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This year’s tax changes include:
The COVID-19 development and high inflation of 2022 resulted in several changes to the Canadian tax system.
Taxpayers must be aware of these changes when filing income tax returns in 2023 and beyond.
To help Canadians offset inflation, which was at a historic high last year, the federal government has adjusted tax brackets for the 2022 tax year.
The new brackets and tax rates are as follows:
The Basic Personal Amount (BPA) is a non-refundable tax credit that can be claimed by any Canadian who files income taxes.
The BPA is a tax break that gives individuals making less than a certain amount a full income tax reduction. Taxpayers who make more than this basic amount receive a partial reduction.
In December 2019, the Government of Canada announced a goal to increase the Basic Personal Amount to $15,000 by 2023. This increase is being phased in over time and will reach $14,398 for the 2022 tax year.
The First-Time Home Buyers’ Tax Credit is a federal government initiative to make homeownership more affordable for some Canadians by providing a tax credit on purchasing newly built homes.
As of December 2022, eligible first-time home buyers can now claim a $10,000 non-refundable tax credit — double what they could before — which could result in tax savings of up to $1,500.
The Home Buyer’s Tax Credit will help you offset taxes you owe—enter the amount of $10,000 on Line 31270 of your income tax return.
The Old Age Security (OAS) program provides retired Canadians with income to help them throughout retirement.
However, seniors who make less income are sometimes asked to pay back some of their OAS.
The following are the revised thresholds for the 2023 tax year:
The Canada Pension Plan changed in 2023. The new calculations will be based on a legislated formula using the average growth rate of salaries and weekly wages earned throughout Canada.
The maximum pensionable earnings under the Canada Pension Plan (CPP) will be $66,600 in 2023. The basic exemption amount stays the same at $3,500 in 2023.
The CPP contribution rate has also been adjusted accordingly.
Employees and employers will pay 5.95% of their income in 2023 (up from 5.70% in 2022) to a maximum contribution of $3,754.45.
Self-employed individuals will pay 11.90% of their income in 2023 (up from 11.40% in 2022) toward a maximum contribution of $7,508.90.
The annual dollar limit for RRSPs is $29,210 for the 2022 tax year, an increase from $27,830 in 2021.
However, remember that your contribution limit is still capped at 18% of your earned income.
The Government of Canada created COVID-19 benefits to provide financial aid to those affected by the pandemic.
Those who received COVID-19 benefits in 2022 will receive a T4A slip showing all the information required to complete their income tax return.
Individuals with incomes over $38,000 might be required to pay back part or all of the benefits received.
Refusal to repay may result in the Canada Revenue Agency keeping some or all future payments, including tax refunds and GST/HST credits.
If you can’t pay in full, the CRA may work with you to arrange a payment plan.
If you have any general queries about Canadian Tax or this article, 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.
Monaco’s fiscal system is based on the principle of a total absence of direct taxation. There are two exceptions to this principal;
Monaco has signed no other bilateral fiscal agreements with other countries.
Monaco residents (except French nationals) are not required to pay taxes on income, betterment or capital gains. For French nationals, two categories exist:
The following rates of inheritance tax apply to assets located in Monaco:
There is no direct tax on companies. Besides the tax on profits mentioned in the previous cases above, companies are not required to pay directly for taxes.
Registration duties are collected from those registering real estate transfers or changes of ownership.
For official civil and judicial acts, fiscal stamps are required. Furthermore, all documents which could be used as evidence in court must be stamped to be valid. Stamp costs vary depending on the document’s format or value involved.
If you have any general queries about this article, please do not hesitate to get in touch.
On 30 June 2022, the Cyprus Parliament approved amendments to the Cyprus Income Tax Law and new Regulations to introduce Transfer Pricing (“TP”) documentation compliance obligations (Master File, Cyprus Local File, Summary Information Table).
The documentation requirements apply to Cypriot tax resident persons and Permanent Establishments (PE’s) of non-tax resident entities that engage in transactions with related parties. The aim of the new law and regulations is to ensure compliance of covered entities with the arm’s length principle.
In addition, the law has been amended to update the definition of related parties by introducing a minimum 25% relationship threshold relevant for companies.
The law amendments and Regulations are effective from the tax year 2022 onwards.
The new transfer pricing law and regulations cover all types of transactions between related parties in excess of €750.000 per category of transaction.
Different types of transactions include sale/purchase of goods, provision/receipt of services, financing transactions, receipt/payment of IP licences/royalties, others.
A relevant notification has been issued by the Cyprus Tax Department (“CTD”) providing (amongst others) the required detailed contents of the Master File and Cyprus Local File.
The Summary Information Table (SIT) must be prepared by all taxpayers that engage in Controlled Transactions on an annual basis, disclosing details regarding such transactions. There is no threshold for the SIT, and this must be submitted electronically together with the Income Tax return for the relevant tax year.
The following exemptions shall apply:
A person who holds a Practicing Certificate from the Institute of Certified Public Accountants of Cyprus (ICPAC) or another approved by the Council of Ministers body of certified auditors
in Cyprus is expected to perform a Quality Review of the Cyprus Local File.
