Bernardo Almeida

The UK Court of Appeal has issued an important decision in Commissioners for His Majesty's Revenue and Customs v GE Financial Investments, [2024] EWCA Civ 797 (17 July 2024). In brief, GE is a UK corporation that was deemed by US tax law to be a US resident corporation and hence liable to US tax on interest earned in the US. The UK refused to give GE a tax credit for US tax paid on the interest because the UK took the position that GE was not resident in the US for purposes of the UK-US Income Tax Treaty and also because the UK took the position that GE was not earning the interest in the course of carrying on business in the US through a US PE. Through an extensive textual, contextual and purposive analysis (which cited several SCC cases), the Court held that GE was not a US resident for Treaty purposes. GE argued that the fact that it was subject to US world-wide taxation made it a US resident automatically for Treaty purposes, but the Court held that there was no factual connection between GE and the US as described in Article 4(1) and hence it was not a US Treaty resident. In essence, this means that deeming someone to be a State resident does not make them a Treaty resident. The Court held also that GE was not earning the interest by carrying on business in the US because it did not require any “busy-like” activities to earn the interest but was earning it passively merely by holding the debt instrument. You will recall that the Department of Finance anticipated this decision when it enacted the current deemed residency rule for trusts in 94(3) by inserting section 4.3 into the Income Tax Conventions Interpretation Act. That section deems a 94(3) trust to be a Canadian resident for all Canadian treaties. https://lnkd.in/gUy_g44R

29

3 Comments

Early bird pricing for December 2024 ADIT courses ends on Wednesday 31 July. Book today to secure your place. Online classes start in late August or early September for: 🔹Principles of International Taxation 🔹Transfer Pricing 🔹UK Tax 🔹EU VAT All courses include a study text, marked past paper questions, online revision sessions and mock exams. To learn more, please visit https://lnkd.in/enT-2ZdR. #OnlineCourse #ADIT #TaxCareers #ContinuingProfessionalDevelopment #InternationalTax

7

International Tax Newsletter - July 2024!!! #tax #tax #gobeyond #womenintax

26

VAT FIXED ESTABLISHMENT - INTERCOMPANY SERVICES A few days ago, the Court of Justice of the European Union (10th chamber) issued a relevant judgment (Case C‑533/22 - SC Adient) on the conditions for the existence of a #VAT #fixed_establishment within multinational groups. The decision appears particularly important for those Member States (such as Italy) that tend to find easily the existence of a fixed establishment of the service recipient at the premises of an #intercompany service provider. 1️⃣ As the #Court clarified : ✔ the fact that two companies belong to the same group is not decisive to conclude that the company providing services to the other constitute a VAT fixed establishment of the latter; ✔ nor is decisive in this regard that the former company is legally bound to provide those services for the exclusive benefits of the other. 2️⃣ Even in such a case, in fact, it is only where the company receiving the services has the technical and human resources of its service provider at its disposal as if they were its own that the former may be deemed to have a fixed establishment in the Member State of the latter. In this respect: ❗ the fact that the employees of the service provider have access electronically to the service recipient's accounting system, in order to register directly the inbound and outbound goods, does not mean that the latter possesses the infrastructure of the former; ❗ nor this conclusion changes due to the fact that the service recipient has a storage facility for its products and raw materials at the premises of the service provider. 3️⃣ On the other hand, the Court appears to attach relevance to whether the employees of the service provider are, in actual fact, removed from the hierarchical subordination of that company and placed at the disposal and under the authority of the service recipient. 4️⃣ Finally the Court restated that the existence of a fixed establishment of the service recipient presupposes that it has human and technical resources distinct from those used by the service supplier. If the fixed establishment were deemed to be both the supplier and the recipient of the same services, the supplier and the recipient would be identical, with the consequence that the existence of a taxable transaction would be precluded. Just another brick in the wall of sound and coherent VAT #principles. #VAT #court #caselaw Giorgio Beretta #tax #eulaw Pirola Pennuto Zei & Associati

74

2 Comments

In a resolution letter published today, the Italian tax authorities confirm that, as of January 2021, UK companies can claim a refund of Italian VAT without the need to obtain a VAT number in Italy (the so-called 'thirteenth directive' procedure). However, considering that the deadline to claim the refund is by September of the year following the one in which the VAT was incurred, it seems unclear how Italian VAT incurred before 2023 can be recovered. #PwCTLSVAT

64

🇪🇺 The fixed establishment concept has been subject to abundant case law as it has been used by tax authorities as an anti-abuse measure to attract domestic VAT in otherwise cross-border transactions. The existence of a fixed establishment can have significant implications. For instance, taxpayers with fixed establishments in member states with electronic invoicing (e-invoicing) mandates could be dragged into the net of these mandates even though nonresidents are not in scope of these obligations. Therefore, understanding when a company has a fixed establishment is essential for companies operating in EU member states and the recent CJEU case law provides some positive relief for taxpayers. The CJEU has now repeatedly held that a toll manufacturer cannot be a fixed establishment if the human and technical resources used to receive services are not distinct from those that provide the services. While in earlier case law, the CJEU appeared to broaden the concept of fixed establishment by acknowledging for instance that a related party (C-260/95 (February 20, 1997)) or even a third party could create a fixed establishment for VAT purposes (C-605/12 (October 16, 2014)), in more recent case law, the CJEU appears to be curbing down the efforts by various EU tax authorities to see fixed establishments in related-party transactions. To preemptively address tax authorities’ questions about the existence of a fixed establishment, taxpayers need to carefully identify and track the human and technical resources that exist abroad and what these resources are used for.

