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In a landmark announcement on 31 March 2024, the Israel Tax Authority (ITA) unveiled two innovative “Green Track” programs aimed at expediting tax ruling applications for foreign investment funds operating within its borders.
This development represents a significant shift towards streamlining the taxation process for these entities, reflecting Israel’s commitment to fostering a favorable investment climate.
The first of these initiatives, known as the Income Tax Ruling, specifically targets hedge funds engaged in a variety of financial activities including trading in securities, futures transactions, and investments in mutual funds.
This ruling outlines a clear tax framework for the calculation and reporting of profits, offering foreign limited partners investing in these funds exemptions from Israeli income taxation.
A notable feature of this arrangement is the provision for a withholding tax exemption certificate, contingent upon the designation of an Israeli trustee.
Venture capital and private equity funds stand to benefit from the second initiative, the VAT Tax Ruling, which directly addresses the Value Added Tax implications for management fees.
This ruling offers a reduction in VAT for management fees, proportional to the investment made by foreign investors in these funds.
It is specifically tailored for funds qualifying under Section 16A of the Israeli Tax Ordinance, affirming the ITA’s support for these critical sectors of the investment landscape.
Historically, the process of obtaining advance tax rulings from the ITA has been both time-consuming and complex, leaving funds and their limited partners in a precarious position regarding tax liabilities.
The introduction of the Green Track Tax Rulings aims to alleviate these challenges, promising a more efficient path to securing necessary tax approvals.
The ITA now anticipates that under this streamlined process, rulings could be issued within a month from the application date, a significant improvement over the previous timeline.
For funds that have already submitted applications for tax rulings prior to the announcement of these Green Track initiatives, the ITA offers an opportunity to expedite their existing applications.
By meeting the eligibility criteria and attaching the new Green Track forms, these applications can now enjoy the benefits of the accelerated process.
Despite the simplified process, the Green Track Tax Rulings come with intricate conditions that necessitate careful consideration and expertise.
This groundbreaking initiative by the ITA marks a significant step towards enhancing Israel’s appeal as a premier destination for foreign investment funds, highlighting its dedication to innovation and efficiency in tax administration.
If you have any queries about the Accelerated “Green Track” Tax Treatment for Foreign Investment Funds, or tax matters in Israel more generally, then please get in touch.
The Indonesian government, in collaboration with the Investment Coordinating Board (BKPM) and the Ministry of Finance (MOF), is introducing additional incentives for the battery electric vehicle (BEV) sector.
These incentives, which include a 0% import duty tariff, exemption from the tax on sales of luxury goods, and a reduced value-added tax (VAT) rate of 1%, are designed to stimulate further investment in the burgeoning electric vehicle industry.
These measures are aligned with Indonesia’s ongoing commitment to accelerating EV investment and complement previous fiscal incentives outlined in the 2019 Presidential Regulation.
Issued on 19 January 2024, BKPM Regulation No. 6 of 2023 offers a range of incentives for BEV manufacturing in Indonesia. Highlights include:
In alignment with BKPM Regulation No. 6 of 2023, the MOF issued three critical regulations to implement the new incentives:
An additional 10% VAT borne by the government for BEV deliveries in 2024, applicable to BEVs with a TKDN of at least 40%;
Further outlines the exemption from the tax on sales of luxury goods for the fiscal period of January to December 2024.
Updates goods classification and import duty rates, specifically adding BEV under certain tariff posts to be subject to a 0% customs duty rate.
To avail of these incentives, manufacturing companies must submit a proposal through the OSS system by no later than 1 March 2025.
This process involves a proposal letter, commitment statements, and subsequent assessment by relevant ministries.
Upon meeting all requirements, companies will receive an approval letter, which serves as the basis for obtaining incentives from the Ministry of Finance and an import certificate from the Ministry of Trade.
As these regulations represent a significant boost for Indonesia’s EV sector, they mark a promising step towards the country’s sustainable and innovative automotive future.
While the application process is still evolving, these incentives are expected to attract considerable investment, drive EV manufacturing, and position Indonesia as a leader in the electric vehicle market.
If you have any queries over this article on Indonesia EV Sector Incentives, or Indonesian tax matters more generally, then please get in touch.
Also, we are looking for tax experts in Indonesia to join our ranks. If you fit the bill, then please get in touch. For more details, please see here.
