Global Tax Policy and Controversy Watch | November 2024 edition

In the spotlight

United States election update

Former President Donald Trump (Republican) decisively won the US presidential election on 6 November, defeating Vice President Kamala Harris (Democrat). In Congress, Republicans will take control of the Senate and hold at least 53 Senate seats. However, control of the House of Representatives remains unclear with several races too close to call as we go to press.

Key highlights

UK Autumn Budget delivers significant tax increases but seeks to plan for the future

The United Kingdom Autumn Budget includes significant tax increases, particularly for employers, with an increase in employers' National Insurance contributions. The Finance Bill 2024-25, which will implement the Budget measures, is due to be published once the Budget resolutions are agreed.

Having a VAT control framework can help reduce tax audit disruption

The shift to digital, real-time value-added tax (VAT) reporting has increased tax administration scrutiny and reduced error correction opportunities for businesses. Tax authorities analyze data, with potential use of AI, to identify high-risk taxpayers for more stringent audits. Having an effective VAT control framework can help reduce the potential for tax audit disruption.

News items

G20 meeting highlights continued support for BEPS 2.0 and international tax cooperation

An 23-24 October 2024, meeting of the G20 Finance Ministers and Central Bank Governors concluded with a communiqué affirming their commitment to the BEPS 2.0 project and to swift implementation by all interested jurisdictions. The communiqué also restates the Finance Ministers' commitment to tax transparency and fostering global dialogue on effective taxation, including the taxation of ultra-high-net-worth individuals and the importance of progressive taxation in reducing domestic inequalities and achieving the Sustainable Development Goals.

EU publishes Directive proposal transposing the GloBE Information Return into EU law

The European Commission has published a proposal to revise the Directive on Administrative Cooperation (DAC9) to implement the OECD's Global anti-Base Erosion (GloBE) Information Return, including the dissemination approach. DAC9 enables central filing via a "Top-up tax information return" as foreseen in the Minimum Tax Directive and establishes a framework for the exchange of these returns between European Union (EU) Member States, ensuring a consistent approach across the EU.

EU Ministers revise list of noncooperative jurisdictions for tax purposes

On 8 October 2024, the EU Finance Ministers approved a revised EU List of noncooperative jurisdictions for tax purposes. Antigua and Barbuda was removed from the EU List.

EU Court of Justice rules on deemed supply for EV charging

A recent EU Court of Justice decision concludes that the owner of a network of vehicle charging stations is considered, for VAT purposes, to be part of the supply chain of electricity, rather than a provider of credit, and thus able to deduct VAT.

Electronic invoicing updates

The French government provides an important development concerning the reform of electronic invoicing in France. Germany finalizes e-invoicing administrative guidance, with the new rules apply beginning 1 January 2025. Poland releases draft amendments to e-invoicing rules and presents a framework for the National e-Invoicing System. The United Arab Emirates formally announces introduction of e-invoicing and launches an e-invoicing portal. The United Kingdom (UK) government confirms that it will publish a consultation in early 2025 to establish standards for the adoption of e-invoicing within the UK.

Canada issues proposed legislation for new clean electricity investment tax credit (ITC)

The new 15% refundable tax credit is intended to support "clean electricity technologies and proponents" to expand the capacity of Canada's clean electricity grid to accelerate progress toward a net-zero grid. The ITC will be available to qualifying entities that make eligible investments in clean electricity property on or after 16 April 2024 and before 1 January 2035. The ITC rate may be reduced if certain labor requirements are not met.

Chile enacts comprehensive tax compliance bill

The tax package includes changes in the: General Anti Avoidance Rules (GAAR), tax evasion, international taxation, VAT, tax compliance and other aspects. Changes included in the law generally come into force on 1 November 2024 (although effective dates may vary depending on the specific measure).

French Government releases draft Finance Bill for 2025

The draft Finance Bill for 2025 includes: (i) creation of an exceptional contribution based on the corporate income tax due by large companies; (ii) creation of an exceptional contribution based on profits generated by large shipping companies; (iii) creation of a new tax applicable to share capital decreases, subsequent to a share-buyback transaction and realized by large companies; (iv) extension of the tax-neutral regime applicable to merger transactions; (v) revision of some of the Pillar Two Global Anti-Base Erosion rules transposed into French domestic law; and (vi) postponement of the repeal of the Business Contribution on the Added Value. The French Parliament will discuss and potentially amend the draft Bill over the coming weeks and vote on the final version by the end of December 2024.

Kenya Supreme Court declares the Finance Act 2023 constitutional

The Kenya Supreme Court has set aside the decision of the Court of Appeal that declared the Finance Act 2023 unconstitutional. The Court held that the Finance Act 2023 was constitutional because sufficient public participation had been conducted by the National Assembly.

Kenya High Court declares Income Tax (Financial Derivatives) Regulations 2023 unconstitutional

The National Treasury sought to impose taxes on gains from financial derivatives earned by nonresident persons. The Income Tax (Financial Derivatives) Regulations, 2023 were issued to guide the implementation of the primary legislation. The High Court held that the regulations were not anchored in law because they attempted to impose a withholding tax obligation on resident persons based on losses incurred in transactions with nonresident persons, which had no basis in the Income Tax Act.

Kenya Business Registration Service provides timeline for companies to file beneficial ownership information

Kenya Business Registration Service has issued a public notice concerning the requirement to file beneficial ownership information. The notice requires all companies and limited liability partnerships to prepare, maintain and submit to the Registrar of Companies a register of beneficial owners.

Philippines passes VAT on Digital Services Law affecting nonresident providers

A new law imposes a 12% VAT on digital services, including those provided by nonresident providers. Digital services cover anything supplied over the internet and are considered performed or rendered in the Philippines if consumed in the Philippines. Nonresident digital service providers must register if they meet the gross sales threshold; failure to register can lead to suspension of business operations in the Philippines.

Portugal adopts Pillar Two rules

Portugal has now implemented the EU Minimum Tax Directive, introducing into domestic legislation a global minimum tax of 15% for large-scale multinational and domestic groups. An Income Inclusion Rule and a Qualified Domestic Minimum Top-up Tax will apply to tax years beginning 1 January 2024, and an Undertaxed Profits Rule will apply to tax years beginning 1 January 2025.

UK Government responds to consultation on introducing UK CBAM

The UK Government responded to the consultation regarding the introduction of a UK Carbon Border Adjustment Mechanism (UK CBAM). The threshold triggering the UK CBAM was sharply increased from £10,000 to £50,000 of imported products each year. The regime will be introduced from 1 January 2027.

United States | Final IRC Section 367(d) regulations open door to intangible property repatriation for US multinationals

The final regulations closely mirror the May 2023 proposed regulations and establish that the continued application of IRC Section 367(d) terminates when a foreign corporation transfers previously outbounded intangible property to a "qualified domestic person" and certain reporting requirements are satisfied. The final regulations apply prospectively only, and taxpayers cannot rely on these rules for intangible property repatriations that occurred before their publication.

United States IRS formally launches LB&I pass-through compliance unit

The US Internal Revenue Service on 22 October 2024, announced (IR-2024-276) that the new pass-through field operations unit has "officially started work in its Large Business and International (LB&I) division" in an effort to more efficiently audit pass-through entities.