Tax news

Midweek Tax News

A weekly update on tax matters to 14 May 2024

Midweek Tax News provides you with a succinct overview of the key tax developments that have occurred each week to allow you to stay up-to-date on tax issues that may have an impact on your business.

If you would like to discuss an article in more detail, please speak to the relevant contact listed at the end of this issue or to your usual EY contact. Alternatively, you can use our ‘contact us’ form. If you give us a brief description of your query (not just on this week’s content), we will send it to a relevant person in EY.

  • Council of the EU reaches agreement on new rules for withholding tax procedures (FASTER)

    On 14 May, the Council of the EU reached an agreement on “safer and faster procedures to obtain double taxation relief”, the FASTER initiative. Initially proposed in June 2023, this is intended to make withholding tax procedures in the EU more efficient and secure for investors, financial intermediaries and EU Member State tax administrations.

    The FASTER directive will introduce:

    • A common tax residence certificate that tax-paying investors would be able to use in order to benefit from the fast-track procedures to obtain relief from withholding taxes. Member States will provide an automated process to issue digital tax residence certificates (eTRC) to a natural person or entity deemed resident in their jurisdiction for tax purposes. Certificates are to be issued within 14 calendar days after a request is submitted (instead of 1 working day as initially proposed).
    • Fast-track procedures (a “relief-at-source” procedure and a “quick refund” system) complementing the existing standard refund procedure for withholding taxes. These are intended to make relief and refund processes faster and more closely harmonised across the EU. The proposals allow Member States to maintain their current relief-at source-system if they have a comprehensive system and a low market capitalisation ratio. The Council also introduced additional circumstances in which Member States may exclude, completely or partially, requests for withholding tax relief from the fast-track procedures, in order to perform further checks, with a view to preventing fraud.
    • Standardised reporting for financial intermediaries. Member States will establish national registers where large (and optionally smaller) financial intermediaries will have to register to be certified. A European Certified Financial Intermediary Portal will act as a central dedicated website where the national registers will be accessible. Once registered, financial intermediaries will need to report the necessary information to the relevant tax authorities so that the transaction can be traced.

    The proposals are summarised by the Council in its press release. Due to the changes the Council made in the Directive during negotiations, the European Parliament will be consulted again on the agreed text. The agreed text will then need to be formally adopted by the Council before being published in the EU’s Official Journal and entering into force. The agreed text will need to be transposed into Member State national legislation by 31 December 2028, and the national rules will become applicable from 1 January 2030.

  • BEPS 2.0 – what to explore with the ongoing activity on Pillars One and Two: webcast 4 June

    The next in our series of webcasts focusing on the OECD/G20 BEPS 2.0 project will take place on 4 June at 14:00 (UK time). During the webcast, our panel will examine the latest developments on both Pillar One and Pillar Two, including:

    • Key aspects of the Pillar Two Administrative Guidance
    • Pillar Two implementation and jurisdictional deviations from the model rules
    • The GloBE information return and jurisdictional compliance requirements
    • Ongoing Inclusive Framework activity on Pillar One and jurisdictional reactions to Amount B
    • What is still to come from the Inclusive Framework on BEPS 2.0

    Please register here to join this webcast.

  • EY 2024 UK Attractiveness Survey: initial findings and webcast 20 June

    The initial findings of the EY 2024 UK Attractiveness Survey reveal that the UK remains second in EY’s annual ranking of Europe’s most attractive destinations for foreign direct investment (FDI) projects – and was the only country in the top three to see project numbers increase year-on-year. France ranked first in Europe for the fifth consecutive year, while Germany followed in third place.

    The full EY UK Attractiveness Survey 2024 findings will be published in June and at 16:00 on 20 June we will be hosting a webcast to examine the results in detail. The webcast will provide a comprehensive overview of the survey results, explore the regional FDI performance and highlight the UK's top five leading sectors for inward investment.

    Please register here to join the webcast.