On 6 March 2024, the Federal Parliament in Belgium saw the introduction of a transformative draft bill aimed at refining Belgium’s investment deduction and tax credit regimes.
This initiative reflects a proactive response to ongoing technological advancements and the pressing demands of climate policy.
Traditionally, Belgium’s tax system encouraged investments through deductions on taxable profits, pegged at a certain percentage of the acquisition value for newly acquired tangible or intangible assets.
Currently, individuals and SMEs enjoy an 8% deduction, with opportunities for enhanced deductions tied to specific investments and adjustments for inflation. However, the landscape is set to change dramatically.
The proposed legislation introduces additional tax deductions for companies and self-employed individuals engaging in specific categories of new assets utilized within Belgium for business operations. Exclusions apply, maintaining a strategic focus on environmental and digital progress.
The basic Investment Deduction is set at 10% for SMEs and self-employed, excluding climate-detrimental investments.
It is boosted to 20% for digital assets investments, with a forthcoming detailed exclusion list.
The Thematic Deduction offers an enhanced 40% deduction for SMEs and self-employed and 30% for larger companies.
Eligible investments include efficient energy, carbon-free transport, eco-friendly projects, and digital advancements in these areas.
A 13.5% deduction for eco-conscious R&D and patents, increasing to 20.5% for staggered deductions.
The bill retains the mechanism for carrying forward unused deductions, ensuring flexibility.
Set to take effect from 1 January 2025, the new regime keeps the current spread investment deduction for assets acquired before this date, promoting a seamless transition.
Belgium’s forthcoming tax reform is a bold step towards marrying fiscal incentives with the urgent need for sustainable and technological advancement.
By fostering a conducive environment for eco-friendly and digital investments, the country positions itself at the forefront of economic resilience and environmental stewardship.
If you have any queries on Belgium’s Investment Deduction for a Sustainable Future, or Belgian tax matters more generally, then please get in touch.
The Canadian government has taken bold steps toward fostering a clean economy with the proposal of five new refundable investment tax credits (ITCs).
These measures, updated as of 6 March 2024, are intended to enhance Canada’s competitiveness in attracting clean energy investments.
This article provides an overview of the proposed ITCs as they stand, following developments from their initial announcement on 4 December 2023.
Aimed at boosting clean technology adoption and operations within Canada, this ITC offers a 30% refundable credit on eligible investments made between 28 March 2023, and the end of 2033.
Investments made in 2034 will receive a 15% credit, with no credit available for investments thereafter.
This incentive targets taxable Canadian corporations and mutual fund trusts, including those part of a partnership investing in eligible property.
This credit supports investments in carbon capture technology, offering up to 50% for direct carbon capture expenditures and 60% for capturing carbon from ambient air.
A 37.5% credit is also available for qualified carbon transportation, storage, and use expenditures.
These rates apply to expenses incurred from January 1, 2022, to December 31, 2030, halving for the following decade and expiring after 2040.
Investments in clean hydrogen production projects will benefit from a credit up to 40%, depending on the carbon intensity of the produced hydrogen.
This applies to projects available for use from 28 March 2023, to the end of 2033, with a reduced rate for 2034 and no credit thereafter.
A 30% credit is available for investments in clean technology manufacturing and critical mineral processing from 2024 to 2031, with a gradual reduction to 5% by 2034.
This aims to encourage the manufacturing or processing of renewable energy equipment and other clean technologies.
Offering a 15% refundable credit for investments in clean electricity generation, storage, and transmission, this ITC will be available following the 2024 federal budget delivery for projects not commenced before March 28, 2023.
The initiative encompasses a wide range of clean energy sources, including wind, solar, and nuclear, and will conclude after 2034.
Each tax credit is specifically designed to support different segments of the clean energy sector, from technology adoption and carbon capture to clean hydrogen production and clean electricity generation.
Taxpayers are generally restricted to claiming one credit per eligible investment, and none of these credits have yet become law.
These ITCs are refundable, meaning they are treated as payments already made by the taxpayer, with refunds issued if no additional tax is due.
The design of these credits involves specific labor and production requirements, with potential recapture for properties that change use, are exported, or disposed of within certain timeframes.
Canada’s proposed investment tax credits represent a significant push toward a sustainable, clean economy.
By incentivizing investments in clean technology, carbon capture, clean hydrogen, and clean electricity, the government aims to position Canada as a leader in clean energy while fostering economic growth.
