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On 19 January 2024, the Dutch Supreme Court delivered a landmark decision addressing the contentious issue of beneficial ownership concerning Dutch dividend tax credits.
This judgement overturns a prior ruling by the Court of Appeal and provides crucial guidance on the interpretation of anti-dividend stripping rules within Dutch tax law.
The case involved a Dutch taxpayer, X BV, a subsidiary of an international banking group that held shares in Dutch companies as part of its investment portfolio.
These shares were loaned to its indirect UK parent company and were returned to X BV’s securities account, managed by a French custodian, just before dividends were distributed.
X BV claimed it was both the recipient and beneficial owner of these dividends, crediting the Dutch dividend tax against its corporate income tax.
The Dutch tax authorities contested this, denying the credit based on anti-dividend stripping rules.
The Court of Appeal had previously determined that X BV was not the beneficial owner of the dividends due to the influence of the UK parent company over the shares and dividends.
However, the Supreme Court found this interpretation overly broad and vague, ruling that the anti-dividend stripping rule did not apply in this context.
It clarified that the legal owner of a dividend, who can freely dispose of it and is not acting as an agent, is generally considered the beneficial owner, except under specific circumstances outlined in anti-abuse rules.
The Supreme Court also instructed a reevaluation of X BV’s legal ownership of the shares under French law, given the securities account’s location.
This is essential for determining X BV’s right to credit the dividend tax.
This ruling has significant implications for Dutch taxpayers and the Ministry of Finance, particularly concerning the interpretation and application of beneficial ownership and anti-abuse rules in dividend transactions. It highlights:
The Supreme Court’s decision offers welcome clarity on the open norm of beneficial ownership, limiting its application and enhancing legal certainty for taxpayers.
It is a crucial development for entities engaged in similar transactions, providing a clearer path to navigate the complexities of Dutch dividend tax law.
As of January 1, 2024, amendments to the rules on beneficial ownership have broadened the scope of specific situations of abuse and shifted the burden of proof to the taxpayer for dividend tax amounts exceeding €1,000.
The verdict also has potential implications for ongoing tax litigation and existing investment structures, warranting a review of stock agreements and tax planning strategies.
If you have any queries about this article on Dutch Supreme Court Clarifies Beneficial Ownership in Dividend Case, or Dutch tax matters in general, then please get in touch.
A year after Hong Kong lifted its final COVID-19 restrictions, the city continues grappling with economic recovery challenges, exacerbated by global geopolitical tensions and high interest rates.
Despite these hurdles, the Financial Secretary, Mr. Paul Chan, unveiled several tax-related measures in the 2024-25 Budget Speech on 28 February2024, aimed at revitalising the economy.
This article delves into the key measures affecting high net worth individuals, fund managers, and property investors.
In an effort to increase public revenue, the government proposes a two-tiered standard rate for salaries tax and personal assessment.
The new regime maintains the standard 15 percent rate on the first HK$5 million of net income, while income above HK$5 million will incur a 16 percent rate.
Targeting the city’s wealthiest, this adjustment is expected to affect approximately 12,000 taxpayers, or 0.6 percent of the taxable population.
Despite these changes, Hong Kong’s tax rates remain competitive globally, with rates significantly lower than those in Australia, the United Kingdom, the United States, and Singapore.
This strategic move aims to preserve Hong Kong’s appeal as a low-tax haven for affluent professionals and talents.
In a decisive move to stimulate the stagnant property market, all existing cooling measures were abolished as of February 28, 2024.
This sweeping reform followed a partial relaxation last October, including a 50 percent reduction in Buyer’s Stamp Duty (BSD) and New Residential Stamp Duty (NRSD).
Now, both sellers and buyers face only the Ad Valorem Stamp Duty (AVD) at Scale 2 rates, which are significantly more favorable and do not discriminate based on buyer type or residency status.
This policy shift is anticipated to rejuvenate market confidence and transaction volume.
It also opens new doors for using corporate vehicles or trust structures for property purchases and succession planning, a tactic previously deterred by high Stamp Duty costs.
Aiming to solidify Hong Kong’s status as a leading asset and wealth management hub, the Budget proposes to refine tax concession regimes for investment funds, single family offices, and entities receiving carried interest.
Plans include broadening the scope of tax-exempt transactions and easing limitations on incidental transaction income, which has been tightly capped until now.
These adjustments are designed to attract more fund managers and family offices by offering tax incentives on a wider array of financial transactions.