The TP Documentation File must be prepared on an annual basis, by the deadline of filing the Income Tax Return for the relevant tax year.
In case of late submission or non-submission of files, the law and regulations prescribe the following penalties:
| Non-submission of Table of Summarized Information within deadline | € 500 |
| Late filing of the Local &/or Master File: | |
| – within the 61st and 90th day from request | € 5,000 |
| – within the 91st and 120th day from request | € 10,000 |
| – after the 121st day from request or non-filing | € 20,000 |
If you have any queries about this Cyprus Transfer Pricing update, or Cyprus tax matters 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.
In December 2022, Kazakhstan amended its tax legislation.
We set out some of the relevant amendments in this article.
New restrictions will be imposed in relation to Kazakhstani companies seeking to apply double tax treaty benefits.
The changes relate to the following payments made to a foreign related party:
In particular, where a related party is in receipt of income, then the treaty rates may only be applied if the recipient is subject to an effective income tax rate of at least 15% on receipt in its home country.
This change was effective from 1 January 2023.
Here, individuals that are not classed as independent contractors will now become withholding agents in relation to capital gains in respect of share deals.
As such, they will need to deduct and withhold capital gains tax from the purchase price of shares. They will then need to pay this over to the authorities.
This change will take effect from 21 February 2023.
For those with, or clients with, subsidiaries in Kazakhstan, we would suggest reviewing these changes in line with any proposals to pay dividends, royalties or interest.
Further, those dealing with individuals who will now be brought within the capital gains tax withholding requirements then they should ensure they consider their compliance with these obligations.
If you have any queries relating to the Kazakhstan’s recent tax amendments or tax matters in Kazakhstan 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.
Eventually, after a number of failed attempts, the EU has reached agreement on the Minimum Taxation Agreement.
The 27 European Union Member States reached agreement on the 12 December 2022.
The agreement clears the way for the implementation of a minimum level of taxation for the largest companies. These reforms are also known as the Pillar Two or Minimum Taxation Directive.
The Directive has to be transposed into Member States’ national law by the end of 2023.
Broadly, the agreed Directive reflects the global OECD agreement with some adjustments.
The new agreement will apply to any large group of companies whether domestic or international. The rules will apply to such organisations with aggregate revenues of over €750 million a year. As such, it will only apply to the biggest companies around the globe.
It should be noted that it is necessary for either the parent company or a subsidiary of the group to be situated within the EU.
The effective tax rate is established for a location by dividing the taxes paid by the entities in the jurisdiction by their income.
Where this calculation results in a rate of tax below 15% then the group must ‘top-up’ the tax paid such that the overall rate is 15%.
The development means that the EU will be a pioneer around Pillar Two. However, it seems highly likely that other jurisdictions (I.e non-EU) will follow suit.
Further, by the end of this month (Jan 2023), it is expected that the OECD will publish its own guidelines for Pillar Two. Again, these should act as a catalyst for wider adoption of Pillar Two internationally.
In addition, it is expected that they will shed some light on some of the key outstanding issues around how the US rules (such as US GILTI rules) will conform with Pillar Two.
If you have any queries about the EU agreement on Pillar Two, or international tax matters 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
The United States and Croatia signed their first double tax treaty (“treaty”) on 8 December 2022.
This means that all member states of the European Union (“EU”) now has a tax treaty with the US, as Croatia was the ‘last man standing’ in terms of not having such a treaty.
So, what does the treaty say?
| Item | Description |
| Dividends | The treaty reduces withholding taxes (“WHT”) on dividends. The treaty rate is capped at 15%. One exception is where the beneficial owner of the dividend is a company which has held a direct interest of at least 10% of the company paying the dividends for the preceding twelve-month period. Here, the maximum rate under the Treaty is reduced to 5%. In addition, dividends generally paid to certain pension funds qualify for a full exemption from WHT in the source company. |
| Interest | The treaty seeks to eliminate WHT on most interest payments. However, WHT is payable and capped at 15% in some circumstances. Those circumstances include: interest arising in Croatia that is determined with reference to receipts, sales, income, profits or other cash flow of the debtor, to any change in the value of any property of the debtor or to any dividend, partnership distribution or similar payment made by the debtor interest arising in the United States that is contingent interest of a type that does not qualify as portfolio interest under the law of the United States. |
| Royalties | The treaty limits WHT on royalties to 5%. |
| Reservation | In the treaty, the US reserves the right to impose what is known as the “BEAT” tax under US Internal Revenue Code section 59A (“Tax on Base Erosion Payments of Taxpayers with Substantial Gross Receipts”). This applies to relevant profits of a company resident in Croatia and attributable to a US permanent establishment. |
| Limitation on benefits (“LoB”) | Those familiar with double tax treaties where one of the contracting parties is the US will be familiar with the LoB article. Broadly, such a clause has applied since the introduction of the 2016 US model tax convention. It is a complex limitation on benefits clause. The result of the LoB in this case means that the application of the treaty is generally limited to “qualified persons” as defined in Article 22 of the Treaty. In general, Article 22(2) requires a resident to be a qualified person at the relevant time that treaty benefits are sought. For the ownership-base erosion test under Article 22(2)(f), the resident must also satisfy the ownership threshold on at least half of the days of any 12-month period that includes the date when the treaty benefit would be accorded. Alternatively, a resident that is not a qualified person under paragraph 2 may still be eligible for treaty benefits for an item of income if it meets one of the other tests under the LOB provision, namely the active trade or business test (ATB test), derivative benefits test or headquarters company test under Articles 22(3), (4) and (5) respectively. |
The signing of the treaty by the US and Croatia is a welcome development. It will clearly be of great application to businesses and individuals operating across the two jurisdictions.