As these credits move through the legislative process, businesses and investors should stay informed and consult with professionals to understand how these incentives could impact their operations and investment decisions.
If you have any queries about the proposed Investment Tax Credits for the Clean Economy in Canada, or other Canadian tax matters, then please get in touch.
The Court of Justice of the European Union (CJEU) Advocate General, Athanasios Rantos, has delivered an opinion suggesting that Spain’s regional variation of the Special Tax on Hydrocarbons (STH), effective between 2013 and 2018, contradicts the EU Energy Taxation Directive.
This position could significantly influence the forthcoming CJEU judgment, potentially impacting how energy products are taxed across regions within Member States.
The STH, an excise duty levied on mineral oil products’ transfer to purchasers, is aimed at taxing the ownership transfer from tax warehouse holders to buyers.
This duty, while ensuring tax collection from the purchaser by the warehouse holder, prohibits the latter from transferring the tax burden to customers, albeit allowing its consideration in product pricing.
Governed by the Law 38/1992 on excise duties, the STH’s harmonization with EU law, specifically with Directive 2003/96/EC, is crucial for its legality.
The introduction of an “Autonomous Community Tranche” allowing regions to apply supplementary tax brackets sparked legal debate, leading to varying tax levels across Spain based on purchase locations.
Questions arose regarding the tranche’s alignment with Directive 2003/96, especially Article 5, which discusses tax bracket uniformity within Member States.
Legal challenges ensued, prompting a referral to the CJEU for clarity on whether such regional tax brackets comply with EU directives.
Advocate General Rantos argued that Member States cannot implement regional excise duty variations without Council authorization, which Spain did not obtain.
Emphasizing the internal market’s integrity and the free movement of goods, Rantos highlighted that differentiated tax tranches could fragment the market, opposing Directive 2003/96’s objectives.
Furthermore, he noted that the Autonomous Community Tranche lacks a specific purpose, thereby not satisfying Directive 2008/118 conditions.
The principle of equal treatment, according to Rantos, further invalidates the regional tax differences within Spain.
Should the CJEU’s final decision align with the Advocate General’s opinion, it could echo the 2014 ruling against Spain’s “Céntimo Sanitario,” leading to the regional tax’s annulment.
This outcome would necessitate a mechanism for affected taxpayers to claim refunds, considering the tax’s non-transferable nature and the need to demonstrate that the tax burden wasn’t passed on.
The CJEU’s forthcoming judgment and its retrospective effect could significantly influence Spain’s taxation landscape, potentially mandating refunds to taxpayers who bore the STH without lawful basis.
As the legal community and taxpayers await the CJEU’s definitive ruling, the Advocate General’s stance marks a critical step towards resolving the dispute over Spain’s regional hydrocarbon taxation.
If you have any queries about this article, or Spanish taxes in general, then please get in touch.
Singapore’s recent decision to significantly increase its carbon tax from SGD 5 ($3.72) per metric ton of CO2 to SGD 25 underscores the nation’s firm commitment to combating climate change and advancing towards a carbon-neutral future.
This policy shift is a clear indication that, without deliberate government action, corporate efforts alone are unlikely to suffice in making a meaningful impact on carbon emissions reduction.
This tax hike is envisioned not as a harsh imposition but as a strategic encouragement for businesses to explore and adopt innovative, sustainable practices and technologies.
With the tax projected to escalate to SGD 50 per metric ton by 2030, the race towards green profitability, where environmental sustainability and economic gains converge, is on.
The focus now shifts towards investing in renewable energy, enhancing operational efficiency, and implementing carbon capture, utilisation, and storage (CCUS) technologies.
Despite the existence of various CCUS methods, integrating these technologies into current industrial frameworks remains a significant challenge.
Singapore’s journey towards economic viability for these technologies involves not only fostering local innovations but also forming international collaborations for carbon sequestration, especially considering the nation’s limited space for onsite carbon storage.
Renewable energy, another cornerstone of Singapore’s sustainability strategy, faces similar spatial constraints.
Despite abundant sunlight, the scarcity of land limits large-scale solar panel installations.
In response, Singapore is diversifying its renewable energy portfolio through regional investments and plans to import up to 4 gigawatts of renewable power, possibly including solar, wind, and hydroelectric sources, from neighboring countries.
This approach, however, introduces new challenges, such as ensuring the consistent reliability of power supply and managing the complexities of subsea cable installations for energy transmission.
