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Malta has recently published legislation that implements Transfer Pricing Rules into Malta’s tax code (“TP Rules”).
The TP Rules apply to transactions entered into on or after 1st January 2024 as well as pre-existing ones if they are materially altered on or after that date.
The TP Rules will apply when calculating a company’s tax base derived from “cross-border arrangement” between “associated enterprises”. They will apply where associated enterprises have more than 75% (directly or indirectly) of participating rights.
This is reduced to 50% where the entity is a Multi-National Enterprise (“MNE”).
SMEs, as defined in the State Aid Rules, do not fall under these rules.
The term “MNE group”, as used in these Rules, refers to a multinational enterprise (or other entity) whose tax residence(ies) or permanent establishment(s), within and outside of Malta, exceeds 75 million Euro per year.
The TP Rules don’t apply to cross-border transactions with an aggregate arm’s length value of €6m and €20m revenue and capital respectively.
The TP Rules will apply to cross-border transactions and arrangements taking place between:
The TP Rules provide for a deeming provision that, where the actual amount differs from an arm’s-length amount under cross-border arrangements, the latter figure shall be used in ascertaining total income instead of the former.
It is anticipated that more detailed guidance will be issued in due course.
Amongst other things, it is expected that this will include reference to the OECD Transfer Pricing Guidelines.
If you have any queries about this article on Malta Transfer Pricing Rules or Malta tax matters in general, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
As from 1 January 2012, according to the provisions of article 5 (2) of the Income Tax Law 118 (I) / 2002, whenever a company grants a loan or any other monetary facility including cash withdrawal (other than balances derived from trade transactions) to natural persons, being its directors or shareholders or their spouses or their relatives up to second degree, then that person is deemed to have a monthly benefit equal to nine percent (9%) per annum on the balance of the loan or of any other monthly cash benefit at the end of each month (including cash withdrawals during the month).
The tax on the monthly benefit is calculated based on the applicable income tax rates and is due in accordance with the Pay-As-You-Earn ‘PAYE’ regulations. This means that the benefit is included in the taxable income of that person in Cyprus.
It is noted that calculation of the benefit does not take into consideration the number of days spent in the Republic by the individual throughout the year (circular 14, dated 14 November 2017), as was the case up to the end of 2017.
Considering the above, the individual will have an obligation to register with the Income Tax authorities in Cyprus and submit an annual tax declaration provided that the annual amount of the deemed benefit, including any income from other sources, exceeds the tax-free amount of €19.500. If his total income is less than €19.500 then the Company has no obligation to withhold any tax.
We note that in case the company charges interest to the individual’s debit balance, then that amount of interest reduces the value of the deemed benefit.
Result: An obligation arises for the Company to withhold tax on behalf of the shareholder according to the applicable rates and pay the tax under the PAYE system.
Result: No obligation arises for the Company to withhold tax on behalf of the shareholder.
Result: No obligation arises for the Company to withhold tax on behalf of the shareholder.
If you have any queries about this article, Cyprus tax , or the matters discussed more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
On 1 November 2022, the Dutch State Secretary for Finance published a legislative proposal to introduce a temporary tax on windfall profits (the Windfall Tax).
The proposal was submitted pursuant to Council Regulation (EU) 2022/1854, which provides for an emergency intervention in the event of extremely high energy prices.
The Windfall Tax will apply to companies that have benefited from restructuring and privatisation of state-owned enterprises retroactively as of 1 January 2022.
The Windfall Tax is levied on entities that:
(i) are subject to Dutch corporate income tax; and
(ii) in their financial year starting in 2022 obtain at least 75 percent of their net turnover from certain economic activities.
It applies to activities conducted in the fields of natural gas extraction, mining, petroleum refining and manufacturing coke oven products. The Windfall Tax will assess profits made over 2022—regardless of when they were earned.
The Windfall Tax is intended to be levied on excess profits, which are defined as the taxable profits of a company in 2022/the Contribution Year—to the extent that they exceed 120% of average taxable profit over four financial years preceding.