Other UK developments

  • Progress of Spring Finance Bill

    The Finance Bill was considered by a Committee of the whole House on 8 May and clauses relating to income and corporation tax charges and rates and the energy profits levy security investment mechanism were passed without amendment. The remaining clauses of the Bill will be considered by a Public Bill Committee, which is scheduled for 21 and 23 May.

  • HMRC call for evidence on enquiry and assessment powers, penalties and safeguards: EY response

    On 15 February, as part of its ongoing Tax Administration Framework Review, HMRC published a call for evidence, focusing on the potential for reform in three areas: enquiry and assessment powers, penalties and safeguards. Potential reforms discussed in the document include replacing HMRC’s current enquiry and assessment powers with a single set of powers that apply across all taxes, and aligning the penalty system across different tax regimes. It also discusses whether there are specific penalties which could be simplified, and the role of penalty escalation for continued and repeated non-compliance within the design of UK tax penalties.

    In our response to this call for evidence, we address the specific questions posed by the document, as well as providing some more general comments on the proposals. With regard to changes intended to make the tax system easier for HMRC to administer, we highlight the importance of also considering the burden imposed on taxpayers and whether the allocation of the administrative burden between HMRC and taxpayers is appropriate.

    Whilst we acknowledge that achieving simplification and greater certainty are worthwhile endeavours, we emphasise that this should not come at a disproportionate cost through the removal of safeguards or assumptions that exist primarily for the taxpayer’s protection. Notwithstanding the need to retain important taxpayer safeguards, we do recognise that there would be merit in simplifying or consolidating the various (and in some instances, disparate) compliance regimes.

    If you would like to discuss our response to this consultation, please get in touch with Amy Smith, Vy Vamadevan or your usual EY contact.

Other International developments

  • EY global tax alerts

    We have included links to a selection of our tax alerts below. Additional articles are available in our global tax alert library.

    Hungary: Hungary's BEPS 2.0 Pillar Two legislation is now in effect, with the Income Inclusion Rule (IIR) and a Qualified Domestic Minimum Top-up Tax (QDMTT) applicable from 1 January 2024. Hungary adopted transitional country-by-country reporting (CbCR) safe harbour rules, and this alert discusses the advantages for multinational enterprises operating in Hungary of accessing the available safe harbours.

    Argentina: The National Executive Branch has published a decree regarding the 17.5% tax on purchases of foreign currency for dividend and profit distributions.

    Canada: Canada's Bill C-69, Budget Implementation Act, 2024, No. 1, has received its first reading in the House of Commons. The Bill implements certain tax measures announced in the 2024 federal budget and the 2023 federal fall economic statement, as well as various other tax measures, such as the implementation of Canada's Global Minimum Tax Act. In addition, the Bill includes some technical amendments to the carbon capture, utilisation and storage investment tax credit (ITC) and the clean technology ITC.

    Kenya: The High Court has affirmed withholding tax on interest-free loans from non-resident entities, rejecting the Tax Appeals Tribunal's view on loan characteristics under the Income Tax Act.

    Pakistan: Effective 16 June 2024, law changes in Pakistan aim to streamline tax appeals procedures, encourage the use of alternative dispute resolution (ADR) and provide clearer rules for resolving tax disputes.

    Saudi Arabia: The Revised Real Estate Transaction Tax Implementing Regulations have been approved and are effective from 3 May 2024. The Regulations broaden exemptions and incentivise public participation in capital markets, with updated due dates for specific transactions.

Publications

  • PE Watch: May 2024

    The latest edition of PE Watch, our monthly summary of the latest international developments regarding permanent establishments, is available. This edition highlights a French Supreme Court ruling on whether foreign PE losses can be deducted, Saudi Arabia's guidelines for Regional Headquarters Tax Rules and Uganda's new PE provisions.

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Further information

If you would like to discuss any of the articles in this week's edition of Midweek Tax News, please contact the individuals listed below, Nicola Sullivan (+44 20 7951 8228) or your usual EY contact.


Council of the EU reaches agreement on new rules for withholding tax procedures (FASTER)
Paul Radcliffe (+44 20 7951 5816)
James Guthrie (+44 20 7951 4366)

For other queries or comments please email eytaxnews@uk.ey.com.