Moreover, the intermittent nature of renewable energy sources necessitates innovative solutions, such as diverse sourcing and storage systems, to ensure a stable energy supply.
Navigating the path to carbon neutrality is further complicated by international policy ambiguities related to carbon trading and storage.
Achieving a global consensus on these issues is crucial for facilitating a seamless transition to greener practices.
As the world gradually shifts towards carbon pricing and sustainability, early adopters like Singapore are poised to emerge as more resilient and competitive entities.
With a pragmatic yet ambitious approach, Singapore’s journey towards energy decarbonization offers valuable lessons and opportunities for innovation and collaboration on a global scale.
If you have any queries about this article on Singapore Increases Carbon Tax, or any other Singopore tax matters, then please get in touch.
If you have any queries about this article on New Zero Tax Rate on Photovoltaic Systems in Germany, or German tax matters in general, then please get in touch.
In an impactful decision, the Spanish General Directorate of Taxes (SGDT) has clarified that capital gains exemptions will apply to the sale of shares in subsidiaries dedicated to photovoltaic energy projects, even if the construction has not commenced.
This announcement marks an essential step in providing clarity for the renewable energy sector.
The ruling specifically pertains to holding companies engaged in renewable energy projects, focusing on photovoltaic energy.
The subsidiaries or Special Purpose Vehicles (SPVs) involved in these projects are at various stages, from land scouting to feasibility analysis and permits and licenses management.
However, these SPVs might not possess their own resources and personnel.
The SGDT’s perspective is that these SPVs should not be considered mere asset-holding entities.
Instead, they are actively involved in the economic activity of promotion and development.
Provided that they have their organizational setup for production and distribution, the SGDT allows for the application of the exemption for capital gains derived from the sale of these SPVs, even before the actual construction work on the photovoltaic solar parks has started.
The SGDT emphasizes that the income resulting from the sale of SPVs should be allocated to the corporate income tax in the year it accrues.
This applies to the fixed part of the agreed price.
For the variable part, dependent on uncertain future events, it should be included in the tax base when those events occur, and a reasonable estimate can be made of the variable price.
This ruling closes the debate that arose from previous similar cases.
Some prior rulings questioned the exemption when economic activity had not yet materially commenced.
However, recent rulings have taken a more favorable stance regarding the application of the exemption.
This ruling provides much-needed clarity for businesses operating in the renewable energy sector, allowing for the application of capital gains exemptions on SPV sales.
It is essential to review the conditions and assess each case individually to ensure compliance.
This decision also highlights the need to evaluate the valuation of services provided by holding companies and group entities to SPVs.
Such assessments should align with market value and necessitate a review of the group’s transfer pricing policy.
If you have any queries about Spain’s Exemption for Renewable Energy Projects, or Spanish tax matters in general, then please get in touch.
France’s vision for a greener and more sustainable future has taken a significant step forward with the release of the French Finance Bill for 2024, unveiled on 27 September 2023.
One of the headline features of this bill is the introduction of a Tax Credit for Investments in Green Industries, known as the Crédit d’impôt “Investissement Industries Vertes” (C3IV).
This tax credit is designed to reinvigorate the country’s industrial sector and reduce the carbon footprint of French industries, setting a promising course towards environmental sustainability.
The C3IV tax credit is poised to make a substantial impact on the development of green industries in France.
It is available to companies based in France that make tangible and intangible investments in the production of specific green products, with a strong emphasis on sustainability and carbon reduction.
The eligible products encompass cutting-edge technologies that are vital for a greener future, including new-generation batteries and their key components, solar panels, wind turbines, and heat pumps.
Companies can claim the tax credit for tangible investments, which include land, buildings, facilities, equipment, and machinery, as well as intangible investments such as patent rights, licenses, knowledge, or other intellectual property rights.
The tax credit’s value varies, ranging from 20% to 60% of the investments made, depending on factors like the location of the investment and the size of the investing entity.
Importantly, this incentivizes both small and large companies to contribute to the green industry.
The tax credit comes with a maximum limit, which ranges from €150 million to €350 million, determined by the location of the investment.
This ensures that the benefits are distributed across various regions.
The tax credit is applied against the corporate income tax due by the company for the fiscal year in which the investments are made.
If the credit exceeds the tax liability, the excess will be reimbursed to the company.