The Treaty will enter into force after both contracting parties have approved it in accordance with their internal legislative procedures.
If you have any queries about the United States / Croatia double tax treaty, or US tax or Croatia 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
Parliament is currently discussing the draft 2023 Budget Law. Although this is yet to be approved, the draft signals a potential change to the taxation of rela estate companies in Italy. Specifically, the tax treatment of shareholdings in such companies.
Article 23 of Presidential Decree no. 917/1986 proposes new provisions regarding the ‘alienation’ of shareholdings in real estate companies by certain persons.
Specifically, the proposals relate to disposals by:
In other words, companies and entities that derive their value mainly from real estate situated within the Italian territory.
It is a provision aimed at taxing capital gains on foreign shareholdings that result, de facto, the transfer of real estate properties located in Italy.
Undoubtedly, the proposal has got its inspiration fromArticle 13, paragraph 3, of the OECD Model Tax Treaty. This is often referred to as the “land rich clause”.
The proposals could have an immediate impact on cases where the shareholder realising the capital gain:
The proposals do not apply to shares listed on a stock exchange.
Where there is a tax treaty in force, the change could apply where the tax treaty with the shareholder’s state of residence grants Italy rights of taxation in respect of capital gains on shareholdings in real estate companies.
In this respect, Italy may tax such capital gains in accordance with provisions set forth by over twenty tax treaties including the land rich clause. It is likely that the number of tax treaties that reflect this position will increase over the coming years.
If you have any queries about this article on Italy real estate companies, Italian tax matters or capital gains in general then please do not hesitate to contact us.
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.
The Hong Kong SAR government is acting to implement the Multilateral Convention on Implementing Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting.
The OECD developed the convention to ensure swift, coordinated and consistent implementation of its tax treaty-related base erosion and profit-shifting measures in a multilateral context.
The Multilateral Convention is one of the 15 recommended actions from the Organization for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project.
It enables fast and steady implementation of the tax treaty-related recommendations under BEPS – hybrid mismatches (Action 2), tax treaty abuse (Action 6), permanent establishments (Action 7) and dispute resolution (Action 14).
The Inland Revenue (Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting) Order was tabled at the Legislative Council on 19 October for negative vetting.
In May 2022, China started with its approval with the OECD.
The Chinese government extended the application of the MLI to Hong Kong and its provisions will take effect here after the completion of domestic legislative procedures.
Hong Kong has listed 39 countries it has signed DTAs with as countries intended to be covered by the MLI.
The remaining six DTAs have already included BEPS-compliant provisions.
The MLI will take effect in Hong Kong concerning covered DTA’s at the beginning of April 2023 for taxes withheld at source or 1 April 2024 for other taxes.
If you have any general queries about this article on the MLI or Hong Kong tax matters, please do not hesitate to get in touch.
Several weeks ago, we commented on the Spanish Government’s recently proposal to introduce a Solidarity Wealth Tax.
However, this article considers new wealth tax proposals – in respect of the Net Wealth Tax and the Solidarity Wealth Tax – for non-Spanish-tax-resident individuals who hold Spanish real estate through one or multiple non-Spanish-resident entities.
It is envisaged that non-Spanish-tax-resident individuals would be subject to the Net Wealth Tax (“NWT”) when they hold shares in an unlisted entity. This would be where “at least 50% of its assets are directly or indirectly made up of real estate located in Spain”.
These new proposals would replace the current domestic provisions which historically have required non-resident individuals to pay NWT in circumstances where they directly own real estate only.
Additionally, the Spanish Government plans to bring in the Solidarity Tax (“ST”) to supplement the regional NWT. The ST will be calculated and assessed at the federal level.
The ST will be levied on non-Spanish-tax-resident individuals with a net wealth in Spain of at least EUR 3 million. It should be noted that this will include any interests in non-resident entities that own Spanish real estate
The NWT can be credited against any ST liability.
It is expected that these measures will be passed before the end of 2022.
If the new legislation is published prior to the end of 2022, then both would apply to indirect holdings of Spanish real estate held on 31 December 2022.
It is currently expected that both would have to be paid in June or July of the following year.
If you have any queries about the Spanish Net Wealth Tax or Solidarity Wealth Tax, or Spanish tax matters in general, then please do 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.
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