12

Here is a link to the EY Global Tax News Update, which addresses the Brazilian Provisional Measure restricting the monetization of VAT credit. #EY #VATCREDIT https://lnkd.in/dde8Rzwr

2

📢 Call for Research Proposals: Reforming the UK's VAT System 📢 The Institute of Chartered Accountants in England and Wales (ICAEW), professional institutional member of the IAAER, is seeking innovative research proposals to tackle the complexities of the UK's VAT system. This call focuses on streamlining VAT rates, enhancing digital tax compliance, and reducing the administrative burden on businesses. 🔍 Key Areas of Focus: ◾ Streamlining VAT: Simplify the VAT system using global models for better compliance and understanding. ◾ Digital Innovations: Explore digital technologies to improve VAT efficiency and combat evasion. ◾ Impact on SMEs: Analyze the effects of VAT on small and medium-sized enterprises. ◾ Environmental Sustainability: Investigate reduced VAT rates on eco-friendly products and services. ◾ Digital Economy: Adapt VAT for the expanding digital economy. 💼 Objective: To collate innovative and practical ideas for reforming the UK's VAT system, paving the way for detailed research and policy development. 🌐 Eligibility: Open to all (international contributors welcome) 📅 Submission Deadline: 31 August 2024 📝 Proposal Requirement: Detailed proposal (max 2,000 words) + CV + application form. 🥇 Prize: The author of the selected proposal will be awarded £5,000 and the opportunity to present their research at a prestigious VAT conference to be held at Chartered Accountants’ Hall in London in 2025. Submit your proposals and be part of the change! Let's create a more efficient, business-friendly, and modern VAT system for the UK. This project is a collaboration with Ed Saltmarsh, the ICAEW Technical Manager for VAT and customs. Also contact Dr Oluwatosin Adebola-Akande for any questions. 🔗 For more details, visit: https://lnkd.in/dm7vGQbs #ICAEW #TaxResearch #VATReform #DigitalTax #SustainableEconomy #SMEs #TaxCompliance #IAAER

8

Changes to the Bulgarian VAT Law Implementing Regulations 💡 The Bulgarian Official Gazette June 25 published changes to regulations for implementing the VAT law. The changes include measures: 1) abolishing the special registration for the application of specified regimes under certain conditions; 2) providing importers the right to provide alternative proof to deduct tax credits for goods received in circumstances where the importer doesn’t have the specified proof of tax payment; 3) applying a zero-tax rate for taxable supplies of goods and services with a place of performance in Bulgaria; 4) specifying conditions for the application of the zero-tax rate; and 5) specifying that invoices, as well as notices to invoices on paper, are issued in a minimum of two copies, regardless of a recipients registration status under the law. The regulations enter into force on the same date. [Bulgaria, Official Gazette, 06/25/24]

17

Latest issue of BDO Indirect tax news

6

When I read the ECJ decision in case C‑696/20 from 2022, the phrase which comes into my mind is: "Tell me you don't understand VAT without telling me you don't understand VAT" Am I the only one? Link in the comments

10

1 Comment

The German Court in Munster handed down its ruling quashing the determination of the German Tax Adminustration in a case that involved the operation of CFC rules. In brief, the German Tax Administation included in the tax base of the German parent entity the profits (comprising interest from lending activity) of its low taxed Belgium subsidiary citing that the profits constituted passive income for the purpose of the German CFC Law. The Court invoked the rebuttal/ counterevidence rules for dissaplying the taxation under the CFC rules. The rebutal rules built on the CJEU ruling on Cadbury that confined the national CFC rules scope to artificial entities. The Court grounded its decision by citing that the subsidiary had premises, equpments, personnel, in Belgium therefore undertaking business activity and the German Tax Administration show no evidence that the subsidiary was interposed artificially. #tax #cfc #taxcourt #antitaxavoidance #directtax https://lnkd.in/dCZ9uE5G

