In brief from international taxation [October 2022]

The OECD publishes progress reports on BEPS, as well as several pieces of guidance aimed at the further improvement of global tax transparency. Luxembourg and Spain introduced temporary VAT reduction. Greece intends to implement energy saving “superdeduction” for SMEs. You can find more detailed information on these issues and other important news on international taxation in our article.

OECD: Publication of BAPA Manual

The OECD Forum on Tax Administration published a manual on 28 September 2022 on the operation of, and best practices to streamline, bilateral advance pricing arrangements (“BAPAs”). The manual is intended as a guide for businesses and tax authorities to improve the BAPA process.

The manual has been approved by the inclusive framework, as well as by all members of the OECD Forum on Tax Administration. The manual supplements the OECD transfer pricing guidelines and does not affect the BEPS action 14 minimum standard on mutual agreement procedures.

Greece: Implementation of “superdeduction” for SMEs

The Government Gazette no. B’5083/28-09-2022 published on 28 September specifies the conditions, procedures and types of eligible costs from Greek SMES to claim “superdeduction” for 200 % of expenditure on green initiatives, energy efficiency, and digitisation when calculating their taxable profits. Based on the existing corporate income tax rate of 22%, a tax benefit of 22% on green energy and digitisation expenses is expected. The “superdeduction” applies only to expenses incurred and assets purchased during fiscal years 2023, 2024 and 2025.

OECD: Progress reports on the BEPS project and Pillar One and Pillar Two solution

On 4 October 2022, the OECD released the sixth annual progress report from the OECD/G20 Inclusive Framework on BEPS, covering the period from September 2021 to September 2022. The topics covered in the report include the implementation of the two-pillar solution to address the tax challenges arising from the digitalisation of the economy agreed on by more than 130 members of the inclusive framework in October 2021 (“two-pillar solution”), the implementation of the BEPS minimum standards, progress on other BEPS actions, and activities undertaken to support developing countries.

Further, on 6 October 2022, the OECD issued an announcement regarding the progress toward the implementation of a two-pillar solution. On the same date, the OECD issued an invitation for public comments on a progress report on the administration and tax certainty aspects of “Amount A” of Pillar One, which was released during the 14th plenary meeting of the OECD/G20 Inclusive Framework on BEPS on 6-7 October 2022. Comments on the progress report are requested by 11 November 2022.

Temporary VAT reduction in Spain and Luxembourg

The reduced VAT rates of 16 %, 13 % and 7 % (reduced from 17 %, 14 % and 8 % currently) will apply from 1 January 2023 to 31 December 2023 in Luxembourg. The temporary reduction of VAT rates by one percentage point was introduced as a measure to fight inflation. The new measure fully enters into force after parliament voting once the “nihil obstat” of the State Council is obtained.

Similarly, the Spanish government has introduced temporary reduction of VAT rate (from the current 21 % to 5 %) effective from 1 October 2022 to 31 December 2022 on supplies, imports, and intra-EU acquisitions of natural gas, biomass briquettes and wood for use in burning. The rate reduction is intended to alleviate the burden on families for the winter season of the significant increase in the cost of energy due to inflation.

OECD: Final guidance on Crypto-Asset Reporting Framework and CRS amendments released

On 10 October 2022, the OECD released the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard. These rules establish new crypto asset due diligence and reporting requirements under the Crypto-Asset Reporting Framework (CARF) and amend existing due diligence and reporting requirements under the Common Reporting Standard (CRS). These amendments bring new financial products and intermediaries in scope and are aimed at further improving the operation of the CRS.

OECD: Guidance on implementation of CbC reporting updated

In October 2022, the OECD/G20 Inclusive Framework on BEPS released an updated version of guidance on the implementation of country-by-country (CbC) reporting under action 13 of the OECD/G20 BEPS project. The guidance, which is periodically updated, aims to facilitate the consistent implementation of CbC reporting and provide increased certainty to tax authorities and taxpayers.

The updated guidance includes new content on the following topics:

  • Positive and negative figures in completing Table 1 of a CbC report (which provides an overview of the allocation of income, taxes and business activities by tax jurisdiction);
  • Reporting permanent establishment information; and
  • Short accounting periods and long accounting periods.

Czech-Senegal Double tax treaty

On 29 August 2022 a new double tax treaty between the Czech Republic and Senegal entered into force. The treaty will be applied from 1 January 2023. The treaty will provide a 5 % withholding tax rate on dividends paid to a company that (other than a partnership) holds directly at least 25 % of the capital of the payer company; otherwise, the rate will be 10 %. The 10 % withholding tax rate will also be applied to interest and royalties.

Spain: Introduction of temporary tax measures

The Spanish Minister of Finance and Civil Service announced on 29 September 2022 a package of temporary tax measures. Among them, the limitation to 50 % offset tax losses within a tax consolidated group in 2023 and 2024 was introduced. The corporate income tax rate should be reduced from 25 % to 23 % for small enterprises with a turnover of up to EUR 1 million. Further, a new solidarity tax on large fortunes has been introduced. The new solidarity tax shall affect those individuals that have net assets of more than EUR 3 million. The tax would be a temporary state tax for the years 2023 and 2024, although a review clause is expected to be included to evaluate, at the end of the tax’s scheduled validity, whether it is necessary to retain the tax. In July 2022, the Spanish government also announced that banks and energy companies will be subject to a new “windfall tax”.

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