Although specifics are pending, the commitment to expand these tax advantages underscores a clear strategy to bolster investment and reinforce Hong Kong’s competitive edge in global finance.
The 2024-25 Budget reflects Hong Kong’s strategic approach to economic recovery, with significant tax reforms and regulatory easements designed to attract high net worth individuals, enhance the property market, and cement the city’s role as a global financial hub.
As these measures unfold, they promise to reshape Hong Kong’s economic landscape, offering new opportunities for growth and investment in the post-pandemic era.
If you have any queries about the Hong Kong 2024-25 Budget, or Hong Kong tax matters in general, 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.
In its 2024 budget, Zambia sets forth a series of tax measures designed to stimulate economic growth, enhance policy consistency, and ensure equitable development across various sectors.
With a projected growth increase from 4% in 2023 to 4.8% in 2024, and amid a backdrop of contained external debt and decreasing inflation, these reforms aim to unlock Zambia’s economic potential through both incentives and tightened tax administration.
Enhancements to the Pay-As-You-Earn (PAYE) system include raising the income tax exemption threshold from K4,800 to K5,100 and reducing the top monthly tax rate from 37.5% to 37%, effectively increasing disposable incomes and stimulating consumer spending.
A reduction in income tax by 20% for five years for investments in rural areas, applicable to all sectors except mining, encourages businesses to contribute to rural economic development.
Tax exemptions for up to 10 years for profits derived from the cotton value chain promote the agriculture sector’s diversification and competitiveness.
Immediate 100% tax write-offs for new equipment for both developers and investors in MFEZs aim to spur significant investment in these special economic zones.
Aligning with incentives for other crops, this measure encourages the production and processing of sorghum and millet, supporting agricultural diversification.
The law now acknowledges the final ruling date in disputes as the official date for assessment, ensuring fairness in transfer pricing adjustments.
Removing the six-year limit on assessing transfer pricing issues enhances the tax authority’s flexibility in managing complex audits.
This measure ensures that related-party transactions employing non-OECD methods meet the Commissioner’s standards, aligning Zambia with international best practices.
The redefinition of terms to match OECD standards demonstrates Zambia’s commitment to maintaining coherence with global tax norms.
The introduction of agents to manage royalty withholding aims to improve compliance among small-scale miners, ensuring a level playing field in the mining sector.
Harmonizing penalties across the mining sector, including artisanal and small-scale activities, deters tax evasion and fosters fair competition.
Enhancing the Commissioner General’s authority to request information from various professionals and regulators strengthens the tax administration’s capacity to enforce compliance.
By incentivizing investment in key sectors, adjusting direct tax measures for individuals and industries, and tightening tax administration, Zambia is poised to harness its full economic potential while ensuring fairness and transparency in its tax system.
If you have any queries about this article on Zambia’s 2024 tax reforms, or other related tax matters, then please get in touch.
The Netherlands’ recent update to its list of low-taxed and non-cooperative jurisdictions for 2024 has notably excluded the United Arab Emirates (UAE), marking a shift in tax policy.
This change follows the UAE’s introduction of a federal Corporate Income Tax (CIT) regime, setting a standard tax rate of 9% for financial years beginning on or after 1 June 2023.
Of course, this blacklist has nothing to do with Raymond Reddington.
Instead, the Dutch tax blacklist is a list of jurisdictions that facilitate abusive tax structures through minimal or non-existent taxation rates, defined as less than 9%.
The presence on this list subjected entities in blacklisted jurisdictions to stringent domestic anti-abuse measures in the Netherlands.
These included conditional withholding taxes on cross-border payments and limitations on obtaining tax rulings for transactions involving blacklisted jurisdictions, alongside the application of Controlled Foreign Corporation (CFC) rules that impacted the taxable income of Dutch entities.
The removal of the UAE from this blacklist alleviates several challenges for UAE-based businesses operating in the Netherlands.
Previously, the anti-abuse measures introduced a layer of complexity and uncertainty for transactions between the two nations.
Now, the reclassification signals a positive development, potentially enhancing economic connections and fostering a more favorable environment for cross-border investments and collaborations.
The UAE’s proactive adjustment of its tax regime to introduce a CIT rate aligns with global tax standards and demonstrates a commitment to fostering a transparent and cooperative financial landscape.
This adjustment has directly influenced its standing with the Netherlands, removing barriers that once complicated financial and corporate engagements.