The average taxable profits for the four previous years are not adjusted in any way (for example, there is no correction for lower taxable profits in prior years as a consequence of the Covid-19 pandemic; nor would inflation be taken into account).
The excess profit is taxed at a rate of 33 per cent.
Entities that are part of a fiscal unity can be treated as stand-alone entities for the calculations and mechanics above.
The administrative burden of calculating every entity’s stand-alone profits for the previous four years may be less than previously thought.
However, the complexity may increase for taxpayers as they have to perform intra-fiscal unity transfer pricing analyses.
The Windfall Tax will be a self-assessed tax (‘aangiftebelasting’), which means that the taxpayer must file his or her own return to calculate how much tax is owed; this makes it similar in some ways to VAT but with greater flexibility because forms can be amended at any time.
The return must be filed and the tax paid within seventeen months of the end of a contribution year.
The calculations underlying the Windfall Tax depend on returns filed in 2022; as these are normally extended, 2018 CIT returns will be used instead.
As a result, the statute of limitations for imposing additional Windfall Taxes is extended from five years to seven: it starts when the contribution year ends and runs until seven years after.
To reduce the risk of tax recovery by the authorities, if a company is included within a fiscal unity that generated windfall profits during the year in which contribution was due—and remains part of it for any portion or all of that fiscal unity until filing deadline —then other companies sharing this group at some point during those two periods are liable to pay unpaid contributions.
If a taxpayer emigrates from the Netherlands, that person is still responsible for paying the Windfall Tax if any part of it remains outstanding—unless such person can prove (to Revenue’s satisfaction) that he or she was not at fault for failing to pay all due amounts.
In the context of CIT, secondary liabilities are those imposed on a company after its primary liability has been established.
The proposal has been discussed in parliament, with little pushback on the issue of retroactivity. Much of the discussion focused around what aspects or entities would be subject to the Windfall Tax.
The government did not engage with the other party’s argument about excessive profits in other industries, noting only that these measures came from the European Commission.
Several political parties queried how incidental profits and losses would be taken into account in calculating the ‘reference profit’ and ‘excess profit.’
The Windfall Tax will be based on taxable profits for CIT purposes, and there will not be any specific rules/corrections for incidental profits or losses.
The government acknowledged that taxpayers are free to challenge or appeal tax assessments if they disagree with them.
Many questioned whether the Council had the authority to impose a tax without unanimous consent of all member states.
The government indicated that Article 122 of the Treaty on European Union, which allows for certain decisions to be made by qualified majority instead of unanimity when necessary (such as in situations involving an energy crisis), justified these measures. The Netherlands is obliged to follow that directive under ECT Article 27(1) and Annex II-VI, Section I.
If you have any queries about Netherlands Windfall Tax or Netherlands tax matters more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
On October 26, 2022, President Zelensky signed a law creating an electronic system through which foreign entrepreneurs can apply for residency permits.
Foreigners will be able to obtain an electronic residence (an E-Residence / E-Resident) in Ukraine without having to become Ukrainian tax residents.
It is scheduled to come into effect on April 1, 2023. Under it, foreigners will be able register themselves as private entrepreneurs and pay taxes in Ukraine.
The E-Residency program provides its participants access to a range of services, including the registration and termination of business activities in Ukraine.
The E-Residency status will not grant the right to live or visit Ukraine.
The E-Residency program is open to people who meet all of the following requirements:
To become an E-Resident, applicants must go through the “E-Resident” information system, obtain qualified digital signatures, and pass identification procedures.
Ukraine E-Residence may withdraw from the program at any time by applying for termination.
Ukrainian authorities have the power to revoke an individual’s E-Residency if they decide that this person no longer qualifies for the status.
To become an E-Resident, in addition to the above conditions, you must:
E-Residents will pay a flat tax of 5% on their business income. They are not allowed to deduct any expenses from this amount.
The nature of the business activities of the E-Resident is not restricted.
E-Residents must transfer their business income to the Ukrainian bank account they opened as part of the process.
