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KPMG EU Tax Centre E-News Summary - Issue 142, November 9, 2021

Core Content

This issue of KPMG's EU Tax Centre E-News provides an overview of recent developments in EU and international tax policy, including updates on country-by-country reporting, the OECD's two-pillar solution, and various national tax reforms and court decisions. It also highlights KPMG's upcoming webinars and insights on key topics such as the EU Green Deal and digital taxation.

Main EU Tax Developments

EU Public Country-by-Country Reporting Directive

• Status: Approved by the European Parliament's Economic and Monetary Affairs Committee on October 28, 2021.
• Next Steps: Will be voted on during the November 10-11 plenary session of the European Parliament before publication in the Official Journal.
• Purpose: To enhance tax transparency and prevent double non-taxation by requiring public reporting of MNEs' tax information.

European Parliament Hearing on Withholding Tax Framework

• Focus: On establishing a more effective and fraud-resistant EU withholding tax system.
• Key Proposals:
  • Minimum effective tax rate for dividend, interest, and royalty payments.
  • Harmonized EU procedure for withholding tax refunds.
• Technology Role: Emphasis on blockchain for improved tax compliance and fraud prevention.
• Cooperation: MEPs urged national tax authorities to enhance cooperation in withholding tax matters.

Response to the Pandora Papers

• Resolution Adopted: On October 21, 2021, the European Parliament called for measures to address issues highlighted in the Pandora Papers.
• Actions Required:
  • National authorities to investigate wrongdoing.
  • European Commission to review the EU list of non-cooperative jurisdictions.
  • Enhanced identification and sharing of information on individuals benefiting from shell company structures.

OECD and International Institutions

G20 Endorses OECD Two-Pillar Solution

• Pillar One: Reallocation of profits of MNEs.
• Pillar Two: Effective global minimum tax rate of 15%.
• Status: G20 leaders endorsed the solution in October 2021.

OECD Releases 2021 Progress Report on PCT

• Platform for Collaboration on Tax (PCT): Joint initiative by IMF, OECD, UN, and World Bank.
• Focus Areas: Medium-term revenue strategies, tax and SDGs, international taxation, etc.
• Purpose: To help countries build resilient tax systems post-pandemic.

UN Launches Carbon Tax Handbook

• Target: Developing countries.
• Content: Practical guidance on carbon tax design and implementation.
• New Subcommittee: To address environmental tax issues and opportunities.

National Tax Developments

Belgium

• Interest Deduction Limitation: Grandfathering rule for loans before June 17, 2016.
• Legislative Proposal: Introduces liability for company directors and shareholders for tax debts.
• Simplification Measure: Temporary extension for loans affected by the pandemic.

Czech Republic

• Non-Cooperative Jurisdictions List: Revised in line with EU updates.
• CFC Rules: Apply to non-resident companies with low tax rates or insignificant economic activity.

Finland

• Transfer Pricing Adjustments: Revisions in line with OECD guidelines.
• ATAD Reverse Hybrid Mismatch: Draft bill with exemption for alternative investment funds.

Germany

• Interest Rate on Back Taxes: 6% annual rate deemed unconstitutional from 2014.
• New Guidance: Applies until 2018; new rules to be enacted by July 2022.
• Court Ruling: Interest on shareholder loans must comply with arm's length principle.

Ireland

• DAC6 Filing Guidelines: Updated to align with new reporting schema.

Italy

• Hybrid Mismatch Consultation: Public consultation launched on draft guidance.
• Tax Deferrals: Plastic and sugar taxes postponed to 2023.
• Tax Credits and Incentives: Extended for certain sectors.

Malta

• 2022 Budget Measures:
  • Increased interest rate on unpaid income tax to 7.2%.
  • Exemption from capital gains tax and stamp duty on certain property transfers.
  • Temporary surrender of excess capital allowances due to pandemic losses.

Poland

• Digital Service Tax (DST): Introduced if OECD two pillars are not implemented simultaneously.
• Draft DST Bill: Proposed at 7% for companies with significant digital presence in Poland.

Slovakia

• Paperless Communication: Effective from 2022, all communication with tax authorities will be electronic.

Spain

• Minimum Corporate Tax Rate: Set at 15%, 18%, and 10% for different company types.
• Applicability: Applies to companies with annual net turnover of at least €20 million.
• Other Measures: Reduced tax credit for rental of dwellings and new legal interest rates.

Sweden

• Risk Tax on Credit Institutions: Proposed at 0.05% (2022) and 0.06% (2023) for institutions with simplified debt over SEK 150 billion.

The Netherlands

• Conditional Withholding Tax on Dividends: Effective from 2024, applies to low-tax jurisdictions and EU non-cooperative jurisdictions.

KPMG Insights and Events

Webinars and Webcasts

• EU Tax Perspectives Webcast: December 8, 2021 – Discusses latest EU tax developments.
• Great Tax Climate Debate: November 18, 2021 – Explores the role of tax in the climate agenda.
• Polish Tax Changes Webinar: November 17-18, 2021 – Focuses on tax reforms effective from 2022.

BEPS 2.0 Impact on Middle East

• Global Minimum Tax: 15% rate affecting MNEs with consolidated turnover over €750 million.
• KPMG Summary: Available on the KPMG Lower Gulf website.

Defensive Measures Against Non-Cooperative Jurisdictions

• EU Code of Conduct Group (CoCG): Encouraged Member States to implement defensive measures from 2021.
• Overview: Available on KPMG's dedicated page.

EU Tax Policy Agenda

• Communication on "Business Taxation for the 21st Century": Summarized by KPMG's EU Tax Centre.
• Focus: Implementation of international tax rules under BEPS 2.0.

Taxation of the Digitalized Economy

• KPMG Overview: Includes digital services tax, tax measures, and a mobile app for tracking digital economy tax developments.

EU Green Deal Insights

• Carbon Border Adjustment Mechanism (CBAM): Overview of the July 14 regulation proposal.
• Energy Taxation Directive (ETS): Proposed revisions.
• Plastics Tax: Dedicated KPMG webpage.

Contact Information

• KPMG EU Tax Centre Director: Raluca Enache
• Key Links:
  • Earlier editions of Euro Tax Flash
  • KPMG's dedicated pages on relevant topics

Disclaimer

• This information is general and not intended for specific advice.
• Consult local KPMG tax advisers for accurate application of tax rules.
• Unsubscribe from Euro Tax Flash by emailing eutax@kpmg.com with "Unsubscribe Euro Tax Flash" as the subject.