For businesses within the UAE with Dutch interests, this development opens doors to new opportunities and simplifies operations, heralding a phase of strengthened economic ties between the UAE and the Netherlands.
This move is anticipated to encourage a smoother flow of trade, investment, and financial services between the two countries, reinforcing their positions in the global market.
If you have any queries about this article on the UAE being off the Dutch Blacklist, or UAE matters more generally, then please get in touch.
Important changes in employment law, prompted by the Finance Act 2023, are set to reshape the landscape for employers and employees alike in Kenya.
Understanding these changes is crucial for businesses to ensure compliance and adapt their employment strategies effectively.
One of the key changes introduced by the Finance Act 2023 is the implementation of a housing levy.
Employers are now required to deduct 1.5% of an employee’s gross monthly salary as a contribution towards this levy, match this contribution themselves, and remit both amounts.
This move is designed to foster a more inclusive housing scheme for employees.
Additionally, the Act has redefined the taxation landscape for employees participating in employment share ownership plans, particularly those working for eligible startups.
This initiative aims to encourage employee ownership while providing tax-efficient benefits.
Moreover, the amendments to the Income Tax Act, including adjustments to the Pay-As-You-Earn (PAYE) system, target higher-income earners with increased tax deductions.
These changes are part of a broader effort to ensure a more equitable tax regime.
The rise of the ‘virtual workspace’ is another significant development, with legal implications for employers.
A landmark ruling involving Meta Platforms Inc. highlights the legal responsibilities of employers in virtual work environments, especially concerning employee rights.
This ruling underscores the importance of understanding the legal framework governing virtual workspaces.
The concept of an employee’s ‘right to disconnect’ has gained traction, with legislative proposals aiming to protect employees from being obligated to engage in work-related communications outside of work hours.
This initiative reflects a growing recognition of the need for work-life balance in the digital age.
The courts have also addressed the contentious issue of mandatory employee vaccinations, ruling that such policies are permissible under certain conditions.
This decision emphasizes the delicate balance between individual rights and public health imperatives.
A notable legal challenge has resulted in a ruling against mandatory contributions to the NSSF by employees who are already part of alternative pension schemes.
This decision highlights the importance of freedom of choice in pension contributions.
The introduction of an Unemployment Insurance Fund represents a significant policy shift, aiming to provide financial support to those affected by job loss or inability to work due to illness.
Employers and employees are expected to contribute to this fund, underscoring a collective approach to social protection.
The pandemic has accelerated the adoption of flexible working arrangements, prompting legislative proposals to formalize these practices.
These changes, along with adjustments to policies on sexual harassment, non-compete clauses, and employee rights in business transactions, signal a comprehensive update to employment law.
Businesses should proactively review employment contracts and benefits, ensuring they are compliant with the new legal framework.
If you have any queries about this article on Kenya’s employment law changes then please get in touch.
In its pursuit of greater tax compliance, HMRC seems to have significantly ramped up its efforts to combat tax evasion and avoidance.
The past year saw the opening of 1,091 of HMRC’s most serious tax investigations, known as ‘COP8‘ and ‘COP9′.
HMRC’s strategic approach involved 417 investigations under ‘COP9’ targeting severe suspected cases of tax evasion, alongside 674 ‘COP8’ civil investigations focusing on suspected tax avoidance.
These numbers contribute to a total of 3,300 ongoing COP8 and COP9 investigations, representing HMRC’s activities in clamping down on major tax evasion and avoidance.
The behavior-based penalty structure employed by HMRC ensures that penalties escalate with the severity of the taxpayer’s actions.
These penalties potentially reach up to 100% of the tax for UK matters, and even higher for offshore issues.
However, there is a silver lining for those willing to cooperate.
Full cooperation with HMRC’s investigations can lead to significantly reduced penalties, provided taxpayers make a comprehensive and truthful disclosure of all irregularities in their tax affairs.
A COP9 investigation, reserved for suspected tax fraud cases, offers a final opportunity for individuals to rectify their tax affairs.
Such an investigation comes with the assurance of remaining under civil investigation if they cooperate fully.
Conversely, failure to cooperate, as seen in high-profile cases like that of former Formula 1 boss Bernie Ecclestone and Dominic Chappell, former owner of BHS, can lead to staggering fines and even imprisonment.
When faced with these types of issues, it is important that you engage a specialist in tax investigation matters to assist you.
HMRC’s intensified efforts in conducting serious tax investigations underscore a stern warning against tax evasion and avoidance.
