Global Tax Policy and Controversy Watch | October 2023 edition

In the spotlight

Italy's new Enabling Law for Tax Reform foreshadows positive changes to cooperative compliance program

On 14 August 2023, the Italian government published Law No. 111/2023 (the Enabling Law), which takes the form of a series of high-level guidelines/principles. The Enabling Law delegates the Italian Government to issue, within the next 24 months, one or more legislative decrees that would provide a series of enhancements to Italy's broader tax system, including enhancing Italy's existing cooperative compliance program and aligning domestic rules to international tax principles, such as the Pillar Two provisions.

See EY Global Tax Alert, Italy's new Enabling Law for Tax Reform foreshadows positive changes to cooperative compliance program, dated 28 September 2023.

Key highlights

European Commission proposes BEFIT and Transfer Pricing Directives

The "Business in Europe: Framework for Income Taxation (BEFIT) Directive" would introduce a common framework for tax-base determination and aggregated corporate income taxation in the European Union for in-scope multinationals. The Transfer Pricing Directive would codify the OECD principles and guidance on transfer pricing in the domestic laws of Member States and provides clarifications and processes to secure aligned administration and prevent double taxation.

See EY Global Tax Alert, European Commission proposes BEFIT and Transfer Pricing Directives, dated 15 September 2023.

French Government releases draft Finance Bill for 2024, including Pillar Two rules

The French Government has presented the draft Finance Bill for 2024 with key tax reforms, including transposition of the EU Minimum Taxation Directive into French domestic law, postponement of the repeal of the Business Contribution on the Added Value, creation of a tax credit for investments in green industry, criminalization of the provision of instruments supporting tax fraud, and strengthening of transfer pricing audits for multinational enterprises.

See EY Global Tax Alert, French Government releases draft Finance Bill for 2024, including OECD Pillar Two rules, dated 29 September 2023.

Netherlands budget proposals include Pillar Two minimum tax

The Dutch Government has published its budget proposals for review, discussion and possible changes by Parliament. Enactment of the final proposals is expected in December 2023.

See EY Global Tax Alert, Netherlands budget proposals: Key legislative developments for 2024 and 2025, including Pillar Two minimum tax, dated 19 September 2023.

Companies should examine their tax governance and data as focus on tax controversy grows

As a new, post-pandemic era of tax risk and controversy takes shape, global businesses should consider enhancing their tax governance approach and closely examining the accuracy and sources of their tax data. Greater transparency, cross-border cooperation and access to technology have increased tax authorities' expectations of quick access to company data, and proactive audit readiness will be essential as multinational companies prepare for implementation of the BEPS 2.0 initiative in different countries.

Read the latest EY Global Tax Controversy monthly flash news article, EY Global Tax Controversy Flash Newsletter (Issue 62) | Companies should examine their tax governance and data as focus on tax controversy grows, dated 12 September 2023.

News items

European Commission proposes Head Office Tax System Directive for SMEs

On 12 September 2023, the European Commission proposed a Directive establishing a Head Office Tax system for micro, small and medium sized enterprises (SMEs) and amending Directive 2011/16/EU. If adopted, the Directive will introduce a one-stop-shop regime for easing corporate income tax compliance for in-scope SMEs operating cross-border in the European Union through permanent establishments in other Member States.

See EY Global Tax Alert, European Commission proposes Head Office Tax System Directive for SMEs, dated 27 September 2023.

Argentina proposes to evaluate a 15% corporate minimum tax

On 15 September 2023, the Argentine Government sent the draft Budget Law 2024 to the Congress with a recommendation to evaluate possibly enacting a 15% corporate minimum tax applicable to multinational groups to increase tax revenues. To date, no specific project or further details have been disclosed.

See EY Global Tax Alert, Argentine Government proposes to evaluate a 15% corporate minimum tax, dated 20 September 2023.

Brazil introduces individual income tax bill affecting taxation of foreign investment income

Following the rejection of measures aimed at altering the taxation of investments made abroad by individual Brazilian taxpayers, the Brazilian Government has proposed a new bill that would address the same topics but make minor changes to the previously proposed measures.

See EY Global Tax Alert, Brazil introduces individual income tax bill affecting taxation of foreign investment income, dated 11 September 2023.

Costa Rica enacts law making reforms to achieve exclusion from EU's list of non-cooperative jurisdictions in tax matters

The Costa Rican Congress overturned the partial veto of Legislative Decree No. 10.381, which aims to incorporate amendments to the Income Tax Law necessary to achieve Costa Rica's removal from the EU's list of non-cooperative jurisdictions in tax matters. The law came into force on 02 October 2023.

See EY Global Tax Alert, Costa Rica enacts law making reforms to achieve exclusion from EU's list of non-cooperative jurisdictions in tax matters, dated 2 October 2023.

