Global Tax Update, Issue 1

Global Tax Update, Issue 1

Global Tax Update is a quarterly publication that examines the newest developments in the field of tax.


OECD BEPS: OECD Releases Public Discussion Drafts and Receives Comments in respect of Action 2 (Hybrid Mismatch Arrangements) and Action 6 (Prevent Treaty Abuse)
The recommendations set forth in these reports are solely intended for public consultation but will have a significant impact on both multinational taxpayers and governments if widely adopted in their current form.  

EU Code of Conduct Group Reviews EU Patent Boxes
Following investigations by the EU with respect to the newly introduced UK patent box (see below), the EU Code of Conduct Group has agreed to review nine existing patent box and similar regimes across the EU.  


Belgium Modifies its Notional Interest Deduction Regime to Comply with EU Law
Belgium has changed its notional interest deduction regime with respect to foreign branches following a taxpayer victory in front of the EU Court of Justice.

Three Special Areas Designated for Preferential Corporate Income Tax Rates
China clarifies tax benefits for three special areas to promote economic cooperation between the Chinese Mainland and Hong Kong, Macau, and Taiwan.  

SAT Clarifies Certain Filings for Special Reorganization Tax Treatment by Nonresident Enterprises
China clarifies certain filing and pre-transfer dividend issues concerning special reorganization tax treatment to equity transfers by nonresident enterprises.  

Focus on the Anti-Avoidance Provision Targeting Hybrid Debt Instruments
France introduces further limitations of the deductibility of related party interest expenses focusing on hybrid debt.  

Recent Case Law Affecting French CFC Rules
Recent decisions of French courts may have a significant impact on the application of the French CFC rules.  


German Tax Authorities Allow Tax Deductibility of Additional Tier 1 Capital
Germany announces a circular to confirm deductibility of Additional Tier 1 Capital.

German Domestic Anti-Abuse Rules Regarding the Taxation of Partnerships Possibly Unconstitutional
The German Tax Court has referred a case to the Constitutional Court, requesting that the Constitutional Court declare German domestic anti-abuse rules regarding the taxation of partnerships unconstitutional. The case may possibly have wider implications. 

German Constitutional Court Issues Ruling on Retroactivity of Tax Laws
Unclear wording of existing law does not justify the retroactive implementation of new law, according to the German Constitutional Court. 

German Tax Court Rules on Termination of Fiscal Unity under International Reorganization
The German Federal Tax Court has ruled that an intra-group reorganization involving the transfer of shares in a German subsidiary does not constitute a good cause to terminate the fiscal unity.  


New Decree Expands the Scope of the International Ruling Procedure
A new decree expands the scope of the ruling procedures, particularly with respect to transfer pricing, but also with respect to the attribution of profits to a permanent establishment and the application of tax treaties.  

Clarifications with Respect to Deductibility of Losses on Receivables
Italy's Finance Act 2014 clarifies the conditions that must be met to deduct losses on receivables.  

Amendments of the Tax Regime for Financial Leases
The Finance Act 2014 improves the corporate income tax regime for financial leases. 


Changes to Permanent Establishment Allocations
Japan changes permanent establishment income allocation rules, effective as of the fiscal year commencing on or after April 1, 2016.  

Revision of the Japan–UK Income Tax Treaty
Japan and the UK sign a new Protocol to their income tax treaty.  

Increase of Consumption Tax Rate
Effective as of April 1, Japan's combined rate of national and local consumption taxes has increased from 5 percent to 8 percent (6.3 percent national tax and 1.7 percent local tax). The consumption tax rate is planned to further increase from 8 percent to 10 percent (7.8 percent national tax and 2.2 percent local tax) on October 1, 2015. 

New Reporting System for Offshore Assets
A new reporting system for offshore assets took effect as of January 1, 2014. 

New Withholding Tax on Dividends in Mexico
Mexico has introduced a new 10% withholding tax on dividends.  

Claiming Tax Treaty Benefits in Mexico as of January 1
Mexico has introduced new procedures for claiming treaty benefits.  


Government Launches Tax Reform
Spain is planning a major tax reform.  

Changes to Exit Tax
Spain has changed its exit tax rules.  


Supreme Court Takes Formal Approach and Sides with Taxpayer in Landmark Hybrid Instrument Case
The Dutch Supreme Court has ended a long debate by confirming that income from redeemable preference shares qualifies for the participation exemption, regardless of whether a deduction will be available in the source country.  

Introduction of New Reporting Requirements for Certain Intra-Group Lending, Licensing and Leasing Activities
Beginning on January 1, Dutch companies that are predominantly involved in intra-group back-to-back lending, licensing, or leasing transactions must declare in their Dutch tax return that they meet certain minimum substance requirements. If not all requirements are met, the Netherlands will exchange information with source countries.  


EU Investigates the Legality of the UK Patent Box Regime
The recently introduced UK patent box regime is under renewed investigation by the EU.  

Court Case Arguably Clarifies UK Source Rules with Respect to Interest
A recent case heard by the First Tier Tribunal arguably clarifies how the question of whether interest has a UK source will be decided.

Increased Use of UK Tax Resident Holding Companies
The UK experiences a significantly increased interest for UK holding companies.  


Senate Hearing on Profit Shifting
On April 1, the Senate Permanent Subcommittee on Investigations held another hearing on multinational corporations that are perceived to actively reduce their worldwide tax burdens by shifting profits out of the U.S. 

New FATCA Guidance
On April 2, the U.S. Treasury released Announcement 2014-17 under the Foreign Account Tax Compliance Act, sections 1471 through 1474 of the Internal Revenue Code, broadening the scope of when an intergovernmental agreement is considered to be in effect and extending the registration timeframe for foreign financial institutions.  

Getting to Know Blaise Marin-Curtoud, UK Tax Partner
Jones Day partner Blaise Marin-Curtoud helps his clients plan and conduct their businesses to manage tax liabilities, which in today's global business environment requires vast knowledge of multiple and changing tax codes as well as strategic problem-solving skills. Based in London, Blaise focuses on tax aspects of mergers and acquisitions and real estate transactions, both of which are thriving areas of law in the United Kingdom.