While the investigations pose significant risks, they also offer a final chance for individuals to regularise their affairs.
Again, if you are faced with a COP* or COP9 then please take this seriously and appoint a specialist adviser to assist you.
Unlike a hand of Texas Hold ’em… You won’t be able to bluff your way to victory!
If you have any queries over this article on HMRC COP8 and COP9, or UK tax matters in general, then please get in touch
The Scottish Government Budget 2024/25 was recently unveiled by Shona Robison.
In this short article, we summarise some of the changes that are, to be honest, pretty bold
In a move that was more foreshadowed than a plot twist in a detective novel, a new Scottish income tax rate has emerged.
It targets income between £75,001 and £125,140 at a 45% rate. Named “Advanced” – because, just like in school, “Advanced” here means “Higher.”
Catching us slightly off guard, the Scottish Top rate of tax has nudged up a notch to 48%. It’s edging ever closer to the half-century mark – that’s 50% for those who skipped math class.
Reminder: these rates are exclusively for Scottish taxpayers, focusing on income from jobs, self-employment, or property.
Scotland says “why stop at three?” and introduces a sixth income tax rate, making it a half-dozen compared to the rest of the UK’s trio.
Scottish taxpayers, brace yourselves for a marginal rate of 67.5% on incomes between £100,000 and £125,140.
Inflation’s not just for balloon animals. The Starter and Scottish Basic rate bands are inflating by 6.7%. The Starter band now encompasses income up to £14,876, and the Basic band stretches from £14,877 to £26,561.
The Council Tax freeze is more solid than a Scotsman’s resolve. It’s not only confirmed but also fully funded, giving councils a financial boost equivalent to a 5% tax increase.
The Basic Property Rate (poundage) is frozen faster at 49.8p per £1 of rateable value, mirroring the UK Government’s recent move.
Despite numerous pleas, the wider hospitality sector won’t see an extension in current reliefs.
However, island-based hospitality gets a 100% break, capped at £110,000.
The Scottish Government is also cooking up some targeted solutions and a new valuation method for the sector.
In the Land and Buildings Transaction Tax (LBTT) and Additional Dwelling Supplement (ADS) world, it’s status quo for both residential and non-residential dealings.
In sync with UK landfill tax increases, from April 2024, the Scottish Landfill Tax will see the standard rate climb to £103.70/tonne and the lower rate to £3.30/tonne.
Talk about trashy tax rates going up!
The Scottish Aggregates Tax (SAT) is set to make its grand debut in April 2026, replacing the UK-wide aggregates levy.
This new kid on the block was introduced to the Scottish Parliament back in November 2023.
If you have any queries about this article on the Scottish Budget, then please do get in touch
In a significant legislative update, Spain has revised its ‘Beckham Law’, originally implemented on 6 December 2003.
The Royal Decree 1008/2023, issued by the Spanish government, brings crucial amendments to the Personal Income Tax Regulations, aligning them with the new Startup Law.
These changes, effective from January 2023, have redefined the impatriate regime, expanding its scope and refining application processes.
Effective from 1 January 2023, the Law 28/2022, known as the Startup Law, introduced notable enhancements to the impatriate regime.
The law now encompasses a broader group, including teleworkers, innovative entrepreneurs, and highly skilled professionals involved in training, research, development, and innovation (R&D&I) activities, as well as company administrators, irrespective of their share capital ownership.
Royal Decree 1008/2023, published on 6 December 2023, serves to adapt the Income Tax Regulations to the Startup Law’s modifications.
It specifies new eligibility criteria for the impatriate regime, focusing on entrepreneurial activities and highly qualified professionals, among others.
Notably, the decree clarifies the prerequisites for these categories and establishes a six-month period for family members of the taxpayer under the special regime to relocate to Spain.
The revised rules state that only income from professional activities is eligible for deductions or economic activity payments.
It’s mandatory for taxpayers to maintain detailed records of their income, expenses, and invoices.
Additionally, the waiver and exclusion regime has been expanded to include family members, with individual applications being the norm, barring exceptional circumstances.
For individuals who gained residency in Spain in 2023 due to postings in 2022 or 2023, a transitional regime is in place.
They can opt for the impatriate regime within six months following the ministerial order, which came into force on 15 December 2023.
The Ministerial Order, also issued on 15 December 2023, introduces Form 149 for reporting personal income tax and opting in or out of the special regime, and Form 151 for personal income tax returns.
These forms are specifically tailored for the varied categories of professionals, entrepreneurs, and investors affected by the new regime.
