Direct Tax
India and USA agree on a transitional approach on Equalisation Levy 2020
[Excerpts from Press release by Ministry of Finance, 24 November 2021]
On 21 October 2021, the United States, Austria, France, Italy, Spain, and the United Kingdom reached an agreement on a transitional approach to existing Unilateral Measures while implementing Pillar 1.
India and United States have agreed that the same terms that apply under the 21 October Joint Statement shall apply between the United States and India with respect to India’s charge of 2% Equalisation Levy on e-commerce supply of services and the United States’ trade action regarding the said Equalisation Levy. However, the interim period that will be applicable will be from 1 April 2022 till the implementation of Pillar One or 31 March 2024, whichever is earlier.
The final terms of the Agreement shall be finalized by 1 February 2022.
USA and Turkey reach a compromise on transitional approach on Digital Service Tax
[Excerpts from US department of Treasury press release, 22 November 2021]
On 21 October 2021, the United States, Austria, France, Italy, Spain, and the United Kingdom reached a political compromise on a transitional approach to existing Unilateral Measures while implementing Pillar 1 (Unilateral Measures Compromise).
The United States and Turkey have agreed that the same terms that apply under the Unilateral Measures Compromise shall apply as between the United States and Turkey with respect to Turkey’s Digital Service Tax and the United States’ trade actions regarding the Digital Service Tax. Accordingly, the Unilateral Measures Compromise described in the 21 October 2021 Joint Statement is incorporated by reference into this joint statement between the United States and Turkey.
South Korea to delay crypto taxation by one year
[Excerpts from Reuters, 30 November 2023]
South Korea's finance ministry said that the National Assembly passed a bill on pushing back the planned taxation of capital gains from cryptocurrency trading by one year. South Korea had earlier said it will start taxing capital gains from cryptocurrencies starting January next year.
Transfer Pricing
Ireland adopts Transfer Pricing
Irish Finance Bill 2021
The Finance Bill 2021 released by the Irish government on 21 October sets out legislative changes related to TP, anti-tax avoidance measures, planned tax treaty ratifications and various other previously announced corporate and international tax measures.
Transfer Pricing updates
Prior to the above Finance bill, Ireland’s TP rules only applied to certain trading transactions. With effect for accounting periods commencing on or after 1 January 2020, the majority of intragroup transactions are now required to be entered into on arm’s length terms and documented appropriately. The expanded rules now apply to:
- all trading and non-trading transactions;
- capital transactions between associated entities where the market value of the asset is in excess of €25 million; and
- previously ‘grandfathered arrangements’ (which are transactions entered into pre 1 July 2010 and which were previously excluded from TP rules).
Transfer Pricing exemptions
There is an exemption from the TP rules for certain domestic Irish-to-Irish transactions together with certain robust anti-abuse provisions. However, the law does not specify the monetary limit of the transactions that are applicable for exemption.
Transfer Pricing legislation definition of “relevant person”:
The bill further amended the transfer pricing definition of “relevant person” to specify that the term includes, in relation to an arrangement, “a supplier or acquirer, whose profits or gains or losses within the charge to tax would take account of any results of the arrangement.”
Profit Attribution
The bill adopts the authorized the Organisation for Economic Co-operation and Development’s (OECD) approach for the attribution of income to a branch of a non - resident company operating in Ireland, i.e., the profit allocation approach under Pillar 1. The bill inserts a new Section 25A TCA to provide for the application of the authorized OECD approach to the attribution of income to branches of non-resident companies in Ireland. In accordance with the OECD guidance, the relevant branch income which is attributable to a branch is the amount of income it would have earned if it were an independent and separate enterprise, that is to say, in an arm’s length scenario. This amendment essentially codifies the requirement to comply with OECD guidance and introduces prescribed documentation requirements to ensure relevant branch income has been computed in line with such guidance. Penalties will apply for taxpayers who fail to provide relevant branch records to the Revenue. This new Section will come into effect for accounting periods commencing on or after 1 January 2022. SMEs will come within the scope of the new provision subject to Ministerial Order.
Indirect Tax
Implementation of UK VAT rules in free zones
[Excerpts from GOV.UK]
Free zones are secure customs zones located within a Freeport where business can be carried out inside of the UK’s land border, but where different customs, VAT and excise rules apply. In order to maintain a level playing field, goods that are benefitted from a zerorated supply in a free zone are subject to VAT if they are not sold to a customer outside the free zone within a time limit or if the rules relating to the free zone procedure are breached. The measure is expected to take effect after the Autumn Budget 2021.
UK VAT rise warning due to price hikes
[Excerpts from express.co.uk]
Sacha Lord, Greater Manchester’s nighttime economy expert, has warned that businesses strained by labor shortages and supply chain expenses may go bankrupt next year when VAT rises. Following a temporary pandemic cut to 5%, currently, VAT is 12.5% for the hospitality industry. Furthermore, it is expected to return to 20% in April next year under current plans.