The bank will also operate as the E-Resident’s tax agent and deduct the relevant tax and deal with all other reporting.
E-Residents are not subject to the social security charges in Ukraine.
E-Residents should consider whether the Ukrainian taxes deducted in respect of their business income can be credited against taxes they are liable in their country of tax residency.
If you have any queries about Ukraine E-Residence then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article
Last week, Belgium approved its federal budget for 2023 – 2024.
The new budget agreement will have a tax impact for individuals and companies established or operating in Belgium. Below is an initial discussion of the tax measures announced in this context.
The highlights in the Belgian Budget are as follows:
| Curtailment to aspects of the copyright regime | At present, copyright income is subject to withholding tax of 15% following the deduction of lump sum expenses of up to 50%. This will be curtailed over a phasing in period of two years. |
| Tax relief for second homes | From 2024, tax relief for second homes will be abolished. |
| Flexi job scheme extension | The scope of the flexi jobs regime will be extended with an increase in hours for student jobs. |
The prime cuts of corporate measures in the Belgian Budget are as follows:
| Employer contributions on indexed wages | There will be a reduction for employer contributions on indexed wages. This applies to contributions for quarters one and two of 2023. |
| Restriction on offset of carried forward tax losses | Tax losses from earlier periods are restricted if the profit of the current taxable period is in excess of €1m. For the 2023 year, large companies would be able to offset only 40% (as opposed to 70%) of profits that exceed €1m against carried forward tax losses. |
| Restrictions to deduction for risk capital | From financial year 2023, the application of the deduction for risk capital will be restricted. |
| Energy Producers Profits Tax | For energy produced between 1 January 2022 and 1 November 2022, there will be an excess profits tax on profits above €180 per MWh. This is a retrospective tax. From November to June 2023, excess profits above EUR 130 per MWh will be taxed. |
The main indirect tax measures are as follows:
| Excise taxes on tobacco | An increase in tobacco excise duties was announced |
| Excise taxes on e-cigarettes | Further, the introduction excise duty on e-cigarettes was unveiled |
| Eco tax on polluting packaging | The tax on polluting packaging was extended |
It is worth noting that the budget has not yet been finalised at this stage so there might be changes or revisions to these proposals.
If you have any queries about the Belgian budget and the proposed tax changes, or Belgian tax more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
Measures announced in the 2021 Federal Fall Economic Update will be implemented by Bill C-8. On 4 May 2022, this Bill passed its third reading in the House of Commons on 4 May 2022.
Its contents will enact measures including:
Other measures are also included.
The first reading of the Bill took place on December 15, 2021.
The new Bill will include a refundable 25% tax credit for qualifying entities, which have qualifying expenditures for air quality improvements. This expenditure must have been incurred between 1 September 2021 and 31 December 2022.
Qualifying entities will include both unincorporated sole proprietors and Canadian-controlled private corporations with taxable capital employed in Canada of less than $15 million in the tax year directly preceding it.
A maximum of $10,000 is available in qualifying expenditures per qualifying location. The credit is capped at a maximum of $50,000 across all qualifying locations. It should be noted that these two ‘caps’ are shared amongst affiliated businesses.
The contents of the bill also includes the new refundable tax credit to return fuel charge proceeds from pollution pricing directly to farming businesses in certain provinces.
These provinces include Ontario, Manitoba, Saskatchewan and Alberta. The scheme started in 2021.
The refundable tax credit is available to taxpayers who are actively engaged in either the management or day-to-day activities of farming. This includes farming enterprises that are carried out through a partnership.
A qualifying farming business must incur total farming expenses of $25,000 and those expenses must be at least partly attributable to the provinces mentioned above.
The bill also includes the proposed legislation behind the Underused Housing Tax Act. This legislation will result in an annual tax of 1% on the value of vacant or underused Canadian residential real property.
The property must be owned either directly or indirectly owned by non-resident non-Canadians.
The new annual tax applies beginning in the 2022 calendar year.
If you have any queries about this article, the Canada Federal Fall Update, or the matters discussed more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.