The C3IV tax credit is expected to not only boost environmental sustainability but also stimulate the French economy.
According to the French government, this initiative has the potential to generate approximately EUR 23 billion in investments and create around 40,000 jobs in France by 2030, showcasing the power of green industry growth.
To be eligible for this tax credit, companies must align with certain criteria, subject to approval by the Ministry of Finance and authorization by the European Commission.
Eligible expenditures include:
It’s important to note that the C3IV tax credit will apply to projects approved by the Ministry of Finance and subject to prior approval by the Agency for Ecological Transition (ADEME).
The eligibility window extends until December 31, 2025, with applications accepted from September 27, 2023, onward.
France’s 2024 Finance Bill and the introduction of the C3IV tax credit signify a resolute commitment to a sustainable and environmentally responsible future.
This innovative approach not only promotes the growth of green industries but also aims to strengthen the nation’s industrial base.
With the potential to drive billions in investments and create thousands of jobs, this tax credit is a bold step towards a cleaner, greener, and more prosperous France.
As the world grapples with environmental challenges, France’s vision for green investments sets a powerful example for the global community.
If you have any queries about this article, or tax matters more generally, then please get in touch.
In a bid to take substantial strides towards its climate goals, the Dutch government unveiled a series of legislative proposals and amendments concerning energy and environmental taxes on Budget Day.
These measures are geared towards reducing the Netherlands’ greenhouse gas emissions by a commendable 55% by 2030, in alignment with the government’s climate ambitions.
However, it’s essential to bear in mind that these proposals are subject to discussions, amendments, and adoption by the Dutch parliament.
This article provides an in-depth look at some of those proposals covering:
From 1 January 2024, the energy investment deduction (EIA) rate will undergo a reduction, declining from 45.5% to 40%.
Additionally, the sunset clause for energy and environmental deductions has been extended until 2028, implying that they will remain in effect, at least until that time.
As of 1 January 2025, the energy tax exemption for electricity and gas used in metallurgical and mineralogical processes will be eliminated.
The Dutch government views these exemptions as fossil subsidies, which no longer align with the nation’s climate objectives.
In addition, a new energy tax exemption will be introduced on 1 January 2025, for the supply of electricity used in hydrogen production via electrolysis.
This exemption is confined to electricity utilized directly in the water-to-hydrogen conversion process, encompassing activities like demineralization, electrolysis, and the purification and compression of resulting hydrogen.
Starting January 1, 2025, several changes are proposed regarding exemptions for electricity production, including cogeneration.
Key changes include:
The reduced energy tax rate presently applicable to the greenhouse horticulture sector will be gradually phased out, commencing on 1 January 2025, and concluding in 2030.
Effective from 1 January 2024, a new, lower bracket in the energy tax will be introduced for both electricity and gas.
This bracket will cover the first 2,900 kWh of electricity and 1,000 m3 of gas.
This adjustment is intended to provide the government with the flexibility to reduce energy tax for households when necessary, aligning with the current price cap for households.
Various changes will be made to tax regulations for block heating, designed to accommodate the modifications in tax brackets mentioned above.
Starting January 1, 2024, the Dutch minimum carbon tax prices for the industrial and electricity generation sectors will rise. Despite these increases, the government anticipates no budgetary implications, given the existing EU ETS price. The new minimum prices are as follows:
Commencing January 1, 2025, a carbon tax will be introduced for CO2 emissions in the greenhouse horticulture sector, mirroring the current system in place for the industrial sector.
This development coincides with the introduction of specific EU ETS obligations for the built environment.
With effect from 1 January 2028, the coal tax exemptions for dual coal use and coal utilization for energy production will be discontinued.
The current coal tax rate stands at EUR 16.47 per metric ton.
New information obligations will be incorporated into specific energy tax regulations to align with the European Commission’s guidelines on State Aid for climate, environmental protection, and energy.
Commencing on 1 January 2024, these rules will encompass principles for providing data and information, upon request, to comply with EU obligations.
The Dutch government’s commitment to climate goals is evident in these proposed tax changes, which seek to incentivize eco-friendly practices while gradually phasing out less sustainable measures.
These proposals will be closely monitored as they make their way through the legislative process, potentially reshaping the landscape of energy and environmental taxation in the Netherlands.
If you have any queries about the Netherlands’ Green Budget, or Dutch tax in general, then please get in touch.