final proposal of guidance clarifying stock attribution rules

On 21 September 2020, the US Treasury and the Internal Revenue Service released the final proposal of regulations relating to the repeal of section 958(b)(4) of the Internal Revenue Code. As a result of the repeal, stock in a foreign corporation owned by a foreign person can be attributed “downward” to a US person for various purposes, including the determination of whether the US person is a US shareholder and the foreign corporation a controlled foreign corporation.

Telco multinational wins arbitration concerning tax dispute over Indian capital gains

The Permanent Court of Arbitration in The Hague has agreed with big Telco multinational in its long-running capital gains tax dispute with India. The court held that the Indian government’s tax assessment of about INR 400 billion, including penalties and interest, relating to a key acquisition involving Indian assets in 2007, was “in breach of the guarantee of fair and equitable treatment” set out in the India-Netherlands bilateral investment treaty.

EU Commission to appeal the General Court’s ruling in the Irish state aid case

On 25 September 2020, European Commission Executive Vice-President, Margrethe Vestager, announced that the Commission is to appeal to the Court of Justice of the European Union against the General Court’s judgment of 15 July 2020 on the Apple state aid case in Ireland.

The Commission is bringing the case before the CJEU since the General Court’s judgment raises important legal issues that are of relevance to the Commission in its application of state aid rules to tax planning cases. The Commission also “respectfully considers” that the General Court has made a number of errors of law in its judgment.

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