17

🌏😵‍💫🏛️ Pillar 2 and Dispute Resolution P2 is quickly commencing around the world, imposing a 15% minimum corporate tax in each country a MNE operates in if its group revenue is above EUR750m. 🧨 Disputes are inevitable, with 140+ countries having to enact local legislation to apply the OECD's rules, and needing to also consider the OECD's administrative guidance. 🌋 Countries have different economies, so if anyone is even a little bit self-interested you can bet there will be some slanted interpretations going on. ❗️Tax disputes between 2 countries will be common, but multi-sided disputes between 3 or more countries are increasingly likely (eg UTPR claims between multiple countries). ⚠️ How big this issue is will depend on the uptake of P2 generally. QDMTT only has a role if countries don't impose a 15% tax. IIR only has a role if there aren't QDMTTs. The UTPR is a backstop to the backstop to the backstop. 📜 Can MAP work under tax treaties to help? Maybe. But only as between 2 countries, and only if P2 is a covered tax under the treaty (depending on the definition of taxes in the treaty and how the P2 legislation was enacted in each country). 💡 Could a new mechanism work? Getting agreement looks highly unlikely. The Inclusive Framework for P2 has 140+ countries, but dispute resolution clauses are often looked at skeptically by countries for fear of ceding sovereignty. Australia has 40+ tax treaties but only 20 of those have arbitration, for example (17 via the MLI and 3 otherwise). Good luck! #taxlaw #internationaltax #transferpricing #pillartwo #oecd

77

1 Comment

Be part of one of the highlights in the VAT calendar 2024! More than 200 in-house professionals have already registered to: - get the latest updates on ViDA from the European Commission briefly after the announcement of the new proposals and timeline ⚡ - discuss cash generation opportunities in VAT 💰 - see practical examples how AI supports tax functions already today 🤖 #VAT #IndirectTax #ITRIndirectTax #InternationalTaxReview #wts #wtsglobal

28

Corporate Tax Partner Clair Dart explains the key differences between a branch and a subsidiary - it's important to know that each are treated differently for tax and accounting purposes and to consider these consequences carefully beforehand. https://lnkd.in/e5TXNCr2 #branch #subsidiary #expansion #tax

4

As from September 2024, proof of intra-EU supplies from Italy with transport arranged by or on behalf of the customer must be collected within 120 days from the supply.  If this is not done, VAT has to be charged. This VAT could, in principle, be recovered once the evidence is subsequently collected. If the proof is not collected within 120 days and VAT is not charged, a penalty of 50 per cent of the VAT due applies. The process of collecting this proof should be reconsidered in light of the above. For further info: https://lnkd.in/ePNZR7kU #PwCTLS #PwCTLSVAT

116

"Because Pillar One is focused on changing where profits are taxed, including for many large digital companies, DSTs are expected to be repealed in a transition process anticipated to be completed by June 2024. However the OECD missed the March 31 deadline to reach an agreement on the text of Pillar One, casting doubts on when or if DSTs would ever be repealed." Mais importante: "(...) in March 2024, the U.S. Treasury held a public hearing where a Joint Committee on Taxation staff report was discussed showing that Pillar One would result in a loss in U.S. federal receipts of $1.2 billion." Pilar I a abanar... #DST #TAX #digitalservices #OECD

8

Today the EU Council reached an agreement on a European directive to make it easier for investors to get an exemption at the source or claim withholding tax paid on distributed dividends. Here are the 10 key takeaways from the new rules for withholding tax procedures under the FASTER initiative agreed upon by the Council: 1. Streamlined Procedures: The FASTER initiative aims to make withholding tax procedures faster, simpler, and safer across the EU, enhancing the efficiency and safety of cross-border investment activities. 2. Double Taxation Relief: The initiative addresses the challenge of double taxation where investors often face tax both in the state from which income is derived and in their residence state. It facilitates easier access to tax relief for cross-border investors. 3. Digital Tax Residence Certificate (eTRC): The introduction of a common EU digital tax residence certificate will allow investors to easily prove their tax residence, speeding up the relief procedures. 4. Fast-Track Procedures: Two fast-track procedures are introduced—a relief-at-source system and a quick refund system. These are designed to provide tax relief more rapidly than the standard processes. 5. Member States' Flexibility: Member states have the option to maintain their current systems instead of applying the new fast-track procedures if they already have effective systems in place for certain types of dividends or if they meet specific market capitalization criteria. 6. Fraud Prevention Measures: Additional checks can be implemented by member states to prevent tax fraud, ensuring that only legitimate requests for tax relief are expedited. 7. Standardized Reporting for Financial Intermediaries: The directive establishes a standardized reporting obligation to help detect tax fraud and abuse, increasing transparency and accountability. 8. European Certified Financial Intermediary Portal: A central portal will be created for the registration of certified financial intermediaries, simplifying the registration process and allowing easier access to national registers. 9. Penalties for Non-Compliance: Member states are required to impose penalties for non-compliance with the obligations set out in the directive, reinforcing the importance of adherence to the new rules. 10. Implementation Timeline: Member states are to transpose the directive into national legislation by December 31, 2028, with the rules becoming applicable on January 1, 2030. This provides ample time for adjustment to the new system.

30

1 Comment