Midweek Tax News

The Government has announced that the UK will host a major International Investment Summit on 14 October 2024, two weeks ahead of the Budget on 30 October. The aim is to bring together up to 300 industry leaders and confirm that the UK is ‘open for business’. The summit is a key milestone in the Government’s growth mission and is intended to underpin a modern Industrial Strategy.

On 22 August, from 12:00 to 12:30, our Technology, Media, and Telecommunications (TMT) indirect tax team will be hosting the next in their series of short lunchtime webcasts addressing topics relevant to indirect tax practitioners working in the TMT sector. In this webcast, the panel will focus on case law updates and technical developments in the sector. To join this event, please register here.

On 6 August 2024, a double taxation convention between the UK and Ecuador was signed in Quito, Ecuador. This is the first tax treaty entered into between the UK and Ecuador. It will enter into force once both countries have completed their parliamentary procedures and exchanged diplomatic notes.

In proposed regulations (REG-105128-23) published on 6 August 2024, the US Department of Treasury and the IRS have addressed the interaction of the dual consolidated loss (DCL) rules with Pillar Two of the OECD's global anti-base erosion (GloBE) model rules. A summary of the key points is set out below.

• The proposed regulations provide that a foreign income tax may include a Qualified Domestic Minimum Top-Up Tax (QDMTT) or an Income Inclusion Rule (IIR), such that the inclusion of a DCL in Pillar Two GloBE income may result in a foreign use. There is, however, a transition rule.
• The favourable "inclusions on stock" rule for computing the income or loss of any separate unit would be eliminated, causing taxpayers to have more and/or larger DCLs.
• The proposed regulations would limit the effect of the intercompany transaction rules for computing the group's consolidated taxable income and its members' DCLs.
• New "disregarded payment loss" rules would require a domestic owner of a disregarded entity or foreign branch to recognize income with respect to certain net losses arising from disregarded payments.
• The proposed regulations would include a new anti-avoidance rule authorising ‘appropriate adjustments’ where taxpayers engage in a transaction, series of transactions, plan or arrangement with a view to avoiding the purposes of the DCL rules (including the disregarded payment loss rules).
• The proposed regulations would generally apply to tax years ending on or after 6 August 2024.

On 31 July 2024, the European Commission initiated an evaluation of the 'anti-tax avoidance directive' (ATAD), as required under Article 10 of the directive. The ATAD lays down measures in five areas: the interest limitation rule, exit taxation, the controlled foreign company rule (CFC), the hybrid mismatches rule and the general anti-abuse rule (GAAR). The evaluation, which includes a call for evidence open until 11 September, seeks to collect a wide array of evidence and viewpoints on the ATAD's implementation across EU Member States, the efficacy of the measures, and their alignment with the current tax landscape. The outcome of this evaluation may signal potential adjustments to the ATAD measures, particularly in light of the Minimum Tax Directive's introduction.

In addition, on 1 August 2024, the European Commission released a draft implementing regulation to standardise the presentation of income tax information for public country-by-country reporting (CbCR), as mandated by Directive 2013/34/EU. The proposed regulation, which would come into effect for financial years commencing on or after 1 January 2025, emphasizes the use of Extensible Hypertext Markup Language (XHTML) and Inline XBRL to enhance the accessibility and precision of financial reporting. The draft is open for public consultation until 29 August 2024.

Further detail on both the above developments is provided in our global tax alert.

The OECD has published a new report providing guidance when addressing the transfer pricing challenges faced when pricing lithium, a critical mineral in the global energy transition, which builds on the OECD’s transfer pricing framework for minerals. The schedule presented in this report identifies the primary economic factors that influence the price of lithium in applying the Comparable Uncontrolled Price method and ensure that developing countries are able to tax lithium exports appropriately.

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

Denmark: The Danish government has established a long-term plan (‘Agreement for a Greener Denmark’) which is designed to significantly cut greenhouse gas emissions from the food and agriculture sectors, aiding Denmark in achieving its climate objectives for 2030. The agreement outlines a substantial shift in land use and introduces a CO2 equivalent emission tax on livestock emissions.

Denmark: The Danish Parliament has introduced a new CO2 tax on fuels (natural gas, coal, oils, etc.). The new tax introduces significant changes to existing legislation, aiming to enhance sustainability and green industrial practices. The main changes to the current legislation include increasing the existing CO2 tax on fuels by 400%; cutting the existing excise duty on fuels in half; and adding a new CO2 equivalent emissions tax for companies covered by the European Union's Energy Trading System (ETS-1).

Italy: The Italian Council of Ministers has approved new provisions introducing amendments to Italy’s Co-operative Compliance regime, which entered into force in January 2024.

Poland: The Polish Constitutional Court has ruled that certain mandatory disclosure rules (MDR) in the Tax Ordinance are unconstitutional as they violate the legal professional privilege of tax advisors.

Korea: Korea's 2024 tax reform proposals, announced on 25 July 2024, include clarifications of the global minimum tax rules, an extension of the application period for R&D and Integrated Investment tax credits, the elimination of the share premium for shares held by major shareholders and the introduction of a tax incentive to promote the return of earnings to shareholders.

The latest edition of Trade Talking Points, our fortnightly newsletter on the latest insights from EY's Trade Strategy team, is available. This edition provides updates on the US delay to its China tariff implementation, the US-Japan Partnership on Trade meeting, the World Trade Organization’s (WTO) Electronic Commerce agreement, the latest WTO trade statistics and the upcoming 2024 WTO public forum. The next edition of Trade Talking Points will be issued on 5 September.

The August edition of PE Watch, our summary of the latest international developments regarding permanent establishments, is available. This edition highlights the Pillar Two legislation introduced to the Australian Parliament, which, following consultation on an exposure draft earlier in 2024, includes clarification of the treatment of permanent establishments. It also discusses the UAE’s new guidance on exemption for foreign PEs.

Governments around the world encourage businesses to make investments with a range of tax-related incentives, such as intellectual property incentives, tax credits and tax allowances, and non-tax incentives, such as research and development (R&D) grants, discretionary incentives, loans and guarantees. Under the OECD’s GloBE rules, the financial benefit of certain types of tax incentives could be negated by the proposed 15% effective tax rate. But the good news is that certain categories of incentives will not impact GloBE calculations. In a LinkedIn article, EY’s Chris Peck looks at the steps that multinational enterprises can take to review their incentives portfolio and make any necessary adjustments.