With these changes, Spain is modernizing its approach to attracting global talent and investment.
The updated Beckham Law now offers more inclusive and detailed guidelines for the impatriate regime, making it an attractive proposition for a wider spectrum of professionals and entrepreneurs.
Taxpayers seeking to benefit from this regime must be mindful of the new regulations, ensuring compliance with the updated processes and documentation requirements.
The transitional provisions offer a crucial window for those who established tax residence in Spain recently, enabling them to adapt to these changes smoothly.
If you have any queries about this article on the Beckham Law, or Spanish tax matters in general, then please get in touch
The meeting takes place in an undisclosed, luxurious, but bustling hotel lobby in Rome
Secret Private Client Adviser in Italy, your mission, should you choose to accept it, is to educate us on the practical tax considerations in Italy.
This task requires a delicate balance of expertise and discretion. Be warned, should your real identity be revealed during this covert operation, you will be disavowed by Tax Natives and shunned by your fellow private client advisers.
Do you accept?
I accept.
[settles into a plush chair in the bustling hotel lobby, notebook ready] So, let’s dive straight into Italy’s tax residency rules.
What makes someone a tax resident here?
[leans forward, glasses reflecting the lobby’s chandeliers] It’s about presence and connection.
If you’re registered at an Italian municipality, have your domicile or main center of interests in Italy for over 183 days a year, you’re a tax resident.
Interestingly, even if you leave the registry and move to a low-tax country, you might still be deemed a resident unless proven otherwise.
[animatedly to a guest] “No, the gondola ride isn’t included with your room, this is Rome, not Venice!”
[smiles, then refocuses] And for these residents, how does Italy tax their income?
[sips espresso] Residents face worldwide income taxation, meaning they’re taxed on income earned both in and outside Italy.
The IRPEF system classifies income into categories like employment, business, and capital, applying progressive rates from 23% to 43%.
[interrupts, brandishing a map] Could you point me to the Leaning Tower of Pisa?
[points gently] That’s a bit of a journey from here. Head to the train station… and get a train to Pisa.
Now, regarding non-residents…
[jots down notes, intrigued] Yes, how are non-residents taxed?
Non-residents are taxed only on their Italian-sourced income.
But there’s an appealing flat tax option for new residents, like a €100,000 substitute tax on foreign income.
[nods] That’s the famous ‘non-dom’ regime we hear so much about?
Go on… tell us a bit more. Don’t be shy!
[Laughs] OK, you twist my arm!
As I say, one of the most advantageous aspects of the regime is that Italy now offers a flat tax rate for high-net-worth individuals.
[Takes another sip of Espresso for extra fortitude]
As a high-net-worth individual, you have the option to pay €100,000 per annum on any foreign income you generate as an Italian tax resident.
The rate is fixed – it doesn’t matter how much foreign income you have.
[Leans back]
There is an exemption from paying wealth tax in Italy on your foreign investments, including paying tax on the value of foreign real estate investments.
In addition, there is an exemption from inheritance and gift tax payable in Italy.
[starts unconsciously twiddling with spoon]
But don’t get carried away. Any income you generate in Italy will not fall under the flat tax and will be taxed at standard Italian rates.
The scheme is likely to be most beneficial if most of your income is – and will continue to be – generated outside Italy.
Intriguing. How long does this regime apply to taxpayer?
The flat tax rate is applicable for a period of fifteen years, which is counted from the first year that you benefit from Italian tax residency.
And all that great food and wine. What is there not to love?
Indeed!
What about capital gains?
Capital gains, typically from financial assets like stocks or bonds, are taxed at 26%.
But there are lower rates, like 12.5% for government securities.
There is no tax on real estate sales if held for more than five years.
And the approach to lifetime gifts and inheritances?
Gifts are subject to indirect tax, with rates depending on the relationship between donor and donee.
Inheritance tax also varies but offers some exemptions, especially for direct relatives.
[returns, cheerfully] Got my ticket to Pisa, thanks!
[stands up] Just a quick one on real property taxes before we wrap up?
[standing too] Sure.
The key ones are IMU and TARI, but your primary residence is typically exempt, barring luxury properties.
[extends a hand] Thanks for your insights. I’ve learned a lot about Italian tax laws today.
[shakes hand warmly] Happy to help. Enjoy your time in Italy!
[They part ways, the Tax Natives heading towards the bustling hotel exit, amused and enlightened by the day’s interactions.]