Dominican Republic signs Multilateral Competent Authority Agreement for automatic exchange of transfer pricing information

The Dominican Republic signed the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports as part of its commitment to the OECD/G20 Inclusive Framework on BEPS.

See EY Global Tax Alert, Dominican Republic signs Multilateral Competent Authority Agreement for automatic exchange of transfer pricing information, dated 13 September 2023.

Ireland publishes roadmap for introducing dividend participation exemption to corporation tax system

The participation exemption for foreign-sourced dividends is slated to take effect at the beginning of 2025. The roadmap published sets out a series of milestones, with the first phase of consultation launched on 14 September.

See EY Global Tax Alert, Irish Government publishes roadmap for introducing dividend participation exemption to Ireland's corporation tax system, dated 15 September 2023.

Kenya enforces VAT and DST compliance for electronic, internet and digital marketplace supplies

Kenya introduced the taxation of digital services from both a VAT and Income Tax perspectives, with retroactive effect from January 2021. The Digital Service Tax regulations provide that a nonresident person without a Permanent Establishment in Kenya must register and account for DST in Kenya.

See EY Global Tax Alert, Kenya Revenue Authority enforces VAT and DST compliance for electronic, internet and digital marketplace supplies, dated 2 October 2023.

Luxembourg modernizes subscription tax regime

Recently enacted legislation aligns the subscription tax regime applicable to money market funds with EU regulation and enhances and modernizes the existing investment fund toolbox.

See EY Global Tax Alert, Luxembourg legislation modernizes subscription tax regime, dated 20 September 2023.

Saudi Arabia approves amendments to Income Tax Bylaws and Zakat Regulations and proposes more

The approved amendments to the Income Tax Bylaws relate primarily to interest charges on capital assets, employers' retirement fund contributions, appeals processes and withholding tax rates. The proposed amendments to the Income Tax Law primarily relate to withholding tax applied on payments made to nonresidents. The new draft Zakat Bylaws aim to provide greater clarity on existing zakat regulations and zakat compliance.

See EY Global Tax Alerts, Saudi Arabia approves amendments to Income Tax Bylaws and Zakat Regulations, dated 19 September 2023, Saudi Arabia proposes amendments to the Income Tax Law, dated 29 September 2023, and Saudi Arabia releases new draft Zakat Bylaws for public consultation, dated 28 September 2023.

Taiwan announces foreign institutional investors may use Taiwan-listed stocks as collateral for offshore investment activities

To attract foreign investment in the Taiwan stock market, the Financial Supervisory Commission announced that foreign institutional investors may use Taiwan-listed stocks as collateral for offshore investment activities as of 28 August 2023.

See EY Global Tax Alert, Taiwan announces foreign institutional investors may use Taiwan-listed stocks as collateral for offshore investment activities, dated 15 September 2023.

Türkiye's Constitutional Court annuls rule blocking access to digital services for DST liability default

The court's ruling annulled as unconstitutional a provision in Digital Services Tax Law No. 7194 that allowed the Ministry of Treasury and Finance to block access to a digital service provider's services for failure to timely fulfill its tax filing or payment obligations.

See EY Global Tax Alert, Türkiye's Constitutional Court annuls rule that allows blocking access to digital services upon default on Digital Services Tax liability, dated 15 September 2023.

Türkiye amends accounting standards to align with BEPS 2.0 Pillar Two legislation

The Decision amends Turkish Accounting Standard 12, which deals with accounting for income taxes due to the implementation of the Pillar Two rules. The Turkish amendments provide entities an exception to the requirements to recognize and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes.

See EY Global Tax Alert, Türkiye amends accounting standards to align with BEPS 2.0 Pillar Two legislation, dated 25 September 2023.

US IRS publishes additional interim guidance clarifying certain provisions of the corporate alternative minimum tax

In Notice 2023-64, the US Internal Revenue Service (IRS) has published interim guidance that clarifies certain provisions of the corporate alternative minimum tax. The IRS also announced that it plans to issue proposed regulations that are consistent with the guidance in the Notice and previously issued interim guidance in Notices 2023-7 and 2023-20.

See EY Global Tax Alert, US IRS publishes additional interim guidance clarifying certain provisions of the corporate alternative minimum tax, dated 20 September 2023.

For additional information with respect to this Alert, please contact the following:

• Matt Andrew, Asia-Pacific Tax Policy Leader, Auckland

• Barbara M. Angus, Global Tax Policy Leader, Washington

• Julie Byrne, Global Tax Policy, Washington

• Martin Caplice, Asia-Pacific Tax Controversy Leader, Sydney

• Luis Coronado, Global Tax Controversy Leader, Singapore

• Cathy Koch, Americas Tax Policy Leader, Washington

• Jean-Pierre Lieb, EMEIA Tax Policy and Controversy Leader, Paris

• Kiara Rankin, Americas Tax Controversy Leader, Houston

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.